–Dig hole; fill same hole. Step forward; step back. Congress at work.

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.

●Until the 99% understand the need for federal deficits, the upper 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.


[Chicago Mayor Rahm Emanuel: “Why would he (missing Congressman Jesse Jackson, Jr.) go back to work at a Congress that does not work? Why rush it? I mean, they’re all talking about him going back to work. Last time I checked, Congress had their second repeal of their healthcare bill – another symbolic victory. Why rush?”

Lest you believe Congress, Chairman Bernanke and the old-line economists are not schizophrenic, Read this:

How the Potential Across-the-Board Cuts in the Debt Limit Deal Would Occur
By Richard Kogan, Updated November 22, 2011

The debt limit deal enacted on August 2, 2011 calls for about $900 billion in cuts in discretionary programs over the next decade and would impose further automatic, across-the-board spending cuts in many programs if Congress fails to enact an additional $1.2 trillion in deficit-reduction measures by January 15, 2012.

Those across-the-board cuts would represent approximately a 9 percent annual cut in affected non-defense programs, along with roughly a 9 percent cut in defense programs in 2013.

Translation: “We all knew Congress would not enact those $1.2 trillion in deficit cuts. How could they? The cuts not only would require massive reductions in the military, but reductions in Medicare and Social Security benefits, too, imediately throwing the nation into a depression.

“So why did Congress pass the law in the first place, if it knew implementation would be impossible?


(That was then. This is now.)

7/12/12: Bernanke to the the Joint Economic Committee:

“Even as fiscal policymakers address the urgent issue of fiscal sustainability, a second objective should be to avoid unnecessarily impeding the current economic recovery.

“Indeed, a severe tightening of fiscal policy at the beginning of next year that is built into current law–the so-called fiscal cliff would, if allowed to occur, pose a significant threat to the recovery.”

Translation: “I know the ‘urgent issue of fiscal sustainability’ is a myth. How do I know. Because as Fed Chairman, I’m well aware a Monetarily Sovereign nation can “sustain” any amount of debt.

“How? So-called ‘debt’ is nothing more than the total of the T-security accounts at the Federal Reserve Bank. When people buy T-securities, we transfer their dollars from their checking accounts to their T-securities accounts.

“To pay off the ‘debt,’ we’ll merely transfer their dollars back from their T-securities account to their checking accounts. It’s the same as your bank transferring your money from your savings account to your checking account. No problem.

“I also am aware of this formula: Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net Exports.

To grow GDP, something on the right side of the equation has to grow. “But deficit reduction reduces everything on the right side of the formula. So deficit reduction reduces GDP growth, i.e. the ‘fiscal cliff‘.

“However, if I tell Congress the facts, they might fire me, so I’ll just take both sides of the issue, and let them work out the details.”

“Fortunately, avoiding the fiscal cliff and achieving long-term fiscal sustainability are fully compatible and mutually reinforcing objectives.

Translation: “We need to cut the debt, while not cutting the debt, that is, we must destroy the economy while stimulating the economy. Those are the ‘fully compatible and mutually reinforcing objectives.’

“Got it? Anyone?”

“I’d tell you to try to avoid a situation in which you have a massive cut in spending and increase in taxes all hitting at one moment, as opposed to trying to spread them out over time in some way that will … create less short-term drag on the U.S. economy,” Bernanke said.

Translation: “If we cut deficits fast, there will be a fast drag on the economy. If we cut the deficits slowly, there will be a slow drag on the economy.

“Which do you prefer?”

U.S. ‘Fiscal Cliff’ Looms: Will Lawmakers Heed Bernanke’s Warnings?
By Morgan Korn | Daily Ticker – Tue, May 15, 2012 8:37 AM EDT

Economists agree that tax hikes and spending cuts will drag down economic growth in 2013 yet the estimates vary.

Moody’s Analytics chief economist Mark Zandi predicts the fiscal drag next year could be to closer to 1.5 of a percentage point of GDP.

The Congressional Budget Office calculated GDP could drop by nearly 3.6 percentage points in the 2013 fiscal year.

Morgan Stanley economist David Greenlaw says fiscal tightening could translate into a 5 percent drag on GDP during the 2013 calendar year.

Er, ah, excuse me, but remind me again. Why do we wish to raise federal taxes and cut federal spending?


Rodger Malcolm Mitchell
Monetary Sovereignty

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


4 thoughts on “–Dig hole; fill same hole. Step forward; step back. Congress at work.

  1. Unfortunately, many people believe our rampant economic inequality should partly be solved by pulling down the rich. This is a distraction from where our focus should be: lifting up the poor.


    1. “Pulling down the rich” as you say hurts no one, including the rich, provided that the money that is taxed away would not otherwise be spent in the economy. Anyone that has extra money that is not being reasonably saved for a future purpose is hoarding, and this simply increases the money supply with no benefit to the economy or the individual.

      That said, it is probably more politically and socially acceptable to give people money to effect redistribution than to take it away from those that are hoarding.


  2. Money that is taxed by the federal government disappears from the economy. It is not recycled by the government.

    This is different for state and local governments, that do recycle tax dollars. A completely different process. The former is Monetarily Sovereign; the later is monetarily non-sovereign.

    Please give an example of how dollars can be “hoarded.” Where does one put dollars when “hoarding” them?


    1. Dollars are hoarded when they aren’t being spent. This is essentially all the time. Dollars are only claims to real goods/services and they are only truly useful when being used to make those claims. Most people accumulate money for the purpose of future purchases: to pay the rent at the end of the month, buy groceries, make the car payment, put their kids through college, etc. If one has no reasonable potential use for dollars, then the dollars serve no purpose. Taking money from Larry Ellison through taxation would probably have no impact on the economy whatsoever.

      If you are suggesting that dollars, when deposited in a bank, for example, are used by others to make purchases, I’d just say that this is not the case in modern banking, as dollars lent by banks are not those entrusted by depositors. I believe that you are well aware that banks create money at the time loans are made without regard to deposits.

      Monetary volume without velocity doesn’t get you very far.


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