Mitchell’s laws:
●The more federal 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.
●The penalty for ignorance is slavery.
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Here is the European formula for economic growth:
1. First, destroy a nation’s ability to create money. One method is to take away the nation’s sovereign currency, and force it to use an alien currency, the euro.
2. If the nation runs a trade deficit (mathematically necessary for half the world), its euro supply declines, and it finds itself less and less able to pay its bills. So it is forced to borrow euros.
3. The EU sets requirements for borrowing: Increase taxes and reduce spending (aka “austerity”) Both requirements draw euros out of the private sector, which depresses the nation’s economy, further. The nation must borrow more and more.
4. As loans are repaid – with interest – euros flow out faster and faster. The nation now is in an economic “death spiral,” from which there is no escape.
But wait. Along comes the EU and the other euro nations, to save the day. Here are some excerpts from Bloomberg News:
Bloomberg News
German Lawmakers Set to Approve Greek Aid Plan This Week
By Patrick Donahue on November 27,German lawmakers are set to approve Greece’s new aid package by the end of this week after euro-area finance ministers reached an overnight agreement to ease terms on emergency bailout aid for the country.
Lawmakers expressed relief that a Greek debt write- off wasn’t part of the agreement in Brussels.
Translation: Greece will continue to go deeper into debt.
The euro ministers gave Greece more breathing room to scale back its debt amid economic collapse, declaring after three years of false starts that Europe has found the formula for nursing the debt-stricken country back to health.
Translation: Greece has “breathing room,” but has no way to obtain euros to pay its debt – plus interest — except to borrow more and more.
“We believe that these measures are appropriate for the solution of the problems that have emerged in Greece,” Gerda Hasselfeldt, the Bundestag caucus leader for the CSU, told reporters. “I also can’t say whether this is the last step. We have to keep an eye on this.”
Translation: They will watch as Greece descends in an ever faster “death spiral.”
The agreement “offers a change so that Greece can return to the markets and sustainable growth and competitiveness after long and difficult developments,” Finance Minister Wolfgang Schaeuble said today.
Part of the welcome for the agreement, stemmed from the rejection of forgiving any of Greece’s publicly held debt, an option the government in Berlin has ruled out.
Translation: Greece has no way to grow its economy, except by obtaining euros. It has no way to obtain euros except by more borrowing. No one will forgive Greece’s debts, so Greece will sink deeper and deeper into debt, the economic “death spiral.”
And that is the EU formula for Greek economic growth.
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Here is how the U.S. Congress applies the European successful formula for national growth:
1. First, cut the deficit to destroy the government’s ability to create dollars.
2. As the U.S. runs a trade deficit, its dollar supply declines, and it finds itself less and less able to pay its bills.
3. Congress demands increased taxes and reduced spending (aka “austerity”). Both requirements draw dollars out of the private sector, which depresses the nation’s economy, further.
4. America now is in an economic “death spiral,” from which there is no escape.
And that’s it. That is the European model for economic success. We’re fortunate our Congress is copying it.
Rodger Malcolm Mitchell
Monetary Sovereignty
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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
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Hey RMM, I wrote a similar piece for facebook friends yesterday. Mine tried to incorporate sectoral balances. If you’re willing, does this accurate to you?
TRY THIS ON FOR SIZE
Let’s break the economy into three parts:
1)) The Government Sector
2)) The Private Sector (businesses and people)
3)) The Foreign Sector (the places we import stuff from)
Two Definitions:
DEFICIT – spending more than receiving
SURPLUS – receiving more than spending
All dollars spent go somewhere. Examples…
If you purchase a bottle of wine from France, The Private Sector has sent dollars to The Foreign Sector.
If your grandmother receives her social security check, The Government Sector has sent dollars to The Private Sector.
If the government pays a German company to build us a solar energy plant, The Government Sector has sent dollars to The Foreign Sector.
If you pay your taxes, The Private Sector has sent dollars to the Government Sector.
And so on…
For most of the past 40 years the United States has run a trade-deficit. What that means is we in the United States have bought more stuff from foreigners than they have bought from us. Said another way, for the last 40 years, The Private Sector has sent more dollars to The Foreign Sector, than have been sent back.
So, without introducing The Government Sector yet… The Foreign Sector is in SURPLUS and The Private Sector is in DEFICIT.
