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.
To help you understand the wonderful world of economics, I give you excerpts from the following Associated Press article:
Deep spending cuts pose a new threat to US economy.
By Christopher S. Rugaber, AP Business Writers | AP – Fri, Nov 18, 2011 11:51 AM EST
WASHINGTON (AP) — Just as the U.S. economy is making progress despite Europe’s turmoil, here come two new threats. A congressional panel is supposed to agree by Thanksgiving on a deficit-reduction package of at least $1.2 trillion. If it fails, federal spending would automatically be cut by that amount starting in 2013.
Congress may also let emergency unemployment aid and a Social Security tax cut expire at year’s end. Either outcome could slow growth and spook markets.
Many economists hoped that an extension of the Social Security tax cuts and unemployment benefits would be part of a supercommittee deal. . . . The Social Security tax cut gave most Americans an extra $1,000 to $2,000 this year. Unemployment benefits provide about $300 a week. Most of that money quickly and directly boosts consumer spending, which drives the economy.
By contrast, an expiration of those benefits could cut growth by about three-quarters of a percentage point, economists say. Throw in other cuts, like those passed in the August debt deal, and all told, federal budget policies could subtract 1.7 percentage points from growth in 2012, according to JPMorgan Chase and Moody’s Analytics.
“It would be very difficult for an economy that’s doing well to digest, let alone one that’s barely growing at potential,” said Ryan Sweet, an economist at Moody’s. “That could unwind a lot of the improvement we’ve seen so far.”
The economy grew at an annual rate of 2.5 percent in the July-September quarter. Some analysts fear it could fall below 2 percent next year, especially if the emergency unemployment benefits and Social Security tax cuts aren’t renewed.
If the automatic spending cuts take effect, the defense budget could be cut by nearly $500 billion over nine years. Some contractors are nervous. Wes Bush, CEO of Northrop Grumman, has told analysts that the company is bracing for spending cuts. “It’s certainly going to be a more challenging environment” next year, he said.
O.K., we understand and agree. Moody’s says spending cuts will adversely affect economic growth. Absolutely true. It’s what we’ve been preaching for years. But wait. Continuing to read the same article, we find this:
Some investors fear that the supercommittee’s failure would spark fresh downgrades of U.S. debt. Standard & Poor’s downgraded the government’s long-term debt in August. That contributed to a stock market plunge. It’s possible that a deadlocked supercommittee would lead the two other major rating agencies — Fitch and Moody’s — to follow suit.
Huh? Spending cuts would adversely affect the economy, reducing economic growth. Reducing economic growth would prevent rating agencies from downgrading U.S. credit??
But wait. Continuing in the same article we read:
Some economists say the automatic spending cuts could actually boost confidence a bit: They would reassure the world that the U.S. government can make progress in shrinking its deficit.
Priya Misra, an analyst at Bank of America Merrill Lynch, estimates that Congress will need to find $2 trillion more in cuts by August 2013 to prevent another credit downgrade.
So let’s get this straight. Spending cuts will hurt the economy. They will reduce economic growth and take spending money from consumers. Hurting the economy, reducing economic growth and taking spending money from consumers will reassure the world and boost confidence and prevent a downgrade in credit.
And this is what passes for logic in mainstream economics.
Yet the “99%” believes it.
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