Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Mark, one of our readers, called our attention to this article:
AMERICA’S DEBT CHALLENGE, By Jeanne Sahadi @CNNMoney September 12, 2011:
NEW YORK — When it comes to cutting deficits, don’t play small ball. That was the message Monday in a letter to Congress’ national debt super committee from a group of more than 60 leading economists, budget experts, former Treasury secretaries and former lawmakers.
Fiscal experts estimate that to stabilize the debt held by the public at today’s level — roughly 67% of GDP — by the end of the decade, lawmakers would need to institute about $4 trillion worth of deficit reduction over 10 years. If the committee only recommends $1.5 trillion in deficit reduction, the country’s accumulated debt will still be on track to grow faster than the economy indefinitely.
They predict the federal debt (i.e. the total of outstanding T-securities) will grow faster than GDP. This has been true since 1971, when we went off the gold standard. So? As readers of this blog know, the Debt/GDP ratio is meaningless. The letter writers make an ominous statement to strike terror into your heart, but as usual, provide no data to support it.
We do know this much, however. Slow deficit growth leads to recessions.
“We believe that a go-big approach … is necessary to bring the debt down to a manageable and sustainable level, improve the long-term fiscal balance, reassure markets and restore Americans’ faith in the political system,” the letter said.
Total garbage. What does “manageable and sustainable” mean? They have no idea. What is the benefit of “long-term fiscal balance”? They have no idea. And as for restoring American’s faith in the political system,” are you kidding? Any American who has faith in Washington must have no source of news.
Signing the letter were a number of former lawmakers from both sides of the aisle, including Republican Judd Gregg and Democrat Bob Kerrey, as well as a bipartisan bevy of former presidential economic advisers, including Christina Romer, Martin Feldstein and Glenn Hubbard. The letter was also signed by former Treasury secretaries Robert Rubin and Paul O’Neill, as well as Erskine Bowles and Alan Simpson, who co-chaired President Obama’s 2010 fiscal commission. Several fiscal experts rounded out the group. Among them: William Gale of the Brookings Institution and Maya MacGuineas of the nonpartisan Committee for a Responsible Federal Budget, which organized the letter.
May their names live in infamy. And look at what “organized the letter.” The Committee for a Responsible Federal Budget. This notorious bunch wouldn’t understand Monetary Sovereignty if their mothers read it to them from their coloring book.
Next week, President Obama will send the super committee his proposal for how to reduce the debt over time, and he’s promised it would be big enough to stabilize the debt in the long run.
I’m afraid no president ever has been more over his head than President Obama. For every issue, whether it be Israel/Palestine, Pakistan, Afghanistan, Iraq, Iran, Syria, Egypt, the euro, Medicare, Social Security, the Tea Party or the federal budget, we repeatedly think to ourselves, “This guy simply does not get it.”
Here is the man who perfected the “Obama compromise” (doing exactly what the other guy wants and calling it a compromise). But in all fairness, can we really expect someone who was both a Harvard graduate and a University of Chicago professor to understand anything about the real world?
I must admit I voted for him, because I thought a Chicago politician would be smarter. Turns out he was just carried along by the real Chicago politicians. Now, he’ll have to depend on Rahm Emanual to save Florida for him (but that’s another story).
Three years ago, Byron York wrote an article about President Obama for the National Review online. It ended with this sentence: “He’ll dazzle the country with his message of hope and possibility. But we shouldn’t expect much to actually get done.”
Anyway, cutting the federal deficit absolutely, positively will lead to a recession if we are lucky and a depression if we are not. I award all those who signed the letter four dunce caps.
Rodger Malcolm Mitchell
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