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.
James B. Stewart writes the “Common Sense” column for the Business Day section of The New York Times. He shared the Pulitzer Prize for explanatory reporting back in 1988, when he was a reporter at The Wall Street Journal. He now is a professor of business journalism at the Columbia University Graduate School of Journalism.
He wrote a column recently, in which he said:
. . . our political leaders and those who aspire to replace them should be debating the fiscal policies that will put Americans to work in the short term and reduce the deficit in the long term . . .
Really? Think about it Mr. Stewart. Fiscal policy that stimulates employment in the short term, then reduces the deficit in the long term? How and why should the federal government spend more today to stimulate the economy and employment, then when that effort works, make a U-turn, abandon what works, then spend less – to do what? Strangle the economy and reduce employment?? Even a non-economist should recognize the silliness of that concept.
And your column is titled, “Common Sense”? Yikes!
O.K., so you “only” won a Pulitzer for reporting and not a Nobel for economics (not that it makes any difference, based on Nobels awarded to date). But, there is zero data to indicate that reductions in federal spending will do anything other than lead to recessions.
Sadly, you got your information from Ben Bernanke, who you quoted, “To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time.”
And where did Mr. Bernanke get that? Gross National Income (GNI) for all practical purposes is Gross Domestic Product (GDP) less comparatively small amounts of interest paid to other countries. So, Mr. Bernanke says, for U.S. fiscal policy to be sustainable, Debt/GDP must remain the same or decline.
As readers of this blog know, the Debt/GDP ratio is meaningless. Federal debt is a life-of-nation measure that easily could be eliminated tomorrow. GDP is a one-year measure, unrelated to T-securities (aka “Debt”). There is not one iota of historical data to support Mr. Bernanke’s conclusion that Debt/GDP should be reduced in a Monetarily Sovereign nation.
What reporter believes science is based on common sense rather than on facts? If only reporters would do a bit of fact-checking, the public might not be so confused by common nonsense.
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