–You never will know what you have lost

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 long-standing, though currently Tea/Republican inspired, desire to reduce federal spending and deficits, is based on the erroneous beliefs that:

1. Federal taxes pay for federal spending so that by cutting spending, we can cut taxes. Fact: This was true before 1971, when we were on a gold standard. Today, there is no financial relationship between federal taxes and spending. Were taxes to fall to $0 or rise to $100 trillion, our Monetarily Sovereign federal government could pay any bill of any size.

2. Big government burdens our individual freedoms. Fact: A big nation needs a big government to provide the myriad benefits its big and diverse population desires. Federal laws can be burdensome, but federal spending is not. It is a gift of a Monetarily Sovereign government, the most brilliant form of government financing ever created.

That said, there is something insidious, essentially invisible, that happens when federal spending is reduced. The absence of benefits sneaks up on us, like the butterfly killer that leaves no clue, until one day there are no butterflies. You never will know how your life and America’s future will be affected by:

1. Reduced federal support for education. What child genius will not grow to invent the cancer cure or the unlimited, pollution-free fuel or the food that does not require farming? How many great scientists and artists and builders will not be created? You never will know.

2. Reduced federal support for health services. How many future leaders will not live to fulfill their potential? How much suffering will result? Which of your own relatives will die prematurely or live nonproductive lives? What preventable “black death” next will scourge the human race? You never will know.

3. Reduced police/military support. How many soldiers will die from inadequate equipment? How many civilians will be murdered for the lack of a cop-on-the-beat? How many investors will be cheated because federal agencies did not have the funds for proper supervision? You never will know.

4. Reduced aid to the poor. How many children will poverty turn to crime? How many great minds will be dulled by starvation before making their contribution to America and the world? How much of America’s potential will be lost to homelessness or to the struggle for bare existence? You never will know.

The list goes on and on: The lame who might have walked. The blind who might have seen. The children who might have given to America. The tornados and hurricanes and earthquakes that might have been foreseen. The money that investors might have saved. The inventions never invented. The recessions and depressions that might have been avoided. The wars that might have been won or prevented. The life-saving drugs that might have been developed. The people who might not have died too soon. The beauty never created. The ideas lost. The better world that might have been. You never will know.

And we trade all this potential for the reality of a meaner, uglier, less elegant life, especially for the lower classes, who will be affected most by deficit reduction, though we all will be affected. What a waste, given the tools we’ve been given, that we intentionally should deprive ourselves and our children and our grandchildren of the benefits a society can offer, and instead retreat toward the days of hardscrabble anarchy.

What have we lost? What will we lose tomorrow? You never will know.

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

–Another “Obama compromise”: The Tea/Republican version of the Postal Service

Excerpts from a Washington Post story, by Ed O’Keefe, dated 9/6/11:

The White House will include a financial rescue plan for the U.S. Postal Service as part of a broader $1.5 trillion deficit reduction package due to Congress in the coming weeks, it said Tuesday.

The White House will rescue the Postal Service, while reducing the deficit? How will they do that?

In advance of those recommendations, the Obama administration is asking lawmakers to give the Postal Service a 90-day extension to pay billons of dollars in mandatory annual retirement payments that are due at the end of its fiscal year Sept. 30.

Ah, you see, they will delay payments to retirees. As you know, these retired workers have more money than does the federal government, so they can support the Postal Service, while the federal government cannot.

The U.S. Postal Service wants to cut 120,000 jobs as it reports another loss in revenue.

And not just the retired workers. We need to save the federal government and help the nation’s unemployment problem by cutting 120,000 jobs.

The White House declined to detail what a postal rescue package might include, but one senior administration official said the plan would be “consistent with the Postal Service’s mission and its obligations to all of its stakeholders, including its workers.”

Let’s see: Its stakeholders are:
Users: But the plan is to cut service
Employees: But the plan is to cut employees.

Any other stakeholders you can think of? (Don’t say, “taxpayers.” Taxes don’t pay for federal spending.)

Sen. Joseph I. Lieberman (I-Conn.), who chaired Tuesday’s Homeland Security and Governmental Affairs Committee hearing on the issue, said his panel would draft legislation to address the concerns.

Two of the panel’s members, Sens. Thomas R. Carper (D-Del.) and Susan Collins (R-Maine), are pushing competing proposals, but both signaled Tuesday that they are willing to collaborate on a plan. Carper’s bill would give the Postal Service the flexibility to cut Saturday mail deliveries, close thousands of post offices and give USPS access to money it has overpaid for decades to federal retirement funds. Collins, who opposes curtailing mail deliveries because of potentially adverse effects on rural and far-flung areas, wants to overhaul the Postal Service’s payments to pre-fund future retiree benefits, which cost USPS about $5.5 billion annually.

Got it. Cut service; cut employees; cut pensions. Cut, cut, cut: The Tea Party mantra, via Obama.

The Postal Service is a self-funding entity drawing revenue from the sale of stamps and shipments . . .

Why is the U.S. Postal Service self-funding? The army isn’t. The Congress isn’t. The White House isn’t. The Department of Homeland Security isn’t. In fact, none of the thousand federal agencies are self funding. Why the Postal Service? Anyone?

In addition to structural reforms, Sen. Claire McCaskill (D-Mo.) suggested that USPS should mount a national advertising campaign promoting the value of printed mail.

“You cannot get money by text message,” McCaskill said. “I really think that there is a longing out there right now, especially in these uncertain times, for some of the things that have provided stability over the years.”

Donahoe said such a campaign is in the works. Aides said it will debut for the holiday shopping season.

Lieberman voiced his support, suggesting, “We should be writing more passionate letters to those we love.”

O.K., problem solved. Spend advertising money the Postal Service doesn’t have, to encourage people to write passionate letters.

Now let’s get real. Cutting service will beget reduced usage, which will force more service cuts, which will beget further reduced usage, until over time, we will be left with one letter carrier, working out of one post office, carrying one letter – a passionate love letter from Sen. Lieberman.

If America wishes to have a postal service, the federal government must support it, the same way the federal government supports every other vital service. This self-funding nonsense – a relic of the pony express – is a ticket to mail oblivion.

But then, how can a Monetarily Sovereign government, with the unlimited ability to pay any bills of any size at any time – a government that has no problem supporting troops all over the world, from South Korea to Germany and points in between, all without raising taxes – how can such a government not afford to support the U.S. Postal Service?

It’s just another “Obama compromise.”

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

MONETARY SOVEREIGNTY

–Will Obama’s latest mortgage relief plan be a hit or a miss?

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

MONETARY SOVEREIGNTY

Rodger Malcolm Mitchell

–Proof that money and brains don’t always go together: Steve Forbes

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

MONETARY SOVEREIGNTY

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