–Welcome to slavery in America. Lincoln never imagined this.

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
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BACKGROUND
As you’ve seen in previous articles (for instance, No, it’s not your imagination. The upper 1% really are screwing you more. Saturday, Jul 7 20120) the GINI ratio is a calculation of the gap between the richest and the rest. The higher the number, the greater the gap. Every year the number is higher; every year the gap is greater:

Monetary Sovereignty

The above-referenced article listed “Ten suggestions (for the upper 1%) about how to screw the lower 99% even more, and increase the income gap.” Here is a quick outline of the “10 Suggestions.” Read the article itself for more details:

1. Maintain or increase the FICA tax.
2. To “save” Social Security, claim it’s insolvent, reduce benefits and increase the starting age and tax benefits.
3. To “save” Medicare, claim it’s insolvent, and reduce payments to doctors, hospitals and other health care providers.
4. Cut government employment and payments to government suppliers.
5. “Broaden” the income tax base. Include more people in the Alternative Minimum Tax (AMT).
6. To reduce “big government” cut food stamps, unemployment compensation, Medicaid, aid to education, job training and all other federal aid programs.
7. Cut financial assistance to the states.
8. Spread the myth that the U.S. government is insolvent, like Greece, and that federal taxes and borrowing pay for federal spending.
9. Allow banks to trade for their own accounts, bail them out when their investments go sour and never accuse a banker of criminal activity.
10. Nominate arch conservatives to the Supreme Court to maximize the political power of the rich.

TWO MORE METHODS
With 10 simple ways to screw the average American, you would think the super-rich would be satisfied. But no, here are 11th and a 12th methods, countenanced by the bribed politicians:

I. Replace full-time, experienced workers with part time, inexperienced workers at much lower salaries.

naked capitalism
Barbara Garson: How to Become a Part-Time Worker Without Really Trying

Big companies squeeze down even more on workers by turning what were once full-time jobs into part-time positions to avoid providing benefits and to push pay even lower. 21% of the jobs lost during the Great Recession were low wage, meaning they paid $13.83 an hour or less. But 58% of the jobs regained fall into that category.

Employers have used the downturn to dump entire departments and to reorganize themselves so that the same work, the same jobs, requiring the same skills, would henceforth, in good times and bad, be done by contingent workers. During the course of the Great Recession corporate profits went up by 25%-30%, while wages as a share of national income fell to their lowest point since that number began to be recorded after World War II.

Not only are salaries lower for part time workers, but these poor souls receive no benefits. They cannot afford health care or health care insurance. But even the middle class is under huge financial pressure from increasing health care and health insurance costs.

II. Make sure college, the source of hope for financial growth, is unaffordable:

Bloomberg
College Costs Reaching a Breaking Point?
By Karen Weise

Standard & Poor describes a spiraling problem for colleges: As they raise tuition, more families need aid to afford school. Students take out more debt. Colleges are increasingly directing their aid to wealthier families—who need it least.

And uniquely among all debts in America, student debt is not dischargeable via bankruptcy. If you owe money to the federal government (the one lender in America that creates its own money, so should not ask for repayment), you essentially are locked into a debtor’s prison of unaffordable, unending debt draining away your ability to grow financially.

WELCOME TO SLAVERY
Experienced, full-time workers are being replaced with inexperienced, part-time workers, at lower salaries and no benefits. Meanwhile, working class Americans are denied college — their one path to financial security — by a combination of unaffordable tuitions and unaffordable college loans.

The rich have created a brilliant, 12-part plan. It will force you, your children and your children’s children to spend your lives working harder and harder for less and less, completely at the mercy of the rich.

If you accept the twin myths that the federal government “can’t afford” paying benefits, and that federal spending causes inflation, then welcome to slavery in America. Lincoln never imagined this.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================
Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

THE RECESSION CLOCK

As the lines drop, we approach recession, which will be cured only when the lines rise.

