Mitchell’s laws: The more budgets are cut and taxes increased, the weaker an economy becomes. Until the 99% understand the need for deficits, the 1% will rule. 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.
==========================================================================================================================================

I hope you enjoy comedy as much as I do. Here are a few excerpts from a truly hilarious article about Spain.

Spain Bank Rescue Glee Morphs Into Markets Rout
By Associated Press | June 11, 2012 |

MADRID (AP) — Euphoria over a lifeline of up to €100 billion ($125 billion) to rescue Spain‘s hurting banks morphed into a financial markets rout in a matter of hours Monday, as investors digested the still-undefined plan and became concerned the country may be unable to repay the new loans.

What!! You mean lending a lot more money to someone who has no source of income, and cannot possibly service its current debts, will not solve that person’s debt problem??! Who’da thunk it?

The rate on Spanish 10-year bonds — a measure of market trust in a country’s ability to repay debt — rose to an alarmingly high yield of 6.47 percent.

You think that’s “alarmingly high”? Would you really want to lend money to someone who has no hope of ever servicing their debt — and now is burdened with even more debt? I think 6.47% is way too low.

Overshadowing Spain’s acceptance over the weekend of a bailout for banks burdened by toxic property assets and loans are Greek elections next weekend and concerns that the anti-bailout left-wing party Syriza could become the largest party in parliament, putting the country’s membership in the zone at risk.

If Greece left the euro behind, within two years, they would be one of the wealthier nations in Europe. Why? They could pay their debts, with no difficulty, and a probably lower-value currency, would allow them to become big exporters. Monetary Sovereignty would mean more money; more businesses and more jobs.

Investors also zeroed in on Italy, sending its bond yields sharply higher amid worries it could be next in line for a bailout.

Or, better yet, Italy should get in line to leave the euro. Face it, the euro is the worst idea since raising duties during the Great Depression.

“Plenty of risk still remains in place, with question marks over the ability of Spain to repay the debt, especially, if the country fails to get back on the growth path, the outcome of the upcoming Greek elections and the perception of situation in Italy,” Anita Paluch of Gekko Global Markets wrote in a note to clients.

Anita, they can’t pay their debts. Their people are broke. They have no jobs. The nation is broke too, also with no source of income. The country just took on huge added debt. And you wonder whether the country will “fail to get back on the growth path”?? What world do you live in?

Spain’s bond yield is worrisome because it is perilously close the 7 percent rate that is considered unsustainable, and the level that pushed Greece, Ireland and Portugal to ask for bailouts of their government finances.

Forget the 7% rate. A 1% rate would be unsustainable for a nation that has no net income and no source of money. How do you people come up with these magic numbers? From a “Magic 8 Ball”?

“When people lend money, they never do it for free. They want to know what is done with the money,” said Joaquin Almunia, the European Competition Commissioner.

“I am not talking about just the obligation to pay back the money, but also some other kind of terms,” he told Cadena Ser radio, adding that these remain to be determined.

Translation: Not only are we lending you money you cannot repay, but we are assigning conditions to the loan — conditions you cannot meet. (Could it get any funnier? Hello Jay Leno, are you listening?)

The loan will be supervised by the European Commission, the European Central Bank and the IMF, Almunia said. This troika will have people on the ground overseeing the restructuring of the Spanish financial sector. Representatives of the same three groups regularly visit Greece, Ireland and Portugal to make sure the governments in those nations are complying with bailout terms.

Oh, thank goodness. I was worried you might send idiots. But, I feel reassured, now that Greece, Ireland and Portugal have recovered due to your excellent supervision.

Altafaj noted that the European Commission last month recommended Spain undertake further reforms such as speeding up the phasing of a higher retirement age — it is to go from 65 to 67 — and raise VAT sales tax.

Great idea. The people are broke and jobless, so your solution is to reduce their pensions and increase their taxes.

Harold Heckle and Alan Clendenning in Madrid contributed to this report.

Thanks guys, for providing a few laughs in this otherwise gloomy day. Here’s your reward:

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

==========================================================================================================================================
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

Mitchell’s laws: The more budgets are cut and taxes increased, the weaker an economy becomes. Until the 99% understand the need for deficits, the 1% will rule. 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.
==========================================================================================================================================

You can find many parallels between meteorology and economics. The most striking: They both involve huge masses of data and they both are extremely chaotic – small changes can cause large effects – which makes prediction extremely difficult.

Modern Monetary Theory (MMT) and Monetary Sovereignty (MS) are quite good at describing the economy as it is, but rather poor at describing the economy as it will be. Yes, I can tell you, with some assurance, that running a federal surplus will lead to a recession or a depression, (See: Items 3 and 4), but I can’t tell you exactly when this will happen, nor exactly what will trigger it.

It took a 10-year federal surplus to cause the Great Depression, but a mere 3 years of surplus caused the recession of 2001, and most recessions have not been associated with federal surpluses. They have been associated with reductions in deficit growth.

In each case, there needed to be a trigger(s), something in addition to surpluses or reductions in deficit growth, to push the economy past the tipping point. (“What triggers recessions and depressions?”)

And therein lies the rub, because although federal surpluses and deficit growth reductions are somewhat predictable, the triggers are much less so. And that is why I beg the National Center for Atmospheric Research, or any other federal agency, to help us:

New Wyoming supercomputer expected to boost atmospheric science
By Scott Gold, Los Angeles Times, 6/10/12

The National Center for Atmospheric Research’s machine, called “Yellowstone,” is one of the fastest computers ever built, its sheer speed designed to burst through the limits of chaos theory.

CHEYENNE, Wyo. — This month, on a barren Wyoming landscape dotted with gopher holes and hay bales, the federal government is assembling a supercomputer 10 years in the making, one of the fastest computers ever built and the largest ever devoted to the study of atmospheric science.

The National Center for Atmospheric Research’s supercomputer will have 100 racks of servers and 72,000 core processors, so many parts that they must be delivered in the back of a 747. It will be capable of performing 1.5 quadrillion calculations — a quadrillion is a 1 followed by 15 zeros — every second.

The study of climate and weather patterns has always been hamstrung by volatility — by elements of chaos in the seas and the air. That challenge is most famously summed up by the “butterfly effect,” the idea that the flapping of a butterfly’s wings on the coast of Africa can determine whether a hurricane will strike New Orleans.

Rather than warning of a tornado risk in the central U.S. between noon and 9 p.m., scientists might one day warn of a tornado risk in Woodson County, Kan., between 1 and 3 p.m. Rather than warning of a hurricane striking the coast of Texas, they hope to be able to warn of a hurricane striking the town of Freeport, with a top wind speed of 90 mph and a tidal surge of 4 1/2 feet.

That regional accuracy is particularly critical in the study of climate change. “The disaster of climate change happens on a regional scale,” Loft said. “Everything is connected.”

For example, once scientists use Yellowstone to help predict the melting of ice at the North Pole, which means significant change in nearby waters, they can better predict the patterns of storms that form in the Gulf of Alaska. Then Yellowstone can help predict how those storms will deposit snow atop the Sierra Nevada, down to precise changes in elevation on individual faces of mountains.

That snow will melt, and the water will run downhill — which means Yellowstone can help predict how much water California will have to drink, even the most efficient locations to build the state’s reservoirs.

Yes, predicting the weather is important, because it will allow us to react sooner and better. But, I argue that predicting the economy is even more important. As Mark Twain famously said, “Everyone talks about the weather, but no one does anything about it.” While we must react to weather, we have the every day power to bend the economy to our will. We can do something about our economy.

We’re a long way from preventing or turning off a hurricane, but we already know how to prevent and turn off a recession — if given the correlated data.

The computer will be housed in a futuristic, $70-million compound west of Cheyenne. The National Science Foundation, which funds NCAR, is paying $50 million of the tab.

An investment of only $70 million dollars — that’s less than a rounding error in the federal budget — to get a machine that will help us predict and change the world’s economies. Is it worth just $70 million to be able to predict and prevent the every-five-year economic crises that beset us? How many billions has the recession cost us — a recession that could have been prevented — if the data were assembled and correlated? How many ruined lives? Is a paltry $75 million a worthwhile investment to help prevent all that misery?

