A straightforward solution to the oncoming flood of business and personal bankruptcies.

Small Business Owners Should Have Legal Power Against Firms That ...When Donald Trump (soon) turns away from giving wonderful medical advice, and begins to boast about his tremendous economic successes during this pandemic, and tells you he knows more about economics than anyone, remember that none of the following should have happened.

It all easily could have been, and still could be, prevented.

Despite $484 Billion Loan Program, a Flood of Small Business Bankruptcies Likely in Coming Months

(NEW YORK) — The billions of dollars in coronavirus relief targeted at small businesses may not prevent many of them from ending up in bankruptcy court.

Business filings under Chapter 11 of the federal bankruptcy law rose sharply in March, and attorneys who work with struggling companies are seeing signs that more owners are contemplating the possibility of bankruptcy.

Small business is the lifeblood of the U.S. economy. It is where many, if not most, American jobs and ideas originate. It is where the more entrepreneurial Americans can be found.

Yet, the government has stood by, tossing crumbs — reluctantly tossing crumbs — which is why there will be that “flood of small business bankruptcies.”

Companies forced to close or curtail business due to government attempts to stop the virus’s spread have mounting debts and uncertain prospects for returning to normal operations.

Even those owners receiving emergency loans and grants aren’t sure that help will be enough.

The most vulnerable companies include the thousands of restaurants and retailers that shut down, many of them more than a month ago.

Some restaurants have managed to bring in a bit of revenue by serving meals for takeout and delivery, but even they are struggling financially.

Small and independent retailers, including those with online stores. are similarly at risk; clothing retailers have the added problem of winter inventory that they are unlikely to sell with spring here and summer approaching.

The common denominator is lack of money. Money is disappearing from the economy. The federal government has unlimited money.

Does that give you any ideas?

Apparently, it doesn’t give our federal government any ideas. This administration is far more interested in criticizing Democrats and the “lamestream media,” denying science, and lying to get Trump re-elected, than actually doing something for businesses, especially small businesses and the economy.

Independent oil companies whose revenue was slammed by the collapse in energy prices also are strapped, as are other companies that were already burdened with high debt levels before the virus struck.

Oil companies are strapped because people are traveling less. And it’s not only the social distancing that causes less travel.

After social distancing becomes less necessary, the potential travelers still will defer travel because — here it is again — they lack money.

And — here this is again — the federal government has unlimited money.

Jennifer Bennett, who closed one of her San Francisco restaurants on Wednesday, was still waiting for the financial aid she sought from the federal, state and city governments.

Even with the money, she doesn’t know if the revenue will cover the bills when she’s finally able to reopen Zazie — especially if she’s required to space tables six feet apart for social distancing.

She’s waiting for financial aid, waiting, and waiting, and waiting. And if/when it ever comes, it may not cover her expenses.

But (Did we mention this?) the federal government has unlimited money.

So why is she forced to wait, and why does she think it may not be enough? The two answers: Federal incompetence and unfortunate history with federal agencies.

“Our occupancy is going to be cut 60% to 65%,” Bennett says. “I fear bankruptcy is a possibility.”

Other small companies have similar anxieties, says Paul Singerman, a bankruptcy attorney with Berger Singerman in Miami.

“There is no reliable visibility into when business operations will be able to resume the pre-COVID normal,” Singerman says.

Even larger companies are in trouble, including already struggling retailers who had to shut their stores.

The jeans company True Religion filed for Chapter 11 earlier this month, saying extended closures of its stores in the pandemic have hurt its business.

Recent reports say department store chains Neiman Marcus and J.C. Penney, which has struggled for years with slumping sales, could soon file for bankruptcy protection.

Bankruptcy “protection” may, in a few cases, somewhat protect the businesses declaring Chapter 11, though most such businesses never regain previous viability.

Worse, bankruptcy merely transfers the business loss to creditors, who also are part of the economy.

It does not benefit an economy for a business to survive while its creditors to suffer. The money and jobs still are lost to the economy.

But, (just to remind you, again), the federal government has unlimited money.

