Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
The Tea Party was a recent phenomenon that managed to convince mostly Republicans (but many Democrats, too), along with the popular media and even some old line economists, that by some mathematical magic, reducing the money supply (aka cutting the federal deficit and reduced federal spending), could reduce unemployment and grow the economy. They are the most notorious believers in the myth, anemia can be cured by bleeding the patient.
I never have seen any substantiation for this wild-ass hypothesis, but it is widely followed, not only in America, but through much of the world. Ask your own friends if the deficit and debt are too high, and they will tell you, “Yes.” But ask them if there is too much money in the economy, and they likely will tell you, “No.” Such is popular ignorance.
The #Occupy Wall Street (#OWS) group is an even more recent phenomenon, that rightly believes the so-called “1%” is cheating the “99%,” but wrongly believes this situation can be cured by closing the income gap (or is it the wealth gap?) and taking money from the rich – a Robin Hood solution.
They have not yet achieved the initial, wide-spread acceptance of the Tea Party, partly because they haven’t expressed a coherent plan, and partly because they are young and tend to look scruffy – and perhaps partly because many people understand the Robin Hood solution would do nothing to benefit the economy.
If #OWS would take the trouble to learn Monetary Sovereignty, and use it to propose specific solutions, they could be a powerful force for economic growth. But will they? Probably not.
So, I suggest the time is nigh for a third group. This is the background:
1. Banks intentionally gave mortgages to unqualified people, then sold those worthless mortgages to Ginnie Mae and Freddie Mac, which bundled them into worthless bundles.
2. Banks intentionally sold these worthless bundles to unsuspecting investors, under the theory that ten pounds of garbage smells better than one pound of garbage.
3. Banks set about foreclosing on homes for which the bank held no mortgage. In many instances, the banks would invade the wrong homes, steal the furniture and refuse to allow the rightful owner access.
4. Banks also pretended to work with home owners on the government’s Home Affordable Modification Program (HAMP). Home owners were shuffled around from voice mail to voice mail, kept on hold for hours, repeatedly asked for the same documentation, and overall given the run-around for years, until the poor home owners were forced into default, at which time the banks took over the property. (In some cases, banks even falsely recommended default to home owners, as a way to move the HAMP process along.)
5. Banks used “robo-signers” – people who signed thousands of documents a day – to cheat on laws requiring individual bank employees personally to inspect and sign mortgage papers.
6. Banks, not having legal title, forced courts into foreclosure mills – where judges rubber-stamped hundreds of foreclosures each day, without allowing home owners the opportunity for defense.
7. Banks, having caused trillions in losses, both for their customers and themselves, appealed to friends in the administration for financial assistance. Treasury Secretary, Timothy F. Geithner, a notorious friend of banks, was pleased to bail out virtually any, large troubled bank or other financial institution. In a handful of cases, other large companies (GM, for instance), but no small companies were bailed out, but the vast majority of help went to the very banks that caused the recession.
To this date, no CEO, CFO or other decision-maker for any large bank has been investigated for their crimes, much less tried, much less convicted, much less sentenced, much less served any time. In the Obama America, banks and their officers are immune from the law.
Do you see a commonality? Yes, the banks stole billions and were the prime cause of the recession. They were “punished” by being rewarded with more billions. Unless action is taken, the banks will continue to steal and continue to be rewarded by Geithner, Obama et al, or by the next administration, as Republicans are equally beholden to banks as are Democrats..
So I propose the formation of a new group, perhaps called “Brake the Banks.” The goal of Brake the Banks would be to do exactly as its name suggests: Put the brakes on the banks, so they can’t continue to steal. Some thoughts:
1. Restore The Glass-Steagall Act, which prohibited commercial banks from engaging in the investment business. Unfortunately, the Gramm-Leach-Bilely Act repealed the Glass-Steagall Act’s restrictions on bank and securities-firm affiliations. It also amended the Bank Holding Company Act to permit affiliations among financial services companies, including banks, securities firms and insurance companies. The new law sought financial modernization by removing the very barriers that Glass-Steagall had erected. (New York Times, Friday, November 25, 2011)
or better yet:
2. Nationalize all banks licensed to do business in the United States. The profit motive caused banks and bank leaders to ignore public safety and responsibility. Instead, banking became a cesspool of personal greed, where sales commissions, not service, were the goal. Government owned banks, with neither private shareholders nor sales-rewarded employees, would be less subject to profit and greed motivations.
I suggest that Brake the Banks would be a worthy, third group, even more economically and positively effective than the Tea Party or #OWS.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
b>Gross Domestic Product = Federal Spending + Private Investment + Private Consumption + Net exports