AI discusses the cause of inflation. Here’s an addictive example you can enjoy yourself.

Want to have a discussion about anything — ANYTHING —with an intelligent person? How about a discussion with a seemingly intelligent, seeming person?

Here’s a discussion I had with a pretty good facsimile, an exercise you can enjoy yourself by clicking the link.

We discussed the cause of inflation. Warning, it’s addictive. Unlike the humans I try to reason with, the computer never gets angry or even impolite. It always acknowledges points made. And its opinions are not its own.

Sadly, it doesn’t learn from arguments. It just keeps repeating what it already has been told by its references.

Rodger Mitchell: It widely is believed that “excessive federal spending causes inflation,” yet when I try to find an example of excessive federal spending causing inflation, I receive the explanation that, “It’s really a combination of factors of which excessive federal spending is one factor and not even an immediate factor.

“It could be a delayed part.”

Sadly, that could be said of anything. I could make the same statement about phases of the moon or children born with red hair — as being only one factor and not even an immediate factor in inflation.

**A computer-generated illustration of: A computer on a stage, talking into a microphone.”**

In short, federal spending is no more a demonstrable factor than is a sign of the zodiac.

Chat GPF: The relationship between federal spending and inflation is a complex and debated topic among economists.

While some people hold the belief that excessive federal spending directly causes inflation, the reality is more nuanced and not as straightforward as a simple cause-and-effect relationship.

Inflation is a general increase in prices over time, and it can be influenced by a variety of factors, including monetary policy, fiscal policy, supply and demand dynamics, international trade, productivity levels, and more.

Excessive federal spending can potentially contribute to inflation, but it is not the sole or immediate factor responsible for it.

When economists explain that excessive federal spending is only one factor and not an immediate one in inflation, they are acknowledging the multifaceted nature of inflation.

They are suggesting that while federal spending can have an impact on inflation, it needs to be considered alongside other variables that influence price levels.

Simply blaming federal spending without considering other factors would oversimplify the issue.

It is important to note that economic phenomena, such as inflation, are typically the result of multiple interacting factors. This complexity makes it challenging to isolate and definitively prove the direct causal relationship between any single factor and inflation.

Therefore, it is not accurate to compare federal spending’s role in inflation to unrelated factors like phases of the moon or hair color, as the former is subject to economic analysis and empirical research.

**Computer-generated image of: “A computer pondering a question in economics.”**

Economists continue to study the relationship between federal spending and inflation, and there are differing views within the field.

Some argue that excessive government spending, particularly when not matched by increased productivity or accompanied by monetary expansion, can contribute to inflationary pressures.

Others argue that other factors, such as changes in private sector spending, global economic conditions, or shifts in supply and demand, have a more significant influence on inflation.

In summary, while excessive federal spending can potentially contribute to inflation, it is just one factor among many.

The complexity of economic systems and the multitude of factors influencing inflation make it difficult to attribute it solely to federal spending. Economic analysis and research are ongoing to better understand these dynamics and their interrelationships.

Rodger Mitchell: It’s not terribly “challenging to isolate and definitively prove the direct causal relationship between any single factor and inflation.” Inflations historically are caused by shortages, usually shortages of oil or food. I see many parallels through history between oil or food shortages and inflation.

I do not see the same parallels between federal spending and inflation. Can you provide an example of an inflation that did not result from an oil or food shortage, but instead resulted from excessive federal spending?

ChatGPT: While it is true that supply shocks, such as oil or food shortages, have historically played a role in triggering inflationary episodes, it would be incorrect to assert that inflation is exclusively caused by these factors. Inflation can also arise due to other factors, including excessive government spending.

One example often cited as an instance where excessive federal spending contributed to inflation is the case of Zimbabwe in the late 2000s. The Zimbabwean government embarked on a policy of significant fiscal expansion, primarily through extensive money creation, to finance its expenditures.

This resulted in a substantial increase in the money supply, leading to hyperinflation.

During this period, Zimbabwe experienced a severe economic crisis, with skyrocketing prices, rapid depreciation of the currency, and a loss of confidence in the monetary system.

Your Creation — **Four computer generated images of: “A computer laughing at a joke”**

While there were other factors at play, such as economic mismanagement and a decline in agricultural productivity, excessive government spending and the consequent increase in the money supply were key drivers of inflation in Zimbabwe.

It’s important to note that this example is just one case among many, and the relationship between federal spending and inflation is not always straightforward.

