–A new group: Brake the Banks Friday, Nov 25 2011 

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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The Tea Party was a recent phenomenon that managed to convince mostly Republicans (but many Democrats, too), along with the popular media and even some old line economists, that by some mathematical magic, reducing the money supply (aka cutting the federal deficit and reduced federal spending), could reduce unemployment and grow the economy. They are the most notorious believers in the myth, anemia can be cured by bleeding the patient.

I never have seen any substantiation for this wild-ass hypothesis, but it is widely followed, not only in America, but through much of the world. Ask your own friends if the deficit and debt are too high, and they will tell you, “Yes.” But ask them if there is too much money in the economy, and they likely will tell you, “No.” Such is popular ignorance.

The #Occupy Wall Street (#OWS) group is an even more recent phenomenon, that rightly believes the so-called “1%” is cheating the “99%,” but wrongly believes this situation can be cured by closing the income gap (or is it the wealth gap?) and taking money from the rich – a Robin Hood solution.

They have not yet achieved the initial, wide-spread acceptance of the Tea Party, partly because they haven’t expressed a coherent plan, and partly because they are young and tend to look scruffy – and perhaps partly because many people understand the Robin Hood solution would do nothing to benefit the economy.

If #OWS would take the trouble to learn Monetary Sovereignty, and use it to propose specific solutions, they could be a powerful force for economic growth. But will they? Probably not.

So, I suggest the time is nigh for a third group. This is the background:

1. Banks intentionally gave mortgages to unqualified people, then sold those worthless mortgages to Ginnie Mae and Freddie Mac, which bundled them into worthless bundles.
2. Banks intentionally sold these worthless bundles to unsuspecting investors, under the theory that ten pounds of garbage smells better than one pound of garbage.
3. Banks set about foreclosing on homes for which the bank held no mortgage. In many instances, the banks would invade the wrong homes, steal the furniture and refuse to allow the rightful owner access.
4. Banks also pretended to work with home owners on the government’s Home Affordable Modification Program (HAMP). Home owners were shuffled around from voice mail to voice mail, kept on hold for hours, repeatedly asked for the same documentation, and overall given the run-around for years, until the poor home owners were forced into default, at which time the banks took over the property. (In some cases, banks even falsely recommended default to home owners, as a way to move the HAMP process along.)
5. Banks used “robo-signers” – people who signed thousands of documents a day – to cheat on laws requiring individual bank employees personally to inspect and sign mortgage papers.
6. Banks, not having legal title, forced courts into foreclosure mills – where judges rubber-stamped hundreds of foreclosures each day, without allowing home owners the opportunity for defense.
7. Banks, having caused trillions in losses, both for their customers and themselves, appealed to friends in the administration for financial assistance. Treasury Secretary, Timothy F. Geithner, a notorious friend of banks, was pleased to bail out virtually any, large troubled bank or other financial institution. In a handful of cases, other large companies (GM, for instance), but no small companies were bailed out, but the vast majority of help went to the very banks that caused the recession.

To this date, no CEO, CFO or other decision-maker for any large bank has been investigated for their crimes, much less tried, much less convicted, much less sentenced, much less served any time. In the Obama America, banks and their officers are immune from the law.

Do you see a commonality? Yes, the banks stole billions and were the prime cause of the recession. They were “punished” by being rewarded with more billions. Unless action is taken, the banks will continue to steal and continue to be rewarded by Geithner, Obama et al, or by the next administration, as Republicans are equally beholden to banks as are Democrats..

So I propose the formation of a new group, perhaps called “Brake the Banks.” The goal of Brake the Banks would be to do exactly as its name suggests: Put the brakes on the banks, so they can’t continue to steal. Some thoughts:

1. Restore The Glass-Steagall Act, which prohibited commercial banks from engaging in the investment business. Unfortunately, the Gramm-Leach-Bilely Act repealed the Glass-Steagall Act’s restrictions on bank and securities-firm affiliations. It also amended the Bank Holding Company Act to permit affiliations among financial services companies, including banks, securities firms and insurance companies. The new law sought financial modernization by removing the very barriers that Glass-Steagall had erected. (New York Times, Friday, November 25, 2011)

or better yet:

2. Nationalize all banks licensed to do business in the United States. The profit motive caused banks and bank leaders to ignore public safety and responsibility. Instead, banking became a cesspool of personal greed, where sales commissions, not service, were the goal. Government owned banks, with neither private shareholders nor sales-rewarded employees, would be less subject to profit and greed motivations.

I suggest that Brake the Banks would be a worthy, third group, even more economically and positively effective than the Tea Party or #OWS.

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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
b>Gross Domestic Product = Federal Spending + Private Investment + Private Consumption + Net exports

MONETARY SOVEREIGNTY

–The selling of science in America. How to make economic facts penetrate closed minds. Friday, Nov 11 2011 

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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A word may mean one thing to scientists and something completely different to lay people. Consider “theory.” In everyday usage, “theory” means speculation, as in, “That’s just a theory.” But a scientific “theory” is a whole body of facts that leads up to a scientifically acceptable belief. For an idea to be labeled a theory, it must have been researched and tested by many scientists, and based on undeniable facts.

What the layman thinks of as a “theory,” actually is a hypothesis, which is a suggested solution based on limited facts: An educated guess. So for instance when the scientifically ignorant deride Evolution as “just a theory,” they misuse the word, perhaps intentionally.

In economics, “debt” and “deficit” have different meanings and different implications, depending on whether the subject is a Monetarily Sovereign government or a monetarily non-sovereign entity. Among my quibbles with MMT (Modern Monetary Theory) is its name. It’s not a theory. It’s a statement of facts about how our Monetarily Sovereign government works, the same facts Monetary Sovereignty uses — the same facts politicians, media and economists deny or ignore. A few of these facts are:

1. The federal government creates dollars by paying its bills
2. Without federal deficits there would be no dollars; surpluses reduce the money supply
3. Taxes destroy dollars
4. Neither taxes nor borrowing help the federal government pay for its spending.
5. Today’s and future taxpayers will not pay for today’s federal spending.
6. A Monetarily Sovereign nation can pay any bill of any size at any time, and cannot be forced into bankruptcy.
7. No agency of a Monetarily Sovereign can be forced into bankruptcy without the consent of the government
8. Bank lending creates bank reserves that form the basis for further bank lending.
9. The federal debt is the total of outstanding T-securities and not functionally the total of federal deficits.
10. State, county and city governments finances are unlike federal finances.
11. Greece’s and Italy’s finances are unlike U.S. finances in that they can be forced into bankruptcy.
12. The debt/GDP ratio does not measure the federal government’s ability to service its debts.

None of these are theories or even hypotheses. They are undeniable statements of fact, which somehow have been unable to penetrate the mainstream. In this vein, I want to call your attention to a marvelous article in the October 29th edition of NewScientist magazine, titled, “Don’t tell it so straight,” by Peter Alhous.

Today’s post cannot begin to do justice to this excellent article, so I’ll merely quote a few lines, and urge you to buy a copy or read the article at http://www.newscientist.com/article/mg21228361.600-science-in-america-selling-the-truth.html.

. . . a classic example of the “deficit model” of science communication . . . assumes that mistrust of unwelcome scientific findings stems from a lack of knowledge. Ergo, if you provide more facts, scepticism should melt away. This approach appeals to people trained to treat evidence as the ultimate arbiter of truth. The problem is that in many cases, it just doesn’t work.

True. It has not worked for MMT or for Monetary Sovereignty

People aren’t empty vessels waiting to receive information. Instead, we all filter and interpret knowledge through our cultural perspectives, and these perspectives are often more powerful than the facts.

One of the most powerful cultural perspectives is personal experience, which is misleading when applied to federal financing. Another cultural perspective comes from “expert” opinion.

Dan Kahan of Yale University . . .(explained that) we have a strong interest in mirroring the views of our own cultural group. . . In one experiment, . . when presented with balanced arguments for and against giving the HPV vaccine to schoolgirls, 70 per cent of (liberals), and 56 per cent of conservatives, thought it was safe to do so.

Kahan then attributed the arguments to fictional experts described so as to make them appear (appropriately) either liberal or conservative. (This) drove the two camps a little further apart. But, crucially, swapping the messengers around had a dramatic effect: 58 per cent of liberals and 61 per cent of conservatives rated the vaccine as safe.

These findings suggest that one way to change people’s minds is to find someone they identify with to argue the case. Climate scientists have almost certainly been badly served by allowing former Democratic vice-president Al Gore to become the dominant voice on the issue. His advocacy will have convinced liberals, but is bound to have contributed to the rejection of mainstream climate science by many conservatives.

