Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●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.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Why the Polish people are smarter than the Polish government, the European Union (EU) and the International Monetary Fund (IMF):
Poland was smart enough to retain the single, most valuable asset any nation can have: its Monetary Sovereignty. Rather than adopting the euro, over which it would have no control, Poland retained the złoty, over which it has total control.
It can create them at will, pay any bill of any size, and change their value whenever needed. Poland is sovereign over the złoty, just as the U.S. is sovereign over the dollar. By contrast, the euro nations use an “alien” currency, over which they have no control, which is the fundamental reason why they are in financial trouble.
Global Property Guide
Feb 27, 2012
Poland, the Exceptional East European?With Europe in meltdown, is Poland an exception? Europe’s sixth-largest economy has strong domestic demand, and has not yet adopted the euro: so it was able to devalue the zloty to maintain competitiveness. Poland’s economy grew by 3.8% in 2011, and is expected to grow by 2.5% in 2012 and 2.5% in 2013 (OECD forecast November 2011).
While most of Europe is struggling to avoid a double-dip recession, the Polish economy is growing. Its depreciated currency makes its products attractive to buyers.
Workers are moving back to Poland, according to recent OCDE data. Unemployment was 9.6% in 2011, and is expected to rise to 9.9% in 2012, but this is lower than in many European countries. Migration dynamics are a fundamental demand driver for urban housing markets, particularly for urban areas such as Warsaw, Krakow and Wroctaw characterized by significant in-migration rates.
Poland’s relatively strong economic position is highlighted by Bloomberg, which calculates that Polish government bonds provide a better risk-adjusted return than German Bunds and US Treasuries.
Attention: Polish government: Your “relatively strong economic position” comes from your being MONETARILY SOVEREIGN. You can control your money supply. So, if it isn’t broken, don’t fix it.
Conditions of Poland’s accession to the European Union oblige the country to eventually adopt the euro, though not at any specific date and only after Poland meets the necessary stability criteria. Serious discussions of joining the Eurozone have ensued.
However, article 227 of the Constitution of the Republic of Poland will need to be amended first, so it seems unlikely that Poland will adopt the Euro before 2019. Public opinion research by CBOS from March 2011 shows that 60% of Poles are against changing their currency. Only 32% of Poles want to adopt the Euro, compared to 41% in April 2010
Let’s see now: Our monetarily non-sovereign euro neighbors are in the toilet. We Poles are Monetarily Sovereign over our currency, the złoty, and are in a “relatively strong economic position.” So what shall we do? Shall we give up the złoty, surrender our Monetary Sovereignty and join the euro nations by adopting their alien currency? Hmmm. . .
Thousands of Poles protest pro-market reforms
By VANESSA GERA
Associated Press / September 29, 2012WARSAW, Poland (AP) — Thousands of Poles blew horns, prayed and waved flags in downtown Warsaw on Saturday to show their anger over a new law which will gradually raise the retirement age to 67 for all Poles from 60 for women and 65 for men.
Dubbed ‘‘Wake Up, Poland,’’ the protest is an expression of the deep anxieties gripping many Poles as the government tries to lower state debt by embracing pro-market reforms that are weakening the social safety net.
Police had no estimate yet for the number of protesters, but private broadcaster TVN24 said tens of thousands turned out.
Quick summary: A Monetarily Sovereign nation has the unlimited ability to pay its bills. Nevertheless, it thinks its deficit is unsustainable, so it decides to take money from its citizens (who need money) and give it to the government (which doesn’t need money, because it creates money.) The government gradually raises the retirement age to lower state debt, and it weakens the social safety net.
Sound familiar?
Apparently, the Polish government (like the U.S. government) doesn’t realize it is Monetarily Sovereign, so it acts like a nation already stuck with the euro.
The Polish people probably don’t understand Monetary Sovereignty either, but they know enough not to want the euro and the cuts in social services that monetarily non-sovereign (i.e. euro) nations are forced into. This says the Polish people are smarter than the Polish government, the EU and the IMF — and the U.S. government, for that matter.
It seems they also are smarter than the American people, who continue to buy into the absolute nonsense (promulgated by the upper 1% income group) that the U.S. federal deficit and debt are too high, when in fact, they are too low.
If Poland resists the siren song of the failed euro, the failed EU and the failed IMF, and begins to use its Monetary Sovereignty, rather than act like a euro nation, it soon will be the strongest nation in Europe. But that’s a big “IF.”
Rodger Malcolm Mitchell
Monetary Sovereignty
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Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%
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 Imports
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Poland has a lot of foreign currency debt, so even though it had its own currency, It is very very far from being a true monetary sovereign, like USA or UK or Japan.
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Anton,
Foreign currency debt easily is accommodated. Merely exchange your sovereign currency for the debt currency, then pay the debt using the debt currency.
Today’s rate is 1.00 Zloty = 0.317679 US dollar. So, for instance, if Poland owed $1 million, they would create 3,148,480 PLN, exchange them for $1 million, and pay the debt.
No problem at all.
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Not the same as having your debt in your own currency. Much easier to have a debt crisis-see Asia’97/98. Plenty of problems when your currency starts to depreciate. Forces the government to accumulate fx reserves whenever it can to prevent that in order not to have an attack on its currency by speculators. A true sovereign like USA for example or Japan or UK can never experience that.
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Anton,
You would be correct if supply were the only factor influencing price. You are, however, forgetting about demand. The demand for a currency is based on risk (inflation) and reward (interest).
To protect the value of its sovereign currency, a Monetarily Sovereign nation merely increases interest rates on its bonds. Demand instantly goes up, because to purchase the nation’s high-paying bonds, investors first must obtain the nation’s sovereign currency.
The short speculators get squeezed, and soon must cover, which increases demand even more.