The impact of government spending on inflation can vary depending on several factors, including the overall state of the economy, fiscal and monetary policies, and the credibility of the government in managing its finances.

In many instances, inflation may result from a combination of factors rather than being solely attributable to a single cause.

It is also worth noting that the effects of excessive government spending on inflation may not be immediate but can manifest over time as the economy adjusts to the increased money supply and the potential distortionary effects of government interventions.

In summary, while oil or food shortages have historically been associated with inflation, excessive federal spending can also contribute to inflationary pressures under certain circumstances.

The example of Zimbabwe illustrates how a combination of factors, including excessive government spending and monetary mismanagement, can lead to inflation.

However, it is important to recognize that the relationship between federal spending and inflation is complex, and various factors can interact to influence price levels in an economy.

Rodger Mitchell: The Zimbabwe inflation was caused by a food shortage. Farmland was taken from farmers and given to non-farmers. The result: Food shortage and inflation.

The money “printing” was a response to, not a cause of, inflation.

ChatGPT: While it is true that Zimbabwe’s land redistribution policies and subsequent disruptions in agricultural productivity were significant contributors to the country’s hyperinflation, it is essential to note that excessive money creation by the central bank played a crucial role as well.

The Zimbabwean government resorted to financing its budget deficit by effectively printing money, leading to a significant expansion of the money supply.

This, combined with the loss of agricultural output, created a situation of excess money chasing limited goods, fueling hyperinflation.

The land redistribution policy disrupted agricultural production by displacing experienced farmers and replacing them with individuals who lacked the necessary skills, resources, and incentives to maintain productive farms. This resulted in a decline in food production, contributing to shortages and price increases.

However, it is important to understand the sequence of events. The initial cause of the inflationary spiral in Zimbabwe was the disruption in agricultural productivity due to the land redistribution policy.

As the economy faced shortages of food and other goods, the government responded by printing money to finance its spending obligations, exacerbating the inflationary pressures.

Inflation is a complex phenomenon, and it rarely has a single cause. In the case of Zimbabwe, both the land redistribution policy and the subsequent monetary expansion played significant roles in the hyperinflationary episode. It is crucial to recognize the interplay between these factors rather than attributing the entire inflationary outcome to a single cause.

This example underscores the importance of considering multiple factors and their interactions when analyzing the relationship between excessive federal spending and inflation. While it is true that supply shocks like food shortages can trigger inflation, the subsequent monetary and fiscal responses to those shocks can amplify and prolong the inflationary effects.

Rodger Mitchell:

(At this point I decided not to get into the fact that Zimbabwe was not Monetarily Sovereign, so though it could print currency, it’s money was tied to the dollar, and important inflationary consideration.)

It would be helpful if you could point to a single inflation in history that was precipitated by government spending rather than being precipitated by a shortage of oil, food or some other critical factor.

I suspect all inflations really are caused by shortages.

ChatGPT: There have been cases in history where excessive government spending has contributed to inflation, even in the absence of shortages in critical factors like oil or food. One notable example is the hyperinflation experienced by Germany in the early 1920s.

After World War I, Germany faced significant war reparations and a massive budget deficit. The German government resorted to financing its spending by issuing large amounts of debt and, eventually, by printing money.

The excessive money creation, combined with a lack of corresponding increase in production and output, led to a rapid devaluation of the German mark and hyperinflation.

During this period, there were no significant shortages of oil or food in Germany. Instead, the excessive government spending and the resulting increase in the money supply caused a loss of confidence in the currency, leading to skyrocketing prices.

People’s wages and savings quickly became worthless as the value of the mark rapidly declined.

This example illustrates how excessive government spending and the subsequent expansion of the money supply, without corresponding increases in productivity or output, can lead to inflation.

It demonstrates that inflation can occur even in the absence of shortages in critical factors.

While supply shortages can certainly contribute to inflation, it is not accurate to claim that all inflations are solely caused by shortages. Economic phenomena such as inflation are influenced by a multitude of factors, including both demand and supply-side dynamics, monetary policy, fiscal policy, and other macroeconomic conditions.

It is crucial to recognize that inflation is a complex phenomenon with multiple potential causes, and it can arise from different combinations of factors in different historical contexts.

Rodger Mitchell: So, prices of food and oil went up even though there was no shortage of these products? And it was all due to government spending? Then the inflation was cured by even more government spending to create the greatest military force the world had ever known? Does any of this make sense to you?

ChatGPT: I apologize if my previous responses were not clear. Allow me to clarify.

