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.
See how euro Europe formalizes the self-mutilation of the truly insane, by agreeing to make economic growth a crime.
Sarkozy, Merkel call for mandatory deficit limits for Euro zone countries
PARIS — Under growing pressure from nervous financial markets, the leaders of France and Germany reached a compromise agreement Monday to seek mandatory limits on budget deficits among debt-laden European governments.
The limits–a “golden rule” of 3 percent of Gross Domestic Product–would be enforced by leaders of the European Community, according to explanations provided by President Nicolas Sarkozy of France and German Chancellor Angela Merkel at a joint news conference here.
Governments whose debts exceeded three percent of their GDP would be cited by the European Court of Justice, after which a super-majority of 85 percent of European governments would have to agree to impose some sort of sanction against the offending country.
Austerity, not economic growth or citizen well-being, now will become the official policy of the euro nations.
The new rules would be part of a renegotiated European Union treaty that is to be completed by March and ratified two months later, Sarkozy and Merkel said. The speeded-up calendar is designed to show global financial markets that the 27-nation European Union is serious about bring its debt problem under control once and for all.
“Once and for all”? Get real. When austerity has the 99% raging in the streets, that “once and for all” will turn into, “How do we get out of this mess?”
The Franco-German accord is to be outlined in a letter to European Union leaders Wednesday and voted on at a special summit conference Thursday. Sarkozy said the hope is that all 27 nations will adhere to the plan. But he added that it could also move forward with consensus from only the 17 countries that use the euro as their common currency.
They even want the Monetarily Sovereign nations to join in this foolish plan. Those are the nations that could pay off all their debt tomorrow if they chose, but are being sucked into the euro ignorance. Misery loves company.
Merkel hinted before the meeting that Germany will insist on sanctions for spendthrift governments, and other moves to instill fiscal discipline, in exchange for any decision to make more funds available to countries that have run so deeply into the hole that they can sell their bonds only with excessively high interest rates. In other words, she wants other European countries to run their economies more like Germany does.
Oh sure, enforce German discipline on Italy and France. That should be interesting. One tiny problem. The Germans succeed because they are net exporters. Getting all the euro nations to be net exporters should be an interesting exercise in mathematics.
Many inside Germany argue that German Chancellor Angela Merkel is simply holding out to put as much pressure for reforms on laxer Southern European countries as possible. Already Italy has implemented austerity measures, Spain has passed a constitutional amendment to limit its debt, and Greece has sworn to crack down on tax scofflaws — changes that seemed unthinkable just a year ago.
Since WWII went badly for Germany, perhaps she belatedly can win the war by forcing the rest of Europe into austerity.
The problem is not that the euro nations spend too much or tax too little. What the EU leaders term “profligate,” i.e. running deficits, is the only way to grow an economy. The problem is that they are not Monetarily Sovereign.
As I have said, seemingly forever: There are two, and only two, long-term solutions for euro nations:
1. Return to Monetary Sovereignty
2. The EU to give (not lend) euros to member nations as needed.
There are no other long term solutions.
Meanwhile, stare in amazement, as the euro nations continue to saw off pieces of themselves – the self mutilation of the truly insane. Oops. Our own Congress and President are trying to do the same to us.
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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
b>Gross Domestic Product = Federal Spending + Private Investment + Private Consumption + Net exports