Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which leads to civil disorder.
●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.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.


In “Travel to Spain to see a culture of dependency” we discussed how the starving Spanish feed themselves and their children with rotting food dug from dumpsters. Because of deficit reduction, aka “austerity,” the unemployment rate in Spain ranges from “relatively low” in Girona (14%) to 25% for the country as a whole. About 22% of Spanish households exist in poverty.

Now let’s talk America:

New York Times
Soaring Poverty Casts Spotlight on ‘Lost Decade’
By Sabrina Tavernise
Published: September 13, 2011

WASHINGTON — Another 2.6 million people slipped into poverty in the United States last year, the Census Bureau reported Tuesday, and the number of Americans living below the official poverty line, 46.2 million people, was the highest number in the 52 years the bureau has been publishing figures on it.

And in new signs of distress among the middle class, median household incomes fell last year to levels last seen in 1996.

Economists pointed to a telling statistic: It was the first time since the Great Depression that median household income, adjusted for inflation, had not risen over such a long period, said Lawrence Katz, an economics professor at Harvard.

As we continually mention (even at the bottom of each post), here is how Gross Domestic Product, the prime measure of economic growth, is calculated:

GDP = Federal Spending + Non-federal Spending – Net Imports

So, by definition, economic growth requires federal and non-federal spending growth. That is why deficit reduction, which involves spending decreases and tax increases, always must reduce economic growth and lead to recessions and depressions. It’s a mathematical necessity.

People who deny the adverse effect of deficit reduction, also would deny that taking one apple from a dozen, leaves only eleven apples.

The bureau’s findings were worse than many economists expected, and brought into sharp relief the toll the past decade had taken on Americans at the middle and lower parts of the income ladder. It is also fresh evidence that the disappointing economic recovery has done nothing for the country’s poorest citizens.

Readers of this blog know deficit reduction hurts the middle and lower classes much more than the upper classes, thereby increasing the gap between the so-called “1%” and the “99%.” This is not accidental. It is by design.

The 1% are perfectly happy to see their own fortunes decline so long as the gap increases. That is the goal of the 1%, and the bought-and-paid-for politicians and media are happy to further that goal, by spreading the lie that deficits are “too big” and “unsustainable” and “the federal government must live within its means.”

Of course, the exact opposite is true: Federal deficits are too small. They easily are sustainable. And being Monetarily Sovereign, the federal government has the power to create any amount of “means” it wishes.

The report said the percentage of Americans living below the poverty line last year, 15.1 percent, was the highest level since 1993. (The poverty line in 2010 for a family of four was $22,314.)

The past decade was also marked by a growing gap between the very top and very bottom of the income ladder. Median household income for the bottom tenth of the income spectrum fell by 12 percent from a peak in 1999, while the top 90th percentile dropped by just 1.5 percent.

The rich are overjoyed. Their income fell 1.5%, but the gap increased. Exactly what they wanted.

This year is not likely to be any better, economists said. Stimulus money has largely ended, and state and local governments have made deep cuts to staff and to budgets for social programs, both likely to move economically fragile families closer to poverty.

Why has stimulus money ended? That’s right: The lie that deficits must be reduced.

Minorities were hit hardest. Blacks experienced the highest poverty rate, at 27 percent, up from 25 percent in 2009, and Hispanics rose to 26 percent from 25 percent. For whites, 9.9 percent lived in poverty, up from 9.4 percent in 2009. Asians were unchanged at 12.1 percent.

Most blacks probably will vote for Obama, but for the wrong reason: Not because he’s less likely to cut federal spending, but because he’s black (or ½ black). Most Hispanics also will vote for Obama, also for the wrong reason: Because he’s more sympathetic to immigrants.

But poor or middle class or unemployed whites – who will they vote for? Unaccountably, they make up a large part of the Romney vote. And he is the man who tells them they live in a “culture of dependency,” as his excuse for wanting to cut federal deficits.

In truth, both candidates have said they want to reduce the deficit, though Obama is less likely to do so. With both candidates in the pocket of the rich, voting choices are limited, to say the least. So the electorate needs to learn up then speak up. Occupy Wall Street had the chance, but though they speak up, they have not learned up, so their words are meaningless.

Last year, about 48 million people ages 18 to 64 did not work even one week out of the year, up from 45 million in 2009, said Trudi Renwick, a Census official.

“Once you’ve been out of work for a long time, it’s a very difficult road to get back,” Lawrence Katz said.

More “culture of dependency” members, too lazy to look for work, according to the “religious” right.

“We’re risking a new underclass,” said Timothy Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin, Madison. “Young, less-educated adults, mainly men, can’t support their children and form stable families because they are jobless,” he added.

With cuts to unemployment compensation, food stamps, Medicaid, Medicare and for older people, Social Security, how will these people find food, clothing and shelter? The same way people in Spain do: Digging through dumpsters and flopping in abandoned buildings.

When enough men can’t support their wives and children, society is just one step away from riot and insurrection. America is not immune.

The report also said the number of uninsured Americans increased by 900,000 to 49.9 million. Those covered by employer-based insurance continued to decline in 2010, to about 55 percent, while those with government-provided coverage continued to increase, up slightly to 31 percent. Employer-based coverage was down from 65 percent in 2000, the report said.

All of the above could be prevented and cured by steady increases in federal deficit spending, which the government can and should do. But when I tell this to one of those most affected by deficit reduction — middle and lower income, white Americans — they often get angry and spit out, “What about inflation?” then illogically mention the pre-WWII Germany and Zimbabwe hyperinflations.

I only can shake my head in wonderment. The German and Zimbabwe hyperinflations were not caused by government spending, but rather were the cause of government spending. And as for the U.S., our inflation rate has remained close to the Fed’s intentional target of 2% – 3% – and when it has risen above that, the cause was not related to federal spending, but rather to oil prices.

These poor people are more worried about an inflation that rarely happens, and easily is controlled by the Fed, than they are about something that is upon us and is killing us at this very moment. They act like a drowning man refusing to be pulled from the water, because the air is cold and he doesn’t want to catch a chill.

In summary:

1. Reductions in deficits have led to nearly every depression and recession in American history.
2. Increases in deficits have cured every recession and depression.
3. Deficits have not caused inflations, which in any event, easily are cured by interest rate control.
4. Mathematically, GDP growth requires federal deficit growth
5. Deficit reduction increases the gap between the rich and the rest of us, which is exactly what the rich want.

Aside from that, deficit reduction is a wonderful idea – especially if you’re rich – and live in Spain. But even if you’re not rich, but still would like to visit Spain, don’t worry.

Look out your door. Spain is coming to visit you — in a ship named “Deficit Reduction.”

Rodger Malcolm Mitchell
Monetary Sovereignty


Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

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 Imports