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. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
A most remarkable, though belated, awakening may be under way. Read about the letter from several Senators to the deficit reduction super-committee. The letter urged the Co-Chairs of the Joint Select Committee on Deficit Reduction to take steps to ensure that Congress and the public get an independent estimate of their proposal’s impact on jobs – and do no harm to employment in America.
In part, the letter said,
We must do more to focus our national agenda on job creation and restoring our middle class. With that goal in mind, we ask you to take steps to ensure that your deliberations about deficit reduction do not worsen, and hopefully improve the jobs picture.
The letter specifically asks the Select Committee to adopt two principles:
That the proposals be analyzed by CBO for impact on employment; and
That the overall package not result in any net decrease in employment.
The letter is remarkable, not only for it’s recognition of economic reality, but for its bow to political reality. The economic reality is it is 100% impossible to stimulate employment while reducing the federal government’s money creation (aka deficit spending). The political reality is the voting public cares more about jobs than deficits.
The letter also is remarkable for the low bar it sets. It doesn’t ask this committee of luminaries to do anything positive; just don’t do anything negative. This is the measure of success. It’s like saying to the doctor, “Your goal is not to cure the patient; just don’t kill him.”
It will be interesting to see the independent estimates of the Committee’s proposals. It also will be interesting to see how the Tea/Republicans bob and weave to show that somehow, by a miracle of fudged mathematics, reducing the money supply will increase employment. I have a feeling we soon will see a spate of double-talk and fake data analysis beyond anything even this moribund Congress has produced.
Contrast the above message with the “don’t play small ball” message delivered by “60 leading economists, budget experts, former Treasury secretaries and former law makers. They essentially told the Committee not to consider what will happen to the economy, the poor, the sick, the unemployed, those losing their homes, the elderly and the children, but rather to focus on cutting federal deficits.
I’ll continue to keep you informed about the request to consider the effect of deficit cuts on unemployment. Meanwhile, keep a sharp ear for chest-thumping, flag-waving gobbledegook from the debt-hawks, as they realize how untenable their position has become.
By the way, here is another reminder about what happens when deficit growth declines: Recessions. (And recessions are cured with increased deficit growth.)
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