#MONETARY SOVEREIGNTY

–Does federal deficit spending lift corporate profitability?

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Often, I receive notes from folks on the right, who hating government and professing macho self-sufficiency, tell me government doesn’t create anything or do anything or benefit anything, and that all the benefits come from the hard work of private people and private companies.

In one sense, these folks are correct, as everything ultimately does come from people (so far, until the machines take over ala “Terminator”), but diminishing the vital role of government seems especially ignorant of fact.

I won’t get into the myriad scientific, environmental and social initiatives funded by the federal government. To deny them is to be deliberately obtuse.

Rather, I’ll allow those on the right to stew over the following graph:

Monetary Sovereignty

The red line shows annual changes in federal deficit spending. The blue line shows annual changes in corporate profitability.

There are many causes for corporate profitability and unprofitability, and deficit spending is just one of them, so the lines are not perfectly in parallel — but pretty close for economics, a science in which every effect has multiple causes.

So, unless one wishes to believe that corporate profitability somehow stimulates federal deficit spending, or that the whole thing is one giant coincidence, and not cause-and-effect, we are left with the fact that federal deficits increase corporate profits.

This makes logical sense, if for no other reason than deficits pump dollars into the economy, and dollars are what fund work. Corporations are part of the “private people and private companies” that ultimately accomplish everything.

[You may believe that not only is government spending useless, but corporate profits are equally useless, in which case please return to chipping your stone ax prior to skinning a mastodon.]

During recessions, when the federal government and the public temporarily remember the need for deficit spending, corporate profits actually rise.

But after the recessions end, when the government and the public forget what cured those recessions, and “stimulus” becomes a bad word, the government cuts deficit spending, and corporate profit growth begins to fall — as is happening, now.

And the whole ridiculous charade begins anew.

Now, yet again the public has turned against what lifted us from the last recession and we yet again are in the deficit cutting mode, and we yet again head for recession, and corporate profit growth yet again is falling.

Yet again and yet again and yet again and yet again — learning nothing from yesterday.

Isn’t it amazing how the world’s most intelligent species can be so ignorant?

Rodger Malcolm Mitchell
Monetary Sovereignty

As the lines drop, we approach recession, which will be cured only when the lines rise.

#MONETARY SOVEREIGNTY

–A funny (sad?) letter from my Senator, Dick Durbin

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Whenever I feel the need for a laugh, I write to one of my Senators. Being busy guys, their responses come in the form of stock letters, selected by low-paid kids, who probably have stars in their eyes from working with a SENATOR!

If you have an iPhone, you probably laugh at some of the responses you receive from Ciri. Senatorial responses are just about as intelligent, but the following is one of the better ones. It should brighten your day.

I wrote to Senator Dick Durbin (D – IL), asking why not one top-level criminal banker has been prosecuted, much less convicted. (I already knew the answer: They have bribed the President with campaign contributions and promises of lucrative gigs later).

Here is the complete text of Senator Durbin’s response:

Mr. Rodger Name.

Dear Mr. Name.:

Punctuation errors aside, my name is not “Name,” but I do appreciate the almost personalization.

Thank you for your message about President Obama. I appreciate hearing from you.

President Obama took office facing a financial market meltdown, an economy in tatters, and two wars. He has taken bold action to address our economic challenges and is charting a new course in our foreign policy.

Somehow, “bold action” and “Obama” (the great compromiser) don’t seem to go together.

Anyway, the economy still is in tatters, because of deficit reduction, and we continue fighting two wars which cannot be won, never will end, destroy thousands of lives and always seem to require ever greater erosion of our freedoms: The war on terror and the war on drugs.

As for the “new course in our foreign policy,” exactly what is our foreign policy regarding China? Russia? Iran? Iraq? Libya? Israel? Syria? Pakistan? Mexico? Afghanistan? Do we have a foreign policy, anywhere?

He is also establishing a new level of transparency and accountability in the federal government . . .