But… where is The Private Sector getting all these dollars to continually send more of them to The Foreign Sector than receive back??? Why aren’t we running out?
Consider this…
It’s by definition impossible for all three sectors to be in SURPLUS. Going back to the definitions above, a SURPLUS is receiving more than spending. If all dollars go somewhere, how could all three sectors receive more than they spend???
If The Foreign Sector has been in a SURPLUS for the past 40 years, which it has, then either The Government Sector or The Private Sector must be in DEFICIT (spending more than it receives), in order for The Foreign Sector to be able to accumulate a SURPLUS.
Now, imagine for a moment… could The Private Sector, i.e. people and businesses, continually keep spending more money than it receives? Wouldn’t we run out of money to spend at some point? How would any of us people and our businesses have any money to spend among each other if we as The Private Sector continually sent more dollars away from us than we received in return?
Think about this: if we kept sending more dollars to foreigners than they sent back, and if we kept paying more taxes than we received back in government spending, how would we in The Private Sector have any money?
Do you see where this is going??
Since The Foreign Sector has been in SURPLUS for most of the past 40 years, in order for us in The Private Sector to also be in SURPLUS (meaning, we accumulate dollars… i.e. have “savings”)…
Tada!… The Government Sector must be in DEFICIT.
Meaning, the U.S. government must run budget deficits, i.e. spending more money than it collects in taxes.
When the U.S. government spends more money than it collects in taxes, where do you think that money goes?
Most of it goes to us… The Private Sector. (some goes to The Foreign Sector directly)
So long as we keep sending more dollars to foreigners than they send back to us, we NEED the U.S. government to run budget deficits… otherwise, we’d run out of money!
What did you say? You think the government shouldn’t spend more than it collects in taxes? How is that possible if The Foreign Sector is in SURPLUS? Won’t we, The Private Sector, run out of money?
Do you realize that if The Foreign Sector is in SURPLUS, and The Government Sector has either a balanced budget or is also in SURPLUS… then us, The Private Sector, would then have to be in DEFICIT?
Really, think about it, how long do you think we, i.e. people and businesses, can spend more than we receive back? We’ll run out of money… We won’t have money to exchange with each other!
Fortunately the U.S. government, since it creates the dollar, never has a problem spending more than it receives. It can always create more money. If foreigners want to accumulate dollars (which they do), then our government MUST spend more than it receives in taxes. WE NEED THOSE DOLLARS IN ORDER TO BUY AND SELL STUFF WITH EACH OTHER.
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JK can I steal this from you and post it to my friends too?
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Nathan, sure. No problem. Information is meant to be shared!
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There are huge flaws with this logic.
On the existing fiat system, yes, one sector has to be in deficit for the others to be in surplus, every dollar is a form of debt. However, and this is where your argument is misleading, it does NOT have to be growing. If the Government balanced the budget tomorrow, it would still be trillions in currency circulating and it would still be in a deficit while other sectors are in surplus. The money supply does NOT need to be growing for the economy to grow. And no, the private sector would not be in deficit if the government stopped spending more than it received, there is tons of currency already in the system. To stop growing the money in the system is not the same as pulling all the money from the system. Very misleading. Everyone on this board should see the gap in your argument.
Next, your logic about us running out of money is also flawed. Let’s say the government balanced the budget as I stated above but we were importing more then we exported. Since the exporting nation has to buy our currency to export to us, our currency will get stronger against theirs and their margins will become thinner and would start losing money. A point will be reached where those exporters would be forced to move production to the US and we may start exporting to them, which would mean the return of the money that escaped via deficits. Why doesn’t this happen today.. well.. because your government artificially lowers the value of the currency via deficits which helps those nations exporting to us, not the other way around.
The final and last thing is you seem to think that the government is doing us a favor by issuing more “money”. It’s sad that anyone would think such a thing, if it was than perhaps we should all get a counterfeiting machine and start helping the government.
I’m amazed anyone would believe the argument above. It shows our lack of basic analysis.
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“The money supply does NOT need to be growing for the economy to grow. “
Oh really? Give me an example of a growing economy with a static or shrinking money supply.
” If the Government balanced the budget tomorrow, it would still be trillions in currency circulating and it would still be in a deficit while other sectors are in surplus.”
