–Eleven people who proudly signed a letter testifying to their ignorance

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.

Mark, one of our readers, called our attention to this article:

AMERICA’S DEBT CHALLENGE, By Jeanne Sahadi @CNNMoney September 12, 2011:
NEW YORK — When it comes to cutting deficits, don’t play small ball. That was the message Monday in a letter to Congress’ national debt super committee from a group of more than 60 leading economists, budget experts, former Treasury secretaries and former lawmakers.
Fiscal experts estimate that to stabilize the debt held by the public at today’s level — roughly 67% of GDP — by the end of the decade, lawmakers would need to institute about $4 trillion worth of deficit reduction over 10 years. If the committee only recommends $1.5 trillion in deficit reduction, the country’s accumulated debt will still be on track to grow faster than the economy indefinitely.

They predict the federal debt (i.e. the total of outstanding T-securities) will grow faster than GDP. This has been true since 1971, when we went off the gold standard. So? As readers of this blog know, the Debt/GDP ratio is meaningless. The letter writers make an ominous statement to strike terror into your heart, but as usual, provide no data to support it.

We do know this much, however. Slow deficit growth leads to recessions.

“We believe that a go-big approach … is necessary to bring the debt down to a manageable and sustainable level, improve the long-term fiscal balance, reassure markets and restore Americans’ faith in the political system,” the letter said.

Total garbage. What does “manageable and sustainable” mean? They have no idea. What is the benefit of “long-term fiscal balance”? They have no idea. And as for restoring American’s faith in the political system,” are you kidding? Any American who has faith in Washington must have no source of news.

Signing the letter were a number of former lawmakers from both sides of the aisle, including Republican Judd Gregg and Democrat Bob Kerrey, as well as a bipartisan bevy of former presidential economic advisers, including Christina Romer, Martin Feldstein and Glenn Hubbard. The letter was also signed by former Treasury secretaries Robert Rubin and Paul O’Neill, as well as Erskine Bowles and Alan Simpson, who co-chaired President Obama’s 2010 fiscal commission. Several fiscal experts rounded out the group. Among them: William Gale of the Brookings Institution and Maya MacGuineas of the nonpartisan Committee for a Responsible Federal Budget, which organized the letter.

May their names live in infamy. And look at what “organized the letter.” The Committee for a Responsible Federal Budget. This notorious bunch wouldn’t understand Monetary Sovereignty if their mothers read it to them from their coloring book.

Next week, President Obama will send the super committee his proposal for how to reduce the debt over time, and he’s promised it would be big enough to stabilize the debt in the long run.

I’m afraid no president ever has been more over his head than President Obama. For every issue, whether it be Israel/Palestine, Pakistan, Afghanistan, Iraq, Iran, Syria, Egypt, the euro, Medicare, Social Security, the Tea Party or the federal budget, we repeatedly think to ourselves, “This guy simply does not get it.”

Here is the man who perfected the “Obama compromise” (doing exactly what the other guy wants and calling it a compromise). But in all fairness, can we really expect someone who was both a Harvard graduate and a University of Chicago professor to understand anything about the real world?

I must admit I voted for him, because I thought a Chicago politician would be smarter. Turns out he was just carried along by the real Chicago politicians. Now, he’ll have to depend on Rahm Emanual to save Florida for him (but that’s another story).

Three years ago, Byron York wrote an article about President Obama for the National Review online. It ended with this sentence: “He’ll dazzle the country with his message of hope and possibility. But we shouldn’t expect much to actually get done.”

Anyway, cutting the federal deficit absolutely, positively will lead to a recession if we are lucky and a depression if we are not. I award all those who signed the letter four dunce caps.

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


7 thoughts on “–Eleven people who proudly signed a letter testifying to their ignorance

  1. Roger. I just finished reading ‘Free Money’. You’ve been at this for over a decade now. How do we make progress to get this message out? How do I help? It sounds insane when you begin reading, but it adds up in the end. How do we prevent a depression?


    1. I’ve had similar problems getting the message out. I started with a group of associates whom I thought would be receptive to the message and all I got was ridicule and hostility for my effort. Some seemed to think I was on to something, but weren’t interested in learning more, or claimed they were but soon made it apparent to me that they weren’t willing to make the effort.

      People have had it drilled into their thoughts for decades that governments all fund their spending through taxation and borrowing. They cannot conceive that this explanation is wrong and that the vast majority of economists do not know what they are talking about. When you ask them to think about where money actually comes from (in order to demonstrate that government is not constrained by the need to obtain money externally) their eyes glaze over.

      Economic thinking also depends greatly on where one falls on the political spectrum. I find that people adopt the economic position that comes along with their political affiliation, and lose interest in changing their thinking about economics after that. When I try to persuade conservatives I am called a socialist, when I try to persuade liberals, I am called a right-winger.


  2. Johan,

    I don’t have a simple answer. Many people agree. There is a school of thought called MMT (Modern Monetary Theory) that is in the same ballpark as Monetary Sovereignty, and they too have blogs and they too struggle with that question.

    I have a hunch (a hope?) that if we keep pounding away, eventually enough people will have that “aha” moment, and there will be a sudden rush to realization.

    Contact your Congresspeople. If enough people do that, perhaps they will realize the world is not flat.

    Rodger Malcolm Mitchell


  3. Walter,

    It takes to long of an explanation for them, most people like a short and sweet soundbite that makes everything seem so simple like. If you cant explain something in 3 words or less people will space out. To most people deficits being bad is an accepted fact that only a crazy man would dispute.


  4. What do you think of Ron Paul’s idea of returning to the gold standard? He’s not a fan of fractional reserve banking, yet even when we had a gold standard we had this type of lending. What would force banks to also move away from fractional reserves? Strong government regulation that Paul opposes. And then our economic growth would be limited to how fast we can mine gold.


  5. Bank lending is not limited by reserves. They receive all the reserves they want from the federal government, other banks or the public. A bank with zero reserves could lend trillions, if it’s capital were sufficient. You see, bank lending is limited by bank capital. The government could reduce bank lending, if it chose, merely by changing the capital/lending ratio.

    Ron Paul’s understand of economics is somewhat below that of my pet hamster, now deceased. A return to the gold standard, would make us monetarily non-sovereign, exactly where the PIIGS are.

    The Great Depression occurred while we were monetarily non-sovereign.


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