Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Most of my posts begin with “Mitchell’s laws,” one of which is: Austerity breeds austerity and leads to civil disorder. The term “civil disorder” is a euphemism for police brutality, including torture and even killings. And it’s happening right here in innocent America.
In the post “How the 1% turns the 99% against itself and makes us into dogs,” I described how the media and politicians brainwash you into believing #Occupy Wall Street (#OWS) is a gang of childish, ignorant rowdies, who deserve neither attention nor respect.
The fact that #OWS is fighting on behalf of the 99% is not completely understood by the very people who would benefit most – including the police themselves. Also, not understood, is the power being unleashed by the 1%, not just against the protesters, but against all of you.
The truly great blog, “naked capitalism” posted the following account. See if it reminds you of what happens in nations run by vicious dictators:
While people are now beginning to learn that the police attack on Occupy LA was much more violent than previously reported, few actually realize that much—if not most—of the abuse happened while the protesters were in police custody, completely outside the range of the press and news media. And the disgraceful truth is that a lot of the abuse was police sadism, pure and simple:
* I heard from two different sources that at least one busload of protesters (around 40 people) was forced to spend seven excruciating hours locked in tiny cages on a Los Angeles County Sheriff’s Dept. prison bus, denied food, water and access to bathroom facilities. Both men and women were forced to urinate in their seats. Meanwhile, the cops in charge of the bus took an extended Starbucks coffee break.
• The bus that I was shoved into didn’t move for at least an hour. The whole time we listened to the screams and crying from a young woman whom the cops locked into a tiny cage at the front of the bus. She was in agony, begging and pleading for one of the policemen to loosen her plastic handcuffs. A police officer sat a couple of feet away the entire time that she screamed–but wouldn’t lift a finger.
• Everyone on my bus felt her pain–literally felt it. That’s because the zip-tie handcuffs they use—like the ones you see on Iraq prisoners in Abu Ghraib—cut off your circulation and wedge deep through your skin, where they can do some serious nerve damage, if that’s the point. And it did seem to be the point. A couple of guys around me were writhing in agony in their hard plastic seats, hands handcuffed behind their back.
• The 100 protesters in my detainee group were kept handcuffed with their hands behind their backs for 7 hours, denied food and water and forced to sit/sleep on a concrete floor. Some were so tired they passed out face down on the cold and dirty concrete, hands tied behind their back. As a result of the tight cuffs, I wound up losing sensation in my left palm/thumb and still haven’t recovered it now, a day and a half after they finally took them off.
• One seriously injured protester, who had been shot with a shotgun beanbag round and had an oozing bloody welt the size of a grapefruit just above his elbow, was denied medical attention for five hours. Another young guy, who complained that he thought his arm had been broken, was not given medical attention for at least as long. Instead, he spent the entire pre-booking procedure handcuffed to a wall, completely spaced out and staring blankly into space like he was in shock.
• An Occupy LA demonstrator in his 50s who was in my cell block in the Los Angeles Metropolitan Detention Center told us all about when a police officer forced him to take a shit with his hands handcuffed behind his back, which made pulling down his pants and sitting down on the toilet extremely difficult and awkward. And he had to do this in sight of female police officers, all of which made him feel extremely ashamed, to say the least.
• There were two vegetarians and one vegan in my cell. When I left jail around 1:30 pm, they still had not been given food, despite the fact that they were constantly being promised that it would come.
• There were 292 people arrested at Occupy LA. About 75 of them have been released or have gotten out on bail, according the National Lawyers Guild. Most are still inside, slapped with $5,000 to $10,000 bail. According to a bail bondsman I know, this is unprecedented. Misdemeanors are almost always released on their own recognizance, which means that they don’t pay any bail at all. Or at most it’s a $100.
• That means the harsh, long detentions are meant to be are a purely punitive measure against Occupy LA protesters–an order that had to come from the very top.
Is this the America you know and love? Is this the America you want?
The battle exists because the phony “debt crisis” is forcing austerity on you, and you are buying into the myth. No, Social Security should not be reduced; it should be increased. Same for Medicare, Medicaid, R&D, support for education, housing, the infrastructure and the other programs that support the neediest of us.
The need for austerity is a lie. Those who glibly tell you the government “is broke,” and “can’t afford” to pay for these services, or that spending cuts are “prudent” or that spending will cause inflation, are lying to you, and doing the dirty work of the 1%. (Disclosure: I am part of the 1%.)
Comparisons with the Weimar Republic are bogus. Federal financing comparisons with personal, kitchen-table financing are fraudulent. The federal government is nothing like you and me. It’s not even anything like your state, county or city, though exactly the same incorrect words are used to describe federal financing as your financing.
The “super committee” was a charade to give credence to a false idea, namely that the federal deficit and debt are too high. The deficit is too low and the debt could be eliminated, tomorrow.
You are being sucked into acceptance of a police state, where your every act can be controlled. The ironically named “Patriot Act” is but one example. And now you calmly witness the brutality against your fellow Americans, whose sole crime is protesting. Until you begin to understand the facts of Monetary Sovereignty, and demand that the lower- and middle-classes be supported, things will get worse and worse and worse.
What can you do? First, learn the facts of Monetary Sovereignty, so the media and the politicians won’t be able to deceive you with their lies.
You’ve seen the “Arab spring.” Don’t think it can’t happen here. It already has begun.
One night, there may be a knock on your door, and you will wonder how America could have fallen so far.
I award three “traitor images” to the Los Angeles Police Department, whose history of violence against American citizens is historically established. Unfortunately, they are not alone, as many police around the nation are being urged to violence by your leaders.
(Perhaps a nice $100 million lawsuit against these thugs might open a few eyes.)
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
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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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
b>Gross Domestic Product = Federal Spending + Private Investment + Private Consumption + Net exports
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Rodger
Respectfully, I would suggest not to use the language frame from the mindset one considers wrong. For a monetarily sovereign government there is no deficit. There is (positive) net spending. Neither there is debt. There is total amount of (government guaranteed) savings.
I very much doubt that the best line of argument for a defender of the heliocentric theory would have been something like: the Earth is at the centre of the world; but that is just an illusion provoked by our impossibility to sense Earth’s acceleration; in fact the Sun is at the centre of the world, etc, etc.
Plainly and simply the argument was: the Sun is at the centre of the world and Earth orbits around.
As Lukasiewicz wrote: “I accept truth; I reject falsehood.”
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Yeah, PG, great. Focusing on word games will certainly get us going in the right direction. Putting your ass on the line is required.
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Confusing turning right with turning left while riding a car: is it a word game?
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Yes, (and from a fellow admirer of Lukasiewicz) in addition to the fact that the language frame may not in fact be wrong or misleading. There certainly is deficit & debt for a sovereign government. I think it is much better to use simple & negative, pejorative terms to expound MMT/MS/FF – to immediately engage their skepticism, and anticipate & refute objections before people make them, to assure them that they are not being conned by a soothing fairy tale, and because some of these negative words like “debt” are in fact more familiar, more basic.
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Roger, when I clicked on your Monetary Sovereignty link above, I got this message “Sorry, no posts matched your criteria.” Murray
I also agree with PG above. Monetary Sovereignty need to be explained in simple and positive terms. I encountered the concept in June (2011), and have read /studied hours of material, and have found nothing that makes it clear to the layman, or easy for me to explain to others. I am not an economist, and hated accounting, but I am a highly numerate and analytic engineer. Imagine the difficulty the average hairdresser opr plumber would have getting it.
Maybe you could work with http://www.khanacademy.com to set up a lesson series. Khan is really good at getting basics across so that even first graders learn their material.
Murray
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see
http://aquinums-razor.blogspot.com/
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murrayv,
Many people suffer from “It-can’t-be-that-simple” syndrome. The basic statement of Monetary Sovereignty is this:
A Monetarily Sovereign government has the unlimited ability to create its sovereign currency. A monetarily non-sovereign does not.
Everything flows from that. What could be simpler?
Rodger Malcolm Mitchell
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GOTCHA !
As EINSTEIN said ,”Make it simple.”
RMM,”A Monetarily Sovereign government has the unlimited ability to create its sovereign currency.”
How is this for simple ? Ben Bernanke is now proving the US is “A Monetarily Sovereign goverment.
He has single handedly issued $16 trillion
( Fed Audit ,google or bing “16 trillion dollar Federal Reserve”) And there is more coming!
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Yeah, it’s simple, but without some explanation it’s not believable. My economics studies (MBA level) were way back in the early ’60s, and I “knew” for almost 50 years that as a country we have to balance our budget, just like at home. My first reaction to MMT was “nonsense”, but I have learned as an engineer to investigate and try to keep an open mind until I understand, so I learned. Most people will just leave it at “nonsense”.