In the case of Germany’s hyperinflation in the early 1920s, it is important to note that the excessive government spending and subsequent increase in the money supply were contributing factors to inflation.

However, it would be inaccurate to say that the inflation was solely caused by government spending without considering other factors at play.

During that period, Germany faced a complex set of circumstances, including war reparations, economic disruptions from World War I, and political instability.

The excessive government spending and the resulting expansion of the money supply added to these challenges, leading to hyperinflation.

Inflation is a multifaceted phenomenon influenced by various factors, including monetary policy, fiscal policy, supply and demand dynamics, productivity, external factors, and more. It is rarely driven by a single cause.

Regarding your statement about inflation being “cured by even more government spending to create the greatest military force the world had ever known,” it is important to differentiate between the context of post-World War I Germany and the broader discussion about the relationship between government spending and inflation.

Government spending, particularly in the context of wartime mobilization or rebuilding efforts, can have stimulative effects on the economy.

However, the impact on inflation depends on various factors, including the state of the economy, fiscal management, and monetary policies implemented.

It is crucial to approach the analysis of inflation and government spending with nuance, considering the specific historical context and the multitude of factors involved. There is no one-size-fits-all explanation, and each situation requires careful examination of the unique circumstances at hand.

Rodger Mitchell: There is a widespread fear that government spending causes inflation. It is the foundation of the “debt-limit” laws. Because the federal government cannot run short of dollars, the only ostensible purpose of the debt limit is to prevent inflation.

But, government spending alone doesn’t cause inflation. There needs to be, as you said, “war reparations, economic disruptions, and political instability.”

Absent these factors, which cause shortages of key goods and services, government spending does not cause inflation. Thus, the excuse for a debt limit disappears.

ChatGPT: You raise an important point about the relationship between government spending and inflation. While it is a common belief that government spending alone leads to inflation, the reality is more nuanced.

As you mentioned, inflation typically occurs when there are shortages in key goods and services or when there is excessive money creation that outpaces the productive capacity of an economy.

Government spending can potentially contribute to inflation if it is not matched by increased productivity or accompanied by appropriate fiscal and monetary policies.

The purpose of debt limits, including the ones imposed on governments, can indeed be aimed at controlling inflationary pressures. By limiting the amount of debt the government can accumulate, policymakers aim to prevent excessive money creation and potential inflation.

However, it is important to note that debt limits are just one of many tools governments use to manage their fiscal policies, and their effectiveness in curbing inflation can vary.

In practice, the relationship between government spending, debt limits, and inflation is complex and dependent on various factors. These factors include the overall state of the economy, fiscal management, monetary policies, external economic conditions, and more. Each situation requires careful analysis of the specific context to understand the potential impacts on inflation.

While shortages of goods and services can exacerbate inflationary pressures, it is not accurate to dismiss government spending as irrelevant to inflation in the absence of such shortages. The impact of government spending on inflation is influenced by a range of economic factors, and it is subject to ongoing debate and analysis among economists.

In summary, the relationship between government spending and inflation is multifaceted. While shortages of key goods and services can contribute to inflation, government spending can also have inflationary effects if not appropriately managed. The role of debt limits in preventing inflation depends on various factors and can differ from one economic context to another.

Note the repeated use of the “This, but on the other hand, that” argument.

Also, while the public believes excessive” “federal spending causes inflation, ChatGPT says other factors must be present. (It is these “other factors” that are the cause of inflation. Increased money creation is a response to inflation, not a cause.)

While the complaint often is made that https://chat.openai.com/ is not a reliable source of information, that same complaint can be made about every other source of information — books, newspapers, encyclopedias, and certainly the government, the Internet and television (perhaps except for FOX and Breitbart, which are reliably wrong).

For example, you’ll notice that https://chat.openai.com/ never does provide any data to demonstrate that federal spending causes inflation. It dances around that central point by making the “various factors” claim.

Unfortunately, it cannot yet receive pictures or graphs, else I would have provided it with graphs demonstrating the lack of a historical relationship between inflation and federal spending along with the profound historical relationship between oil shortages and inflation.

I suspect that by the time this year ends, we will be able to show the AI pictures, graphs, videos, and music.

It might even admit that debt limits are a lie foisted on the innocent public by the rich, the purpose being to widen the Gap between the rich and the rest.

Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

The right-wing wants you to believe Social Security and Medicare benefits must be cut. They are liars.

