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
23 thoughts on “–A new group: Brake the Banks”
The reason most people have a huge problem with MMT and MS is because MMT and MS are statements of accounting of some reality. But you haven’t explained the reality itself (i.e., the relationship of currency to the production process).
That is like giving someone an income statement and a balance sheet (the accounting) for a business they don’t know what it sells and how it makes its product or service (the reality).
We need to come up with a very simple childlike explanation of Keynesian economics. Something like:
step 1: Spending of currency generates demand (does not matter where the currency comes from, existing savings or currency printed by the government or currency printed by a bank).
step 2: Entrepreneurs react to this demand signal in step 1 above and make stuff and provide services. Entrepreneurs (and workers) can and will work just to accumulate currency itself as savings (for future buying).
Looked at this way the entire economy can be viewed as a giant converter/transformer of raw materials to finished goods and services with demand (as expressed by spending currency) as the driver.
Mansoor H. Khan
NOTE:” In the Obama America, banks and their officers are immune from the law.”
(read In America Banks are the law and believe the law makers are not subject to their own laws.)
But they are allowed to do this and more because they are allowed to “ELECTRONICALLY PRINT OUR CURRENCY”
This allows them to make loans for 9,or ten times the amount of currency on hand.This is based on the principle of RESERVE BANKING, this allows banks to profit on their interest TEN FOLD without any of their own “skin” in the game.They have made the most powerful force in the universe even more powerful.And POWER CORRUPTS.
BRAKE THE BANKS PARTY should have as two candidates for office,SHEILA BLAIR (former FDIC) and BROOKSLEY BORN (former CFTC).(read AMAZON PARTY,they surely were giants working for the people.)
*****PLEASE CHANGE<CHALLENGE< OR ENDORSE!****
Posted on November 24, 2011 by justaluckyfool
“Bank Of America Warned By U.S. Regulators It Must Get Stronger ““That could be especially true now that the Federal Reserve said late Tuesday that BofA, along with five other large U.S. banks, will need to give the Fed loss estimates early next year that accounts for a “hypothetical global market shock.”
A DREAM COME TRUE ? read justaluckyfool.wordpress.com “The All Inclusive Solution.The Federal Bank of America”Please allow me one more dream…Sheila Blair(former FDIC) and Brooksly Born (former CFTC),our next President and Sect of Treas ! !
…Adam Smith,please show how “the invisible hand” could get this done.
As Thomas Jefferson said,“I believe that banking institutions are more dangerous to our liberties than standing armies the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around (these banks) will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power (of currency) should be taken from the banks and restored to the people,to whom it properly belongs,”
“THE ALL INCLUSIVE SOLUTION.THE FEDERAL BANK OF AMERICA” justaluckyfool.wordpress.com
********THREE STEPS TO A SOLUTION*************
Bernanke and Geithner:
Meet with JPMChase,CITICORP,Deutsche Bank
THROW Bank of America" under the bus" !
^Allow JP,Citi,Deutsche to purchase all assets EXCLUDING LOANS AND OFFICES at fair market value,even lend them the money to do it,(2% for 6 years).
^Notify all financial institution that fractional reserve lending will
no longer be allowed,that all loans must be 100% asset backed,changing the 10% present system with a 10% increase every 30 days untill 100% is reached.
Financial institutions could sell any loan to the FBA at fair market value
^Make a FEDERAL BANK !
Challenge,Change,and then Endorse "The All Inclusive Solution.The Federal Bank of America"
“hypothetical global market shock.”
What is so hypothetical about $800,000,000,000,000,(read EIGHT HUNDRED TRILLION,OR 80% of a QUADRILLION) in a world that only has ,what around $80,$85 trillion.
That’s what is out there in derivatives.
You want to talk LEVERAGE?
What if they are at a 20% loss on these bets?
How do you pay off a $16 trillion loss?
Depends on whose loss it is. The U.S. government, being Monetarily Sovereign, could pay such a bill by pressing a few computer keys, and marking up the checking accounts of the creditors.
In fact current U.S. “debt” (i.e. outstanding T-securities) is about $15 trillion, and I suggest the U.S. liquidate them by debiting all T-security accounts and crediting the checking accounts of T-security holders. This would eliminate all worries about our so-called “debt.”
This would not create any new money (T-bills are a form of money); it would be a simple asset transfer from one bank account to another.
As for the euro government . . . being monetarily non-sovereign, they can’t even pay their current debts.
Rodger Malcolm Mitchell
It is time to start “street level education”. Our current set of leaders are useless at this point:
Educate, Educate, Educate….your wife, your kids, your neighbors, your co-workers, your friends, your fellow church attenders, etc(street level education is needed).
And once they get it ask THEM to do the same.
Mansoor H. Khan
How can we start with with Khan Academy?
“I teach the way that I wish I was taught. The lectures are coming from me, an actual human being who is fascinated by the world around him.”
RMM start with the defininsion of Monetary Sovereign.
We need to start with a model of how the real economy works and teach that first. Specially how currency relates to the production process.
MMT and MS only make sense in context of a Keynesian like mental model of the economy.
Please see the first comment on this thread.
*Depends on whose loss it is. The U.S. government, being Monetarily Sovereign, could pay such a bill by pressing a few computer keys, and marking up the checking accounts of the creditors.”
Absolutely correct,but they need only pay out that part of the debt that is FDIC insured ( because the banks would go into receivership) and since most of the crap was deliberately “off the books” they would simply default,or better yet,if this concept is understood;LEND THEM THE CURRENCY NEEDED AT COMPOUND INTEREST.