Er, ah, excuse me, but it is impossible to run a balanced budget and a deficit, simultaneously. You probably meant “debt,” but don’t know the difference. Your comment is wrong either way.
” Since the exporting nation has to buy our currency to export to us. . .”
Wow, wrong yet again. An exporting nation has to accept our money, not buy our money. According to your belief, China soon will move its production to the U.S. I’m waiting.
” . . . we should all get a counterfeiting machine and start helping the government.”
Give me your address so I can inform the Treasury agents you are counterfeiting dollars. I’ll bet you didn’t know this, but the government legally creates dollars. You can’t.
I do believe your comments have set a world record. Thanks for the laugh.
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I did not say shrinking, but why don’t you give us an example of how these new tokens contribute to the economy other than make prices go up.
Er, ah, forget about deficit and surplus, it matters not. If the US government balanced the budget tomorrow, the money/debt/credit/whatever previously spent by the government would remain in the economy and there would still be money in circulation, that is the point. And this is correct, not wrong at all.
Potato, potato. A nation exporting to the US is taking our money and depositing it on their fed account, same difference. In the markets, it’s called forex. China will not move all it’s production to the US, US cannot compete with the labor. However, China will not move ANY production to the US because the US continues to artificially push the value of the dollar down. You cannot have a cake (deficits) and eat it too (jobs). You will be waiting for a long time.
I don’t get your counterfeit comment. Did you and JK not suggest that this helps the economy as we are losing dollars when we import and it helps us trade with each other? Perhaps we should ask the government to modify the law to let every single American have a printing machine. This would really remove the concern for lack of dollars and our economy would be bumming for ever.
The laugh is from my part….
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Lomus,
Stick around. You’ve got some reading to do. Actually… to the left, there’s a LONG list of posts by RMM. Scroll all the way down to the very bottom, and slowly move up… reading the ones that seem interesting to you. In a few hours, come back and comment.
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Yes, you are correct. Actually, for just clarification, it’s the federal government sector. State and local governments are part of the private sector.
The formula is:
Federal Sectory + Non-federal sector + foreign sector = 0
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I offered this perspective to a friend during a casual dinner gathering. We exchanged no more than three sentences before the inflation concern was voiced. One additional explanatory sentence brought out the China fear: they are buying up real assets, you know. So, it’s not a trivial sell, but this perspective of three sectors, one or two of which must give for the other(s) to prosper, gave my friend a pause nonetheless before those learned concerns took over and ended the conversation.
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Nihat, regarding your friend’s claim that “China is buying up assets,” the U.S. government limits the foreign purchase or ownership of U.S. assets. To learn how this limitation is maintained, see the wikipedia entry for the Committee on Foreign Investment in the United States.
On a different note, Rodger writes that most people “angrily reject what can improve their own lives. They would rather live with unemployment, repeated recessions, poor health care, poor education, poverty, bankrupt cities and states, and unfair taxes, than ‘risk’ something that never has happened in America — hyperinflation.
Indeed. As I keep saying, most people are not happy unless they are miserable. They would rather be “right” than be prosperous. Therefore, the reason why the 1% hold so much power is that the 99% insist on handing them that power. Every act of selfishness and stupidity by the average individual widens the gap between rich and poor, no matter how trivial the act is. It all adds up. The light from one candle cannot be seen from very far away. The light from hundreds of millions of candles can be seen from outer space.
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Mark, I didn’t know about that committee, thanks for the reference.
As for the other note, there is almost some religious flavor to that resistance to understand/accept MMT or MS. It probably sounds too good to be true to many people. Almost sinful, perhaps. Therefore, wrong?
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Nihat,
The public has been brainwashed to mouth these words:
1. “But that will cause hyperinflation.”
2. “What about the Wiemar Republic and Zimbabwe?”
3. “If that’s so good, just send me a million dollars.”
4. “There’s no such thing as a free lunch.”
5. “If you just give things to people they won’t work and will be sloths.”
6. “How come you know this and the government doesn’t.”
The irony is, they angrily reject what can improve their own lives. They would rather live with unemployment, repeated recessions, poor health care, poor education, poverty, bankrupt cities and states, and unfair taxes, than “risk” something that never has happened in America — hyperinflation.
That is the power of brainwashing. It removes all sense.
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“they angirily reject what can improve their own lives”
Indeed… that’s the power of effective brainwashing.