MMT and MS need someone of high stature to present the facts, which alone cannot penetrate. And this may be particularly true with someone from “the other side.” President Nixon was able to open trade with China, because he was known as a hard liner. A “soft” Democrat probably couldn’t have done it.

How a message is framed in relation to the cultural biases of the intended recipients is crucial to its persuasiveness. Opponents of evolution have learned this lesson well. After failing to get biblical creationism taught in science classes, they came back with the “scientific” concept of intelligent design, and two key talking points: “evolution is just a theory” and “teach the controversy”.

Not only were these frames attractive to the religious right, they were also difficult for scientists to counter without seeming to endorse censorship.

For MMT and MS the framing might be love of country and/or love of our children. The nation and our children would have a brighter future if our leaders understood these factual descriptions of economics.

Two different ways of presenting the same information about temperature records (were tested on ) people who identified themselves as “strong Republicans” sceptical about human-caused climate change. One was in the form of a line graph, the other plain text.

The text had little effect, but the graph made the strong Republicans more likely to acknowledge that global warming is both real and a consequence of human activities.

Taken together, studies of communication provide a recipe to allow science to better inform US political debate: find frames that work with broad sections of the population and stick closely to those narratives; seek allies from across the political spectrum who can reach out to diverse audiences; and remember that a graph can be worth a thousand words

MMT and MS should find frames (patriotism and/or love of children??), allies (especially someone who heretofore has been known to be strongly anti-debt) and simple graphs to illustrate facts.

I welcome your suggestions.

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

–Remember Europe? Once important; soon austere. Wednesday, Nov 9 2011 

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Remember Europe? It used to be important.

As we watch in sorrow and amazement, the great European nations slowly fade into a distant memory, hung on their own petard, the euro. All those once-viable, once-powerful nations, melting, melting like the Wicked Witch of the West.

There is Greece:

Greece: Austerity Bill Passed, Despite Protests
Huff Post, Nicholas Paphitis and Derek Gatopoulos 10/20/11

ATHENS, Greece — Greek lawmakers passed a deeply resented new austerity bill Thursday, caving in to the demands of international creditors in order to avoid a national bankruptcy, as a second day of riots left one protester dead and more than 100 people wounded.

The austerity measures won 154-144 in the 300-member parliament despite dissent from a prominent Socialist lawmaker who voted against a key article of the bill. The vote was expected to pave the way for a vital euro8 billion ($11 billion) payout from creditors within weeks so Greece can stay solvent.

And Italy:

Uncertainty over Italy’s future slams markets
Markets’ Berlusconi rally proves short-lived as Italian borrowing rates again spike higher
Pan Pylas, AP Business Writer, On Wednesday November 9, 2011

LONDON (AP) — Uncertainty over who will lead Italy through the debt crisis once Premier Silvio Berlusconi resigns slammed European stocks and bonds on Wednesday, pushing Rome’s borrowing rates to worrying new highs.

Tuesday’s news that Berlusconi had finally bowed to pressure and would resign once new austerity measures are passed had helped markets in the U.S. and Asia higher. Berlusconi had been perceived as part of the problem in the political deadlock gripping Italy.

And Spain.

Spain and the euro crisis
A great burden for Zapatero to bear
The Spanish prime minister has become a reluctant convert to reform—but maybe too little, too late

Jan 20th 2011 | MADRID | The Economist

José Luis Rodríguez Zapatero, the Spanish prime minister . . . said,“There is something worse than the lack of a broad consensus about how to implement reforms and that is, especially at this moment in time, a lack of reform.”
[…]
Spain’s road to recovery is still fraught with dangers. […] The need for reform and austerity is urgent. As Portugal teeters on the verge of a bail-out, Spain yo-yos anxiously. It has just had to pay a steep 5.5% on a €6 billion ($8 billion) syndicated bond. Spain’s fellow euro members are looking for broader solutions to their sovereign-debt crisis, in which Spain (by virtue of its size) is by far the biggest risk.
[…]
Elena Salgado, the finance minister, trimmed the budget deficit from 11.1% of GDP in 2009 to under 9.3% in 2010. She aims to get it to 6% this year. Spain’s national debt is below the euro-zone average and less than America’s and Britain’s.
[…]
The government has dragged its feet on reform in the past. A so-called sustainable economy law, which Mr Zapatero announced in May 2009, is still stuck in parliament.

And Portugal.