The Fed successfully controls inflation exactly this way.
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Monetary Sovereign or Monetary Xtrevilism?
Roger, you have one of the best blogs on the net for explaining the mechanics of credit and money creation, but I really think you do your readers a disservice by referring to nation states like China, Canada, Australia, the UK, Japan, and Poland, that have unlimited power to create their sovereign currencies, as “Monetary Sovereigns”. The problem in doing so is that it suggests that the people in those respective nation states have control over their governments and central banks. Nothing could be further from the truth. What they really have is “Monetary Xtrevilism”, control of credit and money in the hands of the aberrant sociopathic Xtrevilist few;
http://www.boxthefox.com/
The global crisis is not a financial crisis it is a moral crisis caused by the hijacking and intentional dismantling of the now scam ‘rule of law’ in these nation states. What we really have is an intentional herd thinning and restructuring of the global society into a two tier ruler and ruled structure with the ruled destined for a perpetual conflict with each other. If the Poles had a responsive to the will of the people government there would be no need for them to be on the streets protesting. They are being sold out by their disingenuous ‘leaders’ just as the rest of the European nations that have adopted the Euro have been sold out by their ‘leaders’, and the Poles too will soon join them unless they can mount an overwhelming political will to resist.
Deception is the strongest political force on the planet.
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Warren,
I never have heard the term “xtrevilism.” Sounds bad. (Extra evil??)
Anyway, China, Canada, Australia et al are Monetarily Sovereign, as is the U.S. Unlike the euro nations, they have sovereign power over their sovereign currencies.
But having the power doesn’t mean using the power judiciously. The ongoing attempts, in the U.S., to reduce the federal deficit, are in reality, attempts to increase the income gap between the very rich and the rest of the populace. So, attempting to use your word, the U.S. is ruled by xtrevilists.
People who care about people, would not try to reduce federal spending. There is no fiscal reason for doing so, and there are powerful human reasons for not doing so.
That said, the fundamental difference between the above-named nations and the euro nation is that the former are Monetarily Sovereign and the later are monetarily non-sovereign–and until the “99%” understand that difference, they will be ruled by the “1%.”
Rodger Malcolm Mitchell
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Raising int. rates to protect your currency never stopped speculators. On the contrary. I refer you to look at the Asian crisis in 97/98, Mexico’95/96,Hungary’03. It will work for a true sovereign with no foreign currency debt but not for a country like Poand…
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How much of that is Polish public debt denominated in foreign currencies, vs private debt so denominated? Otherwise, agree with you.
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Poland can create zlotys, then exchange them for foreign currency to pay any foreign debt.
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Not if the exchange rate of zlotys versus euros, say, goes down fast enough. Debts measured in foreign currency terms can go to infinity (and beyond! 🙂 ) in domestic currency terms, and so can become absolutely unpayable.
I was wondering if a lot of that debt is private sector, like in Ireland say. Recently, an insane practice arose in Europe of ordinary people becoming indebted in foreign currency for house mortgages. Then the Polish government has the simple expedient of not paying debts it doesn’t owe, not following in Ireland’s crazy footsteps. Letting the fools who lent be parted with their money.
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Anton,
No need to stop speculators. On the contrary, raising interest rates uses speculators.
If Poland wishes to fight inflation (i.e. increase the value of its currency relative to goods and services), it raises the interest rate paid by its bonds. This increases the demand for those bonds. In order to buy those bonds, speculators (investors?) first must acquire zlotys. This increases the demand for zlotys, but does not increase the supply of zlotys.
What happens when the demand for something increases, while the supply does not? Answer: The price goes up. Since inflation is a reduction in the price of a currency vs. the price of goods and services, raising interest rates is anti-inflationary.
The advantage held by a Monetarily Sovereign nation is that it doesn’t need or use the money “borrowed,” so can issue bonds and increase interest rates, endlessly. It is sovereign over its money.
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Cal,
Ordinary people are monetarily non-sovereign, so it doesn’t much matter what currency they owe. If they have sufficient zlotys, they can exchange them for the foreign currency. If they don’t have sufficient zlotys, they are no more screwed than if the debt were in zlotys.
Poland, being Monetarily Sovereign (unlike Ireland), can pay any debts, in any currency.
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That’s just not true. Monetary sovereignty does not imply that. If the exchange rate goes up fast enough, all the printing money & issuing bonds and raising rates can do nothing. The maximum amount of euros that zlotys can buy is finite. If the number of euros one zloty buys at each time period shrinks successively, quickly enough, the sum can be finite, a convergent series. E.g. day 1, 1 zloty = 1 euro, day 2 1 zloty = 1/2 euro day 3 1 zloty = 1/4 euro etc. you are only going to be able to get <2 euros, no matter how many days you continue to pay 1 zloty. The point is that a foreign currency exchange is always for a finite amount X of foreign currency, not unlimited amounts, and prior payments can drive down the rates fast enough.
Even a monetary sovereign country could not pay a debt to a creditor IN ITS OWN CURRENCY – if the "debt" had the crazy condition that each time you paid X zlotys, you owe 2X zlotys more. The more you pay, the more your are in debt. That's what foreign denominated debt can be like. Better not to pay at all & default right away, or never incur it.
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Exchange rates are not a mathematical function of relative supply. You’re ignoring demand.
Today it takes 4 zlotys to buy one euro. Tomorrow it might take 5 zlotys to buy one euro. Next year it might take 10 zlotys to buy one euro. So what? The number of zlotys available to the Polish government is infinite. No matter what the exchange rate, the Polish government can create sufficient zlotys.
And, if the Polish government increases zloty demand> by increasing interest rates, you might see the value of zlotys go up, even as the supply goes up.
Depending on both supply and demand, next year might require only 3 zlotys to buy one euro.
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