Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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The double dip recession has gone from probable to almost certainty. While no prediction in economics can be absolutely certain, this one comes pretty close, depending on what the federal government does.
Background for this prediction can be found at SUMMARY where I briefly summarize much of what is contained in the rest of the posts.
One of the tables on that page shows the relationship between federal surpluses and depressions:
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
Each depression began with a series of federal surpluses. No surprise here. A federal surplus happens when more money flows out of the economy in the form of taxes, than flows into the economy, in the form of deficit spending. A federal surplus drains the economy of money.
A federal surplus is an economic deficit.
Semantically, we have everything backwards. The positive-sounding word, “surplus,” actually is negative for the economy, and the negative-sounding word, “deficit,” actually is positive for the economy.
Because money is the lifeblood of an economy, removing money takes the life out of the economy. As recently as 2000, President Clinton (should have) learned this lesson, when his federal surpluses (economic deficits) led to the 2001 recession, which ended only when the federal government began to pump more money into the economy (i.e. ran larger “deficits”).
Readers of this blog have seen this graph, before:
The graph compares deficit growth (aka the rate of money growth) with recessions.
The graph demonstrates that:
1. Since we went off the gold standard in 1971, we have had six recessions
2. All but one have followed periods of reduced deficit growth
3. During and immediately following each recession, the rate of money growth increased or at worst, remained level – except for the most recent recession.
Prior to the most recent recession, money growth fell, and predictably, we had a recession. Then, during the recession, deficit growth rose as the federal government pumped in stimulus money, which is what the government generally does to fight a recession.
But here is the unique and frightening part. Immediately following this recession, the rate of money growth fell off a cliff. This is the first recession after which we have seen such a sharp drop in federal money creation. The reason, of course, is the insistence of the Tea/Republican insistence on money-growth reduction.
While the American people are having terrible difficulty paying their bills, the federal government, never has had, and never can have, difficulty paying its bills (unless Congress enforces a debt ceiling). Yet, for reasons unknown, the Tea/Republicans prefer the economy to run a deficit and the federal government to run a surplus. Totally senseless.
The sharp drop in the rate of money creation, leaves no room for surprise that the unemployment rate has not improved. With the economy remaining fragile, the Tea/Republicans resisting deficits, and that unprecedented fall-off in the economic surplus, I fear we are headed for an even worse recession than the terrible one we just suffered.
And when it comes, I predict the Tea/Republicans will blame it on too much federal spending. I liken this to bleeding an anemic, then blaming the subsequent health deterioration on too much blood.
Meanwhile, the Tea/Republicans have convinced the public that federal spending will cause an inflation and higher taxes, ignoring three facts:
1. The lack of deficit spending causes recessions, a far more immediate problem.
2. Deficit spending has not been the cause of inflations (See: INFLATION.)
3. There is zero relationship between taxes and deficits in a Monetarily Sovereign nation.
In summary, by resisting federal “deficit” spending, i.e. by draining the anemic patient of blood, the Tea/Republicans will cause the next recession, and unless the government comes to its senses, this recession will be deeper, longer and more tragic than anything since the 1930s.
Be prepared to suffer at the hands of ignorance.
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
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No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetary Sovereign, , and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.
Remember that the next time you’re tempted to ask a teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it ruined my future.”
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
One of the reasons Republicans want to cut federal spending is obvious: They’d like to send Obama packing.
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Hi Rodger,
An economist was interviewed on Stossel last night who pointed out that the Canadian federal debt (as per Wikipedia) peaked at $563 billion in 1997. The debt then declined to $458 billion by 2008. Yet their economy had done quite well during this time. How can this be explained? It would seem to refute the above.
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Here’s what declining Canadian government debt is doing to the economy: greater private sector debt.
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Jason,
Selective data presentation.
There have been periods in which the debt declines, but the momentum of the economy continues. In the U.S., it happened in the 1920’s. and again at the end of the 80’s. However, the loss of money takes its toll, and either the debt begins to rise, or there will be a recession.
Here is a quote from a debt-hawk organization in Canada (See: CANADA
So their debt declined until they entered the 2008 recession. I don’t have a graph of all Canadian recessions. Though I suspect they parallel U.S. recessions, I’d like to see such a graph, comparable to the one I posted for the U.S.
Rodger Malcolm Mitchell
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Canada also tends to run a trade surplus most of the time.
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Most economists expect the second half of 2011 to be very strong. We are just experiencing a soft patch. It’s all transitory.
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In commentary after commentary, you have tried to emphasize the fact that the American public is in ultimate charge (sovereign) of it’s own destiny.
“Congress shall have power to…coin money, regulate the value thereof, and of foreign coin,, and to fix the standard for weights and measures.
Other clauses in the Constitution clearly eludicate the reader to the basic fact that it is the people of the US who are ultimatley sovereign here.
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James,
Didn’t mean it that way. The people are not the government. The federal government is Monetarily Sovereign. The people are not. The government collects taxes; the people pay taxes. The government makes the laws; the people obey the laws.
The misunderstood relationship between the people and the government is what leads to silly “debt-clocks” claiming that every man, woman and child in America owes $5,000 (or some other ridiculous figure) of the federal debt. The people do not owe the federal debt. The government does. In many cases the people are the creditors.
Federal debt is not your liability, nor your children’s liability. Your taxes do not pay for it. This is how Monetary Sovereignty differs from monetary non-sovereignty.
Sadly, neither the politicians, nor the media nor the old-line economists, nor most bloggers understand the difference. That is why we are headed for another recession.
Rodger Malcolm Mitchell
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THere has to be an “ultimate power” somewhere, or else there will be a never-ending squabble over whose authority supercedes all others. That is what underlies all political thought: The ultimate authority…whatever it is. In the US Constitution that authority is given to the “people” of the US, clearly, explictly and unambiguously in the opening words of the preamble to the Constitution, to wit: “We, the people”…
While I thoroughly agree with you about the origin of money and the venues of its valuation, we apparently disagree about this point.
The public will not even attempt to understand a theory which it perceives as being based in some mathematical theory that it cannot understand. The public doesn’t do “wonk.”
The public may well know that the outcomes described are what ought to be , to their reckoning, what should be in a “fair” world, but they can’t defend the theory.
(Maybe I should insert here words here like “innocent”, “naive”, or whatever , but I think that everyone who follows these things knows perfectly well what is being discussed here. No extraordinary arrogance here…)
And it is a crying shame that the public doesn’t understand it’s monetary system. Whose fault is that? I put the entire fault on the another part of the Constitution, the First Amendment, the media.
For example, last night I happened to catch the last few words of an interview that was broadcsst on PBS “The News Hour” in which the PBS interviewer, Judy Woodruff, let a representative of the Peterson Institute of International Economics (A Pete Peterson device) get away with comparing the US debt with that of Greece–unchallenged!–but she then let some other talking head agree with him, saying, as I recall that we were all going the way of Greece if we didn’t get out house in order, or something along those lines. This is TV that we pay for. What a joke. I see now why revolutions occur.
Some of you folks who are most active in this field of economics are going to have to get yourselves a PR agency. The rest of the media is obviously too busy currying favor with the elite to pay any attention to this most important topic.
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