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.
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France became the latest in the line of euro nations, whose voters tossed out their leader. Why has this been happening?
Washington Post
Francois Hollande wins French presidential vote over Sarkozy, exit polls show
By Edward Cody, Updated: Sunday, May 6,PARIS — Francois Hollande, a moderate Socialist with an easy smile, was elected president of France on Sunday, exit polls showed, narrowly defeating the incumbent, Nicolas Sarkozy, a conservative whose five-year term was undermined by Europe’s economic crisis and his combative personality.
The outcome turned Sarkozy into the latest political leader to fall victim to the European economic implosion of the past four years.
Leaders of France, Portugal, Italy, Greece and Spain all have been voted out. According to European Union and International Monetary Fund philosophy, all these leaders did not create enough austerity for their economies, while the voters believed these leaders created too much austerity.
Who is right? Could it be that the problem lies not in the leaders nor in their nations, but in the euro itself? That the problem might be a fundamental weakness in the euro, never seems to occur to the EU.
Based on EU beliefs,all these nations, (and in fact, most nations of the world,) have been profligate. The vast majority are deeply in debt to everyone else. So “A” owes “B” and “B” owes “C” and “C” owes “A” – and they all are in trouble. See anything wrong with those mathematics?
Sarkozy was generally given high marks for statesmanship in dealing with the economic crisis in the European Union. But voter dissatisfaction swelled nevertheless, in part from an impression that working-class French people were not getting enough attention as Sarkozy dealt with the crisis.
The Socialist candidate, although making clear that hard times lie ahead, promised to apportion out austerity with a more even hand, including stimulus for economic growth alongside debt reduction. In one telling argument, he charged Sarkozy with protecting the rich by limiting upper-tier tax rates and said, if elected, he would impose a 75 percent rate on all earnings above $1.3 million a year to finance more help for the poor.
A man is elected because he will “apportion out austerity with a more even hand”? Think how desperate the people must be, if that’s their criterion — continuing economic disaster, but doled out more equally.
And then there’s “stimulus for economic growth alongside debt reduction.” Exactly how is that accomplished? There is no known mechanism by which a government can reduce its debt (i.e. increase taxes and/or reduce spending), while stimulating its economy (something the U.S. Tea/Republicans have not yet figured out).
[O.K., there is one method: Spend less on foreign soil. This means reduced foreign wars, foreign purchases (by the government) and foreign assistance. But to achieve an approved level of austerity, governments tend to reduce domestic spending, a sure road to recession or depression.]
The euro is a failed concept. Unless changes are made, look for every euro nation, not just the PIIGS, to tumble painfully down the dark hole of austerity and economic disaster.
As I have said repeatedly, there are two, and only two, long-term salvations for the euro nations:
1. Return to Monetary Sovereignty by re-adopting your own sovereign currencies
or
2. The EU to become a republic, similar to the U.S. federal government, with the euro nations similar to U.S. states, in which the EU provides euros to member nations as needed.
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
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
yeah, i was listening to his victory speech this morning and he said he was committed to “reducing the deficit to get control of the debt.”
the more things change, the more they stay the same…
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Right, imagine tax increases and/or spending cuts (the only two ways to reduce the deficit) in the midst of a recession. Does the word madness apply here?
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I don’t know if it’s possible, but maybe one of the national central banks should just start printing Euros and deficit spending. What’s the “worst” that’s going to happen… they’ll get kicked out of the EMU? 🙂
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The European Central Bank can create euros at will — and it should.
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RMM,
I understand that. My comment was half serious and half tongue in cheek.
The serious part was asking the question: does the ECB literally MANUFACTURE all Euro bank notes and coins, or do many of the respective central banks in the Eurosystem each manufacture the amount they are permitted to?
So my half serious and half tongue in cheek comment was saying that if banknote and coin creation is distributed among the Eurosystem banks, one of the countries could break the agreement by issues notes and coins (maybe even direct demand deposits?) in order to deficit spend and help their economy.
Surely all hell would break lose. It would be a media firestorm. But if the other Eurosystem banks followed the lead, and they all just started deficit spending… maybe that would solve the crisis?
My tongue in cheek comment was “what’s the ‘worst’ that’s going to happen… they’ll get kicked out of the EMU?”
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JK: In a way, that is what already happens. In a normal country, the bonds are basically money already. Even if there is a gold standard, you can always go off the gold standard. And your bonds are still worth something, as deferred tax credits. They are already “Mosler Bonds”. As FDR said, government currency & government credit are one and the same thing. The Euro is much further from monetary sovereignty, much worse than a commodity standard.
In the Eurozone, the bonds each state issues are money to the extent that the ECB supports them, intervenes to keep their interest rates low. If it does not intervene, it is making a self-fulfilling prophecy that the state will go broke. So far, in Greece & Italy, the ECB response has been to destroy elected governments that do not obey its malicious & destructive orders, replace them with Eurocrat apparatchiks & then stop the torture a little, to make it look like they know what they are doing and have public interest at heart.
So the answer is pretty much that they would not accept the “Euros” each central bank would print, any more than they now accept the bonds the governments print. And the individual governments are still so hypnotized by mainstream quackonomics that they do not make their bonds Mosler bonds, which they could do unilaterally. They do not accept their own bonds. So really, a Greek bond is nothing but a bad check, and the rest of the Eurozone states’ bonds are just checks which will become bad in the near enough future.
The French Chose a New “President”; Will the Eurocrats Let Him Do Anything? is a good informative article on the recent French election by Diana Johnstone, that shows some grasp of the real monetary issues.
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