This would be one hellafa “hat trick”.-The 1% paying the taxes of the 99%.
Upon creation of such a group, do you expect that that the average American citizens, in numbers necessary to effect such an agenda, would be able to both absorb such a concept and support it? I can hear the screams of “Socialism” and “Government Over Reach” at a decibel level that would rupture ear drums now. Do we have the decade/decades it might take to educate the ignorant and install a majority of legislators that would be agreeable to the concepts? It is frightening to imagine society ten years hence if circumstances remain as they are and the neo-liberal agenda continues to dominate.
Funny, I thought the neo-fascist agenda was dominating.
Is not neo-liberalism the dominate economic ideology currently? Am I missing something? I suppose the question itself did not warrant a response?
In an attempt to clarify, you are preaching to the choir.
*”Upon creation of such a group, do you expect that that the average American citizens, in numbers necessary to effect such an agenda, would be able to both absorb such a concept and support it”
YES if social media were to endorse it.
Yes if it were presented in an “Einstein ” manner.
The end of income taxes for 80% of the people.
An immediate benefit to 80% of paychecks-no withholding.
*I can hear the screams of “Socialism” and “Government Over Reach” at a decibel level that would rupture ear drums now.
YES, but that would be the 1%,s screaming propaganda.
And the 99% can answer,”We will use the most powerful weapon in the universe that wich you no longer have (compound interest),we will prevail.”
I appreciate and commend your passion. However, reality is certainly otherwise. Are you suggesting that the propaganda of the 1% will not continue to influence the minds of so many Americans who do not nor ever will comprehend who is zoomin’ who?
We either believe in democracy or we don’t. If we do we start the street level education process. Yes, it may take a couple generations to get but at least we will get there (good willing).
Otherwise, lets give all power to a small group of wise men or a king and teach him/her and they hope that they will keep the somewhat society balanced.
I’ll join that group.
“banks stole billions and were the prime cause of the recession”
I thought reduced debt growth was the prime cause of the recession.
Reduced debt growth seems to be a necessary criterion for a recession, but as you’ll notice, reduced debt growth can last a long or short time. There needs to be a trigger, and for the latest recession, reduced debt growth slowed economic growth (as it always seems to). The improper lending required real estate values to grow, continuously.
When the reduced economic growth flattened real estate values, mortgages became unsustainable, and the house of cards fell.
So, for the most recent recession, reduced debt growth was the necessary criterion, and improper bank lending was the trigger.
Rodger Malcolm Mitchell
The point, which it seems you fail to comprehend or address, is, at the present rate of disintegration of governments that serve any sort of public purpose and society in general can you actually believe that we have generations to deal or solve problems? Things are progressing very, very rapidly sir. Things that do not serve mankind well. Generations! No, we do not have generations to educate and make the necessary changes. That’s reality.
Ok. got it.
Then let us just make a deal with those in control. We would let them live like kings/queens. Let them print money without having to lend it. They would just spend it and use it for their purposes.
Why go let our civilization go down in flames so easily?
mansoor h. khan
Mr Fasola,perhaps, we are in a different era.What took generations to accomplish may now be done OVERNIGHT.Education thru social media.
Also the “disintegration of governments” may already have been in the making for generations(read in US since the FED came into being)
NY judge rejects $285 million Citigroup settlement with SEC over mortgage investment
By Associated Press, Updated: Monday, November 28, 4:20 PM
NEW YORK — A judge on Monday used unusually harsh language to strike down a $285 million settlement between Citigroup and the Securities and Exchange Commission over toxic mortgage securities, saying he couldn’t tell whether the deal was fair and criticizing regulators for shielding the public from details of the firm’s wrongdoing.
U.S. District Judge Jed Rakoff said the public has a right to know what happens in cases that touch on “the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives.” In such cases, the SEC has a responsibility to ensure that the truth emerges, he wrote.
So where do you think he will be working tommorow,
patent or parking?
*******comment sent to:his blog****
Robert Lenzner, Forbes Staff
Investing|11/28/2011 @ 6:24PM |557 views
We Didn’t Know About the Fed’s $7.7 Trillion
Thank you for submitting your comment:
“May I presume all of you don;t know that the amount revealed by the Federal Reserve that was given out by the Federal Reserve is
in fact over $13 Trillion.YES TRILLION ,$13 of them, please note “that has been revealed so far.
Ben Bernanke should be a candidate for the Nobel Prize.He has singlehandedly proven
Monetary Sovereignty is a valid economic principle-THE US CAN PRINT ALL THE MONEY IT NEEDS.PERIOD.
We the people have only one prayer,”Do it for the people.
Ben Bernanke please head The Federal Bank of America.
Please check out :rodgermmitchell.wordpress.com
CORRECTION:”THE FED AUDIT” U.S. Senator Bernie Sanders.
$16 TRILLION….not $13 trillion.
This has got to earn Dr.Ben Bernanke the Noble Prize for Economic based upon his proving Monetary Sovereignty .
Latest news is we will perhaps get a QE3 ( probably just a few more trillion)as the Feds may BUY MBS’s,you know that “toxic” stuff that even Pimco and Blackrock just haven’t seemed to want to buy even with The Feds giving them FREE money.Just as ” Our Nobel Prize ” continues to prove, “A sovereign nation needs only to ‘JUST DO IT’.