Yellowstone will replace NCAR’s Bluefire system, a supercomputer in its own right, though this one will have roughly 30 times the throughput of the old system.

Hey, if you don’t want it, we’ll take it.

Yellowstone will hold 600 sets of atmospheric data in its vast memory bank — temperatures, humidity, wind motion, rainfall. Information gleaned from the world’s data-collection systems — buoys in the ocean, wind monitors fastened to the top of telephone poles — will be added to the archive.

How about an economics computer that will correlate such world data as debts, imports/exports, salaries, savings, agriculture, manufacturing, exchange rates, population shifts, inflation, wars, technology changes and yes, world weather. Today’s economists are able to focus on only a handful of data at any one time. In essence, we try to predict the weather in Florida based on last year’s rain in France.

(The machine will be open) to researchers from across the nation, probably in August. Scientists will make proposals to book an “allocation” on the computer, similar to using minutes on a cellphone plan. Most will access the computer remotely.

Some hope to predict migration patterns of animals, others the success and failure of certain farm crops, others specific hillsides that would be the most efficient spots for wind turbines.

Think of how valuable this would be for economics.

NCAR scientist Michael Wiltberger studies solar flares, superheated gas that emanates from the sun, with the potential to be enormously disruptive on Earth.

“Right now, we don’t know why a particular configuration of the magnetic field of the sun is going to erupt,” Wiltberger said. “We need to know — and now we can run millions times more models to provide meaningful predictions.”

Armed with better predictions of what will happen when solar flares reach Earth — and where, precisely, they will occur — scientists could warn energy companies to protect against power surges. Global positioning systems could be disrupted, so farmers that use GPS to map crops could be warned to suspend planting operations.

Hey, some of this is economics stuff. And, is it more important to predict solar flares or the next depression?

NCAR senior scientist Morris Weisman specializes in a tricky corner of science: severe, high-impact weather events, which are by definition so rare that they are difficult to predict. “Scientifically non-satisfying” is how Weisman puts it — but with such a leap in computer modeling, he said, scientists could theoretically predict an extreme weather event “within an hour, within a few kilometers.”

Or the date and cause of a war. Or the economic implications of planting more wheat and less corn. Or the effect of opening the border between the U.S. and Mexico. Or the world-wide effect of building one water desalinization plant.

Loft marveled that such a dizzying array of experiments will be done using time-tested and sometimes rudimentary math — 19th century laws of thermal dynamics, rules of mechanics devised by Isaac Newton after an apple supposedly bonked him on the head and got him thinking about gravity. Yellowstone will use the same, just a whole lot of it at once.

We have the math. All we need is the machine.

The scientists behind Yellowstone shrug at a bitter reality: cutting edge doesn’t last long in their world. The Wyoming facility was built with enough space to accommodate the next generation of computer, which is already being contemplated, before this one is put together. “We won’t be cool for long,” Loft said. “This business is ephemeral. There’s not much room for nostalgia.”

Here is the The National Center for Atmospheric Research, having received a $70 million computer from the government, already now is planning for its replacement. Are we to believe that meteorological research is important, but economic research is not? Are we to believe there would be no value in being able to predict the next recession or depression, so we could forestall it?

I can make the case that, considering its affect on human lives, economics is the most important science of all. So where are the super computers?

We want that next machine. We need that next machine. The American people need us to have that next machine. My question is: Who in the world of economics, is asking for that next machine?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

==========================================================================================================================================
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

Mitchell’s laws: The more budgets are cut and taxes increased, the weaker an economy becomes. Until the 99% understand the need for deficits, the 1% will rule. 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.
==========================================================================================================================================

Visualize, you walk into a bank looking for a loan. You tell the loan officer your income is not large enough to cover your current expenses. Moreover, your current debts are so high, there is no reasonable possibility you ever will be able to service them, much less service any new debts.

What will the bank loan officer do?

If this occurred before 2008, and the loan you sought was a home mortgage, the bank would have given you the loan, under the belief that the collateral would keep increasing in value, and if you didn’t pay, the bank always could sell your house and make a profit.

