–More “Who’da thunk?” Europe’s austerity doesn’t work, either. Saturday, Aug 30 2014 

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

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive,
and the motive is the gap.
===================================================================================

Quoting from the previous post:

Austerity, aka deficit reduction, stems from the belief that a government’s income pays for government spending. This is belief is correct for monetarily non-sovereign entities: Cities, counties, states, businesses and people.

You and I need outside sources of income in order to spend. So do our local governments. We all are monetarily non-sovereign.

By contrast, Monetarily Sovereign entities, such as: U.S., UK, Canada, China, Japan et al, do not need outside sources of income.

A Monetarily Sovereign entity is sovereign over its own sovereign currency, and so, has the unlimited ability to create its currency. A Monetarily Sovereign entity never can run short of its own currency, and never needs to ask anyone for its own currency.

So, a Monetarily Sovereign entity never needs to tax or borrow, in order to obtain its own sovereign currency. It is sovereign.

That is a fundamental economic truth, though all our politicians, most notably the Tea Republicians, refuse to acknowledge it. Debt and deficit limitation is the set of actions responsible for our unnecessarily slow recovery.

And now we come to poor, euro-smashed Europe, with its twin problems: The euro and austerity:

Divisions Grow as a Downturn Rocks Europe
NY Times, By LIZ ALDERMAN and ALISON SMALEAUG. 29, 2014

Germany, the Continent’s economic engine, contracted in the second three months of the year, while the bloc of 18 European Union nations that use the euro failed to grow at all.

While the per capita Gross Domestic Product of the U.S. has risen following the Great Recession, the euro nation’s recovery not only has stalled, but has declined for the past two years.

The eurozone is in the midst of what is known as “a recession” — headed toward a full-fledged depression.

united-states-gdp-per-capita (1)
United States = Solid Line (left); Euro Area = Dotted Line (right)

The decline has not been fairly distributed among nations, of course. But even the mighty Germany now has leveled off and begun its fall.

france-gdp-per-capita
France = Solid Line (left); Germany = Dotted Line (right)

Why has the U.S. grown (albiet too slowly, because of deficit reduction) while the eurozone has faltered? Monetary non-sovereignty.

When the eurozone nations adopted the euro, they surrendered the single most valuable asset any nation can have: Its Monetary Sovereignty, i.e., the unlimited ability to create its own sovereign currency, and thereby pay any debt denominated in that currency.

The monetarily non-sovereign eurozone nations need endless deficit reduction to avoid debt defaults, while the Monetarily Sovereign U.S. does not need deficit reduction and never will default on dollar-denominated debts. Having the unlimited ability to create dollars prevents default (despite John Boehner’s famous lie, “Let’s be honest. We’re broke.”)

One result of less austerity in the U.S.: Our unemployment rate is falling much faster:

united-states-unemployment-rate
The U.S. = Solid Line (left); The Euro Area = Dotted Line (right)

Yet another effect of monetarily non-sovereign austerity: Dreaded deflation. While the inflation rate in the U.S. remains very close to the Fed’s target rate of 2.5%, the eurozone’s lack of money has sent it into a deflationary slump.

united-states-inflation-cpi
The U.S. = Solid Line (left); The Euro Area = Dotted Line (right)

Deflation is felt to be anti growth, because it encourages consumers to delay spending until prices fall further. If you know products will be cheaper tomorrow, you’ll wait until tomorrow before purchasing. This delay evolves to “no-purchase-at-all,” which impacts GDP.

The eurozone provides the perfect test of deficit reduction (austerity). The test demonstrates how deficit reduction leads to recessions and depressions:

U.S. depressions tend to come on the heels of federal surpluses.

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.

Recessions tend to come on the heels of reductions in federal debt/money growth (See graph, below), while debt/money growth has increased when recessions were resolving. Taxes reduce debt/money growth. No government can tax itself into prosperity, but many government’s tax themselves into recession.

Reductions in federal debt growth lead to inflation

Deficit reduction causes economic destruction. But deficit reduction often is necessary for monetarily non-sovereign governments, which cannot create the money to pay their bills. Long term, such governments can survive only if they have money coming in from outside their borders.

The euro nations need the EU (which, by the way, is Monetarily Sovereign) to give (not lend) them continual infusions of euros. Similarly, the U.S. states (which are monetarily non-sovereign) need continual infusions of dollars.

