Tag: bank lending

–Ignorance on every side. Et tu Shadow Government Statistics?

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Shadow Government Statistics (SGS) is a popular site for those who correctly recognize that many government data are politically spun. It’s a good data resource, but when it comes to economics . . . well you be the judge. Here is a quote from the site:

The U.S. government effectively is bankrupt and remains extremely likely to resolve this ultimate sovereign insolvency by printing money to meet its obligations. As global pressures force the Fed into further Treasury debt monetization, as global confidence in the world’s reserve currency evaporates, risks remain particularly high of a U.S. hyperinflation beginning to unfold in the first-half of 2011, along with severe economic, social and political consequences that will follow. The outside timing for this manmade financial catastrophe remains 2014.

Let’s analyze this:

“The U.S.governemtn effectively is bankrupt . . . “ What does that mean? A bankrupt entity cannot pay its bills; the U.S. can. . . endlessly.

“. . . and remains extremely likely to resolve this ultimate sovereign insolvency by printing money to meet its obligations.” If by “printing money” SGS means crediting the bank accounts of its creditors, yes, that’s the way a Monetarily Sovereign government pays its bills. Always has; always will. If the government didn’t “print” dollars, there would be no dollars.

Then we get into hyperinflation, scheduled by SGS to begin the first half of this year and no later than 2014. Let’s call this the Harold Camping syndrome – the foolish attempt to date a catastrophy prediction without giving yourself a “out.” At least when I recently predicted a “full blown depression for 2012, I included the caveat, “Based on where Obama and the Tea/Republicans are headed. . . “ which at the time was toward a $4 trillion deficit reduction, which unquestionably would cause a depression. Clever me. I gave myself an “out.”

But John Williams, the author of SGS offers no caveat. He just flat-out predicts hyperinflation, which the U.S. never has had, through wars, depressions, recessions, stagflations and every other economic crisis. Hyperinflations always are caused by specific and unique circumstances, and are not merely inflations on steroids. Today, we are worried about deflation, while having the absolute power to prevent even inflation, via interest rate control.

No, hyperinflation is the least of our worries — somewhere at the danger level of being destroyed by a huge meteor. The “most” of our worries: Recession and depression, which either are existent or imminent, depending on how you define them. Oddly, debt hawks continue to fret about the least of our worries, while ignoring the “most” of our worries. Just can’t figure those strange people.

So add Shadow Government Statistics and John Williams to the long list of people and institutions that display zero understanding of Monetary Sovereignty.

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


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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.

MONETARY SOVEREIGNTY

–A tale of two businesses – a lesson for the future of the American economy

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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There is an old saying, “Long after the price is forgotten, the quality and service are remembered.” Though some American businesses complain about the Chinese (or is it the Indians, the Vietnamese, the Mexicans et al?) taking business away due to low prices, many American businesses thrive with quality and service.

Even the mighty Walmart, which grew on the basis of low prices and no service, recently learned there is a limit to what Americans will endure. The chain began to remove slow selling items, and suddenly, sales took a hit. Americans wanted that minuscule amount of service at least – the ability to find their favorite products.

While numerous exceptions to this generalization can be found, I suspect American businesses will do better long-term, by focusing on quality and service than on price. Here are brief accounts of my experiences at two businesses. You be the judge about which has the better future:

Rooms to Go: This chain of furniture stores, selling moderately priced pieces assembled into groupings, has a store in Boca Raton, from which I made a purchase. Their advertised deal was: Buy now and pay monthly over two years, at no interest. The amount I bought was small – about $2,000 – but what the heck. Two years of no interest is worth something.

The month after I made the purchase, my credit card was charged the full amount. I called the store manager, who said there is nothing she could do, because the salesperson had quit, and note had been sold to a bank. I (not she) would have to call the bank. I tried, but after 20 minutes on hold, I gave up. I mean, we’re not talking about big money. I twice wrote to a guy named Stephen Buckley, who not only is company president but CEO – a real big shot. No response from the big shot.

What they could have done:Rather than putting the onus on me to spend my time trying to solve their mistake, they at least could have given me the interest I would have earned, had I invested my money. What would that have been? Forty dollars? A mere pittance, to be sure, but a gesture of concern for a customer. After all, it was their advertised deal, and they screwed up.

Needless to say, I never will buy from that chain again, and I tell this story every chance I get. So they saved $40, and cost themselves lots of business, as I am just now furnishing a new apartment in Boca Raton, as are some of my friends.

Wildfire Restaurants This chain is part of the Lettuce Entertain You group, that became big and famous for good food and good service. Their staff is well trained. Within two minutes after you are seated, a waiter must come to your table. Your water glass never is empty. You don’t need to find a waiter; they know how to anticipate your needs.

They send out “secret shoppers” to test the service and quality. These people are trained and given a long list of criteria to measure. Reports are made daily to home office. I mean, Lettuce Entertain You is dedicated to quality and service. Their prices are not low; in fact, they lean toward the higher side. Virtually all the restaurants nearby charge more, but Lettuce grows.

Recently I made an reservation for eight people. When we arrived, our table wasn’t ready and we had to wait 15 minutes. That may be normal for some restaurants, but for Wildfire that was unacceptable.

What they did: Immediately after we were seated, a waiter apologized and told us they were “comping” all appetizers, which eventually totaled about $60.

Will I go back to Wildfire? Darn right I will, as will the others who were with me. What could have been a grumpy meal, suddenly became great, as we snarfed down those free appetizers.

So that is the tale of two businesses, one providing me crap service from top to bottom, and one providing great service. Would Rooms to Go do better if it provided better service? You decide.

I believe American business can compete with the sweatshop nations, if not on price, then on quality and service. We have little to fear from competition; we have much more to fear from incompetent management. Once dominant General Motors learned that harsh lesson, but I doubt Rooms to Go will be bailed out by the federal government as GM was.

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


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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.

MONETARY SOVEREIGNTY

–Why there will be a full-blown depression in 2012

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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The Naked Capitalism blog quotes the N.Y. Times, in an article titled, “More Proof That Obama is Herbert Hoover”:

An extraordinary amount of personal income is coming directly from the government. Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government.

By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession. Moody’s Analytics estimates $37 billion will be drained from the nation’s pocketbooks this year.

And President Obama not only wants federal budget cuts, he is aiming for a $4 trillion cut – the biggest cut even he can imagine. He’s ready to cut spending for everything – Medicare, Social Security, Medicaid – and to compound the problem, he wants to increase income taxes (but “only” on the wealthy, so that won’t remove money from the economy . . . or will it?)

Consider the enormous money drain from the economy, when the government reduces spending and compounds it with increased taxes. The economy is starved for money, and the government wants to cut the supply. Talk about applying leeches to cure anemia!

Question for debt-hawks: Where is the money going to come from to grow our economy? Given any thought to that?

The article’s author makes one final comment:

Even knowing how dedicated to bad ends Obama is, I still feel like I’ve walked into a parallel universe. He’s now determined to make these horrific entitlement cuts a sign of his manhood. This is “Change” for sure, to a more brutal, grasping, dog eat dog society, all administered by self serving elites. They will in the end reap the whirlwind they are creating, but not before it mows a path of destruction through our social order.

Based on where Obama and the Tea/Republicans are headed, there will be a depression (not just a recession) next year. Only a miracle of realization, by both parties, can save us now.

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


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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.

MONETARY SOVEREIGNTY

–Learn the bare fundamentals of Monetary Sovereignty in just five minutes

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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In comment #4. in the post titled, “Obama joins the Tea Party,” Tyler F. asked, “If you had 3 minutes to speak at a town hall meeting, what would you say?”

Well, three minutes could be a problem, only because so many questions remain unanswered, and for something most people are not prepared to understand, much less believe, the racetrack approach doesn’t work.

Nevertheless, given perhaps five minutes, I might say something like this:

In just five minutes, I can show you how to cure America’s economic problems.

The U.S. became Monetarily Sovereign in 1971, when we went off the gold standard. That change was so counter-intuitive, few economists, politicians or media writers understand it.

Unlike you and me, unlike the states, counties and cities, unlike Greece and Ireland, a Monetarily Sovereign nation has the unlimited ability to pay its bills. I must live within my means. The federal government has no means to live within. You must have a source of money before you spend. The government creates money by spending. The financial rules that apply to you and me, do not apply to the government.

Something else counter-intuitive: The dollar does not exist. Just as the number seven does not exist, the dollar merely is a balance sheet number. If you own a home, you have a title; it is evidence you own the home. But the title is not the home. Similarly, that dollar bill in your wallet is not a dollar. It is a title; it is evidence you own a dollar.

Because a dollar is just a balance sheet number, the federal government has the power to create and destroy dollars, merely by changing numbers. When you receive a government check, that check is not money. It is a set of instructions telling your bank to change the number in your bank account.

Your bank account number goes up, and a government balance sheet number goes down. No dollars move from the government to you. Dollars can’t move because dollars don’t exist. Your bank could be on Mars, and the government could pay you by changing the number in your bank account. That is the meaning of Monetarily Sovereign – infinite control over sovereign currency.

So, how is it possible for a Monetarily Sovereign nation to run short of its sovereign currency? Why would a nation, that can pay all its bills by changing bank account numbers, ever need to borrow its own currency? Why would a nation with infinite control over its sovereign currency, need tax money to pay its bills?

The answers are: The U.S. government never can run short of dollars. The U.S. government no longer needs to borrow money or to levy taxes. Borrowing and taxing are relics of the gold standard. To pay its bills, the U.S. government simply changes numbers in bank accounts.

So, what is the purpose of the debt ceiling? Answer: It has no purpose. It too is a relic of the gold standard.

By definition, a large economy contains more dollars than does a small economy. So, to grow from smaller to larger, an economy must have a growing supply of dollars. The government adds dollars to the economy by deficit spending, that is by changing numbers in bank accounts.

Why then does Congress wish to reduce deficit spending? Because Congress does not understand Monetary Sovereignty.

So, what about inflation? The value of money is based on supply and demand. Demand is based primarily on the reward for owning money, which is interest. So, preventing inflation requires reducing the money supply or increasing interest rates. However, reducing money supply growth historically has led to recessions and depressions. That is why the Fed controls inflation by raising interest rates.

To summarize, There is a simple and direct solution for our economic problems: Grow the economy with federal deficit spending, and use interest rate control to prevent excessive inflation.

Yes, this could be cut to three minutes, but people need more time to absorb a counter-intuitive concept. Even five minutes doesn’t really do it.

That’s why town hall meetings are not informative but rather are stage shows for the amusement of the audience.

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


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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.

MONETARY SOVEREIGNTY