–Et tu, Netanyahu? Israel joins the ranks of suicidal nations

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.


We know that both President Obama and Mr. Romney are ruled by the upper 1% income group, and though Obama makes some weak pretense at supporting the lower 99%, Romney is more honest. He makes no secret of his desire to spread the income gap between rich and poor. His vow to dismantle Obamacare (aka Romneycare) is only the more egregious of his cut spending, cut benefits, cut aid to the poor genuflection to the Tea right.

Similarly, the entire, monetarily non-sovereign, euro zone is in thrall of economy-devastating austerity (i.e. austerity for the poor, not for the rich), and will continue to slice away at government spending until the 99% begin to erect guillotines and do some slicing of their own.

Then there is the UK. It does not remember why it wisely rejected the euro and remained Monetarily Sovereign, retaining the unlimited ability to create it’s own sovereign currency. So, wrongly thinking the finances of a Monetarily Sovereign government are like the finances of monetarily non-sovereign people, it embarked on a serious austerity plan. It cut its deficits.

Now it is shocked – shocked! – that cuts in government deficts impoverish the citizenry. As UK citizens receive less money, they spend less, which in turn, impoverishes businesses, which then fire people, who then have even less money to spend. And on and on we go, in the downward helix of deficit cuts, to depression.

The record of deficit cutting austerity approaches perfection. Wherever it is tried it succeeds – succeeds, that is, in tanking the economy. Around the world, dozens of anemic economies have had the leeches of austerity applied, and as the financial blood is drained, the doctors scratch their heads and wonder why their patients sicken and die.

And now comes Israel:

Israel eyes austerity after prosperous year
By Jean-Luc Renaudie | AFP

Prime Minister Benjamin Netanyahu, who has long boasted how Israel has avoided the fiscal fate of Spain and Greece, is poised to unveil tough austerity measures likely to hit the underprivileged. The measures will aim to make up part of the budget deficit that has climbed to 4.0 percent of Israel’s GDP — twice that which was expected for 2012.

Translation: “Because we have not become Spain and Greece, I must cut deficits to make us into Spain and Greece.”

Sound familiar? The dreaded budget deficit, which by mysterious coincidence, seems to rise in lock step with economic growth, now is being blamed for — what? — economic growth? Or just being misnamed “deficit”?

Never mind that a government deficit = private sector surplus, and the bigger the deficit, the more money people spend, and the more businesses grow.

And everywhere the dreaded deficit is “cured,” the underprivileged suffer, but isn’t that the whole point?

Taxes on cigarettes and beer have already been hiked this week, and according to media reports the government will also be raising VAT from 16 to 17 percent and introducing a 2.0 percent income tax rise in households with an annual income of at least a million shekels ($245,000, 199,300 euros).

Also expected is a combined 700-million-shekel ($171 million) cut from the budgets of all ministries with the exception of defence, education and welfare. A spokesman for Netanyahu told public radio on Thursday that the projected measures would raise the annual tax burden of each Israeli household by 1,740 shekels ($426/347 euros).

But these could only be the beginning, with Finance Minister Yuval Steinitz preparing an additional series of tax rises for 2013.

Translation: “See, it goes like this. We’ll raise taxes, which will take money out of the private sector. And we’ll spend less, which will put less money into the private sector. By draining the private sector of money, we’ll crush the economy — well, not the whole economy. The rich will be all right. It’s the poor who will be crushed, which will give the rich even more power. Simple, huh?”

“There are no free lunches,” Netanyahu said this week in an attempt to justify the austerity plan.

This is known as “governing by slogan.” Sounds wise; means nothing.

“Those who say that we can spend lavishly… endanger the state of Israel and could easily lead it to the brink of bankruptcy, as is the case of leading European economies,” Netanyahu said.

Er, ah, excuse me, Ben, but the euro nations are monetarily non-sovereign, and cannot control their money supply. They can be bankrupt. Israel is Monetarily Sovereign, has the unlimited ability to create shekels, so never can be forced into bankruptcy.

Ah, details, details.

Israeli officials also fear that the major international rating agencies, which had hitherto provided Israel with a clean bill of health, will lower their ratings.

Oh, woe! Lower ratings would mean Israel would pay a higher rate on borrowing — which as a Monetarily Sovereign nation, it doesn’t need to do. Further, a Monetarily Sovereign nation has the unlimited ability to pay any interest rate.

So, the problem is . . . ?

Until now, the Jewish state had effectively escaped the sub prime crisis of 2008 and the beginning of the current crisis in the eurozone. “To ensure stability, we must take unpopular measures,” said Harel Locker, director general of Netanyahu’s office.

Translation: “Heaven forbid we continue to do what has worked. To ensure stability, we must change the very thing that gave us stability.”

And even within the coalition, several religious and ultra-nationalist parties denounced the “anti-social” character of Netanyahu’s plan for 2013, an election year. It is the planned increase in Value Added Tax (VAT), which will affect all Israelis, that has come in for the harshest criticism.

One of the main critiques levelled at Netanyahu is his intention to give a huge “gift” to multinationals by halving the taxes on monies earned in Israel and which are transferred abroad, from 25 percent to 12 percent.

See the pattern? Social programs (for the 99%) will be cut. The VAT (which mostly punishes the 99%) will be increased. Taxes on multinationals (affecting the 1%) will be halved. It’s the same the world over.

