The debt hawks are to economics as the creationists are to biology.
Back in 2005, I said, “The Euro is the worst economic idea since the recession-era, Smoot-Hawley Tariff. The economies of European nations are doomed by the Euro.” I said that because the euro, or specifically the rules surrounding the euro, transformed a group of monetarily sovereign nations into helpless, monetarily non-sovereign nations.
These were nations that thirty years earlier had rejected the straightjacket of the gold standard, only to adopt the straightjacket of the euro standard. One EU nation, England, was wise enough to reject the euro. It still uses the pound sterling. So England is the only monetarily sovereign EU nation.
Alas, England has forgotten why it rejected the euro, and now has begun to act as though it were monetarily non-sovereign. Here is the headline for today’s article in the Washington Post, by Rebecca Omonira-Oyekanmi: “British budget cuts to include nearly 500K job losses”
The article says, “The measures announced by Chancellor of the Exchequer George Osborne will span four years and include an average cut of 19 percent in central government departments’ budgets, an $11 billion reduction in welfare spending and an increase in the pension-eligibility age to 66. The government acknowledged that 490,000 public-sector jobs would be lost over the four years as result of the cuts.”
Osborne went on to say, “The cuts deal decisively with the largest budget deficit this House of Commons has ever had to face outside of wartime.”
Isn’t austerity wonderful? What a clever way to cure the recession: Destroy 500K jobs. But what choice do they have? As long as they mistakenly believe they are not monetarily sovereign, and so cannot afford budget deficits, they are required to cut spending and/or to raise taxes, both of which will send the English economy into a tailspin.
So England is doomed, because the debt-hawks have taken over.
In a similar vein, the debt-hawk Committee for a Responsible Federal Budget (what an ironic name), has posted a questionnaire titled “In Search of Fiscal Responsibility: Ten Questions to Ask the Candidates.” The ten questions boil down to one: Would you rather have a tax increase or have certain federal programs cut? I urge you to go to their site and see what your answers would be.
Of course, the questionnaire is based on their false premise that cutting the deficit will benefit the economy. If you write to their president, Maya MacGuineas, as I have many times, and ask, “What evidence do you have that the federal deficit is unsustainable, and the budget should be cut?, you either will receive no answer (likely) or you will be given non-sequitur answers like, “The deficit is a high percentage of GDP.” Try it yourself. Her Email is:crfb@newamerica.net
Meanwhile, watch England fall – unless it comes to its senses.
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”
#Monetary Sovereignty - Mitchell 
From empire to Third World in a matter of decades.
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England did one of the smartest things that any nation could do(though they still plan to do some stupid things). If you are spending too much money, which comes from your citizens, then you need to re-assess, re-evaluate ad re-analyze what you are doing. The thought that someone could make money from no where in changing monetary policy, is like taking the pound and going to a printer and copying it. The British government is a collection of people, it is some some entity that is above and smarter than that of most people. To think so is self-imposed and foolish.
Many countries and tried to do what you have talked about like Germany and the hyper-inflation of the Mark, Rhodeshia before couped by Mugabi and became Zimbabwe. He did what you suggested and now their currency is worthless. If you try to use a currency trader, that is what their government sets and is incorrect. People trying to get out of the country will pay you double or more for foreign currency to get out of the country(and I have been there and met people in Zimbabwe). If you want to do some real geo-politcal strategy then take a look at some of the professionals and how they do it.
Go to the middle of this page and read the man’s biography. This is a true professional who has spent his life to making correct and reliable geo-political predictions http://www.tothepointnews.com/content/view/1117/90/
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As a Monetarily Sovereign Nation, England indeed has the unlimited power to create money. As you are not monetarily sovereign, you do not have that power, nor do the PIIGS, which also are not monetarily sovereign.
The nations you mentioned had hyper-inflations because of circumstances unique to each nation, not because of money printing. In fact, the hyperinflation caused the money printing, and not the other way around. (Read: Giving Life to a Lie)
Contrary to popular intuition, there is in fact no relationship between federal deficits and Inflation.
As for Dr. Wheeler’s predictions, we all make them, then we boast about the ones that turn out right. Ten years ago I predicted the recession and five years ago I predicted the problems with the euro. I won’t tell you about my wrong predictions, nor will Dr. Wheeler tell you about his.
Rodger Malcolm Mitchell
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Jim: If you are spending too much money, which comes from your citizens Really? Didn’t know about all the counterfeiting in Britain. Money in my pocket comes ultimately from the US government. Guess I’m not entrepreneurial enough to print it. Those ingenious brits are probably anticipating austerity and “fiscal responsibility”.
Rodger: In addition to the UK, Sweden still has its own currency: Sweden and the euro
So does Denmark, which has a voluntary peg. Denmark and the euro So they have put the noose around their neck, and tied it to the ceiling, but haven’t jumped off the chair yet.
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Good analogy. You are correct, though it is to be hoped that the current situation of the PIIGS will prompt sanity.
Also, as you know, California, Illinois et al are in the same situation as the PIIGS. They need federal help. The PIIGS need EU help, and that would be the salvation of the euro.
Rodger Malcolm Mitchell
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