That was then. This is now. Today, loan officers are a bit more careful (unless they happen to work for one of the “too-big-to-fail” banks in which there is no risk. If things go well, they make a fortune, and if things go poorly, Timothy Geithner will bail them out.)

Anyway, all of the above is merely a confirmation of the general rule: If someone can’t service his current debts, don’t put him even deeper in debt — which leads me to the following headline:

Spain to accept Europe bailout offer of up to $125 billion to rescue ailing economy

“Bailout” in Eurospeak means another loan. You see, Spain is hopelessly in debt, because although their debts are not especially high, they are monetarily non-sovereign. They can’t create the euros to pay even modest debts.

Austerity is collapsing their economy. Each day, their ability to service their debt declines. That’s why they need euros. So rather than give Spain euros, Europe will lend them the money, putting them deeper in debt.

Here are a few excerpts from the article:

. . . the eurogroup statement said that it expected Spain’s banking sector to implement reforms and that Spain would be held to its previous commitments to reform its labor market and manage its deficit.

Translation: “Reform its labor market” means cut salaries and employment. “Manage its deficit” means cut stimulative spending. No explanation on how this will help Spain pay its debts.

U.S Treasury secretary Timothy Geithner welcomed Spain’s decision and the offer of European support, describing them as “important for the health of Spain’s economy and as concrete steps on the on the path to financial union, which is vital to the resilience of the euro area.”

Translation: Putting Spain deeper in debt, while cutting salaries, increasing unemployment and reduced stimulative spending, will help the euro. Trust me. Haven’t I done a great job for the U.S. economy?

French Finance Minister Pierre Moscovici said, “The accord announced tonight speaks to a reinforced solidary among the countries of the eurozone and to their resolute desire to ensure its stability,” he said in a statement.

We political leaders don’t give a fig about our starving people. Hey, we have jobs. All we care about is “stability,” whatever than means.

Analyst Rafael Pampillon if IE Business School in Madrid said, “This uncertainty, and hence the panic, will slowly dissipate from the markets. He added that with polls forecasting a pro-Euro victory in Greek elections, markets would be further relieved because the austerity conditions imposed on Greece would most likely be fulfilled.

Translation: I agree with Moscovici. Austerity is good. Who cares about the starving Greeks? If they’re stupid enough to vote for austerity, let ‘em eat flaming cheese.

Anyway, I have money.

Spain’s in its second recession in three years, with unemployment at nearly 25 percent and little hope for improvement this year. Prime Minister Mariano Rajoy’s government has imposed a wave of austerity measures since he took office in December that have raised taxes, made it cheaper to hire and fire workers and cut government funding for education and health care.

Translation: I don’t get it. When I arrived, there was a fire, so I poured on some gasoline to put it out. but the more I poured, the worse the fire got. It’s truly a mystery.

Spain is the fourth euro nation to receive “bailouts,” after Greece, Italy and Portugal, and as anyone can see, these bailouts have had no positive effect. What a surprise.

Note to Europe: When you bail a boat, the water is supposed to go to the outside of the boat, not in. Just a thought.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

==========================================================================================================================================
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

Mitchell’s laws: The more budgets are cut and taxes increased, the weaker an economy becomes. Until the 99% understand the need for deficits, the 1% will rule. 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.
==========================================================================================================================================

You’re over 50, so you joined AARP, partly to get discounts on hotel rooms, rental cars and other good stuff, and partly because you believe AARP represents your interests with Congress and the President. Well the discounts are real, but AARP does not, repeat NOT, represent your interests.

Quite the contrary, it represents its own interests in selling you insurance, and it represents the interests of those who wish to take dollars out of your pocket. Here is what AARP said in a recent post titled, The Future of Social Security: 12 Proposals You Should Know About

AARP: With more people living longer, Social Security faces increasing financial challenges. Estimates indicate the program will be able to pay full benefits for the next 20 years, but only 75 percent after that.

That comment is based on the gigantic lie that FICA pays for Social Security. When the U.S. government was monetarily non-sovereign, that was somewhat true. But on August 15, 1971, the U.S. became Monetarily Sovereign. No longer did taxes – any taxes – pay for government spending.