In a defensive statement on Thursday, Netanyahu said that “even after the steps we will take, families in Israel — middle-class and underprivileged — will remain with more money in their pockets” thanks to measures such as free education from the age of three, tax benefits for working families and free dental care for children.

And central bank chief Stanley Fischer was quoted as saying that Netanyahu’s planned measures were “very serious progress” which displayed “very responsible leadership by the economic decision-makers.”

Translation: “We’ll take 10 shekels from your left pocket and put 5 shekels in your right pocket. Stanley Fischer says this is good for you, so it must be. Would Stanley lie to you?”

Clearly, Israel has learned a great deal from American politicians, about how to screw the 99%. All of this is possible only because the 99% has been kept ignorant by the 1% — not just ignorant, but resolutely ignorant. (Try explaining Monetary Sovereignty to your friends, and you’ll see the meaning of “resolutely ignorant.”)

Bottom line: Deficit cuts (aka “austerity) will destroy Israel, especially the 99%, as deficit cuts have destroyed every nation where they have been implemented, and even now are destroying America.

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


8 thoughts on “–Et tu, Netanyahu? Israel joins the ranks of suicidal nations

    1. The key though is Govt deficits not so much direct Govt spending. I do not have a problem with Govt spending cuts if and only if the cuts are more than offset by tax cuts or benefit increases (like pensions or unemployment).

      And re what is the upper limit for US Govt debt. I would say when US citizens have all saved enough to meet accrued pension needs. At present this is likely to be around $US100 trillion for the US. So instead of paying tax pay into (compulsory?) pension schemes that then invest in Govt bonds.


      1. You state that government deficits are not the same as government spending. I understand deficits have a cause and effect relationship with government spending. I thought deficits were the result of government spending more than it received in taxes?

        Yes I know that a deficit is a current shortfall and can create national debt.


    1. Many believe QE only made capital available to the banks and did not make it out into the economy as a whole. You suggest using the government projects and employees as a method of dissemination of that capital. This assumes that inefficiencies of dissemination are acceptable as they still result in more money entering the economy and not just the large financial institutions paying returns to the 1%.

      So with a government creating this debt they can float paper to investors in the form of Treasury offerings. Since the Federal Reserve can keep buying these Treasury offerings, they can support the extra spending. Even if the rest of the world stops purchasing these Treasury offerings, the US can keep this going until inflation happens. Inflation would be seen when the price of imports keep rising.

      In essence, large holders of US dollars would be effected only as it relates to exchange rates. If too many US dollars flood the market and cause inflation, then interest rates are raised to curb that inflation and generate more velocity by the normal banking and financial industry which is not happening now.

      Foreign investors would be hurt as foreign exchange rates of currencies not connected to the dollar would be out of balance and the US would pay back those loans in inflated dollars. Since an alternative does not exist to replace the dollar they have little choice but to either invest in commodities or buy US products.

      Inflation would happen because the cost of things like fuel will rise increasing the cost of goods and savings which the top 1% has would be devalued. Fixed assets like real estate would bounce back as well.

      Did I understand what you are suggesting?


  1. More evidence:

    US economic growth slowed to 1.5 pct. annual rate in Q2 as consumer spending weakened

    By Associated Press, Published: July 26, 2012

    WASHINGTON — U.S. economic growth slowed to an annual rate of just 1.5 percent from April through June, as Americans cut back sharply on spending. The weaker growth adds to worries that the economy could be stalling three years after the recession ended. Growth was weaker mostly because consumer spending slowed to a growth rate of just 1.5 percent. Consumer spending drives roughly 70 percent of economic activity.

    Why did Americans cut back sharply on spending? They are short of dollars. Where do dollars come from? Federal deficit spending. Cut deficits and you cut dollars, which cuts consumer spending, which leads to recessions.

    But few think the Fed, the White House or Congress can or will do anything soon that might rejuvenate the economy quickly. Many lawmakers, for example, refuse to increase federal spending in light of historically large budget deficits.

    Many economists, however, believe the Fed will launch another round of bond buying at its September policy meeting. The aim is to drive long-term interest rates lower and encourage more borrowing and spending.

    Contrary to popular (and the Fed’s) belief, there is no relationship between low interest rates and economic growth. Interest rates affect inflation, not GDP. See: https://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/

    Glenn Hubbard, economic adviser for Romney, said, “At that pattern, the economy simply will never return to full employment.”

    Right. The economy is in the clutches of the Tea Party and its austerity lovers.

    Congress could strengthen growth and job creation by adopting President Barack Obama’s plan to extend expiring tax cuts for all but the wealthiest Americans, Krueger said. Republicans want the tax cuts extended for all Americans.

    The Republicans are right on this one. EVERY tax removes dollars from the economy.

    Fear is also growing that the economy will fall off a “fiscal cliff” at year’s end. That’s when tax increases and deep spending cuts will take effect unless Congress reaches a budget agreement.

    Right. Cutting deficits will cause the economy to fall off the “fiscal cliff.” So why does anyone want that? Answer: It will increase the gap between the upper income 1% and the lower income 99%.


    1. You keep on blaming the top 1% for this. But it is also strongly supported by the 99%.

      Its like a virus that has infected everyone not just the 1%.

      I don’t think the top 1% are as smart and free of flawed beliefs as you seem to think they are.


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