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.
Here is a hint about how to cure unemployment.
In the following graph, the blue line shows annual percentage changes in the civilian employment / population ratio. The higher the line, the lower is unemployment (allowing for varying definitions of “unemployment.”)
The red line shows annual percentage changes in federal debt, which under current law corresponds to annual percentage changes in the federal deficit.
Notice how movement in the blue line (employment %) generally follows movement in the red line (deficits) by 1 to 3 years. For clarity, let’s examine the results in smaller increments. Take the period, 1975 – 1980:
Deficit growth reaches a peak in 1976, then declines. Employment reaches a peak in 1978, then declines.
Or take the period, 1979 – 1985. Deficit growth peaks in 1981, falls back, then peaks again in 1983. Employment peaks in 1981, falls back, then peaks again in 1984.
In the next graph, deficit growth reaches a trough in 1989; employment reaches a trough in 1991.
In the next graph, deficits peak in 1992 and 2004. Employment peaks in 1994 and 2006. The 2000 deficit trough is followed by the 2002 employment trough.
And now we come to the latest graph. Deficits peak in 2009 and employment — well, we don’t know. What do you think will happen if the Congressional supercommittee succeeds in cutting deficits? (Remember that the U.S. is Monetarily Sovereign, so has zero need to reduce deficits.)
I know. I know. Correlation doesn’t necessarily mean causation. But add the above data to the fact that every depression has been preceded by years of federal surpluses, plus the sheer logic of money supply reductions having an adverse affect on the economy, and I come to one inescapable conclusion: Deficit-cutting by Congress, the President and the “super committee,” will give us a super recession, with massive unemployment.
The American economy needs federal deficit increases, today, tomorrow and far into the future. The American government, being Monetarily Sovereign, can and should provide those deficit increases.
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