If FICA fell to $0 and Social Security benefits tripled, the federal government still could pay these benefits, not just for 20 years, but forever. That’s right. FICA could be eliminated, and that would not affect the federal governments ability to pay full Social Security benefits, by even one cent.

AARP never tells you that. No, AARP continues promoting the myth that Social Security will run short of dollars. Total nonsense. The federal government, being Monetarily Sovereign, creates dollars at will, merely by increasing the numbers in bank accounts.

So the question is: Are AARP leaders simply ignorant, or are they part of the big money effort to increase the income gap between the upper 1% and the lower 99%? You decide. Ignorance or conspiracy?

Anyway, while you’re deciding, here are the 12 proposed changes in Social Security listed by AARP, all of which will reduce benefits and/or increase taxes. In fairness, AARP does provide pros and cons for each proposal. But all the pros are the same. They save money for the government and take money from you and me. So, I’ll just mention the cons:

Proposed Changes in Social Security

1. Raise the Full Retirement Age ( Raising the full retirement age for everyone simply because well-off Americans are living longer is a stealth benefit cut that is unnecessary and unjust.)

2. Begin Longevity Indexing (Low-earning workers and other disadvantaged groups have seen little or no gains in longevity. Cutting benefits for everyone just because well-off Americans are living longer would be profoundly unjust. Moreover, this change would violate the purpose of Social Security, which is to ensure basic economic security.)

3. Recalculate the COLA (inflation) (The current COLA doesn’t keep up with the inflation that seniors face because they spend more than other Americans for out-of-pocket health care costs and those costs rise faster than average inflation. The chained consumer price index would make matters worse by reducing the COLA.)

4. Increase the Payroll Tax Cap ( This bad idea would cause a hefty tax increase for middle-income taxpayers while not affecting the rich. It would especially hurt the self-employed and certain smaller business owners.)

5. Eliminate the Payroll Tax Cap (If millionaires pay Social Security taxes on all of their salary income, their maximum annual benefit payment could reach over $150,000 a year. Social Security was not intended to provide such large benefits.)

6. Reduce Benefits for Higher Earners (These proposals would actually cut benefits for middle-class workers making as little as $35,000 a year. They are not “high earners.” Benefits are already modest.)

7. Increase the Payroll Tax Rate (Economists have known for decades that if the cost of employees gets too great, employers will start to replace them with machines)

8. Tax All Salary Reduction Plans (This would increase the cost of health care and other employee benefits because the tax savings help to offset the employer’s cost of operating the plans.)

9. Cover All Newly Hired State and Local Government Workers (Making newly hired workers join Social Security would increase revenue now, but eventually the program would have to pay these workers benefits. That would make Social Security’s financial problems even worse.)

10. Benefit Improvements (Although Social Security benefits for some groups are too low, they should only be improved as part of an overall reform. Otherwise, the added costs would only exhaust the trust fund faster.)

11. Increase Number of Years Used to Calculate Initial Benefits (This proposal would reduce benefits the most for people who need them most: women and lower-income, less-educated and minority retirees. It would reduce benefits not only for retired workers, but also for their dependents and survivors.)

12. Begin Means-Testing Social Security Benefits (Means testing would change Social Security from an earned right to welfare. It would penalize you if you saved or earned a pension because that income would reduce your Social Security. And it would cost more to administer. The government would have to routinely check your income and assets in order to adjust your benefit. )

Even some of the cons listed by AARP are based on the big lie, that FICA pays for Social Security benefits, and the federal government cannot afford to pay. The entire article is entwined with the same false idea.

Bottom line: Social Security benefits are too low and FICA should be eliminated. Period.

Meanwhile AARP continues to spread the big lie rather than spreading the truth. They tell you the that Social Security (and Medicare, for that matter) will run out of money unless taxes are increased and/or benefits decreased. That Simply Is Not So. It’s the biggest lie in all of economics.

Of course, you might try writing to AARP, and explaining the facts. But if that doesn’t work, go ahead and join AARP for the discounts. But don’t be fooled. They are no friend of yours.

And whatever you do, don’t buy their insurance. Selling you insurance is what they they were formed to do and what they really care about. You don’t want to reward them for helping the government take money out of your pocket.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

==========================================================================================================================================
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