–Even those, who understand, don’t really understand. Christina Romer came close, but no cigar.

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.

Just when you think someone in the government understands Monetary Sovereignty, they open their mouth once too often. Check these excerpts:

Scottrade Daily Ticker
U.S. Economy Needs More Fiscal Stimulus: Christina Romer Defends Keynesian Economics
By Aaron Task

One of Obama’s former top economic advisers says the President deserves credit for his handling of the economy, not criticism.

“I have no doubt without the actions President Obama took and actions Chairman Bernanke and the Fed took we would be in a much, much worse situation,” says Christina Romer, former chair of President Obama’s Council of Economic Advisers. “This had all of the makings of terrible depression and the fact we are struggling but coming out is a tribute to the President’s policies.”

Specifically, Romer says the Recovery Act and other measures taken by the administration “made a difference, helped to strengthen growth and bring down the unemployment rate.”

Of course, Romer was one of the architects of those policies and, according to multiple reports, lobbied for even more stimulus than the $800 billion package signed in 2009.

True to form, Romer is still lobbying for more and is an ardent believer in the power of fiscal stimulus, a.k.a. Keynesian economics. “I absolutely think more fiscal stimulus would be very helpful,” she says. “We need faster growth [to bring down unemployment]. Fiscal stimulus could help do that.”

Hurrah! She’s right on target. Someone in Washington actually gets it. But then . . .

Notably, Romer believes short-term stimulus should be tied to long-term plans to bring down the deficit, the huge growth of which — along with the more recent rise in gas prices — explains a lot of the public’s displeasure with Obama’s economic policies. Unfortunately, there is little indication “of Congress being willing to go along with that very sensible, rational policy – what would be effective and what the economy needs,” Romer laments.

Oh, no! “Bring down the deficit” is a synonym for “create fewer dollars,” which in turn is a synonym for “austerity.” And she came so close. What a shame she missed it.

Such views are clearly in the minority in Washington and much of the economic punditry these days is seemingly dedicated to the notion that more government spending to help boost the economy — a.k.a. Keynesianism — is the absolute wrong prescription. (See: Europe’s “Going in the Wrong Direction,” Forbes Says: “The Worst of Both Worlds”)

We already spoke of Forbes and his inability to understand the difference between the monetarily non-sovereign euro nations, and the Monetarily Sovereign U.S. government.

That’s another shame. He’s a guy with a very loud bullhorn. He could help save the American economy, and create an everlasting, positive legacy for himself. Instead, he has opted lazily to parrot the same, old popular wisdom, and he will be remembered as a rich guy who, along with his magazine, spouted nonsense.

But Romer dismisses and (politely) challenges the skeptics. “Fiscal stimulus absolutely can and does help the economy,” she says, citing “unbiased” academic research and recent history. “Countries that did more stimulus in 2009 recovered more quickly from the downturn than those that did less,” Romer declares. And, yes, that very much includes the United States — even if growth isn’t what it “should” be and even if President Obama is seemingly getting very little credit for the recovery to date.

Now, if only she could divorce herself from the Tea/Republican/Forbes cut-the-deficit myth. Yes, if only.

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


10 thoughts on “–Even those, who understand, don’t really understand. Christina Romer came close, but no cigar.

  1. “I have no doubt without the actions … Chairman Bernanke and the Fed took we would be in a much, much worse situation,” says Christina Romer.

    I emphatically disagree if she is referring to the bank bailouts. TARP was a crime against humanity. That money should have gone to people who actually needed it.


      1. No, I was just saying that all of the TARP money (I believe TARP 1 and 2 added up to about $2 trillion)should have gone to those in need instead of the banks.


          1. Rodger,

            Though TARP was fiscally feasible, I don’t think it was the right thing to do. We should have just let the banks fail. In a recent blog post, Bill Mitchell writes:

            “I would have allowed all the private banks to collapse and immediately assume public responsibility for their deposit base and ensure the payments system was viable. I would not have allowed the private operators to continue – thus privatising the gains and socialising the losses.”


    1. “That money should have gone to people who actually needed it.”
      How about better yet,do a QE3 (4) bailout their buddies with a $235 trillion loan to make the known deviratives (fact published by OCC.gov) change from a bubble to a 100% asset. Charge them 2% interest on a 36 year loan.GIVE THE $13 trillion annual payment
      (redistribute) to “the people”
      ZERO INCOME TAXES, YES ? Interest instead of taxes.
      And no increase in debt because it would be a 100% purchase of an equal asset.
      Yes inflation of the money supply, but not harmful since the money is not available for circulation.That circulation can be controlled by how the $13 trillion payment is redistributed each year.


  2. Dean Baker. Good old, reliable Dean Baker. He says, “Two years ago, the top honchos at the Fed, Treasury and the Wall Street banks were running around like Chicken Little warning that the world was about to end.”

    So, I guess, based on his “Chicken Little” and “world was about to end” comments, the situation wasn’t really all that serious. Do you agree with that?

    Do you agree that the economy would have recovered faster if all the private banks had failed? This is strictly populist, hate-the-bankers crap, and Billy Mitchell should be ashamed of himself.

    Unless (great, big, gigantic, humongous “UNLESS”) he is talking about federal ownership of banks, which I support. I see no benefit or need for private ownership of banks.

    Rodger Malcolm Mitchell


    1. In the next sentence of his post, Bill Mitchell writes, “I would have installed new management under public control which would have prevented the resumption of all the high salaries etc.”

      I apologize for not including that before.


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