We have discussed this for many, many years. But because of the new, ultra-partisan, endlessly repeated efforts led by the right wing to reduce any benefits to the non-rich, the truth must be repeated so it can fight through the fog of lies to be remembered.

No rational person would take dollars from the economy and give them to a federal government that has the infinite ability to create new dollars.

Yet, that same rational person approves collecting tax dollars from the private sector and giving them to the federal government.

It is illogical to the extreme, yet it is universally countenanced. So much for human mental superiority.

Economics is a combination of mathematics and psychology. Economists lose their place during attempts to blend the two, for instance, when they claim that something must happen when historically it seldom or never happens.

The most important problems in economics involve just two issues:

Monetary Sovereignty describes money creation and destruction.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Insolvency, the phony issue: Cutting SS and Medicare is again being touted as the “only” way to avoid national insolvency. It is a lie.

The federal government, being Monetarily Sovereign, has infinite money to support all its agencies. No federal agency becomes insolvent unless Congress and the President want that.

The notion that funds for Medicare and Social Security — and no other federal agency — are limited by a tax on the lower side of the income scale — FICA — is absurd. Billionaire Donald Trump doesn’t pay that tax; you do.

The fact that the so-called “debt ceiling” has arbitrarily been raised 94 times should give any thinking person pause to consider the idiocy of the ceiling itself.

An astounding 94 increases, the sky hasn’t fallen, and still we debate it.

Ask your neighbor why we have a debt ceiling that we have increased 94 times. I promise he will give you an ignorant answer. Why?

Because the sole purpose of the debt ceiling is to take advantage of the ignorant.

Your neighbors believe they understand economics. They don’t. They think federal financing resembles personal financing. It doesn’t.

If you try to explain it to them, they will resist understanding it. In their ignorance, they will laugh at what they perceive as your ignorance.

Their ignorance is akin to flat-earth believers, who assure you that ships sailing west eventually will fall over the edge. No amount of evidence can convince a flat-earther or a federal debt worrier. They are beyond the evidence.

How do I know? I’ve been doing this for nearly 30 years. Why do I keep doing it? Every so seldom, I meet someone open to learning, which requires changing one’s beliefs.

So despite meeting thousands of learning-resistant people, the relatively few who use their brains give me hope.

In that sense, I am an Ignaz Semmelweis of economics.

I hope I don’t meet his fate.

Federal Taxes: They do not fund federal spending. The U.S. Treasury destroys all dollars it receives and creates new dollars every time it pays a creditor.

To pay an invoice, the federal government sends instructions as a check or wires (not dollars) to the creditor’s bank, telling the bank to raise the balance in the creditor’s checking account.

New dollars are added to the M2 money supply when the bank does as instructed.

At no point are federal tax dollars involved.

When you send your M2 tax dollars to the Treasury, those dollars immediately disappear from any money supply measure. The reason: Our Monetarily Sovereign government has the infinite ability to create dollars from thin air, so trying to measure its supply of dollars would make no sense.

Adding dollars to infinite dollars yields infinite dollars. No change.

The sole purposes of federal taxes are:

To discourage what the government doesn’t like and to give tax breaks to what the goverment likes
To create demand for the dollar by requiring taxes to be paid in dollars.

That’s it. Taxes do not provide the federal government with spending money.

The sole purpose of the debt ceiling is to sell the lower-income groups the false idea that the government cannot afford to give them benefits.

In short, the debt ceiling has no financial purpose other than to widen the income/wealth/power Gap between the rich and the rest. It is a program designed to make the rich richer.

Period.

There is a political purpose, however: To give the party that is out of power leverage over the party that is in power.

Federal finances are nothing like personal finances.

The useless and misleading “debt limit” should be eliminated. The so-called “debt” is the net total of deposits into T-security accounts (T-bills, T-notes, T=bonds). These deposits are:

Like the contents of safe deposit boxes: Owned by the depositors, not by the federal government
Not used by the federal government
Not borrowed by the federal government. The federal government never borrows dollars.
Not touched by the federal government
Not a debt of the federal government
Paid back simply by returning the dollars in the accounts.

The useless and misleading Social Security “trust funds” are:

Not trust funds, but simply bookkeeping notations
Not recipients of FICA tax dollars, which are destroyed upon receipt by the Treasury.
Not paying for Social Security or Medicare, which are funded by new dollar creation like all federal programs.
Illusions, established by President Franklin D. Roosevelt, in a (failed) psychological attempt to keep Congress from cutting Social Security.

And contrary to popular myth, federal deficit spending never has caused inflation. There is no historical relationship between federal spending and inflation.

