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How Nigeria’s Central Bank Inflates the Money Supply

In April 2021 the governor of Edo State, Godwin Obaseki, said that the federal government printed an additional NGN 60 billion (60 billion naira) to be shared between all the states at the Federation Account Allocation Committee (FAAC). This was denied…

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In April 2021 the governor of Edo State, Godwin Obaseki, said that the federal government printed an additional NGN 60 billion (60 billion naira) to be shared between all the states at the Federation Account Allocation Committee (FAAC). This was denied by the minister of finance, Hajia Zenab Ahmed. The Central Bank of Nigeria (CBN) governor, Godwin Emefiele, was a bit more forthright. He said, “That is our job. To print is about lending money. So, there is no need of putting all the controversy about printing of money as if we go into the factory, print the naira and start distributing on the streets…. It’s very inappropriate for people to give colouration to printing of money as if it’s some foreign words coming from the sky.”

It’s understandable that the CBN governor became frustrated at a state governor exposing an open secret of the CBN, since Nigeria’s inflation rate, as of the end of 2020, was 31 percent, according to economist Steve Hanke. Usually when the federal government inflates the nation’s currency, it does not use crude means like printing new money, as this could led to an increase in inflationary expectations by the populace, causing them to demand less of the currency and eventually to dump it quickly for other assets—land, cars, jewelry, bitcoin—that can hold their value much longer, precipitating hyperinflation. The CBN and other central banks around the world use more sophisticated and clandestine means of increasing the money supply.

If the government falls prey to the temptation of printing a great deal of new money, it could result in a phenomenon called hyperinflation, where the currency of the economy loses its purchasing power and essentially becomes useless as a medium of exchange for goods and services. This was the case in Germany in the 1920s, and more recently in Zimbabwe in the late 2000s and Venezuela in the mid-2010s.

Figure 1: Money supply growth versus inflation in Zimbabwe, 1994–2009

Source: Reserve Bank of Zimbabwe.

Generally, the government increases the money through its central bank’s control over private commercial banks. So, while Obaseki was right about the fact that the NGN 60 billion was created out of thin air to share at the FAAC, he may have been wrong about how the money was created. We say ‘may’ because Nigeria is still very much a cash economy; that is, most Nigerians still make payments for goods and services with physical paper currency, so the possibility of increasing the money supply by actually printing more paper money is high. But printing more money than necessary is not recommended for the reasons stated above.

The Central Bank and the Supply of Money

The CBN was established by the CBN Act of 1958. As contained in the more recent 2007 act, the principal objectives of the bank include: “[E]nsure monetary and price stability; issue legal tender currency in Nigeria; maintain external reserves to safeguard the international value of the legal tender currency; promote a sound financial system in Nigeria; and act as banker and provide economic and financial advice to the Federal Government of Nigeria.” Through certain tools called monetary policy, the CBN tries to achieve its objectives.

The CBN is the only organization allowed to issue money in Nigeria, and this is one of its primary objectives. Through legal tender laws, the CBN ensures that the dominant currency in Nigeria is the currency called the naira. By law the naira is the only type of money approved as a medium of exchange in Nigeria.

The objective of ensuring monetary stability in a nutshell means ensuring the stability of the price of money or its purchasing power. Here it is important to note that money is not a price. Prices are represented in money, hence even money has a price. The price of money is its purchasing power.

So how does the central bank really increase the supply of money in the economy? It does this by adjusting the deposit-to-reserve ratio of all commercial banks, providing credit to commercial banks at a rediscount rate, and through open market purchases. Let's break this down.

Deposit-to-reserve ratio: The CBN calls this the cash reserves ratio. This is the fraction of a depositor’s money a commercial bank is required to have in its reserve. Based on the latest CBN annual report (2018), the reserve ratio stands at 22.5 percent, which is approximately a reserve ratio of one to four. This means that for every hundred naira a bank has in its vaults, it can loan just 77.5 naira to the public with interest. Remember that the bank’s original depositor of those hundred naira still believes he has one hundred naira in the bank that he can get at any time. But the bank only has 22.5 naira in its vault. Now remember that there is 77.5 naira out there in the economy, being used by those who borrowed it from the bank to buy things. Hence the total money in the economy is now NGN 100 plus NGN 77.5.

