–Will Obama’s latest mortgage relief plan be a hit or a miss? Tuesday, Sep 6 2011 

Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Stephen Gandel wrote this piece for Time:

Is the Government Going to Lower Everyone’s Mortgage Payment?
Tuesday, September 6, 2011 at 3:02 pm

It’s been about two weeks since the Obama administration floated the idea of a massive mortgage refinance, and there seems to be little consensus on whether the plan would provide a boost to either the economy or the housing market.

The plan is to allow the millions of homeowners who have government owned mortgages to refinance those home loans at today’s lower interest rates. Lower mortgage payments should make it easier for struggling homeowners to make their payments and stay out of foreclosure. What’s more, a massive refi could also boost the economy. The idea is that if people had to spend less on their mortgage they would spend that money elsewhere, buying cars or shoes or whatever.
[…]
Still, a number of economists are giving the plan a thumbs down. The most prominent detractor is Ed Glaeser, an economics professor at Harvard University and a housing market expert. Glaeser says the plan is a poor idea for stimulus because the benefits for homeowners would be spread over 30-years, yet the cost to mortgage investors and banks and taxpayers, which own the loans at what are considered high rates today, would be immediate. That is the opposite of how good stimulus is supposed to work.

As always, the Harvard professors do not understand Monetary Sovereignty. They do not understand that any money spent by the federal government (Is there any in this plan?) does not cost taxpayers one cent. In a Monetarily Sovereign government, federal taxes do not pay for federal spending.

But he’s right about it being a poor plan.

What’s more, Glaeser says lower mortgage rates are unlikely to boost the housing market or even stem foreclosures. Bank analyst Richard Bove says the plan would be a dud because it really doesn’t boost the money in the economy, just transfers it from banks to borrowers.

Bove is right on target. But of course, the government’s idea (really, the Tea/Republican idea — give credit where credit is due) is for the federal government to spend nothing, but magically stimulate the economy. That’s something like filling the water bottle without adding water.

And normally, I would agree with Bove. Normally, if borrowers spend money in the Gap there really shouldn’t be any difference for the economy than if they were sending money to the bank or investors. In fact, the later could be better for the economy because banks or investors could put that money back in to the economy in the form of new loans or investments. But that’s not happening right now. Lending has been on a year and a half slide. And investors are running toward Treasuries, and so far those plunging bond yields have done little for the economy. So right now, putting money in consumer’s hands instead of the banks may make sense.

The problem is the ridiculously low interest rates That is where I disagree with MMT, which says 0% is the “natural rate of interest” (whatever that means.) Historical data shows that contrary to popular wisdom, high rates stimulate, because they force the government to pump interest dollars into the economy.

Lowering the number of foreclosures will boost the housing market. There may be as many as 15 million borrowers in the U.S. who owe more than their house is worth. Lower their payments and you are likely to lower the number of foreclosures. Fewer foreclosures should lead to rising housing prices. And rising housing prices should be better for the economy.

Agreed.

. . . the current recovery is unusual not just for its slow pace of job growth, but also because of the lack of a housing recovery. In the past, housing recoveries have always led more general economic recoveries. That’s not happening this time, and it may be the reason the recovery has been so disappointing.

Yes, that’s one reason, but not the main reason, which is the timidity of the stimulus programs. “Too little, too late” has been the chief characteristic of all federal efforts.

All in all, this plan is typical of Washington politicians. They think our federal government –our Monetarily Sovereign federal government, with the unlimited ability to pay any bill — is “broke” (Boehner’s word), so must cut spending. They want the banks — many of which have gone bankrupt, and none of which are Monetarily Sovereign — to cut their income. It’s beyond ignorant.

And isn’t this eerily similar to Obama’s Mortgage Modification fiasco of two years ago – the one that none of the banks wanted – so they stalled, and stalled and stalled, until perhaps one out of a thousand applicants received a reduced mortgage rate, but all spend countless hours, submitting and re-submitting endless forms and waiting on telephone hold?

Message to Obama: Banks are businesses. Like all businesses, they will do what they feel is profitable. Duh.

How about this, instead: Reduce everyone’s mortgages by the exact amount Obama wants, but have the federal government give the banks that amount, plus a small bonus. So the banks profit immediately and profit again when foreclosures go down, and the economy and consumers gain spending dollars. And no, the taxpayer pays nothing (the federal government does not use federal taxes for spending).

Now there would be a plan that would help the economy (though not as much or as quickly as eliminating the FICA tax. But that’s another story).

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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Rodger Malcolm Mitchell

–Proof that money and brains don’t always go together: Steve Forbes Tuesday, Sep 6 2011 

Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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From Newsmax.com
Proof that money and brains don’t necessarily go together (or why I never buy Forbes Magazine):

Steve Forbes to Newsmax: Obama, Bernanke Must Go
Wednesday, 31 Aug 2011 06:03 PM
By Jim Meyers and Kathleen Walter

Former presidential candidate and Forbes magazine editor Steve Forbes tells Newsmax that President Obama’s planned economic reforms are “the definition of insanity” — repeating failed policies in the hopes that somehow they will become successful.

In a wide-ranging exclusive interview, Forbes also declares that Federal Reserve Chairman Ben Bernanke should have resigned a long time ago, says Obama will be a one-term president, and looks for significant and positive reforms in Washington after the 2012 elections.

He also predicts the United States will make an “astonishing” move and return to a gold standard in the next five years, and says he’s “very impressed” with Gov. Rick Perry and is leaning toward supporting him for the GOP presidential nomination.

