●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●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.
We know that both President Obama and Mr. Romney are ruled by the upper 1% income group, and though Obama makes some weak pretense at supporting the lower 99%, Romney is more honest. He makes no secret of his desire to spread the income gap between rich and poor. His vow to dismantle Obamacare (aka Romneycare) is only the more egregious of his cut spending, cut benefits, cut aid to the poor genuflection to the Tea right.
Similarly, the entire, monetarily non-sovereign, euro zone is in thrall of economy-devastating austerity (i.e. austerity for the poor, not for the rich), and will continue to slice away at government spending until the 99% begin to erect guillotines and do some slicing of their own.
Then there is the UK. It does not remember why it wisely rejected the euro and remained Monetarily Sovereign, retaining the unlimited ability to create it’s own sovereign currency. So, wrongly thinking the finances of a Monetarily Sovereign government are like the finances of monetarily non-sovereign people, it embarked on a serious austerity plan. It cut its deficits.
Now it is shocked – shocked! – that cuts in government deficts impoverish the citizenry. As UK citizens receive less money, they spend less, which in turn, impoverishes businesses, which then fire people, who then have even less money to spend. And on and on we go, in the downward helix of deficit cuts, to depression.
The record of deficit cutting austerity approaches perfection. Wherever it is tried it succeeds – succeeds, that is, in tanking the economy. Around the world, dozens of anemic economies have had the leeches of austerity applied, and as the financial blood is drained, the doctors scratch their heads and wonder why their patients sicken and die.
And now comes Israel:
Israel eyes austerity after prosperous year
By Jean-Luc Renaudie | AFP
Prime Minister Benjamin Netanyahu, who has long boasted how Israel has avoided the fiscal fate of Spain and Greece, is poised to unveil tough austerity measures likely to hit the underprivileged. The measures will aim to make up part of the budget deficit that has climbed to 4.0 percent of Israel’s GDP — twice that which was expected for 2012.
Translation: “Because we have not become Spain and Greece, I must cut deficits to make us into Spain and Greece.”
Sound familiar? The dreaded budget deficit, which by mysterious coincidence, seems to rise in lock step with economic growth, now is being blamed for — what? — economic growth? Or just being misnamed “deficit”?
Never mind that a government deficit = private sector surplus, and the bigger the deficit, the more money people spend, and the more businesses grow.
And everywhere the dreaded deficit is “cured,” the underprivileged suffer, but isn’t that the whole point?
Taxes on cigarettes and beer have already been hiked this week, and according to media reports the government will also be raising VAT from 16 to 17 percent and introducing a 2.0 percent income tax rise in households with an annual income of at least a million shekels ($245,000, 199,300 euros).
Also expected is a combined 700-million-shekel ($171 million) cut from the budgets of all ministries with the exception of defence, education and welfare. A spokesman for Netanyahu told public radio on Thursday that the projected measures would raise the annual tax burden of each Israeli household by 1,740 shekels ($426/347 euros).
But these could only be the beginning, with Finance Minister Yuval Steinitz preparing an additional series of tax rises for 2013.
Translation: “See, it goes like this. We’ll raise taxes, which will take money out of the private sector. And we’ll spend less, which will put less money into the private sector. By draining the private sector of money, we’ll crush the economy — well, not the whole economy. The rich will be all right. It’s the poor who will be crushed, which will give the rich even more power. Simple, huh?”
“There are no free lunches,” Netanyahu said this week in an attempt to justify the austerity plan.
This is known as “governing by slogan.” Sounds wise; means nothing.
“Those who say that we can spend lavishly… endanger the state of Israel and could easily lead it to the brink of bankruptcy, as is the case of leading European economies,” Netanyahu said.
Er, ah, excuse me, Ben, but the euro nations are monetarily non-sovereign, and cannot control their money supply. They can be bankrupt. Israel is Monetarily Sovereign, has the unlimited ability to create shekels, so never can be forced into bankruptcy.
Ah, details, details.
Israeli officials also fear that the major international rating agencies, which had hitherto provided Israel with a clean bill of health, will lower their ratings.
Oh, woe! Lower ratings would mean Israel would pay a higher rate on borrowing — which as a Monetarily Sovereign nation, it doesn’t need to do. Further, a Monetarily Sovereign nation has the unlimited ability to pay any interest rate.
So, the problem is . . . ?
Until now, the Jewish state had effectively escaped the sub prime crisis of 2008 and the beginning of the current crisis in the eurozone. “To ensure stability, we must take unpopular measures,” said Harel Locker, director general of Netanyahu’s office.
Translation: “Heaven forbid we continue to do what has worked. To ensure stability, we must change the very thing that gave us stability.”
And even within the coalition, several religious and ultra-nationalist parties denounced the “anti-social” character of Netanyahu’s plan for 2013, an election year. It is the planned increase in Value Added Tax (VAT), which will affect all Israelis, that has come in for the harshest criticism.
One of the main critiques levelled at Netanyahu is his intention to give a huge “gift” to multinationals by halving the taxes on monies earned in Israel and which are transferred abroad, from 25 percent to 12 percent.
See the pattern? Social programs (for the 99%) will be cut. The VAT (which mostly punishes the 99%) will be increased. Taxes on multinationals (affecting the 1%) will be halved. It’s the same the world over.
In a defensive statement on Thursday, Netanyahu said that “even after the steps we will take, families in Israel — middle-class and underprivileged — will remain with more money in their pockets” thanks to measures such as free education from the age of three, tax benefits for working families and free dental care for children.
And central bank chief Stanley Fischer was quoted as saying that Netanyahu’s planned measures were “very serious progress” which displayed “very responsible leadership by the economic decision-makers.”
Translation: “We’ll take 10 shekels from your left pocket and put 5 shekels in your right pocket. Stanley Fischer says this is good for you, so it must be. Would Stanley lie to you?”
Clearly, Israel has learned a great deal from American politicians, about how to screw the 99%. All of this is possible only because the 99% has been kept ignorant by the 1% — not just ignorant, but resolutely ignorant. (Try explaining Monetary Sovereignty to your friends, and you’ll see the meaning of “resolutely ignorant.”)
Bottom line: Deficit cuts (aka “austerity) will destroy Israel, especially the 99%, as deficit cuts have destroyed every nation where they have been implemented, and even now are destroying America.
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