The cash reserves ratio is set by the CBN, and based on this ratio commercial banks can loan money up to the limit. By adjusting the cash reserves ratio, the CBN can add or remove money from the economy.

The rediscount rate: The CBN calls this the monetary policy rate, and with it the CBN can provide loans to banks at below-market rates. These low rates are meant to encourage banks to use this monetary policy instrument: the banks can borrow money at low prices and then loan the same money at a higher rate to the general populace and make a clean profit. In 2018 this rate was 14 percent. Hence if a bank borrowed NGN 100 billion at 14 percent and loaned it at 25 percent, the bank would make NGN 11 billion in profit.

Open market purchases: The CBN calls this open market operations. This is the most common way the CBN increases the money supply in the economy. The CBN could go on the market to buy any asset if it wanted to increase money supply throughout the economy; it does this in a sophisticated way. For example, if the CBN wanted to increase the money supply by NGN 60 billion and the cash reserves ration were 10 percent, it could decide to buy a supercomputer for a price of NGN 6 billion from Okonkwo Computers Limited. This NGN 6 billion is printed out of thin air. The CBN would give Okonkwo a check for NGN 6 billion. But Okonkwo does not have an account with CBN; only banks have accounts with the CBN. Okonkwo would take the check to his bank, Olumide Bank, for example, and make the deposit. Olumide Bank would then increase Okonkwo’s checking account balance by NGN 6 billion. Olumide Bank now has a check against the CBN. It deposits the check at the CBN and the CBN now increases Olumide Bank’s reserves by NGN 6 billion. Based on the cash reserves ratio, Olumide can now make loans using the formula change in reserves * (1 – rr), where rr is the reserve ratio. Hence it is NGN 6 billion * (1 – 0.1) = NGN 5.4 billion. Olumide Bank can now make up to NGN 5.4 billion in loans.

Let’s say Olamide Bank loans this NGN 5.4 billion to Lola Cosmetics, which deposits the money at another bank, maybe Bank of Nigeria. Now, because all banks in the economy—Olamide Bank and Bank of Nigeria included—have a reserve ratio of 10 percent, per our current example, Bank of Nigeria will then be able to make up to NGN 4.86 billion in loans based on the formula change in reserves * (1 – rr).

After many banks receive the different deposits from loans made by other banks, we will have the following: NGN 6 billion + NGN 5.5 billion + NGN 4.86 billion + NGN 4.374 billion + … = NGN 60 billion.

This way the CBN gradually increases the money supply in the economy by NGN 60 billion but only has to physically print NGN 6 billion

In general, the CBN does not make purchases like a supercomputer or anything of that nature. Instead, it buys securities (bonds), as these assets are highly liquid. In general, it purchases government securities, like state government bonds, to avoid the serious political issues that could arise if it were perceived that the CBN is propping up certain companies unfairly in the market. But in April 2020, due to the recession brought about by the government's response to covid-19, the CBN stated it would purchase corporate bonds.

We have seen what happens when countries continue to print and spend new money. A contemporary example close to home is Zimbabwe, whose dollar collapsed due to excessive money supply in February 2009. And this is what Nigeria must avoid. Nigeria does not want to get to the point of no return. The Obaseki/CBN money-printing saga has reduced public confidence in the naira as a store of value and increased inflationary expectations in the populace. It is our hope that the Nigerian government and the CBN will stop inflating dramatically and reduce their budgets.

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Illegal Immigrants Leave US Hospitals With Billions In Unpaid Bills

Illegal Immigrants Leave US Hospitals With Billions In Unpaid Bills

By Autumn Spredemann of The Epoch Times

Tens of thousands of illegal…

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Illegal Immigrants Leave US Hospitals With Billions In Unpaid Bills

By Autumn Spredemann of The Epoch Times

Tens of thousands of illegal immigrants are flooding into U.S. hospitals for treatment and leaving billions in uncompensated health care costs in their wake.

The House Committee on Homeland Security recently released a report illustrating that from the estimated $451 billion in annual costs stemming from the U.S. border crisis, a significant portion is going to health care for illegal immigrants.

With the majority of the illegal immigrant population lacking any kind of medical insurance, hospitals and government welfare programs such as Medicaid are feeling the weight of these unanticipated costs.

Apprehensions of illegal immigrants at the U.S. border have jumped 48 percent since the record in fiscal year 2021 and nearly tripled since fiscal year 2019, according to Customs and Border Protection data.

Last year broke a new record high for illegal border crossings, surpassing more than 3.2 million apprehensions.

And with that sea of humanity comes the need for health care and, in most cases, the inability to pay for it.

In January, CEO of Denver Health Donna Lynne told reporters that 8,000 illegal immigrants made roughly 20,000 visits to the city’s health system in 2023.

The total bill for uncompensated care costs last year to the system totaled $140 million, said Dane Roper, public information officer for Denver Health. More than $10 million of it was attributed to “care for new immigrants,” he told The Epoch Times.

Though the amount of debt assigned to illegal immigrants is a fraction of the total, uncompensated care costs in the Denver Health system have risen dramatically over the past few years.

The total uncompensated costs in 2020 came to $60 million, Mr. Roper said. In 2022, the number doubled, hitting $120 million.

He also said their city hospitals are treating issues such as “respiratory illnesses, GI [gastro-intenstinal] illnesses, dental disease, and some common chronic illnesses such as asthma and diabetes.”

“The perspective we’ve been trying to emphasize all along is that providing healthcare services for an influx of new immigrants who are unable to pay for their care is adding additional strain to an already significant uncompensated care burden,” Mr. Roper said.

He added this is why a local, state, and federal response to the needs of the new illegal immigrant population is “so important.”

Colorado is far from the only state struggling with a trail of unpaid hospital bills.

EMS medics with the Houston Fire Department transport a Mexican woman the hospital in Houston on Aug. 12, 2020. (John Moore/Getty Images)

Dr. Robert Trenschel, CEO of the Yuma Regional Medical Center situated on the Arizona–Mexico border, said on average, illegal immigrants cost up to three times more in human resources to resolve their cases and provide a safe discharge.

“Some [illegal] migrants come with minor ailments, but many of them come in with significant disease,” Dr. Trenschel said during a congressional hearing last year.

“We’ve had migrant patients on dialysis, cardiac catheterization, and in need of heart surgery. Many are very sick.”

He said many illegal immigrants who enter the country and need medical assistance end up staying in the ICU ward for 60 days or more.

A large portion of the patients are pregnant women who’ve had little to no prenatal treatment. This has resulted in an increase in babies being born that require neonatal care for 30 days or longer.

Dr. Trenschel told The Epoch Times last year that illegal immigrants were overrunning healthcare services in his town, leaving the hospital with $26 million in unpaid medical bills in just 12 months.

ER Duty to Care

The Emergency Medical Treatment and Labor Act of 1986 requires that public hospitals participating in Medicare “must medically screen all persons seeking emergency care … regardless of payment method or insurance status.”

The numbers are difficult to gauge as the policy position of the Centers for Medicare & Medicaid Services (CMS) is that it “will not require hospital staff to ask patients directly about their citizenship or immigration status.”

In southern California, again close to the border with Mexico, some hospitals are struggling with an influx of illegal immigrants.

American patients are enduring longer wait times for doctor appointments due to a nursing shortage in the state, two health care professionals told The Epoch Times in January.

A health care worker at a hospital in Southern California, who asked not to be named for fear of losing her job, told The Epoch Times that “the entire health care system is just being bombarded” by a steady stream of illegal immigrants.

“Our healthcare system is so overwhelmed, and then add on top of that tuberculosis, COVID-19, and other diseases from all over the world,” she said.

A Salvadorian man is aided by medical workers after cutting his leg while trying to jump on a truck in Matias Romero, Mexico, on Nov. 2, 2018. (Spencer Platt/Getty Images)

A newly-enacted law in California provides free healthcare for all illegal immigrants residing in the state. The law could cost taxpayers between $3 billion and $6 billion per year, according to recent estimates by state and federal lawmakers.

In New York, where the illegal immigration crisis has manifested most notably beyond the southern border, city and state officials have long been accommodating of illegal immigrants’ healthcare costs.

Since June 2014, when then-mayor Bill de Blasio set up The Task Force on Immigrant Health Care Access, New York City has worked to expand avenues for illegal immigrants to get free health care.

