Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
The President of the United States, 100% of Congress and virtually all of the media and old-line economists believe the federal deficit is too high. The Tea Party wants reduced federal spending to “get the government off our backs.” America is close to unanimous in the belief that increased deficits are unaffordable and will put us in the same position as Greece.
As you readers know, America is Monetarily Sovereign, while Greece is monetarily non-sovereign. Not to understand the difference between the two is like not understanding the difference between up and down, black and white, rich and poor. Yet none of the abovementioned President, Congress, media, economists or Tea Party understand this fundamental difference, much less care enough to learn. They are stupid with intent.
On June 5, 2005, I gave a talk at the University of Missouri, Kansas City, in which I said, “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.”
Today, Greece, is forced to restrict its deficits, aka adopt “austerity.” Greece has no choice. Being monetarily non-sovereign, it cannot create the euros it needs for economic growth, or even to pay past bills. By contrast, the Monetarily Sovereign U.S. does have a choice. We do have the unlimited ability to create our sovereign currency, the dollar. We do have the unlimited ability to pay any bills of any size. We never can go bankrupt.
But those who are ignorant of Monetary Sovereignty tell us we must “live within our means”, a nonsensical, blatantly ignorant statement, when discussing a Monetarily Sovereign nation. They tell us so-called “printing money” will cause inflation, and they give the hoary, old, inappropriate example of the Weimar Republic, a situation which bore zero resemblance to the U.S. Comparing the U.S. to the Weimar Republic would be as foolish as saying don’t drive your car because the Titanic hit an iceberg.
Since the U.S. became Monetarily Sovereign on August 15, 1971, there has been no relationship between federal deficit spending and inflation. See: “Federal deficit spending doesn’t cause inflation; oil does.” The facts are there, but facts seem not to matter to our “thought” (if you can call it that) leaders.
Which brings me to the subject of this post. Because our “thought” leaders want us to adopt a Greek-style austerity, I’d like you to see what happens when citizens are ruled by fools who demand deficit reductions..
Thank you to the outstanding Naked Capitalism blog, for bringing to the world’s attention, a letter written by the sister of Dimitri Lascaris, a lawyer with family in Greece. The post is titled: “Austerity Policy Destroying Greek Society”
Here are excerpts from that letter:
Dimitri…the decline in our income and therefore in many facets of our lives began in the fall of 2009. In our family carpentry business, we began to go without work intermittently, but for longer and longer stretches as time progressed. Customers who owed us large amounts of money couldn’t pay even 5% of the balance owing on their account.
Our customers of course gave priority to the payment of bank loans, or worse, they gave priority to the payment of credit card debts they had incurred in order to secure the basic necessities…rent, water, electricity, health insurance and food. Cash has became more and more scarce for our customers, and therefore for us.
In a very competitive job market, Greek parents sought to equip their children to secure a job as a civil servant. For that purpose, Greek parents commonly employed ‘frontistiria’ (or supplementary education through tutoring) as early as the onset of elementary school. The need to eliminate the financial burden of tutors was one of the first signs that people were struggling to survive.
All you see is a succession of empty storefronts with rent signs and often a deluge of unopened mail just inside the door. The few businesses that have managed to stay open have gigantic banners proclaiming 50-70% reductions.
Walking through what used to be crowded and bustling markets now feel like a Sunday stroll through deserted urban centers. Going to take care of business at The National Bank of Greece was once an all-day affair…most often now, you can zip in and out in less than 5 minutes.
On the other hand, the line-ups to make payments at the Greek electrical company have become longer and longer. There you find very volatile crowds of people fighting with employees to defer payments through payment plans, or to have their electricity reconnected after having had it cut off as a result of the “haratsi,” which is a government property tax incorporated into the electrical bill, often quoted by legal experts as one of the many unconstitutional acts this government has committed.
What right does the electrical company have to assume the role of a tax collector, and to deprive us of electricity when we become unable to pay the arbitrary taxes issued at the drop of a hat to generate more money for the EU and IMF?
Suicides, drug abuse, prostitution and crime have infiltrated village life. In our village, which has slightly more than 1000 inhabitants, I was a victim of theft by a drug addict just outside my front door. I have been to the funerals of two friends who were murdered here in the village by their assailants when they were unable to produce money on demand.