It seems like the champions of Monetary Sovereignty are no different from other economists except for their belief. They want to make their point, but not sell it or teach it. I have read the 2 “primers” I can find, and they are not easy going. Just because you are right doesn’t mean you will be accepted.
I have tried with several MMT proponents and usually don’t even get the courtesy of a response. It seems to me that economists are capable of being driven by one conviction, but not capable of taking a holistic approach to their subject or to achieving their goal. I’m assuming that the goal of your blog is to spread the word, not just to let off steam.
Do you guys even talk to each other? Is there an association of MMT/Monetary Sovereignty economists? Can you work together to move your work into the mainstream and get it accepted by TPTB?
Cheers, Murray
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Yes, we talk all the time. See: http://moslereconomics.com/ for an MMT blog.
If people don’t want to learn, don’t blame the teacher. I cannot imagine anything easier to understand than “The federal government has the unlimited ability to create dollars.” Can you?
This doesn’t need or use a holistic approach. It’s merely a simple statement of fact.
You’re right. The vast majority of books and papers are too complex. Try reading my book. You may find it easier.
Rodger Malcolm Mitchell
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What about letting blame apart and focusing on difficulties? 🙂
No subject is easy to understand before it is understood.
No subject is difficult to understand after it is understood.
It seems human brain forget all the effort and steps necessary to achieve understanding once it is achieved. I know it from my own experience.
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When you have always been taught that unlimited money creation leads inevitably to hyperinflation, that unlimited ability doesn’t have much useful meaning. When non-sovereign states have to balance the books, but the sovereign government can always create money and bail them out regardless of their irresponsibility, where does responsibility go? When outsourcing/offshoring/mechanization/automation/intelimation/JIT/lean mfg/TQM etc finally destroy more jobs thanm they create, what does the unlimited ability to create money provide, more is needed than simply creating money?
Yes you should blame the teacher. The teacher has to frame the argument to match the mental filter of the student, or the student won’t learn. Failed teaching is usually the fault of the teacher.
“The federal government has the unlimited ability to create dollars.” is a one trick pony in a fairly complex circus.
Cheers, Murray
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where does responsibility go? The responsibility goes to where it always was – the responsibility of the sovereign government to not inflate its currency, to maintain its value, and to fully employ its people.
A US state, or a Eurozone nation may need to be bailed out not because of its irresponsibility, but because it has these two conficting responsibilites (budget balancing, full employment) whose contradiction can only be resolved by the monetarily sovereign government.
When outsourcing eliminates all those jobs, the sovereign government should step in & pay people for doing useful stuff with a Job Guarantee. How successful it is in creating wealth in part depends on how intelligently the government deploys these resources, but the multipler effect of the money spent will keep employment high outside the program, regardless of the success of the JG projects.
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The parts I find confusing are the actual mechanisms of the shell game used to create the money, the banks creation of horizontal money, and how that interacts with govt money, not to mention things like QE.
The core concept of money being created out of thin air, and thus the difference between the money issuer (fed govt) and everyone else, is pretty straightforward once you let go of some preconceptions, and understand the virtual nature of money.
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Murray
“When you have always been taught that unlimited money creation leads inevitably to hyperinflation, unlimited money creation leads inevitably to hyperinflation, . . .”
The debt-hawks rage that the federal deficit is so high it must be cut by an astounding $4 trillion. Now, that’s high. Amazingly high. So where is the inflation, much less the hyper-inflation, that money creation “inevitably” causes?
When you always have been taught the world is flat, and ships will fall off the edge, but no ships fall off the edge, when do you begin to change your mind? When do facts overcome intuition?
During the past 40 years, Federal debt has risen enormously. Yet, though CPI has had up years and down years, overall it has moved up in a nice 3% slope, just as the Fed wishes.
If students do not wish to learn, they will not learn. Try teaching science to a creationist and see how far you get.
Rodger Malcolm Mitchell
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Murray,
“‘“The federal government has the unlimited ability to create dollars.’ is a one trick pony in a fairly complex circus.”
No, it’s the basis for all modern economics, just as E=mc2 is a “one-trick pony that happens to be the basis for relativity. You complain it’s too complex to understand, so when I simplify it, you complain it’s too simple to be real.
Perhaps you can explain (simply) how spending cuts or tax increases will reduce unemployment and grown the economy. Or is that too complex?
As for your question about “responsibility,” exactly what responsibility are you talking about? Responsibility to the citizens to provide for their welfare, or responsibility to an austere economy?