**If federal deficit spending (red) caused inflation (blue), the lines would be parallel. They are not.**

Rather than causing inflation, federal deficit spending prevents and cures recessions.

**Recessions (vertical gray bars) follow decreases in federal deficit spending (red line) and are cured by increases in federal deficit spending.**

Federal “debt” reduction caused every depression in U.S. history.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. A recession began 2001.

All inflations in history have been caused by the scarcity of critical goods and services, mainly oil and food. This is demonstrated by the graph below:

The graph showing federal deficit spending vs. inflation shows no relationship between the two. The graph showing oil prices vs. inflation shows a strong relationship. Oil prices reflect oil scarcity. Thus, inflation is not caused by federal spending but rather by scarcity.

As we said, this has been discussed before on this site.

But past Republican parties, though heavily favoring the rich over the poor, were not led by demonic, psychopathic dictator wannabe who would burn down your house and our entire nation for the chance to rule the ashes.

IN SUMMARY

The federal government is uniquely Monetarily Sovereign. It cannot unintentionally run short of dollars.

When you are told that Medicare and Social Security benefits must be decreased and FICA taxes must be increased, that is a lie, and the person saying it is a liar, ignorant, or both.

The federal “debt” is not a problem, not even a debt, not paid for by your grandchildren, and is necessary for economic growth.

Efforts to decrease the federal “debt” are, in reality, efforts to make the rich richer by widening the Gap between the rich and the rest. The wider the Gap, the richer they are.

Unfortunately, when you try to explain this to your friends, their previous indoctrination will prevent them from believing what is in their self-interest.

So they naively will continue approving and justifying federal tax increases and federal benefit decreases, much to the amusement of the rich, who have blessed themselves with tax loopholes and income not subject to FICA taxes.

All you can do is to keep fighting, and forgive them, for they know not what they do.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

A Challege: Show me where I’m wrong.

Do you love learning? Even though I passed right through 88, and am roaring toward 89, I still do, which means I love being shown where I’m wrong. How else can anyone learn but to be given new beliefs that replace former beliefs?

UX Design Thinking From A Senior Citizen's Perspective - Usability Geek — **Never be too old or too sure to learn.**

So here is a challenge to you, my readers, plus the MMT gang (Stephanie, Warren, Randy et al.), CRFB, Fox viewers, mainstream economists, journalists, politicians of all stripes, and all others who may believe some or all of what I believe is wrong. You may agree with me on many things but disagree on certain details (Hello MMTers). I’d love to hear from you. Some of you may disagree with everything I write. I’d love to hear from you (except from those whose main argument consists of comparing me to excrement. No learning there; I’ve heard it all). Some of you merely may have questions, not necessarily disagreements, about what I believe. Send me your questions and I will try to answer those I feel may be educational. Some of you agree with everything I write. Gotta love you. Here’s the challenge: I will list certain things I believe. You tell me where I’m wrong, and this is the important part: Show me your data. I’ll print worthwhile comments along with whether I feel you’ve made a valid point(s). Where appropriate, I’ll provide data or other evidence to substantiate my point. Or, I’ll simply agree with you. This way, we all can learn, and it will be fun. I believe:

I. Our Monetarily Sovereign government never can run short of its sovereign currency, the U.S. dollar. It can pay for anything costing dollars, instantly, simply by pressing computer keys. This compares to city, county, and state governments, which are monetarily non-sovereign, and do not have a sovereign currency, so can and often do run short of dollars.

In the same vein, euro nations like Germany, France, Italy, Greece et al, do not have sovereign currencies, so they can and do run short of euros. The European Union is Monetarily Sovereign so it cannot run short of euros.

II. Federal taxes do not fund federal spending. The primary purpose of federal taxes is to control the economy by taxing what the government wishes to limit and by giving tax breaks to what the government wishes to encourage.

Even if the federal government collected $0 taxes, it could continue spending, forever. In fact, the Treasury destroys all the tax ollars it receives, and orders new dollars to pay for goods and services.

A secondary (though not necessary) purpose of federal taxes is support demand for the U.S. dollar by requiring dollars to be used for tax payments.

III. The Federal government does not borrow dollars, nor does it use the dollars that are deposited into T-security accounts. After being deposited, those dollars remain the property of the T-security account holders and are not touched (including the interest dollars deposited by the government.)

