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 = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
The problem with the euro nations is they are monetarily non-sovereign. They can run out of money. The same is true for the U.S. states. New Jersey, New York, all of you are in the same pickle. You’re not monetarily sovereign, so can be insolvent.
But you have one advantage over the euro states: You can get money from the federal government, which because it is Monetarily Sovereign, and has the unlimited ability to create dollars, never can run short of money.
Unfortunately, the debt hawks don’t understand that, so they want the government to reduce its deficit spending.
A reader named Tim, from Iowa, commented on my post about gambling, and observed that Iowa has placed casinos near its border with Illinois, to draw as much money from Illinois as possible. Soon, Illinois will place additional casinos near its border with Iowa, and the two will battle in a zero-sum game.
This reminded me that a monetarily non-sovereign government can survive long term only if it has money coming in from outside its borders. It cannot survive on taxes alone, because the first time it spends a dollar on imports it reduces the total dollars in its economy, which is a prescription for local recession.
At http://www.nemw.org/index.php/iowa you will see that in 2009, the federal government spent about $29 billion in Iowa and took out (in taxes) about $18 billion. So you folks came out about $11 billion ahead.
By contrast, New York received about $195 billion, but paid about $200 billion. So you folks were screwed out of $5 billion.
One state that took a real hosing was New Jersey. You paid the federal government $38 billion more than you received. That’s about $4 thousand dollars for every man, woman and child in your state — gone. And I’ll bet at least half of you think the federal deficit should be reduced!!
Connecticut only lost about $1 billion. But Delaware lost $7 billion; goodbye $7 thousand for each of you. A family of four lost $28 thousand, for no good reason. Maine made $8 billion, and Maryland profited by a nice $45 billion. But Minnesota lost $23 billion.
You can see a list of 18 northeast and midwest states at http://www.nemw.org/index.php/state-economic-profiles
The point is, of course, that all you folks who think the federal deficit is too high — do you enjoy seeing your state slowly go down the tubes?
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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports