Category: Uncategorized

–What will the Fed’s $600 billion Treasury purchase accomplish?

The debt hawks are to economics as the creationists are to biology. They, who do not understand monetary sovereignty, do not understand economics.
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Here’s how it works; you be the judge.

The first question is, if the Fed is buying, who is selling? Answer: The banks and the public. If the banks exchange their T-bonds for cash, will that stimulate the economy? Will that make banks more likely to lend? Are banks short of lending cash? The answers are, “No, no and no.”

Banks are not lending primarily because they can lend to the government, risk free, and make an easy 2% on their money. They are not short of lending funds. They don’t want the hassle of credit checking, defaults, collections, etc. Just borrow from the government at 0% and lend back at 2%. What could be easier?

The other reason banks haven’t lent is because business isn’t borrowing. Congress has made sure business has no idea what will happen, tomorrow. Taxes? Who knows? Interest rates? Unsure. A recovery? When? Expand my operations? Are you kidding? So with lenders and borrowers both unmotivated, lending is unlikely.

Well, what about the public? Do Fed bond purchases from the public stimulate the economy? When the Fed trades cash for T-bonds, this is tantamount to advancing the maturity date on those T-bonds. So what will the holder of T-bonds do when the government gives him cash for his bonds? He likes T-bonds, so if he can get a good price, he probably will buy more bonds – right back where he started.

But let’s say some people decide to invest those dollars in something other than T-bonds. Is that stimulative? Yes, but there is another problem. When the Fed buys bonds, the future interest on those bonds is not paid into the economy. The Fed’s purchase reduces future government interest payments, and that is anti-stimulative.

So my take on the $600 billion purchase is that it might have a very small and very temporary stimulative effect. Far better, and far more stimulative would be if the federal government cut taxes by $600 billion. But since our politicians don’t understand monetary sovereignty, that is unlikely to happen.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–Federal savings = the economy’s loss

The debt hawks are to economics as the creationists are to biology. They, who do not understand Monetary Sovereignty, do not understand economics.

According to Joe Davidson, a columnist for the Washington Post:

“Here are some of the proposals that will have new life in the Republican-led House:

“* Federal employees would have two weeks off without pay, under a plan by Rep. Mike Coffman (R-Colo.), who says it would save $5.5 billion. Members of Congress also would be called to sacrifice by taking a 10-percent pay cut.

“* Federal raises and bonuses would be frozen for one year, and the number of employees would be limited, under legislation sponsored by Sens. John McCain (R-Ariz.) and Tom Coburn (R-Okla.).

“* The growth in the federal workforce would be cut by limiting hires to one for every two retirees, under a measure proposed by Rep. Cynthia M. Lummis (R-Wyo.). Her bill excludes the departments of Defense, Homeland Security and Veterans Affairs, which are among the government’s largest employers.
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“* The federal workforce, with exceptions for security-related agencies, would shrink through attrition to February 2009 levels under legislation offered by Sen. Orrin G. Hatch (R-Utah).

“* The number of political appointees would drop to 2,000 from about 3,500 under a plan pushed by McCain and Sen. Russell Feingold (D-Wis.), who was defeated Tuesday.

“* Legislation sponsored by Rep. Michele Bachmann (R-Minn.) that would have eliminated the proposed 1.4 percent pay raise for federal employees was defeated in the House this year, but similar legislation could fare better next year.

“* Federal employees could be fired if they fall behind on their taxes, a proposal pushed by Coburn and Rep. Jason Chaffetz (R-Utah).”

Sounds wonderful, except for one small detail. Every dollar “saved” by these maneuvers is a dollar lost to the economy. For instance, forcing Federal employees to take two weeks without pay, would cost the economy the $5.5 billion Davidson talks about. That’s a $5.5 billion anti-stimulus.

So while the Fed feebly attempts to pump money into the economy, Congress attempts to reduce the amount of money pumped into the economy.

This is yet another example of Congress and the media having no clue about Monetary Sovereignty. If you want to help your country, please take a minute to contact your Congressional representatives and tell them to acquaint themselves with Monetary Sovereignty.

Or we can continue to suffer a recession every five years, on average, as we have for the past century.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–Will the party of “NO!” become the party of “I don’t know”?

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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This should be interesting. Will the party of “NO!” become the party of “I don’t know,” when asked how they plan to reduce federal spending without alienating all the people who receive federal spending, and without destroying the economy, too?

My hunch is all those “small government” types will begin to whine loudly when their favorite federal benefits begin to disappear. And then there is the presumed reduction in federal employees, “to save money” at just the time when we’re supposed to be creating jobs.

For a reminder about some of the things we voters will have to worry about, read: “14 ways to dismantle a monstrous government”.

And why cut federal spending? The debt hawks have no clue. They do not understand monetary sovereignty, and have no desire to learn.

Ignorance has its costs.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–Read how the debt-hawks threaten to destroy Medicare.

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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Read how the debt-hawks threaten to destroy Medicare.

Washington Post, 11/2/10:

“Physicians face painful decision on Medicare

“While most people are focused on the midterm elections Tuesday, the American Medical Association is gearing up for the lame-duck congressional session scheduled to start Nov. 15. Unless Congress intervenes, payments to doctors for treating Medicare patients will be cut by 23 percent on Dec. 1 and another 6.5 percent on Jan. 1.

“Cecil B. Wilson, an internist from Winter Park, Fla., who became AMA president in June, is pressing for a 13-month patch that would prevent the Medicare physician cuts. In April, the Congressional Budget Office said that blocking the cuts until January 2012 would cost about $15 billion. A long-term formula fix, through 2020, would cost about $276 billion, it said.

[…]
“Four hundred physicians across the country were involved in a webinar, in which we talked to them about their options. The reality is between now and the end of December physicians have to make a decision about their status related to Medicare. So we are trying to provide information to [them] so they can make a wise decision. Our concern, of course, is that if Congress in the lame-duck session does not address this problem, or they address it in ways that are disruptive to physicians’ practices, more physicians are going to say, “You know, I’m just out of here. I cannot keep my doors open and provide care for other patients.”
[…]

“This is not about the AMA; this is about senior citizens who need care. I can just tell you from my own [experience in] Winter Park, Fla., the conversation in the grocery store lines [or] at the shopping mart is, “Do you know any physician who is still taking new Medicare patients?” And the answer is no.”

Why are payments to doctors liable to be cut? Because of the absolutely false belief the federal debt is too high, and must be paid by future taxpayers. This just one more example, out of hundreds, of the inexcusable damage debt-hawk ignorance causes us. And they call this “fiscal prudence.”

Hello, all you supporters of federal debt reduction. Thanks for nothing.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”