–The solution to the income gap in less than 1000 words.

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.

So far, it’s been a great week for the public, a great week for Chicago and a great week for America. We can be proud.

The public has used its First Amendment voice, the Chicago police controlled the situation, with scant violence, while being spat on, called names and had bottles and batteries tossed at them. America demonstrated a tolerant democracy.

In reality, it’s been a terrible week, because after much sound and fury, nothing much was accomplished. At great expense and effort, NATO did little it couldn’t have done by staying home. Virtually all the work was done before they got here. And the protesters will go home to a world identical with the one they left.

As I watched the protesters in Chicago, my heart went out to them. I personally agree with most of their beliefs about big business, government and particularly the 1% tyranny over the 99%. Yet, I feel their message is confused, unfocused and devoid of solutions, and their method is self defeating. And like most people, I look upon war as a disgrace. So?

Surely, the marches didn’t change many minds. The people who agreed with the marchers’ arguments, still agree. Those who disagreed think the marchers are a bunch of naive rabble-rousers, using the NATO conference as a substitute for wild Spring Break in Florida.

The politicians ignore the protesters, because there is no bribe money on the table. And the 1% sit in their summer homes and laugh at the futility.

A peaceful protest is like a non-embryonic pregnancy – much effort with no results. A violent protest leads, often as not, to either a more violent push-back by the 1%, or by an even harsher totalitarianism.

Protests have a bad track record for long-term accomplishment.

The Chicago protests seemed to involve two desires: An end to war and an end to income inequality. The end-the-war segment had its humorous moments: the Syrian contingent asking NATO to impose a no-fly zone over Syria (to help prevent the massacres by the Syrian government), standing next to the pacifist group asking NATO to stop shooting at people. How NATO is to do both, was not explained.

The end-income-inequality group seemed somewhat misplaced, as NATO’s relationship to the income gap seems tenuous at best. In short, the protests meant little, will accomplish little, and if anything, will help the media impart a negative impression of the protesters’ causes.

Theoretically, the 99%, having the voting power, should be able to enforce their will. But, the politicians, realizing the 99% doesn’t know what their will is, continue to nominate 1% sympathizers. Voting for Romney is a disaster for the 99%. Voting for Obama is somewhat less a disaster, but a disaster nevertheless. And in America, 3rd party candidates seldom win.

So what’s to be done?

I cannot speak to the anti-war marches, because the reasons for war are so diffuse, different in every situation. But I will speak to the #Occupy complaint about the income gap between the 1% and the 99%.

The fundamental problem facing the 99% is this: They do not understand Monetary Sovereignty. They actually believe the federal government is broke, the federal deficit must be reduced, the federal debt is a burden, social services need to be cut and additional federal spending will cause inflation.

Based on these beliefs, the 99% is in perfect harmony with the 1%. They are like a woman who believes being raped is a proper punishment for being pretty. The 1% enjoys raping the 99%, and the 99% believe rape is necessary.

Since the problem is ignorance, the solution is to teach the facts. And that begins with the media. Because the media are owned by the 1%, merely contacting the media isn’t enough. It helps, and we should continue to write, Email and call, but it isn’t enough. The media have to be forced to listen, embarrassed not to listen.

The protests should not target NATO, which doesn’t care, or the government officials, who care even less. The protest marches should target the media.

A plan outline:

First, #Occupy leaders must learn Monetary Sovereignty, not just learn but be prepared to defend and to teach it. They must learn how and why:

1. The federal government became Monetarily Sovereign on August 15, 1971. Its finances are unlike those of state and local governments, business, the euro nations, you and me.

2. Monetarily Sovereign governments create money by spending. This money creation misleadingly is termed “deficits.” It should be called “economic surpluses, ” and economic surpluses are necessary to grow the economy.

3. The federal government neither needs nor uses tax dollars. Unlike state and local taxes, federal taxes do not pay for spending. Federal taxes do not pay for Social Security, Medicare, Medicaid, Congress, the Supreme Court or the White House. Federal spending does not cost taxpayers one cent.

4. The federal government’s ability to spend is limited only by inflation. But, despite huge “deficits,” federal spending never has caused inflation. And inflation can be controlled by interest rates.

Second, the #Occupy leaders must teach Monetary Sovereignty to their members. Formal and informal schooling should be arranged. Contact such educators as Randy Wray, Bill Black, Stephanie Kelton, and Matt Forstater at UMKC. Ask for advice.

Third, #Occupy must target the media. Contact the media repeatedly. Flood with Emails, snail mail, personal contacts. And march against the media. A hundred knowledgeable, sign-carrying people, standing on Chicago’s Michigan Avenue, in front of the Chicago Tribune headquarters, demanding that the Tribune print the Monetary Sovereignty facts, will do more than all that has been accomplished to date.

Force the media to educate the public, which will give the 99% the information and the voice they have been missing. And when the 99% has a voice, the politicians will listen.

The result: An informed public, a generous Social Security, Medicare for all, more support for education, research, infrastructure, ecology, a healthy, growing economy, and a smaller gap between the 1% and the 99%.

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


18 thoughts on “–The solution to the income gap in less than 1000 words.

  1. The most common sign seen at the NATO protests went something like “End the wars, end the austerity, and tax the rich.”

    Another popular sign was “healthcare, not warfare.”

    The nurses called for a financial transactions tax, with revenues to be used for social programs.

    That’s focused and constructive.

    Agree that it would be wonderful if 300 million Americans could learn MMT/MMR/MS. But it’s not going to happen. Nor is it necessary, just as it was not necessary for Americans to understand Keynes in order to support the New Deal. What is necessary is for political leaders to listen to the right economists, not the wrong economists.

    Chicago cops were extremely violent — but you likely didn’t hear about that in the mainstream media. The violence was always instigated by the cops, not by the protesters.

    The Kent State protests helped turned public opinion against the Vietnam war. The Bonus Army protests ensured FDR’s election and prompted him to create the WPA by executive order. MLK’s protests led to passage of Civil Right’s laws and LBJ’s Great Society. Then as now, the protesters did not have all the answers, but they succeeded in calling attention to the problems.

    As Milt Friedman said, “Only a crisis produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically possible becomes politically inevitable.”

    The protesters are doing their jobs well, by calling attention to the problems. You and the other post-Keynesian economists are doing your jobs well, by developing alternative economic policies and educating anyone who will listen.

    Neoliberal austerity is increasingly discredited in the public eye. Something will eventually take its place. All we can do is what Milt suggested, and hope for the best.


  2. You liked the sign, “End the wars, end the austerity, and tax the rich.” You made my point. The protests were unfocused. The three demands had nothing to do with each other.

    You said, “The nurses called for a financial transactions tax, with revenues to be used for social programs.” You again made my point. The nurses think raising taxes is necessary to pay for social programs. Completely counterproductive.

    You said, “What is necessary is for political leaders to listen to the right economists, not the wrong economists.” Are you assuming that politicians have the best interests of America and the 99% as their prime motivation? If only that were so.

    I believe the three prime motivations of politicians are:

    1. To win elections.
    2. To obtain the money needed to win elections.
    3. To suck up to the people who will provide the most money needed to win elections.

    Have you ever been invited to dinner with the President for giving $10 to his re-election? No? A friend of mine had dinner with the President and the first lady, but he gave $50,000. Get my meaning?

    You listed protests that were easily understood by everyone — the media and the voters. No education necessary. Monetary Sovereignty is not understood by the media or by the voters, as witness your own comments.

    You said, “The violence was always instigated by the cops, not by the protesters.” Really. What is the source of your information?

    Finally, who is Milt? Please tell me you don’t mean Mitt, the guy who takes three sides of every two-sided issue. https://rodgermmitchell.wordpress.com/2012/05/07/which-of-these-three-candidates-do-you-support-barack-obama-flip-romney-or-flop-romney/

    Rodger Malcolm Mitchell


    1. “CNN’s Don Lemon was shocked when he saw police in combat gear were brutally beating protesters Sunday.

      “Does anyone deserve that?” Lemon asked.


      Matt Taibbi wrote this apt piece about police (state) presence at Occupy a little ways back…

      “The police in their own way are symbols of the problem. All over the country, thousands of armed cops have been deployed to stand around and surveil and even assault the polite crowds of Occupy protesters. This deployment of law-enforcement resources already dwarfs the amount of money and manpower that the government “committed” to fighting crime and corruption during the financial crisis. One OWS protester steps in the wrong place, and she immediately has police roping her off like wayward cattle. But in the skyscrapers above the protests, anything goes.

      This is a profound statement about who law enforcement works for in this country. What happened on Wall Street over the past decade was an unparalleled crime wave. Yet at most, maybe 1,500 federal agents were policing that beat – and that little group of financial cops barely made any cases at all. Yet when thousands of ordinary people hit the streets with the express purpose of obeying the law and demonstrating their patriotism through peaceful protest, the police response is immediate and massive. There have already been hundreds of arrests, which is hundreds more than we ever saw during the years when Wall Street bankers were stealing billions of dollars from retirees and mutual-fund holders and carpenters unions through the mass sales of fraudulent mortgage-backed securities.

      It’s not that the cops outside the protests are doing wrong, per se, by patrolling the parks and sidewalks. It’s that they should be somewhere else. They should be heading up into those skyscrapers and going through the file cabinets to figure out who stole what, and from whom.”

      Read more: http://www.rollingstone.com/politics/news/how-i-stopped-worrying-and-learned-to-love-the-ows-protests-20111110#ixzz1vbYsy2iy

      Read more: http://www.rollingstone.com/politics/news/how-i-stopped-worrying-and-learned-to-love-the-ows-protests-20111110#ixzz1vbYVX8Gy


  3. RMM,

    I agree with you that understanding MS is priority #1. It is the key.

    Assuming there isn’t going to be a mass awakening in OccupyWallSt before the elections this Fall, I’m curious if you think a group like OWS ought to consider pushing liberals to “sit out” of upcoming elections. My reasoning is this: although the current batch of TeaParty/Republicans are far more dangerous than Democrats, the two parties are basically GoodCop (Democrats) and BadCop (Republicans).

    Do things have to get worse before they can get better? It feels like voting for Democrats is like the frog who is put in a pot of cold water and boils to death because it doesn’t feel the temperature rising until it’s too late.


  4. I would like more clarification of:

    4. The federal government’s ability to spend is limited only by inflation. But, despite huge “deficits,” federal spending never has caused inflation. And inflation can be controlled by interest rates.

    Are you saying that the Federal Reserve could use interest rates for lending to banks as a blunt instrument to help control inflation? This is because the more effective ways to control inflation (price changes above full capacity) by increasing taxes and/or cutting spending would be politically impossible in the face of inflation.


    1. Inflation is the relative change in value between money and goods/services. So to fight inflation, one must decrease the value of goods/services and/or increase the value of money.

      The value of money is based on risk and reward. To increase the value of money, one must decrease the risk or increase the reward.

      The reward for owning money is interest. Therefore, increasing interest increases the value of money, which fights against inflation.


  5. Pete, from what I can see, the “Alternate Economy” is a blend of “green” and “close-the-income-gap,” with its foundation being “worker owned.”

    I like “green.” And I’m all for closing the income gap. Unfortunately “worker owned” gives the false impression of a benevolent democracy in which each of us is empowered. Yet, that doesn’t happen in the real world.

    United airlines is worker owned. Do you think the flight attendants really run the company? Similarly, corporations are shareholder owned. Do you think shareholders run the biggest corporations? The United States is “voter owned.” Do you think voters run the United States.

    “Worker owned” always devolves to a few leaders who run everything, and these few leaders are subject to the normal human frailties — greed, jealousy, favoritism, ignorance, power, etc.

    Communism was a “worker owned” dream. It works in small groups, for instance the Israeli kibbutzim, but falls apart as the group grows. That, by the way, is one of the problems with democracy.

    Three people can make a decision. Even 300 people might be able to arrive at a good decision. But 300 million people can’t decide anything.

    So we elect leaders, and when the leaders begin to show human frailties, the “worker owned” concept becomes “leader owned,” and the young people, once again, march in protest.

    I have a question: Why does starry-eyed innocence always seem to lean toward a communistic solution?

    Rodger Malcolm Mitchell


    1. German firms have elected worker representatives on the board. So, these days, do some of our better British firms like Rolls Royce and the John Lewis partnership. Pretty big firms & they work fine.

      The general principle of it is that if you’re not allowed at the table where they’re cutting up the cake then at best you get nothing. At worst, the management cake-cutters will even decide to give you some cake, but it’s full of nuts, you’re allergic but they didn’t think to ask, so you die and they sail on by.

      Having representatives on the board makes it harder for management to shove it to their workforce while shovelling all of the profits into their own pockets.

      And at least once in a while you get to say the magic words “you’re fired” to the boss for a change.

      Nobody expects perfection, but democracy beats tyranny, Roger!


  6. What has it accomplished? Great things! More businesses should do it!

    “Why does starry-eyed innocence always seem to lean toward a communistic solution?” That’s a great example of reductive thinking.

    Why does any considered alternative idea to Predatory Capitalism devolve into Stalin and the pinko hobgoblins coming to get you?

    “Our economy is dominated by a monoculture business model, Kelly says, driven largely by publicly traded corporations that have built in pressure from Wall Street for maximum short-term earnings. But a healthy, living economy needs biodiversity. We can find this if we begin to look around — across the U.S. and the world — where there are businesses designed not for maximum profit, but with a mission-driven social and economic architecture. One of these models is the “social enterprise.”

    The Social Enterprise Alliance defines these organizations as “businesses whose primary purpose is the common good. They use the methods and disciplines of business and the power of the marketplace to advance their social, environmental and human justice agendas.” And one of the defining characteristics is that “The common good is its primary purpose, literally ‘baked into’ the organization’s DNA, and trumping all others.”

    Here’s an example. Remember Working Assets? Starting out as a progressive-minded credit card company in the ’80s, it added phone service — first long-distance in the ’90s, then cellular in 2000 — and now it has created the subsidiary CREDO Mobile. The company operates as a for-profit business, which is privately owned, with most of the employees owning the stock, so it doesn’t have to bow to Wall Street pressures. They use their profits to help support causes they believe in — so far the amount of money donated is $70 million and counting.

    Social enterprises can also be nonprofits, like Goodwill Industries, which last year turned donations from 79 million people into revenue that provided job training to 4.2 million people. And by reselling donated clothing, furniture and household goods, they divert an estimated 2 billion pounds from landfills every year.

    The idea of social enterprises is catching on in the business world in the U.S. with the emergence of Benefit Corporations, also known as B Corps, which are designed, “to create a new sector of the economy which uses the power of business to solve social and environmental problems.” B Corps are all for-profit companies that have legal structures mandating that the company is designed to work not for maximum shareholder gain, but for the good of society and the environment.

    Currently there are more than 500 companies that have become approved B Corps and legislation has been passed in seven states (Maryland, New Jersey, Vermont, Virginia, California, Hawaii and New York) making them official entities. Some are larger corporations, such as Method Products and Patagonia, but many are also smaller companies and business-to-business operations.

    Empowering employees has proved a successful business model elsewhere. The John Lewis Partnership has been around in the UK since 1920 and has grown to over 30 department stores and more than 200 supermarkets, with a revenue of $13.4 billion. The business is employee-owned — all workers get to share the profits and vote for the governing council and company’s board.

    “This firm has a written constitution, printed up and publicly available, which states that the company’s purpose is to support ‘the happiness of all its members,'” wrote Kelly. “Now, let me pause and note: this is the only major corporation I’ve found that declares its purpose is to serve employee happiness. This is so, at JLP, not because it boosts returns for shareholders. At the John Lewis Partnership, employee happiness isn’t a path to some other goal. It is the goal.”

    Employee-owned companies aren’t just a British anomaly. “In the United States, the National Center for Employee Ownership reports that there are 11,300 employee-owned firms, with some 14 million participants,” Kelly found. “And in Europe, large companies have nearly 10 million employee-owners. Employee ownership has been increasing in such countries as Spain, Poland, France, Denmark, and Sweden.”



    1. Are you equating “employee-owned” with public good? “Employee-owned” merely means the employees own much or all of the stock of that company, which gives them the same power stockholders in other corporations have, i.e. very little.

      Since the vast majority of shareholders, in most major corporations, are just ordinary employees of some business, I’m not sure how “employee owned” translates into do-gooding, or really translates into anything.

      Every large law firm is employee-owned and run, as is every large accounting firm and most advertising agencies. Has this translated into some sort of public good?

      Your note is a perfect example of my criticism of #Occupy: Lack of focus. They have many ideals in mind, but these ideals don’t come together into a coherent, realistic goal.

      And of course, not understanding Monetary Sovereignty, they are trying to cure diseases with voodoo ignorance rather than medical knowledge.


      1. http://www.neweconomics.org/publications/bit-rich
        “The disconnection between executive remuneration and corporate performance means that high pay differentials cannot be rationalised by performance delivery. An honest analysis ought to concede that the executive elite has the power to demand and receive excessive pay without being bound to contribute greater returns. Remuneration committees are both self-regulated and self-fulfilling, comprised as they are of members of the executive elite. Shareholders have little power to contain management pay.”

        Having unions / workforce reps actually on the management and remuneration board gives the workforce a bit of power. That helps reduce income inequality. That gives the 1% less power over the rest. That is a public good.

        Even if everybody understood monetary sovereignty, it would still do us no good as long as the same old bunch of plutocrats were in charge of the strings.


  7. [1] Roger writes: “The fundamental problem facing the 99% is they do not understand Monetary Sovereignty. “

    >I agree. Most people think that private / individual finance is the same as national finance. That is a catastrophic error. Also, most people do not understand the difference between (a) private monopolistic control of the currency and central bank, and (b) public control.

    [2] Roger writes: “The federal government became Monetarily Sovereign on August 15, 1971.”

    >The day that Nixon took the USA off the gold standard? I disagree. The USA surrendered monetary sovereignty to private bankers on 23 Dec 1913. Since then, a private cartel (the Fed) has controlled our currency and central banking. It, not the US government, has monetary sovereignty. All federal government politicians and employees are on the bankers’ payroll, which is why politicians will never change. Private Fed bankers decide monetary policy, and to a large extent, fiscal policy.

    [3] Roger writes: “Monetarily Sovereign governments create money by spending. This money creation misleadingly is termed ‘deficits.’ It should be called ‘economic surpluses,’ and economic surpluses are necessary to grow the economy.”

    >I agree. The 1% and their shills use the term “deficit” to brainwash the masses into thinking that national finance is the same as private individual finance. Fortunately for the 1%, the 99% believe this lie, and spend all their time bickering with each other, each thinking he is smarter than everyone else. Some of the most idiotic and asinine comments I’ve ever seen are at the “sophisticated” financial blogs.

    [4] “Federal spending does not cost taxpayers one cent.”

    >Agreed. The US government borrows all its money from private bankers and investors. Income tax revenue at the federal level goes to pay the interest on those loans.

    Anyway I agree with Roger that the 99% must wake up to a few simple facts. Until that happens, protests will be counterproductive.

    MINOR ADDENDUM: Roger writes: “The end-the-war segment had its humorous moments: the Syrian contingent asking NATO to impose a no-fly zone over Syria (to help prevent the massacres by the Syrian government)…”

    The corporate media claims that the Syrian government is “massacring” people. That is standard imperialistic propaganda. In reality the Syrian government is trying to protect the Syrian public from Western-backed terrorists who seek regime change to benefit Israel, benefit the Western 1%, and benefit Arab Gulf Cooperation Council oil tyrants. Iran will be next. And Venezuela, and Eritrea, and Thailand, and any other nation that currently seeks to escape enslavement by the global 1%.

    As for the protesters in Chicago who support the global one percent’s terror campaign against Syria, they are a tiny segment of the Syrian expat population.


  8. Gavin,

    Anyone who gets on a board of directors is subject to the same pressures and temptations. Do you really believe union leaders represent union members any more than political leaders represent voters?

    Visualize you being an employee on a board. The rest of the board tells you, “Go along and get rich, or don’t go along and stay poor — or be fired.” Which way to do you go?

    People are people.

    Rodger Malcolm Mitchell


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