A Perry / gold-standard supporter. What more could I say?

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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

–Formerly great America dwindles. Can’t afford to pay for hurricane/tornado damage and postal service. Tuesday, Sep 6 2011 

Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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The Washington Post online has a feature called, “The Federal Eye” The 9/6/11 version included the following:

White House: Hurricane Irene will cost at least $1.5 billion

The White House says it will need at least $1.5 billion in fiscal 2012 to start paying the federal government’s share of damages caused by Hurricane Irene.

An estimate released Monday is on top of $5.2 billion the Obama administration said last week that it needs to keep funding reconstruction projects prompted by previous natural disasters, including the tornadoes in Joplin, Mo., this past spring and Hurricane Katrina in 2005.

The estimates come as Senate appropriators plan Tuesday to begin considering the annual homeland security spending bill. A GOP-backed version passed by the House includes $1 billion in supplemental assistance for fiscal 2011 and $2.65 billion for fiscal 2012, which begins Oct. 1.

House Majority Leader Eric Cantor (Va.) and other Republicans have called on the Senate to pass the measure, which would pay for storm damage by cutting some money allocated for an Energy Department program for advanced-technology vehicles.

At one time, the government believed we needed this advanced technology, which includes:

Plug-in hybrid electric vehicle technologies
Extended range electric vehicle technologies
Hybrid electric, pure electric, and hydraulic technologies
Advanced electric drive technologies and engine technologies
Advanced energy storage (i.e., batteries) technologies and chemistries
Advanced climate control, power electronic, and other ancillary systems technologies
Internal combustion engines burning advanced fuels (i.e., 100% hydrogen and hydrogen/CNG-blended fuels)

The research would have had far-reaching implications, as it not only would help reduce use of fossil fuels and pollution in cars, busses and trucks, but affect many other areas like architecture, manufacturing, farming, and energy production. It could be among the most important research initiatives in America.

However, those things now are felt to be less important than reducing the federal deficit, which I agree is more important, in that such reduction will cause the next recession if not depression. What could be more important than recessions and depressions?

The other headline in the “Federal Eye” was:

Postal Service warns it could lose $10B this year; Postal Service fighting for its life

The U.S. Postal Service could lose up to $10 billion and have little more than a week’s worth of money left in the bank when its fiscal year ends Sept. 30, the nation’s top postmaster will tell Congress Tuesday.

Postal officials are hoping the latest numbers will finally compel lawmakers to grant them new legal authority to alter delivery schedules, close post offices and lay off hundreds of thousands of workers.

Who could argue with the government’s desire to slash postal services and fire hundreds of thousands of postal workers. Our government is “broke” (John Boehner said so), and all spending must be balanced with cuts (Eric Cantor said so), so forget about the fact that a Monetarily Sovereign government never can be broke, and a balanced federal budget always leads to recessions and depressions.

You won’t notice the absence of advanced technology research. You’ll soon forget the worsened postal service and the hundreds of thousands of unemployed postal worker. You happily will vote for the guy who still favors “change” (Obama) or who thinks Social Security is “a bad disease,” (Perry), or one of the other empty vessels, who have zero understanding of Monetary Sovereignty, but want to lead our nation.

I wonder what it will take to get you to contact your political representative, and tell him to stop looking for ways to reduce the amount of lifeblood (aka money) entering our economy.

I seriously hope you are preparing for the next recession or depression. Nothing can stop it now. The politicians guarantee it, as formerly great America dwindles, dwindles, dwindles.

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

–Pulitzer winner James B. Stewart writes “Common Sense” column for N.Y. Times — and gets it wrong Saturday, Sep 3 2011 

Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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James B. Stewart writes the “Common Sense” column for the Business Day section of The New York Times. He shared the Pulitzer Prize for explanatory reporting back in 1988, when he was a reporter at The Wall Street Journal. He now is a professor of business journalism at the Columbia University Graduate School of Journalism.

He wrote a column recently, in which he said:

. . . our political leaders and those who aspire to replace them should be debating the fiscal policies that will put Americans to work in the short term and reduce the deficit in the long term . . .

Really? Think about it Mr. Stewart. Fiscal policy that stimulates employment in the short term, then reduces the deficit in the long term? How and why should the federal government spend more today to stimulate the economy and employment, then when that effort works, make a U-turn, abandon what works, then spend less – to do what? Strangle the economy and reduce employment?? Even a non-economist should recognize the silliness of that concept.

And your column is titled, “Common Sense”? Yikes!

O.K., so you “only” won a Pulitzer for reporting and not a Nobel for economics (not that it makes any difference, based on Nobels awarded to date). But, there is zero data to indicate that reductions in federal spending will do anything other than lead to recessions.

Sadly, you got your information from Ben Bernanke, who you quoted, “To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time.”

And where did Mr. Bernanke get that? Gross National Income (GNI) for all practical purposes is Gross Domestic Product (GDP) less comparatively small amounts of interest paid to other countries. So, Mr. Bernanke says, for U.S. fiscal policy to be sustainable, Debt/GDP must remain the same or decline.

As readers of this blog know, the Debt/GDP ratio is meaningless. Federal debt is a life-of-nation measure that easily could be eliminated tomorrow. GDP is a one-year measure, unrelated to T-securities (aka “Debt”). There is not one iota of historical data to support Mr. Bernanke’s conclusion that Debt/GDP should be reduced in a Monetarily Sovereign nation.

What reporter believes science is based on common sense rather than on facts? If only reporters would do a bit of fact-checking, the public might not be so confused by common nonsense.

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


==========================================================================================================================================
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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

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