For a euro nation, the additional euros can come from a positive balance of payments — importing more euros than exporting. But few euro nations can be net exporters. They need help from the EU.

Again similarly, the U.S. states either must be net dollar importers (via tourism or sales of goods and services) or they must receive dollar infusions from the federal government — federal deficit spending.

Counties and cities, also being monetarily non-sovereign, need continual infusions from their states. The obvious implication is that states must run deficits to support their cities and counties, and in turn, states must be supported by federal deficits.

Bottom line: Barring uncontrollable inflation (which the U.S. never has experienced) austerity, i.e. deficit reduction, always is harmful to an economy. Anyone who tells you the U.S. federal deficit and debt are too large either is ignorant of economics or is a liar. Those are the only two options.

As for the euro nations, they either need to re-adopt their own sovereign currencies, or join politically into something resembling a United States of Europe, in which the EU gives (not lends) euros to member nations as needed.

Perhaps things to get much worse, before the euro nations have the willpower and the desire to implement one of these solutions. After all, reductions in government spending negatively affect the lower income people far more than the upper income people. That is why the upper .1% income/wealth/power group loves austerity: Austerity widens the Gap between the rich and the rest.

Being bribed and controlled by the very rich, the EU and the International Monetary Fund consistently advocate for deficit reduction and Gap widening.

In fact, one may safely assume that Gap widening has been the fundamental purpose of the euro, all along.

Rodger Malcolm Mitchell
Monetary Sovereignty

===================================================================================
Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)

9. Federal ownership of all banks (Click here)

10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

—–

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

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
Two key equations in economics:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

THE RECESSION CLOCK
Monetary Sovereignty

Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.

#MONETARYSOVEREIGNTY

–Japan’s stealth austerity doesn’t work. Who’da thunk? Friday, Aug 29 2014 

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

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive,
and the motive is the gap.
===================================================================================

Austerity, aka deficit reduction, stems from the belief that government income pays for government spending. This is belief is correct for monetarily non-sovereign entities: Cities, counties, states, businesses and people.

You and I need income in order to spend. So do our local governments. We are monetarily non-sovereign.

However, it is not true for Monetarily Sovereign entities: U.S., UK, Canada, China, Japan et al. A Monetarily Sovereign entity is sovereign over its own sovereign currency, and so, has the unlimited ability to create its currency. A Monetarily Sovereign entity never can run short of its own currency, and never needs to ask anyone for its own currency.

So, a Monetarily Sovereign entity never needs to tax or borrow, in order to obtain its own sovereign currency. It is sovereign.

In that regard, I recommend an outstanding article describing Japan’s Prime Minister, Shinzo Abe’s humorous-if-not-so-sad efforts to stimulate Japan’s economy.

Here are a few excerpts:

The Move: (Have the) Bank of Japan double its inflation target to 2% (and) print “unlimited yen” to help achieve its inflation target.

In just three months, from January to April, Mr Abe said that his government would spend an extra $114bn (£75bn).

The Risk: If the measures work and prices start to rise, then eventually interest rates will too. This would see the government’s interest payments go up substantially.

In a worst-case scenario, the government may have to raise more money to meet those payments,

Why this is wrong: Banks don’t simply “print” currency. They create currency by lending, which requires more borrowers. No provision was made to increase borrowing.

Further, forcing government interest rates up is not a “problem”; it’s a benefit, as that does add currency to the economy. The notion that interest payments are a problem indicates a profound confusion about the difference between Monetary Sovereignty and monetary non-sovereignty.

After all, Japan already has said it wants to increase government spending, so how could interest payments be a problem?

The Move: Boosting government spending to help spur growth. In just three months, from January to April, Mr Abe said that his government would spend an extra $114bn (£75bn)

The Risk: Increased spending will further undermine Japan’s finances. Japan’s public debt, which stands close to 240% of its GDP, is already the highest among industrialised nations.

Why this is wrong: Actually, increased government spending is exactly what’s needed. But, Japan still believes it is monetarily non-sovereign, and is paranoid about government debt (which for a Monetarily Sovereign government is meaningless).

Japan could pay off that debt tomorrow if it wished, merely by transferring the yen already in debt accounts to checking accounts.

The fact that Japan’s debt is 240% of GDP, and Japan never has difficulty paying this debt, should have been the clue that debt/GDP is a meaningless number.

What the article doesn’t mention may be the most important factor of all:

Japan raises sales tax in an attempt to rein in public debt.
April 1, 2014

From Tuesday, sales tax will increase from 5% to 8%. It will rise again, to 10%, in October 2015. The stepped tax increases are aimed at covering rising social welfare costs linked to Japan’s ageing population.