“Transparency and accountability”? Is this a riot? Didn’t Durbin update his letters after the NSA scandal broke? Yes, there’s a “new level” of transparency. A new low level. Just ask Edward Snowden.

. . . while taking meaningful steps to alleviate our debt.

Obama has “alleviated” government debt (which is too low), by widening the gap between the rich and the rest. Increase FICA. Cut Social Security. Fire federal workers. Cut infrastructure spending. Cut spending on scientific R&D. So many “meaningful steps” of which to be proud.

He has defended the rights of our service members and helped to provide the necessary equipment and funding to care for our veterans.

Does Durbin live in the U.S.?

VA Healthcare System Failing Veterans, Study Says
March 28, 2013

Military veterans experience “excessive wait time” for medical care, leading to higher incidences of preventable hospitalizations and death, according to a scientific research council.

Drawing on the findings of recent government and scholarly studies, a report issued this week by the Institute of Medicine paints a picture of a healthcare system that is understaffed, undertrained, and inaccessible.

But Durbin’s letter gets even funnier:

A President may be impeached and removed from office when accused of unlawful activity. President Obama has not been accused of unlawful activity.

Huh? My note said nothing about impeaching the President. Where did this response come from?

My guess: Durbin has received so many letters saying Obama should be impeached, he simply added this blanket denial to all his responses.

It’s like the kid telling his mother he did not put the fork in the toaster, when she didn’t even know there was a fork in the toaster.

It is essential that we all work together in a cooperative and bipartisan way for the good of Illinois and the nation. For too long, the political arena has been plagued by polarizing words and a lack of willingness to compromise. President Obama has shown that he is willing to work for the betterment of this nation. It is my hope that we can usher in a new era of civility and bipartisanship.

Ah yes, Obama’s bipartisanship and compromise — not strong, effective leadership or compassion for the middle- and lower-classes.

It was bipartisanship and compromise, not leadership, that brought us the sequester, the FICA increase and the NSA disaster. It’s comforting to know the Compromiser in Chief is at the helm.

Thank you again for contacting me. Please feel free to keep in touch.
Sincerely,
Richard J. Durbin
United States Senator

Senator, I hate to mention it, but you forgot to respond to my message, which asked why the President refuses to prosecute criminal banksters. Strangely, you seem to have avoided the subject.

But I will contact you again, next time I need a laugh — or a cry.

Rodger Malcolm Mitchell
Monetary Sovereignty

As the lines drop, we approach recession, which will be cured only when the lines rise.

#MONETARY SOVEREIGNTY

QE: How $1 trillion = $0, and why the stock market tanked

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

The Fed hinted it may possibly reduce Quantitative Easing, so the stock market tanked. Why?

Question I: What is QE (quantitative easing)?
Answer I: The Federal Reserve purchases billions of dollars worth of T-securities each month, to pump dollars into the economy and to reduce interest rates, so to stimulate the economy.

Question II: Where does the Fed get the billions it spends every month to purchase T-securities as part of its QE?
Answer II: It doesn’t.

Confused? Of course you are, but you’re no more confused than Congress and the media, because Answer I, though it is the official answer, is total bullsh*t.

The federal government is Monetarily Sovereign. It created the laws that created the dollar. The dollar exists only as a system of laws, which the government can change at will. There is no physical dollar. You never have seen or touched a dollar.

That dollar bill in your wallet is not a dollar. It is a bearer instrument, telling the world you own a dollar.

Just as a house deed is not an house, and a car title is not a car, and a loan document is not an loan, that dollar bill is not a dollar. So, what is a dollar? It is nothing more than an accounting notation that follows the currently obsolete laws created, and often revised, by the federal government.

Getting back to QE, how does it work? Let’s think first about bank Certificates of Deposit (CDs), which are similar to T-securities. When you buy a CD, your bank debits your checking account and credits your CD account. No money created or destroyed.

