Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

Read this short excerpt and tell me what you think is its most shocking phrase:

The Telegraph, By Ambrose Evans-Pritchard, in Lindau, 24 Aug 2011
Germany fires cannon shot across Europe’s bows

German President Christian Wulff has accused the European Central Bank of violating its treaty mandate with the mass purchase of southern European bonds.

In a cannon shot across Europe’s bows, he warned that Germany is reaching bailout exhaustion and cannot allow its own democracy to be undermined by EU mayhem. “I regard the huge buy-up of bonds of individual states by the ECB as legally and politically questionable. Article 123 of the Treaty on the EU’s workings prohibits the ECB from directly purchasing debt instruments, in order to safeguard the central bank’s independence,” he said.

“This prohibition only makes sense if those responsible do not get around it by making substantial purchases on the secondary market,” he said, speaking at a forum of half the world’s Nobel economists on Lake Constance to review the errors of the profession over recent years.

As readers of this blog know, I long have said there are two, and only two, long-term solutions for the euro mess:

1. Each nation using the euro, return to Monetary Sovereignty by re-adopting their own sovereign currencies ala the UK, Sweden et al,
2. Merge financially into a quasi “United States of Europe,” in which the European Union supplies euros to each nation on an as-needed basis. This is similar to the way the American states (which like the euro nations are monetarily non-sovereign) survive on dollar inputs from the federal government.

Long term, a monetarily non-sovereign nation, not having the ability to create sovereign currency, needs money coming in from outside its borders. The current situation, in which each euro nation is monetarily non-sovereign simply has no legs. I said so as far back as June of 2005, in a speech at the University of Missoury, Kansas City: “Because of the Euro, no euro nation can control its own money supply. The Euro is the worst economic idea since the recession-era, Smoot-Hawley Tariff. The economies of European nations are doomed by the euro.”

So what is the most shocking phrase? Is it, “. . . Germany is reaching bailout exhaustion. . . ”? No, the only shocking part is how long it took Germany, which survives on exports, to realize it cannot be the endless sugar daddy for all the other euro nations.

Is it “. . . Christian Wulff has accused the European central Bank of violating its treaty mandate with the mass purchase of southern European bonds”? No, the euro nations always have been more interested in legal details than in economic reality.

In my opinion, this is the most shocking phrase: “. . . speaking at a forum of half the world’s Nobel economists . . .”

Here, in one room, sit more than half of the world’s Nobel economists, and these people don’t have a clue! Hello sleepy-heads. Wake up. Monetary non-sovereignty is a guaranteed, long-term disaster, unless there is a Monetarily Sovereign entity supporting the whole system. Otherwise, small financial problems force austerity, which leads to bigger financial problems, in an endless downward helix to bankruptcy.

How the heck are these Nobels awarded, anyway?

Rodger Malcolm Mitchell

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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings