Europe discusses applying leeches to cure anemia, and reducing calories to cure starvation.

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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I continue to be amazed by the Chicago Tribune. Its reporters do some great investigative journalism, possibly the best in the nation. They dig for months into secret files, and bring together data that has been hidden from the public, exposing criminality by public a private officials.

But its editors are completely clueless about data that stares them in the face –even information directly handed to them. Reporters, great. Editors, clueless.

Here are excerpt’s from the latest nonsense editorial.

Is Europe catching?
Hope that the eurozone can survive a Greek collapse

Why would anyone wish the eurozone to survive. It already has shown to be a failed model. Forcing nations to surrender the single most valuable asset they own — their Monetary Sovereignty — is, and has been, the basis for disaster. It’s a disaster I predicted six years ago.

Europe is coming to Chicago in the next few days and the great temptation is to set up a quarantine room at O’Hare International Airport. Our visitors have a bad case of the financial flu. We can only hope it’s not catching.

The euro nations, not being inoculated with Monetary Sovereignty, do not have the ability to fight off recession. Fortunately, the U.S. has that ability (though our politicians don’t understand it), so we can create the dollars necessary to grow our economy.

Greece could collapse in a matter of weeks when its banking system runs out of funds. The tiny Aegean nation’s economic illness could spread to the sickly and much larger economies of Italy and Spain.

That would be disastrous for Europeans and a serious problem for Americans. U.S. economic growth depends on the success of the 27-nation European Union, which, taken together, is America’s biggest trading partner. Eleven of those 27 countries have slipped back into recession.

Exactly! Not being Monetarily Sovereign, these nations cannot create euros. So they cannot prevent their banking system from running out of funds. Eventually, all euro nations will collapse, even Germany.

Here’s a quote from CBS Moneywatch:

U.S. Treasury Secretary Timothy Geithner applauded the softer tone emerging among European leaders. “You are seeing them talk about a better balance between growth and austerity, meaning a somewhat more gradual, softer path toward restoring fiscal sustainability,” Geithner said. The shift shows that European leaders recognize that countries can’t increase their economic growth if they’re forced to focus solely on cutting spending and reducing debts. Geithner said European countries would benefit from investment in public works projects, like roads and schools.

Sadly, Geithner still doesn’t understand the difference between Monetary Sovereignty and monetary non-sovereignty, so he thinks austerity is the same as “fiscal sustainability.” But at least he is does understand a nation cannot recover from a recession but cutting deficit spending (Hello, Tea/Republicans and Democrats, alike).

Back to the Tribune editorial:

Many of them would like to stimulate their way out of recession with government spending. But practically every nation in Europe’s southern tier has piled up way too much debt and cannot afford to keep borrowing. Germany, the strongest economy, has rightly forced austerity measures on its free-spending neighbors as a condition of bailouts.

Change one word and the above paragraph will be accurate. Change “rightly” to “stupidly.” It’s amazing. These people think they can cure starvation by cutting calories.

Greece agreed to slash public spending, rewrite rigid labor rules that throttle its private sector and pay off part of its debt over time. In exchange, its banks got a cash infusion and its creditors agreed to write off more than half its debt.

In the wake of the deal, though, unemployment has gotten worse and money has become more scarce. The Greek economy has shrunk for five consecutive years, with no end in sight.

What a surprise. After they cut spending, unemployment got worse and the economy shrunk. Who could have imagined that?

If a new government rejects austerity and renounces its debt, Greece probably will be forced out of the eurozone, the common currency union.

Long term, this would be the best thing that could happen to Greece and its citizens.

Greece would have to print its own currency, which would be extraordinarily weak because it wouldn’t be backed by wealthier European nations.

So with that “weak” currency, Greek exports would soar, and within two years, Greece would wealthier than any of the euro nations.

With time to prepare, systemic risk has been reduced. Governments have made contingency plans and banks have limited their exposure. Financial firewalls are in place to keep a Greek collapse from spreading to Italy, Spain and other vulnerable countries like Portugal and Ireland.

That’s a shame. But despair not. If they stay with the euro, their economies will collapse, too.

Europe really has no choice but to work off its huge debt over time, though that will hamper economic growth. Its monetary union may wind up losing one or more members. It faces years of slow growth or no growth … or worse.

There are two better choices than applying leeches to cure anemia:

1. Form a republic — a quasi United States of Europe — with the EU supplying its member nations with euros, as needed
or
2. Each euro nation re-adopting its own sovereign currency.

That’s it. There are no other solutions. The so-called “bailouts” merely were loans to countries that cannot service their current debt, let alone trying to service additional debt. This is exactly what the American banks did when giving mortgages to people who couldn’t afford them.

It’s what caused the U.S. recession, which is being ameliorated by federal stimulus spending.

Stimulus today; stimulus tomorrow; austerity never. My question: Why is this so hard to understand?

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