Later, when your bank buys back your CD, it credits your checking account and debits your CD account. Again, no money created or destroyed.

Your bank doesn’t need to spend any money to redeem your CD. The whole process was just a transfer of your funds from one of your accounts to another of your accounts.

It’s the same with T-securities. When you buy a T-security, the Federal Reserve Bank (FRB) debits your checking account and credits your T-security account at the FRB. Then, when the Fed buys back your T-security, it merely debits your T-security account and credits your checking account.

Neither the purchase nor the redemption of T-securities creates or destroys money. So the Fed doesn’t need any money to “buy” T-securities. It just transfers money from one account to another — both accounts owned by the same holder.

That $1+ trillion the Fed has “spent” on T-securities added zero dollars to the economy. So why does the Fed do it?

Three reasons:

1. First, the Fed has created the “confidence fairy,” the belief that merely believing the Fed is supporting the economy, will in fact, support the economy. If you believe it, it must be so.

2. Second, by buying T-securities, the Fed increases the price of T-securities, which reduces interest rates. (Bond prices move the opposite of interest rates). The belief is that low rates cut business costs and thereby stimulate the economy.

As with many Fed beliefs this one is factually wrong. There is no relationship between low interest and economic growth.

There actually is a slight inverse relationship, because low rates require the government to pay less interest into the economy.

USA Today
Federal Reserve pays government $88.9 billion
Martin Crutsinger, Associated Press 11:32 a.m. EST January 10, 2013

The Federal Reserve paid the federal government a record $88.9 billion in 2012.

The central bank earned the money from the Treasury bonds and mortgage-backed securities it has bought to drive interest rates lower and boost the economy.

[That’s $88.9 billion that would have been earned by the private sector, and really stimulated the economy, but now has disappeared from the economy. And this is stimulative??]

3. Third, to increase bank bank lending. Banks are able to lend 10 times their reserves. The vast majority of bank reserves are accounts at the FRB. They can be in the form of cash (i.e. accounting notations) or in the form of T-securities (also, accounting notations).

So, by increasing bank reserves, bank lending is encouraged, and this stimulates the economy. Right? Wrong.

Banks obtain all the reserves they want — from the Fed, from other banks and from private lenders. (My own company lent millions to our local bank for their reserves.) By law, there never can be a shortage of reserves available to banks.

Bank lending is based on credit risk and interest reward. Banks have several investments available to them; lending is just one of those investments.

Ironically then, low interest rates actually reduce the reward for bank lending, and so reduce the motivation to lend.

In total, QE is a fraud. A slight of hand. Under which shell is the pea? QE accomplished nothing good, and mathematically may do harm to the economy.

Somehow, it never seems to make the “experts” wonder how the Fed is “spending” billions every month, yet the money supply doesn’t multiply, the deficit doesn’t grow and the Fed has no source of income to spend all those dollars.

So why did the stock market tank, when Chairman Bernanke hinted he might slow that useless-probably-harmful QE? Because it went up when Bernanke said he would institute that useless-probably-harmful QE.

The stock market went up for the wrong reasons, then came down for the same wrong reasons.

QE is much ado about nothing. It is meaningless, probably harmful. It is like prescribing leeches to cure anemia. The wrong medicine is worse than no medicine at all.

Rather than engaging is shell games, the government could and should stimulate the economy by following the “Nine Steps to Prosperity” listed below.

Unfortunately, Congress and the President have been bribed by the upper 1% income group (via campaign contributions and promises of lucrative employment) to widen the gap between the rich and the rest. This is best accomplished by impoverishing the economy, while pretending to stimulate it.

Unless, by some miracle, an honest politician enters the White House, we are rushing headlong into a recession.

Yikes! Did I just use “honest” and “politician” in the same sentence?

Rodger Malcolm Mitchell
Monetary Sovereignty

As the lines drop, we approach recession, which will be cured only when the lines rise.

#MONETARY SOVEREIGNTY

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