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You may want to take a look at how long the US has been running deficits. You folks seem to think running deficits is some sort of new revelation that has never happened before. We are breaking into the next frontier kind of thing.
This is funny really.. we have been running deficits and MMT for a long long time. I find it amusing that although these policies have failed spectacularly we find the guts to convince ourselves that the stopping these policies is the brainwashing and not continuing it.
Amazing…
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Yea…. the United States has been running budget deficits almost every single year for the course of this country’s history. We’ve come along way since, let’s say the Civil War??…. all the while running budget deficits and increasing the national debt!
Lomus, what you’re doing is rejecting something you do not understand. Do what I did.. spend a few months reading extensively. Then come to this blog, and MMT blogs, asking for clarification wherever you are confused. When you’re confident you can pretty accurately represent what is being said, it is then that your criticisms might not sound silly.
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“This is funny really.. we have been running deficits and MMT for a long long time. I find it amusing that although these policies have failed spectacularly we find the guts to convince ourselves that the stopping these policies is the brainwashing and not continuing it.”
The spectacularly failed policies that created the wealthiest nation the world has ever seen? The nation that produces 20% of the worlds economic output with 5% of its population? The nation that has the world’s strongest military? Gosh where would we be if we had policies that just failed a little?
I believe mmt or ms would say that the current deficits are too small. There is no reason the federal government cannot put idle economic resources to use. Idle economic resources are the real concern as the output lost from under utilization is gone forever. It’s like empty seats on a subway, you cannot save them up and use them 5 years from now.
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Rumble,
You are extremely confused. If this success you mention was due to deficits and mmt, than Russia, China, would be well ahead of us.
We owe the success thanks to other countries being dumber than us. But getting there we are, slowly but surely we now resemble eastern europe, while countries like russia move in the opposite direction.
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Jk,
For the record, i don’t pretend to knowall the answers, but i’ve been reading about financial markets and money since 2003. I was one of those doom sayers telling people home prices could go go up for ever.
The ones pretending to have seen it were calling people like me names, Mike Norman is a good example.
We can bash each other all we want on who is right and who is wrong, but in the end, our families eat food, drive cars, wear clothing, live free because of our form of government, become smarter more creative innovative by our education system, healthier using our healthcare system.
Than implement a system which promotes the production of the items we use and that improves the services we provide.
Mmt requires a centralized government making decisions on how much inflation they will create today, to benefit those in ‘need’. If you think that anyone, including yours truly, will make the appropriate decision, than it should be no surprise why germany ended with hitler. Fiat is not a new concept, there are many lessons in history of its demise.
Roger’s argument that gold is worthless amazes me. Paper has the full faith and credit of the US government, why cant gold? Let me guess, because it’s hard to counterfeit?
If fiat promotes fraud, while gold does not, which one do you think can help to strengthen the trust in commerce, which one do you think promotes productivity and even better services.
Can we do it with fiat, sure, we can. Perhaps the founding fathers would have been able, but they did not leave themselves open to risk. George Washing is not only a hero because he was our first president, he forego many riches to ensure our founders lived free.
So tell me who walk with and i will tell you who you are. MMT/fiat is now, Austrian/gold is what our founding fathers chose.
In my humble opinion, mmt will have its day in the sun, right before the big collapse. Only the currency of history will restore confidence.
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Lomus, the thing about MS and MMT is they are attempting to describe the system we have now, and use that system to the best of it’s potential. You can stomp your feet about it, demanding a return to a gold backed currency. Your choice. In fact, if that’s what you support… great. Convince enough people that it’s better and maybe you’ll get your wish.
Meanwhile, we’re interested in what we’ve got and how to use it effectively to “promote the general welfare” ….
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I believe the dollars -actually electronic $points -we have used to pay for imports have come back to us — to the penny in the form of reserve savings accounts of nations like Japan and China. Our spending comes back from the bank of china first in a checking account for which they get no return and then to reserve savings accounts when they by Treasuries. Even if the sell their Treasuries somebody else or the Fed must buy them in dollars. So the world balance of dollars does not change except from bank lending. The same is true for all sovereign currencies. Dollars stay in the “dollar zone” and yen stays in the “yen zone” — unless someone like a drug dealer is filling up burlap bags with cash.
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