The federal government easily could operate without accepting any T-security dollars. The purposes of T-securities are to provide a safe storage place for unused dollars (which stabilizes the dollar), and to aid the Federal Reserve in controlling interest rates.

IV. The federal deficits and debt are not, nor will they ever be, “unsustainable.” That word, “unsustainable,” is used by Libertarians and other debt hawks, yet never have I seen what it supposedly means. Does “unsustainable” mean the government will be unable to pay its bills? If not, what exactly does it mean?

The “debt ceiling” is an artifact of economic ignorance and should be eliminated. It’s sole purpose is to provide an excuse for outrage by the political party not in power. As such, it is a danger to America if used by traitors in Congress.

V. Federal deficit spending never causes inflation. Every inflation in history has been caused by shortages of key goods and services — most often oil and food — not federal deficits.

Today’s inflation was caused by OPEC and Russia related shortages of oil, and by COVID-related of a litany of products and services.

The old saw, “Inflation is too much money chasing too few goods” is half wrong and half right. It should read, “Inflation is too few goods and services.” Period.

VI. Federal spending does not cause the above-mentioned shortages. Inflations tend to come suddenly. Federal spending does not cause a sudden increase in oil shortages (producers like OPEC, Russia and even America can and do suddenly contract production.)

Similarly, federal spending does not cause people suddenly to eat more food, thereby causeing a food shortage.

Thus, federal deficit spending does not cause inflation.

VII. All hyperinflations — pre-WW2 Germany, Zimbabwe, Argentina, et al. have been caused by shortages, not by government spending. The illusion of “excessive” spending (the infamous currency in a wheelbarrow) is created by an unknowledgable government’s poor response to inflation — printing higher denominations of currency rather than acquiring and distributing the scarce products and services.

VIII. Recessions are caused by reduced federal deficit spending and are cured by increased deficit spending to acquire and distribute the scarce products and services.

IX. Depressions are caused by federal surpluses and “balanced budgets,” and are cured by deficit spending.

X. The federal government can and should fund no-deductible, comprehensive Medicare coverage to every man, woman and child in America.

IX. The federal government can and should fund Social Security benefits for every man, woman, and child in America.

X. The federal government should fund all education from pre-K through post-college-grad, while paying people to attend school. The pre-K through 12 financial burden should be taken from the monetarily non-sovereign cities, counties, and states and paid by the infinitely solvent federal government.

XI. Benefits from the federal government do not dissuade people from working. The vast majority of Americans wish to increase their incomes and/or move up the income/wealth/power scale, so they will work to augment whatever they receive from the federal government.

XII. All benefits should go equally, to everyone, rich or poor. This eliminates the onerous task of monitoring. incomes.

XIII. Gap Psychology (The desire of those near the top of any social scale to distance themselves from those below, and the desire of those below to approach those above) is the prime driver of bigotry, poverty and street crime in America. Curing those social problems will require dealing with Gap Psychology.

XIV. Gold, silver, or any other physical substance never were money, nor have they ever “backed” money nor provided safety for money. They merely are products the federal government periodically decides to purchase or sell at prices stipulated by the whim of the federal government.

If I were writing a book, every paragraph, I – XIV, would warrent a separate chapter and supporting data. Instead, I’ll address your comments and questions, and most importantly, I’ll provide supporting data, as I hope you will. Hoping to receive many objections, so we all can learn. Sincerely, Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

The banking mess and the one solution*

Imagine you own a Las Vegas casino, but instead of running it yourself, you hire a management firm to run it.

After a while, you discover that the management firm was incompetent or crooked.

Their incompetence was costing you money, and their stealing was costing you even more money.

What would you do? How Pros Cheat Casinos - Can Gamblers Really Trick Casino Employees?

Would you fire the management firm and hire a new one?

Would you vow to create stricter rules and to supervise them more closely, only to discover the same thing happening again?

And again.

Woman hand picking red apple from a tree. In summer , #ad, #picking, #hand, #Woman, #red, #summer #ad | Apple, Red apple, Fruit picking — **Even Adam yielded to temptation.**

At what point would you finally realize that the combination of incompetence and the powerful temptation to steal simply are too great for you to supervise someone else running your casino?

At what point would you run the casino yourself?

That is the question the federal government again has before it.

Federal regulators were racing on Saturday to seize and sell the troubled First Republic Bank before financial markets open on Monday, according to four people with knowledge of the matter, in a bid to put an end to a banking crisis that began last month with the collapse of Silicon Valley Bank.