The federal government has already approved or given out more than 2 million loans and grants to small businesses totaling nearly $360 billion; another $310 billion is on the way to one of the programs.

Still, the money may be at best a stopgap for companies with little to no revenue coming in. And the new funds are expected to go so quickly that thousands of owners won’t get loans.

The money from the Trump administration has been, and will continue to be, too-little and too-late, and worse yet, some of it is in the form of repayable loans.

Why loans instead of grants? Why should anyone have to pay money to a Monetarily Sovereign government that has the unlimited ability to create its own, sovereign currency?

And no, federal taxpayers do not fund federal government spending. The federal government creates brand new dollars, ad hoc, by the action of paying bills.

So ignore those false claims that your grandchildren will have to support today’s spending. The claims simply are false.

(The claims would be true of state and local government spending. State and local governments are monetarily non-sovereign. They do not have the unlimited ability to create money. They do rely on tax dollars for spending. The federal government does not.)

There’s no way to predict how many companies will file for bankruptcy. The majority were for liquidations. although some companies restructured their debt and continued operating under Chapter 11.

Many companies, however, just shut their doors, and that’s likely to be the case again, Singerman says. According to some estimates, 170,000 companies failed during the recession.

And now for the simple solution:

Every company files tax returns. The returns from 2019 reveal each company’s gross sales.

To prevent the flood of small (and large) business bankruptcies, the federal government should give (not lend) to each company the dollars that equal or exceed each business’s gross sales from 2019. For those companies that began in 2020, the amount could be the annually amortized gross from the 1st quarter of 2020.

Now let’s deal with the objections, since every plan has them.


1. The plan will cause inflation. Inflation is caused by shortages of critical needs, usually food and/or energy, never by federal spending.

If business bankruptcies cause shortages of food and/or energy, that will cause inflation, which could be prevented/cured by federal spending to obtain and distribute the scarce goods.

2. The plan would require a tax increase. Already discussed. Federal taxes do not fund federal spending. In fact, federal taxes disappear from any measure of the nation’s money supply and thus are effectively destroyed.

No tax increase would be needed.

3. The plan would increase federal debt. The so-called “debt is not like ordinary debt. It is the total of deposits into T-security accounts. The federal government neither needs nor touches these deposits.

They remain in the T-security accounts gathering interest until maturity, at which time the balances are returned to the account owners. No federal deficit spending is involved.

4. The plan is unsustainable. Being Monetarily Sovereign, the federal government can “sustain” any amount of spending.

5. Last year’s tax returns may not be an accurate measure of this year’s potential gross. Each business could fill out a form similar to a tax return containing questions appropriate to that issue. For instance, the form could include this year’s to-date gross rather than last year’s gross.

Like the income tax itself, the government can set up any criteria it wishes, so long as the outcome is sufficient anti-insolvency dollars are being sent to businesses.

It is better to err on the high side, because there is no economic cost in sending “too many” dollars.

6. Some business owners might choose to keep the money personally and still go bankrupt. Although the government can (and already has) set up rules to minimize this, growth money still would be added to the economy.

The major downside would be if some of the dollars don’t reach the lowest income groups. This could be ameliorated by increased unemployment insurance benefits, which is something we should do anyway.

7. People who have lost jobs are covered by unemployment insurance, so this program is redundant. Sadly, and unnecessarily, current unemployment insurance is insufficient to provide adequate support. It should be increased to the point that no one is at or below a poverty level.

8. What about poorly-run companies, that would have gone bankrupt, anyway? Who cares? If the federal government gives money to poorly-run companies, along with the well-run companies, nothing is lost. In fact, the economy gains by the infusion of dollars.

The government does not need to evaluate the merits of any company’s business. It merely needs to grow the economy and narrow the Gap between the rich and the rest.

In Summary:

The single biggest problem facing the American economy is lack of money, and the federal government can solve that problem at the press of a few computer keys.

Every company should have the means to continue in business if it wishes, and to pay its employees. The federal government has the unlimited means to accomplish this.

The Ten Steps can be part of that solution.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell



The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.


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