Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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
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.”