“New York City has a moral duty to ensure that all its residents have meaningful access to needed health care, regardless of their immigration status or ability to pay,” Mr. de Blasio stated in a 2015 report.

The report notes that in 2013, nearly 64 percent of illegal immigrants were uninsured. Since then, tens of thousands of illegal immigrants have settled in the city.

“The uninsured rate for undocumented immigrants is more than three times that of other noncitizens in New York City (20 percent) and more than six times greater than the uninsured rate for the rest of the city (10 percent),” the report states.

The report states that because healthcare providers don’t ask patients about documentation status, the task force lacks “data specific to undocumented patients.”

Some health care providers say a big part of the issue is that without a clear path to insurance or payment for non-emergency services, illegal immigrants are going to the hospital due to a lack of options.

“It’s insane, and it has been for years at this point,” Dana, a Texas emergency room nurse who asked to have her full name omitted, told The Epoch Times.

Working for a major hospital system in the greater Houston area, Dana has seen “a zillion” migrants pass through under her watch with “no end in sight.” She said many who are illegal immigrants arrive with treatable illnesses that require simple antibiotics. “Not a lot of GPs [general practitioners] will see you if you can’t pay and don’t have insurance.”

She said the “undocumented crowd” tends to arrive with a lot of the same conditions. Many find their way to Houston not long after crossing the southern border. Some of the common health issues Dana encounters include dehydration, unhealed fractures, respiratory illnesses, stomach ailments, and pregnancy-related concerns.

“This isn’t a new problem, it’s just worse now,” Dana said.

Emergency room nurses and EMTs tend to patients in hallways at the Houston Methodist The Woodlands Hospital in Houston on Aug. 18, 2021. (Brandon Bell/Getty Images)

Medicaid Factor

One of the main government healthcare resources illegal immigrants use is Medicaid.

All those who don’t qualify for regular Medicaid are eligible for Emergency Medicaid, regardless of immigration status. By doing this, the program helps pay for the cost of uncompensated care bills at qualifying hospitals.

However, some loopholes allow access to the regular Medicaid benefits. “Qualified noncitizens” who haven’t been granted legal status within five years still qualify if they’re listed as a refugee, an asylum seeker, or a Cuban or Haitian national.

Yet the lion’s share of Medicaid usage by illegal immigrants still comes through state-level benefits and emergency medical treatment.

A Congressional report highlighted data from the CMS, which showed total Medicaid costs for “emergency services for undocumented aliens” in fiscal year 2021 surpassed $7 billion, and totaled more than $5 billion in fiscal 2022.

Both years represent a significant spike from the $3 billion in fiscal 2020.

An employee working with Medicaid who asked to be referred to only as Jennifer out of concern for her job, told The Epoch Times that at a state level, it’s easy for an illegal immigrant to access the program benefits.

Jennifer said that when exceptions are sent from states to CMS for approval, “denial is actually super rare. It’s usually always approved.”

She also said it comes as no surprise that many of the states with the highest amount of Medicaid spending are sanctuary states, which tend to have policies and laws that shield illegal immigrants from federal immigration authorities.

Moreover, Jennifer said there are ways for states to get around CMS guidelines. “It’s not easy, but it can and has been done.”

The first generation of illegal immigrants who arrive to the United States tend to be healthy enough to pass any pre-screenings, but Jennifer has observed that the subsequent generations tend to be sicker and require more access to care. If a family is illegally present, they tend to use Emergency Medicaid or nothing at all.

The Epoch Times asked Medicaid Services to provide the most recent data for the total uncompensated care that hospitals have reported. The agency didn’t respond.

Continue reading over at The Epoch Times

Tyler Durden Fri, 03/15/2024 - 09:45

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Fast-food chain closes restaurants after Chapter 11 bankruptcy

Several major fast-food chains recently have struggled to keep restaurants open.

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Competition in the fast-food space has been brutal as operators deal with inflation, consumers who are worried about the economy and their jobs and, in recent months, the falling cost of eating at home. 

Add in that many fast-food chains took on more debt during the covid pandemic and that labor costs are rising, and you have a perfect storm of problems. 

It's a situation where Restaurant Brands International (QSR) has suffered as much as any company.  

Related: Wendy's menu drops a fan favorite item, adds something new

Three major Burger King franchise operators filed for bankruptcy in 2023, and the chain saw hundreds of stores close. It also saw multiple Popeyes franchisees move into bankruptcy, with dozens of locations closing.

RBI also stepped in and purchased one of its key franchisees.

"Carrols is the largest Burger King franchisee in the United States today, operating 1,022 Burger King restaurants in 23 states that generated approximately $1.8 billion of system sales during the 12 months ended Sept. 30, 2023," RBI said in a news release. Carrols also owns and operates 60 Popeyes restaurants in six states." 

The multichain company made the move after two of its large franchisees, Premier Kings and Meridian, saw multiple locations not purchased when they reached auction after Chapter 11 bankruptcy filings. In that case, RBI bought select locations but allowed others to close.

Burger King lost hundreds of restaurants in 2023.

Image source: Chen Jianli/Xinhua via Getty

Another fast-food chain faces bankruptcy problems

Bojangles may not be as big a name as Burger King or Popeye's, but it's a popular chain with more than 800 restaurants in eight states.

"Bojangles is a Carolina-born restaurant chain specializing in craveable Southern chicken, biscuits and tea made fresh daily from real recipes, and with a friendly smile," the chain says on its website. "Founded in 1977 as a single location in Charlotte, our beloved brand continues to grow nationwide."

Like RBI, Bojangles uses a franchise model, which makes it dependent on the financial health of its operators. The company ultimately saw all its Maryland locations close due to the financial situation of one of its franchisees.

Unlike. RBI, Bojangles is not public — it was taken private by Durational Capital Management LP and Jordan Co. in 2018 — which means the company does not disclose its financial information to the public. 

That makes it hard to know whether overall softness for the brand contributed to the chain seeing its five Maryland locations after a Chapter 11 bankruptcy filing.

Bojangles has a messy bankruptcy situation

Even though the locations still appear on the Bojangles website, they have been shuttered since late 2023. The locations were operated by Salim Kakakhail and Yavir Akbar Durranni. The partners operated under a variety of LLCs, including ABS Network, according to local news channel WUSA9

The station reported that the owners face a state investigation over complaints of wage theft and fraudulent W2s. In November Durranni and ABS Network filed for bankruptcy in New Jersey, WUSA9 reported.

"Not only do former employees say these men owe them money, WUSA9 learned the former owners owe the state, too, and have over $69,000 in back property taxes."

Former employees also say that the restaurant would regularly purchase fried chicken from Popeyes and Safeway when it ran out in their stores, the station reported. 

Bojangles sent the station a comment on the situation.

"The franchisee is no longer in the Bojangles system," the company said. "However, it is important to note in your coverage that franchisees are independent business owners who are licensed to operate a brand but have autonomy over many aspects of their business, including hiring employees and payroll responsibilities."

Kakakhail and Durranni did not respond to multiple requests for comment from WUSA9.

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Industrial Production Increased 0.1% in February

From the Fed: Industrial Production and Capacity Utilization
Industrial production edged up 0.1 percent in February after declining 0.5 percent in January. In February, the output of manufacturing rose 0.8 percent and the index for mining climbed 2.2 p…

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From the Fed: Industrial Production and Capacity Utilization
Industrial production edged up 0.1 percent in February after declining 0.5 percent in January. In February, the output of manufacturing rose 0.8 percent and the index for mining climbed 2.2 percent. Both gains partly reflected recoveries from weather-related declines in January. The index for utilities fell 7.5 percent in February because of warmer-than-typical temperatures. At 102.3 percent of its 2017 average, total industrial production in February was 0.2 percent below its year-earlier level. Capacity utilization for the industrial sector remained at 78.3 percent in February, a rate that is 1.3 percentage points below its long-run (1972–2023) average.
emphasis added
Click on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and above the level in February 2020 (pre-pandemic).

Capacity utilization at 78.3% is 1.3% below the average from 1972 to 2022.  This was below consensus expectations.

Note: y-axis doesn't start at zero to better show the change.


Industrial Production The second graph shows industrial production since 1967.

Industrial production increased to 102.3. This is above the pre-pandemic level.

Industrial production was above consensus expectations.

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