Japan currently has one of the lowest birth rates in the world. It also has the world’s highest ratio of elderly to young people, raising serious concerns about future economic growth.

Why this is wrong: Taxes do not pay for the spending of a Monetarily Sovereign government. But sales taxes, which are highly regressive, remove money from the economy, especially from the very people whose spending is necessary to grow the economy: Lower- and middle-class buyers.

Japan has adopted the U.S. Big Lie that Social Security, and indeed the entire nation, will go bankrupt unless taxes are increased or benefits decreased. It can be true of a monetarily non-sovereign entity, but not of a Monetarily Sovereign government.

The tax increase is part of a stealth austerity that has as its sole goal and outcome: The widening of the Gap between the rich and the rest.

And now, it has not stimulated Japan’s economy, and it has not worked as advertised.

Gee, tax increases don’t stimulate?

Who’da thunk?

Rodger Malcolm Mitchell
Monetary Sovereignty

===================================================================================
Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)

9. Federal ownership of all banks (Click here)

10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

—–

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

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
Two key equations in economics:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

THE RECESSION CLOCK
Monetary Sovereignty

Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.

#MONETARYSOVEREIGNTY

–The “inversion” myth: Why 80,000+ people demand poverty. Thursday, Aug 28 2014 

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

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive,
and the motive is the gap.
===================================================================================

Readers of this blog know that federal taxes do not fund federal spending.

Although state and local taxes do support the spending of the monetarily non-sovereign state and local governments, federal taxes have no effect on the spending ability of our Monetarily Sovereign federal government.

If federal taxes fell to $0 or rose to $999 trillion, neither event would affect the federal government’s ability to spend. But because the populace has been brainwashed into believing federal finance is the same as state and local government and personal finance, we are treated to such lies as:

“Washington has to live within its means . . . Both parties agree that we need to reduce the deficit by the same amount — by $4 trillion. Either we ask the wealthiest Americans to pay their fair share in taxes, or we’re going to have to ask seniors to pay more for Medicare. We can’t afford to do both.” Barach Obama

And:

“Let’s be honest. We’re broke.” John Boehner

Honest?? The belief that federal taxes are necessary to support government spending (aka the Big Lie), now is being expressed regarding that “unpatriotic” tax move known as “inversion.”

Inversion means changing the address of a corporation’s headquarters to a lower-tax location, so as to reduce taxes.

It doesn’t require changing the physical location (though it could), doesn’t require firing American employees, doesn’t really require much except perhaps changing some of the company’s letterheads.

But this simple tax-saving procedure, not much different from the steps every taxpayer takes every tax season, has resulted in the most ridiculous commentary seen since Sarah Palin.

Burger King Dares Obama To Stop It From Fleeing To Canada

“My sense is this is Burger King trying to dodge paying its taxes,” Frank Clemente, executive director of the nonprofit Americans for Tax Fairness, told The Huffington Post. “I can’t say what’s on the company’s mind here, whether they’re trying to beat the clock on this and do something before Congress passes legislation or do something before Obama signs an executive order.”

One company, the drugstore giant Walgreen, considered and then abandoned a planned inversion earlier this month, after it faced significant public backlash. The Walgreen inversion could have allowed the company to slash its tax rate by as much as 15 percent, equating to savings of billions of dollars.

Oh, no! Allowing an American corporation to pay billions of dollars less in wholly unnecessary taxes? Unthinkable! And what would that company do with all those billions? Hire more people? Invest in infrastructure? Buy more goods and services, thereby increasing Gross Domestic Product, and enriching us all?

How awful!

And then, here come the politicians:

Durbin urges Hospira not to flee U.S.

Sen. Dick Durbin has a new target as he tries to halt American firms from moving corporate headquarters overseas to cut their tax bills: Hospira, a Lake Forest-based company that makes injectable drugs and infusion products.

The Democrat from Illinois on Thursday wrote a letter to the CEO of Hospira urging him not to take the firm’s tax dollars overseas.

“I strongly urge you and the Board of Directors not to duck your corporate responsibility by moving overseas to dodge paying U.S. taxes,” he wrote in the letter to F. Michael Ball. The deal, reportedly valued at about $5 billion, would allow Hospira to move its corporate tax base to France, which has a lower tax rate than the United States.