Rodger Malcolm Mitchell
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Rodger, I accept MMT/SM, and I agree that putting more money into the economy doesn’t cause inflation, unless demand equals or exceeds supply, but that isn’t what most people, apparently including most economists have been taught and believe. You apparently have chosen to misunderstand my comments, or I am no more clear than most MMT/SM proponents explaining how the system ties together. How does the unlimited ability to create money help a no growth economy, when demographic factors and saturation are holding down demand, and technology/productivity and globalization are holding down jobs? The MMT theory, especially at the top horizontal level is not “too difficult to understand”, it just doesn’t explain anyhting except that sovereign government debt has no meaning.
Everything I have read on MMT/SM makes the age old economic assumption of endless economic growth. How does it help if there is no growth? How does it avoid “moral hazard’? (I dislike that term). How does it avoid the South’s revenge on the North (your fiction) at the end of the day? Apart from nukes none of our technology really needs an understanding of E=mc2. Does the analogy still apply?
Cheers, Murray
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Monetary Sovereignty also doesn’t prevent baldness or impotence — but money creation does stimulate growth. More importantly, having money helps create better, longer, healthier lives.
The notion that technology holds down jobs has been a concern since the beginning of the Industrial Age, but jobs in themselves are not a goal. Why do you work? Money, and what people can do with it, is the goal.
There is, and always will be, plenty of room for “endless economic growth” despite the legend that Charles Duell wanted to close the Patent Office.
Have all diseases been cured? Does everyone live in the housing he/she prefers? Have all discoveries been made? Have we solved hunger, created unlimited energy, traveled to the stars, found other universes, written all the books, composed all the music, eliminated pain, found the secrets to the brain, created better humans?
Why not? Why is R&D limited? Why are people sick. Why do they die? Why are roads and dams crumbling? Why is there poverty? Think of a perfect world; why aren’t we there?
Still plenty of work for humankind to do, and money will be the fuel.
Rodger Malcolm Mitchell
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Closing patent offices is one key ingredient to “unlimited economic growth”. Software production is a strong argument for it. The only possible benefit of patents is to protect investment recouping and this can be made without patents. The benefits of generalized global access to producing knowledge allow to distribute the costs of knowledge production and increase production more than the patent system can do.
Monetized economic growth has as necessary condition a growing free energy supply. This is also viable but has as a necessary condition that Earth must adequately be managed as a heat engine with a growing flow of energy.
These cascaded conditions are necessary but not sufficient. Ultimately energy is the input being converted to value through labour. Labour is knowledgeable coordinated action towards production. Mobilizing labour through money is a most realistic social device for coordination in present social development state of affairs. Its success depends on the intensity and distribution of the generated money flow. A growing flow is required to mobilize labour and mobilizes labour. Rightly targeting the intensity and distribution depends on distributed knowledge on money management and the knowledge is being created right now.
As an aside: a teacher should not dedicate time with “learners” that do not want to learn. Admittedly, Earth is a loose school. “Learners” that could produce but do not know better than profiting from others product rather than one’s own abound and seriously harm progress by exploitation. Teachers of Earth school face a harder task than those at specific schools as they cannot out such “learners”. Humans are animals and animals must eat. Abstractly this is a reward getting game. At the abstract level question is from what maximizes reward and where it comes from. Individual reward is maximized in the long term inside cooperation. But in the short term the temptation to plunder large chunks of cooperation enabled product exists. Opting for long term is a fundamental step in the evolution of any being.
So, what teachers have at their disposition in Earth school is to contain the negative impact of plunderers of the productive activity of other humans. Either they have the immediate power to do it or they don’t. If not, they have a powerful motive to concentrate on the learners that made the step – or did not fall in temptation 🙂 – and therefore want or can learn.
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Murray (& Hamish) I agree – Things are usually presented badly – in a way that makes them much more complicated & confusing than they really are, and the material is imho usually badly organized, often more comprehensible if read backwards. Boring stuff & unenlightening technicalities are usually belabored at length, while the real ideas, the core is treated in terse footnotes or asides. Par for the course in modern scientific writing. 🙂
Most recent economics is nonsense which is an insult to one’s intelligence. But MMT economists developed in this dark age of economic thought, and many MMT expositions are written with this nonsense in the background. It’s like trying to learn a subject in a classroom where most of the teacher’s time and thought goes to convincing people who are on LSD from the city’s drinking water – that they can’t fly by flapping their arms, that gravity pulls you DOWN, and that pure water is not a poison. And even if there are no acidheads in the classroom, force of habit distorts the presentation.
