Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. 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.
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The following graph is no surprise:
When Gross Domestic Product heads down, we have a recession — but not always.
And when the National Activity Index heads down, we have a recession — but not always — except when it dips below -0.5%.
So how about combining the two indexes and see if we can get an “always” situation, that also may be appropriate to the current situation:
If we make the indicated combination, we find that after the graph line drops significantly below 0.0, we always seem to have a recession. Will this continue? Are we headed for a recession before there will be a recovery? I don’t know, but the data are interesting, and a bit ominous, in light of where we are now.
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
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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
#MONETARY SOVEREIGNTY
Rodger – - -
Interesting observation. One caution though: The CFNAI is subject to backwards data revisons for several months so the actual value is not permanently fixed until six months or so after the original date. See Steve Hansen’s discussion http://econintersect.com/wordpress/?p=20410 (Read caveats).
John
Off topic, but can/will anyone address the following claim about MMT?
http://www.zerohedge.com/news/its-latest-nonfarm-payroll-mea-culpa-goldman-stumbles-answer-and-changes-rules-game
I do not understand the subject matter well enough to know what is wrong with the claims about MMT in this article.
Brian,
The author admits he doesn’t understand MMT (calls it “gibberish”), and his pre-occupation with Treasury pricing proves it. If he understood MMT, he would know that MMT and Monetary Sovereignty say Treasuries are unnecessary.
They merely are evidence of federal “borrowing” (misleading word), and a Monetarily Sovereign nation never needs to borrow, and in fact, does not receive any money when it does borrow.
Treasuries became obsolete on 8/15/71, when the U.S. became Monetarily Sovereign.
As for Quantitative Easing, it’s mostly useless, except as a way to affect long term interest rates.
Rodger Malcolm Mitchell
Thank you for responding. I suspected as much. Still can’t find valid criticism of MMT.
Unfortunately, the criticisms of MMT and Monetary Sovereignty usually come from people who don’t understand it. Both begin as a list of absolute facts about our economy. It’s fine to criticize the conclusions, but to criticize the facts is ludicrous.
Example: I once asked the editor of a major U.S. newspaper, whether he understood that the federal government creates dollars by paying bills. He told me I was wrong. That’s where economics stands, today.
(I now plan to write a criticism of quantum chromodynamics. I know nothing about it, so I feel qualified.)
I think the current definition of “recession” enables policymakers to engage in complacency. A recession should be defined as any time the national unemployment rate exceeds three percent.
A depression should be defined as any time the national unemployment rate exceeds eight percent. This would mean we’ve been in a depression for the past three years, which sounds right.
Right, Tyler,
Or they could rename recessions and depressions: “Good potential” and “maximum potential.” Then, when we enter one, we’ve entered a period of good or maximum potential. Tell that to the media.
Funny you should say that because I have an interview soon with Bloomberg, to be an assistant to the president of Bloomberg.
I definitely think it’s silly that we claim to not be in a recession when 12 million Americans are jobless.
Don’t let them know you understand Monetary Sovereignty or you may not get the job.
Good luck.
Rodger Malcolm Mitchell