The effort, led by the Federal Deposit Insurance Corporation, comes after First Republic’s shares tumbled 75 percent since Monday, when the bank disclosed that customers had withdrawn more than half of its deposits.

It became clear this past week that nobody was willing to ride to First Republic’s rescue before a government seizure because larger banks were worried that buying the company would saddle them with billions of dollars in losses.

At the beginning of what we call “America,” the government wrote laws, among which were laws that created the U.S. dollar.

Because the federal government created the U.S. dollar, you might think the federal government would understand that U.S. dollar banking is the responsibility of the dollar’s creator.

But, seemingly, the federal government (and the public) don’t get it. Allowing for-profit, private banks to handle that responsibility, competently and without stealing, requires an impossible level of supervision along with a naive belief in the purity of the human spirit.

The words, “for-profit” are key.

Instead of their goal being the efficient and honest distribution of dollars, according to the rules and safeguards established by the government, the goal of the for-profit banks is, of course, profits.

Each time the government sees that incompetence combined with dishonesty and the easy availability of billions of dollars leads to losses for the public, new, stricter rules are created, followed by promises of even stricter supervision.

But temptation and incompetence, along with the bribing of lawmakers proves that even the strictest supervision never can overcome human nature to prevent further incompetence and larceny.

So, the government created Federal Deposit Insurance.

This, in effect, said,

“We never will be able to stop these incompetent miscreants from stealing or otherwise losing depositors’ money, so we might as well, just reimburse depositors for the money that was stolen or lost.

“At least that will prevent panicky runs on the banks.”

But even that was not sufficient to guarantee the survival of the most crooked and incompetent banks, which repeatedly tended to fail, leaving the question, “Who will run the bank after it fails, but still has assets and liabilities?”

The F.D.I.C. has been talking with banks that include JPMorgan Chase and PNC Financial Services about a potential deal, two of the people said.

A deal could be announced as soon as Sunday, these people said, cautioning the situation was rapidly evolving and might still change.

Any buyer would most likely assume the deposits of First Republic, eliminating the need for a government guarantee of deposits in excess of $250,000 — the limit for deposit insurance.

It’s difficult to justify the $250,000 limit (which the FDIC can and does ignore, at its whim). The Monetarily Sovereign federal government could, with equal ease, insure any limit. Why not $500,000? Or a trillion?

But here is where we are:

Private, for-profit banks will continue to bend the rules, cheat the public, and fail, after which the federal government will enter cure-and-recover mode by passing new laws, later to rescind them.
In many cases, the federal government will run a failed bank until another for-profit entity can be found to take it over. The federal government knows how to run banks and needs no profit motive.
The federal government will absorb all the losses, up to certain limits (that $250,00 per account, except when the government decides to absorb more than that. It’s all at the discretion of the government which has the unlimited ability to absorb losses.)
Nothing changes. The “solution” will be stricter regulations until Congress is again bribed to loosen the regulations. Typically, Democrats get tougher, and Republicans get looser, but no one is willing to explain the obvious solution*.

Fed will consider tougher banking rules after SVB failure
Courtenay Brown, Kate Marino

The Federal Reserve is considering stricter regulations for banks after an internal review found that looser rules were one key culprit behind Silicon Valley Bank’s collapse — the second-largest bank failure in U.S. history.

Why it matters: The review, released Friday, lays blame on the bank itself, as well as Fed supervisors charged with overseeing it and a regulation rollback, for the failure. The episode forced the government to take extraordinary action to backstop the banking system.

And here we go again. The rules are tightened until again, they are loosened.

But rules don’t just “get” loosened. Politicians loosen them

What they’re saying: “SVB’s failure demonstrates that there are weaknesses in regulation sand supervision that must be addressed,” Michael Barr, the Fed’s vice chair for supervision who led the review, said in a statement.

Nothing learned. No amount of regulation and supervision can prevent a profit-motivated organization, with its sticky fingers on billions of dollars, from stretching the rules or outright stealing.

In a press release, Fed chair Jerome Powell endorsed that takeaway, saying he supported “recommendations to address our rules and supervisory practices.”

Details: The 114-page report, completed in a little over a month, is the most comprehensive look so far at the failures on the parts of supervisors and bank executives that led to the collapse of the bank.

Why did the supervisors and bank executives “fail”? The profit motive impelled them to fail. Adam failed that test. Humanity fails that test.

But underpinning those failures are 2019 changes that loosened regulations and requirements for financial institutions similarly sized to Silicon Valley Bank, Barr said.

Which party was in charge in 2019? The party that boasts how “good for business” it is. (“Good for business,” is another way to say, “You boys do whatever you want, and if get caught, you won’t be prosecuted, and the government will mop up the mess you made.“)

Where it stands: Those rule changes, which came in response to federal legislation, and a “shift in the stance of supervisory policy impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach,” Barr said.

Barr said that the Fed plans to reevaluate those rule changes, which applied to banks with $100 billion or more in assets.

The big picture: Barr also proposed tougher rules related to capital and liquidity requirements, as well as the format of periodic stress tests — all of which had been under consideration before Silicon Valley Bank’s failure.

The event, however, intensified the urgency for review, according to senior Fed officials.

Barr is also looking to improve “speed, force, and agility of supervision,” all of which he said appeared to fall short in the case of Silicon Valley Bank.

Of note: A senior Fed official was confident the recommendations would be approved. But even if that’s the case, the process is lengthy so any new rules — particularly those related to liquidity requirements — likely wouldn’t take effect for several years.

So, for “several more years” (i.e. forever) it will be business as usual, because no one is willing to admit there is one solution* to the entire mess.

Between the lines: The report details the extent to which some of Silicon Valley Bank’s troubles were identified by Fed supervisors but not followed up on.

Silicon Valley Bank’s “foundational problems were widespread and well-known, yet core issues were not resolved, and stronger oversight was not put in place,” the report says.

For instance, by the time Silicon Valley Bank failed, it had accumulated 31 supervisory warnings — triple the average received by peers — about a list of issues that ultimately led to the bank’s demise.

No one did anything about those warnings, because being “good for business,” they had been bribed to do nothing.

The bank’s supervisors also identified problems in the bank’s interest rate risk management in annual exams dating back to 2020, but did not issue findings until 2022.

Supervisors “planned” to downgrade a key rating for the Silicon Valley Bank, but the bank collapsed before that rating was finalized.

Sure, they were “planning” to do something at some time in the distant future, but somehow, never managed to do it in time.

Meanwhile: The FDIC on Friday released a report of its own, on the failure of Signature Bank. This agency, too, highlights weaknesses in its supervision — but it blames those failings in part on being under-staffed.

Why are they “understaffed”? Could it be for the same reason the IRS is understaffed? The rich don’t want regulators to function so they bribe Congress to withhold funds from regulators, then claim this is good for business.

The document also reads as a scathing report card on Signature Bank’s management and board, who the FDIC says are ultimately to blame for the bank’s failure.

Private bankers succomb to the profit-motive.

Management “did not prioritize good corporate governance practices, did not always heed FDIC examiner concerns, and was not always responsive or timely in addressing FDIC supervisory recommendations,” according to the report.

Why should management do any of those things? Crooked bank managers don’t serve jail time. That’s reserved for shoplifters and other petty crooks.

They also dropped the ball when it comes to crypto, the report finds. “[Signature] failed to understand the risk of its association with and reliance on crypto industry deposits or its vulnerability to contagion from crypto industry turmoil that occurred in late 2022 and into 2023,” it said.

Worth noting: A separate report from the GAO, also issued Friday, highlights inadequate bank supervision in both banks’ failures.

The bottom line: The regulatory response to this year’s bank failures — which may soon include another one — is only just beginning.

That is exactly what was said following the Great Recession of 2008, which was caused in part, by bankers’ thievery. No bankers went to jail, though their stunning criminality cost America trillions.

The regulatory response is always “just beginning.” Five years, and ten years, and fifty years from now, after numerous more bank failures, there will be regulatory responses that are “just beginning.”

THE SOLUTION*

There is a solution, though because the rich hate it, it never will happen unless the public catches on to the swindle.

The problem lies with the profit motive. Remember “Lead me not to temptation”? Hang millions of dollars in front of even the most honest man’s nose, and he will graduate from stealing office pencils to stealing everything. Period.

The solution is:

The federal government knows how to run banks.
The federal government creates the lending rules.
The federal government creates the bank investing rules.
The federal government determines the bank security rules.
The federal government determines interest rates
The federal government is the one entity in America that has no profit motive.
The federal government cannot go bankrupt.
The federal government insures the banks’ customer against loss.
The federal government supervises the banks
The solution to private bank insolvency is for private banking to end. The federal government should own and manage all the banks.

There is no public purpose served by allowing the private sector to run banking. The federal government should run the banking industry itself. No other “solution” will work.

This is not difficult to see, unless one if being bribed not to see it.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

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