We, as well as many people we know, are experiencing a strained home environment as a result of financial difficulties. Now we call our customers to beg them on a regular basis to pay something, anything, toward the debts they owe us, because food or heat in the dead of winter has become an issue for us. We now rely on help from family members. People we know go to retirees in their families to ask for contributions from their meager pensions.
We are all now at the mercy of anyone with money at hand to help our family survive. At almost 52, when your stamina and endurance have started to wither away, life feels like a chore. However, children have a way of making you ‘plug’ back into life, even if it’s only to focus on just one more day.
This Greek tragedy is not caused by Greece being profligate. It is caused by Greece’s leaders having voluntarily surrendered the single most valuable asset Greece had — financially more valuable than all that nation’s land, more valuable than all that nation’s buildings, bridges, rivers, lakes and dams, financially more valuable even than that nation’s population — its Monetary Sovereignty, the ability to create their sovereign currency.
Thus, Greece is trapped into austerity. The people running America want us act like Greece, i.e. to act as though we are monetarily non-sovereign by reducing our deficits, and in acting like Greece we will become Greece.
Wake up, America. Read the above letter again. This is the fate our leaders will create for us and for our children. We will be at the mercy of the 1%.
And we can’t say we weren’t warned.
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
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports
7 thoughts on “–Wake up, America! You are being led to a Greek tragedy by fools”
The slow torture of deficit-reducing, austerity-riddled, monetarily non-sovereign Greece continues. Shame on Europe.
Maybe you should try to go on a speaking tour? This blog is spreading the word to a minority of us that more or less already agree with you. Maybe you get a few new visitors every so often?
In the same spirit as Warren Mosler running for public office as a matter of conscience, why not try to set up a speaking tour across universities across the country?
I’d be happy to help out if I knew how.
Convince two people and ask each of them to convince two people. That is all the truth asks.
I have tried preaching MS to well-read and otherwise well-informed friends, some in 1 on 1 settings… after a fair amount of back & forth, they walk away amused and wonder if I have lost it! I have even tried emailing your select posts to friends deluded by the myth of America’s unsustainable debt… all I get back is flippant remarks like ”sure, print infinite $$ and distribute, and we can all be fat dumb & happy” or “buy gold”.
Convincing friends is more than a fair challenge; even those who seem to agree in-situ are back after a few days, with not an iota of dent in their misguided premise. Some even argue how I could be so naïve as to believe govt’s inflation numbers? “Just look at our escalating costs of education, insurances, medical… our $15T debt is the root cause of current high inflation, manipulated and underplayed by the Fed”. Most even blame high oil prices on our incessant printing. Media, pols & oft quoted economists are not helping, they do not and will not mention MS.
I think MS directly challenges our deep-rooted notion: “no pain, no gain”, and somehow we have to get past that. Maybe a carefully scripted, short, fun, MS youtube video is a good start?
I empathize, for believe it or not, I have had the same problem with my own friends. Your friends will offer no data, nor do they feel any is necessary. The notion that federal finances are like their finances has become an article of faith, not evidence.
Have you ever tried to debate faith with anyone?
When they give me the “printing money causes inflation” myth, I say, “So we agree the government has the unlimited ability to create dollars, and all you’re worried about is inflation. All this cut-the-deficit stuff is not about affordability, not about the government being broke, not about Social Security running out of money, not about Medicare running out of money. It’s all about inflation, right?
“But if that’s the case, why do all the politicians say the government can’t afford to support Social Security, can’t afford to pay for Medicare for everyone, can’t afford the thousands of things that are being cut from the budget?
“I never hear inflation being mentioned. Could it be because we are fighting deflation?
“And if you don’t believe the government’s inflation numbers, whose numbers do you believe. What is the inflation rate, today?”
Somewhere in the midst of this, your friends simply will walk away, because they don’t want to hear two kinds of facts:
–Monetary Sovereignty facts
For them, economics is a religion, not a science. The stupidest people on earth are those afraid to change their minds.
Your question is the same as asking, “At what deposit level will a bank’s credit ration be degraded?”
That is all federal debt is: Deposits in T-security accounts at the Federal Reserve Bank.
T-security accounts essentially are bank savings accounts. How does the FRB “pay off” its T-security accounts? Simply by transferring existing dollars to depositors’ checking accounts.
Federal finances are different from personal finances.