Financial Times, October 13, 2011
Portugal announces more austerity measures
By Peter Wise in Lisbon
Portuguese employees will have to work longer, lose bank holidays and forfeit more than a month’s wages in holiday bonuses to combat pressures to leave the euro, the prime minister announced on Thursday night.

In a televised address to the nation, Pedro Passos Coelho outlined the country’s toughest austerity package to date in an effort to avert what he described as a “national emergency”.

And Ireland.

Ireland Plans 12.4 Billion Euros of Austerity Through 2015
Bloomberg, By Finbarr Flynn and Joe Brennan – Nov 4, 2011 11:51 AM CT

Ireland plans 12.4 billion euros ($17.1 billion) of austerity measures over the next four years as it pushes on with a fiscal program to reduce the deficit and insulate it from the crisis in Greece.

There is “no easy path forward,” Finance Minister Michael Noonan said in Dublin today as he published the government’s Medium-Term Fiscal Statement. He is planning a 3.8 billion-euro adjustment in 2012 after a 6 billion-euro budget in 2011. The government also cut its 2012 growth forecast to 1.6 percent from 2.5 percent.

A quote, variously attributed to Albert Einstein, Rita Mae Brown or Narcotics Anonymous, is apt here: “Insanity is doing the same thing over and over again but expecting different results.” Every euro nation believes its salvation comes from reduced government spending combined with increased government taxes, in short, reduced deficits – in short, austerity.

That fact that a reduced deficit – austerity — never has saved an economy, cannot save an economy and always will lead to economic disaster, does not seem to trouble the economists who preach it again and again.

Austerity is ignorance. Austerity is poverty. Austerity is a depression. Austerity is misery for a nation’s citizens, their children and their grandchildren, far into the future. Austerity is a trip to third-world status, or worse. Austerity is bleeding a patient to cure his anemia.

Deficit reduction cannot save Europe. Even were deficits reduced to zero, the euro’s fundamental weakness would continue: Monetarily non-sovereign nations, being unable to create unlimited money, cannot survive long-term without money coming in from outside their borders. This is an absolute law in economics.

There is no magical, long-term solution. No amount of deficit reduction, no amount of austerity will save monetarily non-sovereign nations. Austerity is insanity and death.

And austerity is the goal of America’s Congress and President and the special committee to reduce the deficit.

Remember Europe?

Remember America?

I award 5 dunce caps to all those who believe reduced government deficits will stimulate economic growth, reduce unemployment and save a country from recession.

(I now am running a 1070 dunce cap deficit. Yet I feel no need for austerity. Fear not. I have plenty of dunce caps I can award to politicians, media, economists and the Tea Party.)

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

–What would happen if Greece returned to the drachma? Tuesday, Nov 8 2011 

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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What would happen if Greece abandoned the euro? I don’t know. No one does, though everyone has opinions, and most of those opinions include words like “disaster,” “panic” and “bankruptcy.” So since opinions are free, I’ll give you mine, and mine does not include those words. Not at all.

The key to a smooth transition from euros to a Monetarily Sovereign currency, the drachma, is to create sufficient demand for the drachma to prevent excessive inflation.

Let’s say the Greek government announced that heretofore:

1. The drachma would be the official currency of Greece. The Greek government would exchange one drachma for one euro, in unlimited amounts. Accounts at Greek banks that currently are stated in euros, would be stated in drachmas.

2. Payments by all Greek governments, local and national, would be made in drachmas, not in euros. This would include payments on domestic and foreign debt, payments of government salaries, and payments for goods and services. The payments would be made at the rate of one drachma for one euro.

3. Domestic business must pay salaries and domestic suppliers in drachmas

4. Taxes paid to the Greek government and to any sub-governments must be made in drachmas, not in euros.

5. Greek banks would domestically lend only drachmas, and all domestic creditors, including banks, must accept drachmas in payment for debts.

6. The Greek government would continue to issue bonds, not because it needs to borrow, but to help regulate interest rates, which in turn, help regulate demand for drachmas. The bonds would carry a high enough interest rate to create demand for drachmas.

What does this accomplish? Greece would become Monetarily Sovereign. Its “debt problem” instantly would disappear, as it would have the unlimited ability to pay any bill of any size, any time. Demand for the drachma would be established, to mitigate against inflation.

So tell me, how do you feel this compares with the short-term, borrowing/austerity “solutions” advocated by the IMF and the EU? Personally, I think its much better, partly because it actually is a long-term solution, not a short-term palliative.

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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