●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.
Answer: Run a balanced federal budget.
The federal deficit (red line, below) has exceeded $1 trillion since early in the recession, and the most recent figures show the deficit to be about $1.2 trillion. The reason the deficit is this high: The recession.
Curing a recession requires stimulating Gross Domestic Product (GDP). And GDP = Federal Spending + Non-federal Spending – Net Imports. So curing a recession requires a combination of increased Federal Spending plus reduced taxing (to increase Non-federal Spending), i.e. increased Federal Deficit Spending.
Notice, that in the formula for GDP, Net Imports (shown by the green line) is deducted. This is because Net Import dollars flow out of the country. (By the way, the graph shows an addition of net exports. Net imports and net exports, both being net, actually are the same thing, and because the data are provided as a negative, we need to add them.)
The most recent figures show Net Imports to be somewhat greater than $500 billion. This means that in order for GDP to grow, there first must be enough federal deficit spending to make up for the $500+ billion lost through Net Imports. The bigger the Net Imports, the greater must be Federal Deficit Spending, just to make up for the loss of dollars.
So, the difference between Federal Deficit Spending and Net Imports represents the dollars the federal government adds to the domestic economy. For want of a better name, call that “Net Deficits,” which is shown by the blue line (above), and the most recent data show “Net Deficits” to be about $600 billion.
Is $600 billion a big number in federal government terms? I’ll let you decide. It’s about half the so-called “deficit” that has the debt hawks all in a tither. It’s about ten times the assets of one citizen, Bill Gates. It’s small when compared with GDP:
But there is a larger point to be made — or rather, several larger points:
1. So long as the U.S. continues to be a net importer, it always will be necessary for the federal government to deficit spend, just to break even on our money supply. But breaking even on our money supply, while our population grows (nearly 1% per year), would mean there are fewer dollars available for each man, woman and child in America. So to keep the economy from contracting, deficit spending at least must exceed Net Imports and population growth.
2. Those who wish for a “balanced budget,” actually are wishing the U.S. economy would contract $500 billion per year — at an approximate cost of $5,000 annually, to every household in America. (Compare this with the “debt clocks” that claim the debt costs Americans, when in fact, the debt benefits Americans.) Reducing the deficit reduces GDP.
3. The U.S. federal government, being Monetarily Sovereign, has the unlimited ability to deficit spend, forever. Contrary to popular “wisdom,” there has been zero relationship between federal deficit spending and inflation.
4. The world’s net import/export is zero. Our imports are other nation’s exports. The U.S. pumps %500+ billion into the world’s economies. Were the U.S. to become a net exporter, the entire world would suffer — particularly the monetarily non-sovereign nations, all of which survive long term on net exports.
The terms “balanced budget,” “live within our means,” and “don’t spend what we don’t have” sound oh-so prudent, and they are — for you and me, and the states, counties, cities and euro nations, all of which are monetarily non-sovereign. But when these ideas are applied to a Monetarily Sovereign government, they are totally imprudent — disastrous, actually.
Rodger Malcolm Mitchell
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