I like Rodger’s blog because it is usually down to earth & doesn’t introduce irrelevant complication & big words for the sake of them in the fashion of most academese.
Hamish, yes, the shell game is confusing, and imho usually badly explained. But remembering that it is a shell game is the main thing that allows one to understand it. The main economic function of all the fun & games with bonds & reserves is not fooling around with interest rates of a mere few percent with marginal effect on economic activity. It is to confuse the 99% that black is white & up is down, so they cut their own throats.
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There are deficit and debt for a government that runs a non fiat currency.
There are net spending and savings for a government that runs a fiat currency
if people knowing what fiat money means exist in minimum critical number in the country and abroad.
So what defines a fiat currency?
It is convertible only to itself implies
– the exchange rate must free float,
– it must be issued to exist,
– its value will be set by the real wealth of the people that own amounts of currency.
What does it mean to be a fiat currency issuer? (of the type that exists…)
To own the name of the currency and
to be the monopoly supplier of the currency
or equivalently
to be able to force people to save in the currency.
In a fiat currency taxes are compulsory savings.
Compulsory savings value private commitment to public goods and services.
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Rodger, I came across a discussion on your blog back about 10 Nov which got into the question of convincing people. A couple of posters made sound suggestions, very politely, which you rejected with little short of derision. Your dedication to offputting dunce hats as opposed to possibly valuable stars is quite similar to your views on students that don’t want to learn. In your eyes you are right, period, even if you have clearly given no real consideration to the subject. (Usually students don’t want to learn because they have experienced negative motivation, like dunce hats. and or have been overwhelmed. Positive motivation and small assimilable bites can make a huge difference.) After your last response to me, above, I tried to identify who your approach reminded me of. Finally it came to me – Donald Trump.
I will reply briefly to your rather insulting comments, even though I am probably wasting my time.
“Monetary Sovereignty also doesn’t prevent baldness or impotence” smart ass crack that contributes nothing.
” — but money creation does stimulate growth.”
Sometimes, and under the right conditions, but not much for the last decade, and not likely much going forward unless we use the money a lot smarter. Creating may be necessary, but is far from sufficient.
“The notion that technology holds down jobs has been a concern since the beginning of the Industrial Age, but jobs in themselves are not a goal. Why do you work? Money, and what people can do with it, is the goal.”
So if people are given money, they won’t bother working – hmm. If they are not given money then jobs are necessary for earning money. If there are no jobs, there is no money and no growth. “full employment” is generally defined as some level of unemployment – usually in the range of 4-5%. What if it was defined as “all jobs filled”? A number generally bandied about recently is that there are about 1-1.5 million jobs looking for workers. Out of 150million odd workers, and at least 12 million of them unemployed, we seem to be pretty nearly at full employment. Additional and rapidly growing deficit spending since 2002 has just about got us back to the level of employment of 2000, while population has gone up 15%. Not money creation, but intelligent money application, which you don’t seem to talk about.
And we are already into a condition where the technology we are developing is destroying more jobs than it creates. Just because that hasn’t been true in the past doesn’t say it will never be true. AFAIK manufacturing output in the USA is at least as high as 10 years ago, but manufacturing employment has declined by about 5 million jobs. Service and knowledge jobs are now under attack also.
“There is, and always will be, plenty of room for “endless economic growth” despite the legend that Charles Duell wanted to close the Patent Office. ”
Somewhere. Money creation in the USA, leading to demand for products from and jobs in China doesn’t do much for our economic growth. Replacing well paying manufacturing jobs with low paying service jobs doesn’t do much for economic growth.
“Have all diseases been cured?”
Would curing all disease create jobs, or just supply more jobless workers? Does developing disease cures create as many jobs as the lives saved?
” Does everyone live in the housing he/she prefers?”
Do we have several million houses standing empty, and would creating money to build more add any wealth?
I could go on, but your facetious answers discourage me.
No longer respectfully, Murray
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Sorry your feelings are hurt, but what is your alternative hypothesis?
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Just keeping a partial record of the Syria-style New York police response to #OWS: http://exiledonline.com/domestic-war-on-press-freedom-nypd-continues-to-harass-arrest-video-streamers-journalists-covering-the-occupy-movement/
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I suggest a new name for government debt. Call it TBED (pronounced tee-bed) and say that this is the opposite of household (normal) debt, being the source of money.
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