Durbin also noted that Hospira’s products are bought by the taxpayer-supported Veterans Health Administration and Medicare. Further, he said, Hospira relies on the Food and Drug Administration to “ensure its products are safe for consumers.”

The Durbin article tells every lie about inversion:

Hospira is not planning to “flee” the U.S. It merely is changing the mailing address of its headquarters. No one will move. Nothing will change — except the company will pay less taxes.

The Board of Directors would “duck its corporate responsibility” if it paid more taxes than necessary.

The VHA, Medicare and FDA are not “taxpayer supported.” Federal taxes don’t support anything.

Then, I received this petition:

Burger King: Don’t Try This Whopper of a Tax Dodge

Burger King benefits enormously from being an American company and should pay its fair share of taxes here in America. Don’t even attempt this whopper tax dodge or we will boycott Burger King.

There are currently 80,836 signatures.

How very clever: “Whopper” tax dodge. Sadly, more than 80 thousand people have no clue about federal financing. They actually believe they will benefit if companies pay more taxes. Ask them how they will benefit, and they will look at you like addled, drooling cows.

And finally, there is Gregory (famous economist) Mankiw’s article, which includes these lies:

“Tax inversions mean less money for the United States Treasury.”

“If tax inversions are a problem, as arguably they are . . . “

Wrong and wrong. The United States Treasury has the infinite ability to create money, and tax inversions most assuredly are not a problem. If anything, they are a solution to the corporate tax problem.

Then, when you think that maybe Mankiw is beginning to see the light:

” . . . corporations are more like tax collectors than taxpayers. The burden of the corporate tax is ultimately borne by people . . .”

“Let’s repeal the corporate income tax entirely, and scale back the personal income tax as well.”

Absolutely correct. I think he’s got it. I think he’s got it. The corporate tax, by removing dollars from the U.S. economy, impoverishes us all, especially the middle and lower classes.

But no. He doesn’t have it:

“We can replace (corporate and personal income taxes) with a broad-based tax on consumption.

“Some may worry that a flat consumption tax is too easy on the rich or too hard on the poor. But, one possibility is to maintain a personal income tax for those with especially high incomes. Another is to use some revenue from the consumption tax to fund universal fixed rebates — sometimes called demogrants.”

Sorry Greg, but federal taxes do not fund federal spending. So yes, a flat tax would be a big problem, because by impacting the poor more than the rich, it widens the Gap between the rich and the rest.

Bottom line, inversions are a partial solution (not a problem) to the real problem: Corporate taxes. They are paid by corporate employees and customers, not by the corporations themselves, though these taxes do make our corporations less competitive, internationally.

Why do the politicians hate inversions? Because massive inversions would demonstrate that the federal government doesn’t need taxes, and once the public understands that, all the excuses for federal austerity disappear.

(This was demonstrated before, when FICA was reduced, and SS payments were continued out of the government’s general fund. But Obama raised FICA soon enough that the public didn’t catch on. It also was demonstrated when the federal government, in an effort to stimulate the economy, sent checks to taxpayers — checks that were not backed by FICA or any other tax. But again the public didn’t get it.)

The rich political contributors love austerity. Austerity is what pushes the poor down and the rich up.

And the sound of 80,000+ mooing people demanding poverty, is heard in our land.

Rodger Malcolm Mitchell
Monetary Sovereignty

===================================================================================
Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)

9. Federal ownership of all banks (Click here)

10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

—–

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

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
Two key equations in economics:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

THE RECESSION CLOCK
Monetary Sovereignty

Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.

#MONETARYSOVEREIGNTY

The euro cancer grows; the dunce cap award returns Wednesday, Aug 27 2014 

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

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive,
and the motive is the gap.
===================================================================================

Way back on June 5, 2005, in a talk at the University of Missouri, Kansas City, I said, “Because of the Euro, no euro nation can control its own money supply. The Euro is the worst economic idea since the recession-era, Smoot-Hawley Tariff. The economies of European nations are doomed by the euro.”

On Thursday, Nov 3 2011, this blog published, “There are two, and only two, long-term solutions for Greece and the other euro nations.” The two solutions were then, and remain today:

For Greece and the other euro nations, long term survival requires one of two, and only two, events:

1. Adopt some form of a sovereign currency, and become Monetarily Sovereign
or
2. The EU give (not lend) euros to its member nations as needed.

There are no other solutions. None. All the running in circles by the European financial geniuses will be to no avail. Each day they come up with some new lending plan, and the next day abandon it in favor of some other lending plan.

But none of these plans has any long-term benefit. The euro nations are like rats in a cage, scurrying in all directions, with no hope of freedom. But still they scurry, at top speed.

If you read about any plan that does not include #1 or #2 above, know that it will fail.

One version of solution #2 is a financial merger, a sort of United States of Europe.

In 2011, this blog was awarding dunce caps for economic ignorance. The above-mentioned post went further:

I have been awarding one to five dunce caps for economic ignorance, but now the ignorance has grown so pervasive, with the euro nation leaders and our own Tea/Republican, Democrats, and the media and the columnists and the old-line economists –none of whom admit that what happened in August 1971 completely changed economics — I feel even five dunce caps does not do justice to the universal economic ignorance.

So today, I award 1000 dunce caps to all the self-styled experts, who blather on and on, spouting intuitive economics, but know nothing of the facts Monetary Sovereignty exposes.

The award had a further benefit:

There is a second reason I award 1000 dunce caps: To demonstrate what sovereignty can do. I can create all I wish. I never will run short. I cannot be forced into dunce cap bankruptcy. I don’t have to “live within my means.” I don’t need a balanced budget. I don’t need to tax or borrow dunce caps. I don’t need to be dunce cap prudent. I am dunce cap sovereign.

In that sense I am identical with the United States government which is dollar sovereign. It too can create all the dollars it wishes, never will run short, cannot be forced into bankruptcy, doesn’t have to “live within its means,” doesn’t need a balanced budget, doesn’t need to tax or borrow and doesn’t need to be dollar prudent.

All of this is a prelude to an article I read just today:

Is the End Near for the EU?
Existential Threats And Decisions Approach
by Cliff Wachtel, FX Empire, August 26th, 2014

Summary
Existential Threat #1: Unsustainable Debt Loads That Could Destroy The EU Require A Fully Empowered ECB
Existential Threat #2: Undercapitalized Banks Present Systemic Risk To EU, Global Banking. This too requires a fully empowered central bank that can act fast with needed cash
Implications: A United States of Europe is the solution, but apparent lack of political will and popular support for implied loss of member state sovereignty may doom the EU.

Yes, a United States of Europe is one of the two basic solutions, if keeping the euro as a common currency is important. And I suppose it is, because admitting that the euro is a failure would simply be too humiliating for Europe’s leaders and economists.

One can only laugh at the “implied loss of member state sovereignty line.” Loss of member state sovereignty? Really? Perhaps they should have considered that before they began the euro experiment, which by its nature, demands the loss of member state sovereignty.

The article continued:

(Mario Draghi, an Italian banker and economist) mistakenly believed austerity programs imposed on GIIPS nations were necessary and correct . . . they were mistakes.

To avoid a repeat of prior EU sovereign and bank debt crises that would follow from a collapse in confidence in peripheral bonds, the ECB needs to have the power to print money needed to buy all the sovereign bonds necessary to keep market confidence up and rates down, inflation risks be damned.

The key idea is that a common currency means a common supreme legislature and central bank with authority over member state budgets. In other words, a United States of Europe, with member states ceding most of their control over their budgets, and thus, their full sovereignty. This is really the choice behind all the others.

Austerity (i.e. deficit reduction) doesn’t work? Euro creation and financial merger are needed? Well, well. Who’da thunk?

It only took many years of suffering by the not-rich populace, for these revolutionary ideas to begin bubbling to the surface. Of course, the rich love cuts to government spending, because these cuts punish the poor more, and so, widen the Gap between the rich and the rest. And it is the Gap that makes the rich rich and the poor poor.

Anyway, being dunce cap sovereign, I now award 1,000 dunce caps to the European Union, for continuing this charade and punishing your citizenry, all these years:

———-1000———-

Don’t worry folks. I won’t run short of dunce caps, and you won’t have to pay me any dunce caps as taxes. And if you did pay me any dunce caps, I’d simply destroy them. Why would I keep them? I’ll simply create new ones whenever I need them. I’m dunce cap sovereign.

Just like the Monetarily Sovereign U.S. government is dollar sovereign.

Rodger Malcolm Mitchell
Monetary Sovereignty

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Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)

9. Federal ownership of all banks (Click here)

10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

—–

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

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
Two key equations in economics:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

THE RECESSION CLOCK
Monetary Sovereignty

Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.

#MONETARYSOVEREIGNTY

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