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 EU continues to demonstrate cluelessness about the differences between Monetarily Sovereign nations and monetarily non-sovereign nations. All the more remarkable: This ignorance is shared by most of the greatest economics minds in the world.
European states sign new fiscal treaty, kicking off potentially difficult ratification process
By Gabriele Steinhauser, AP Business Writer
BRUSSELS (AP) — The leaders of 25 European countries on Friday signed a new treaty designed to prevent the 17 members of the eurozone from living beyond their means and avoid a repeat of the region’s crippling debt crisis.
Translation: Because austerity has accomplished nothing good, and has created poverty, misery and pain wherever it has been administered, the 17 euro nations, all monetarily non-sovereign, have agreed to force themselves into more severe austerity.
The leaders hope the rules for budget discipline set out in the accord, known as the fiscal compact, will also lead to closer political and economic integration in the eurozone.
Translation: The ship is sinking, so let’s all drown, together.
Only Britain and the Czech Republic decided not to sign the agreement, a move that triggered concern over a rift in the 27-country European Union.
Translation: Britain and the Czech Republic are Monetarily Sovereign. They use their own currency, so have no need for austerity. Yet, they are the only ones that can see the idiocy of the EU plan. Remarkable.
Many Europeans have grown weary of the EU and the euro. Two years of painful austerity in the poorer countries have taken their economic toll, while many in the richer countries are getting frustrated over funding the expensive bailouts for Greece, Ireland and Portugal.
Others fear that the tighter spending rules will limit governments’ room to maneuver in tough economic times and force German-style fiscal discipline on countries with vastly different economies and cultures. However, the new deficit limits make some exceptions, such as for severe recessions and other unexpected economic circumstances.
Translation: Austerity causes poverty, misery and pain. The people understand that; their leaders don’t. The recession we have is not “severe” enough and anyway, we “expected” all these horrifying economic circumstances. (Well, we really didn’t, because we don’t understand Monetary Sovereignty. But don’t tell anyone. We don’t want to look stupid.)
The economic outlook is darkening. Unemployment is at a record high and several countries are forecast to fall back into recession this year, yet the EU leaders were hesitant to back off the austerity policies that have dominated their response to the debt crisis and are now being blamed for the economic downturn.
Translation: You mean austerity doesn’t work, cannot work and never will work? O.K., let’s do more of it.
“We remain in a fragile situation,” German Chancellor Angela Merkel warned. “The crisis is far from over.”
Translation: We’re swimming in the middle of the ocean, without life jackets. The EU is pouring water on our heads, and sharks are circling. Yep, this crisis is far from over.
The biggest challenge may lie in Ireland . . . This time, EU leaders have ensured that Irish voters cannot block the fiscal pact. Unlike earlier treaties, this one does not require unanimous support to become law. It will come into force once 12 of the eurozone’s 17 members ratify it.
An Irish rejection would chiefly undermine Ireland’s own ability to keep paying its bills. The fiscal treaty proposes to prevent any abstaining eurozone countries from receiving loans from the eurozone’s future financial backstop, the European Stability Mechanism.
Translation: The nerve of those Irish, rejecting the poverty, misery and pain that our “solutions” always cause. We’ll show them. We’ll add to their poverty, misery and pain.
Economists believe Ireland may require a new round of loan aid in 2013 once its current flow of EU-International Monetary Fund bailout funds runs out.
Ireland in November 2010 negotiated a euro67.5 billion ($89.5 billion) EU-IMF credit line and has received euro48 billion ($63.5 billion) so far at an average interest rate of 3.3 percent. The current depressed value of Irish government bonds suggests that, were Ireland to return to normal long-term borrowing today, it would have to pay investors at least double that rate.
Translation: Ireland is starved for money. Being monetarily non-sovereign, plus having a negative balance of payments, they have no way to generate the money to save their economic lives. So let’s withhold money, then blame them for lack of fiscal prudence. So far, the world has been stupid enough to buy that idea.
Wait a minute. Before you smirk, that is exactly the idea our “balance-the-budget, cut-the-deficit” politicians and media have been foisting on the American public. They want us to function as though we were monetarily non-sovereign, institute austerity, and become Ireland.
Ah, faith and begorrah.
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