–It happens here, there and everywhere. Is this really so hard to understand?

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.
●Cutting the deficit is the government’s method for taking dollars from the middle class and giving them to the rich.
●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.

The UK wisely kept its own currency, the pound, rather than join the mutual suicide pact of the euro nations. So the UK remains Monetarily Sovereign. It never can run short of its sovereign currency, the pound. It never needs to borrow pounds or to ask anyone for pounds.

Unfortunately, UK politicians, like U.S. politicians, act as though their nation were monetary non-sovereign. They seek balanced budgets; they cut spending; they raise taxes — all harmful to their economies, and especially harmful to the middle- and lower-income groups.

Excerpts from Financial Times
Britain slides back towards recession
By Sarah O’Connor and Claire Jones

Britain’s economy shrank 0.3 per cent in the final quarter of last year, bringing it closer to a possible “triple-dip” recession and piling pressure on the coalition government.

Chancellor George Osborne, whose austerity programme has come under increasing criticism as the economy has faltered, said he would “confront” the UK’s problems and not “run away” in response to the data, which was worse than economists had predicted.

He said. “. . . we face problems at home because of the debts built up over many years and problems abroad with the eurozone, where we export most of our products, in recession.”

Er, ah, excuse me, Chancellor, but you “face problems” because of your austerity program. You are pulling money out of your citizens’ pockets and expecting this to grow the economy.

But don’t feel bad. Our politicians in the U.S., being on the dole from the 1%, are doing exactly the same thing.

Said Chris Williamson, an economist at Markit, a data company. “. . . the data pile ever more pressure on the chancellor to seek ways to revive the economy in the March Budget.”

If you’re waiting for Chancellor Osborne to revive the economy, I wish you a very long life. He is clueless about Monetary Sovereignty.

The opposition Labour party hit out at the government, holding it responsible for the poor economic figures. Ed Balls, shadow chancellor, said: “These deeply disappointing figures expose just how dangerously complacent the prime minister was when he said last autumn that the ‘good news will keep coming’.”

Mr Balls called for the government to abandon its plans for fiscal consolidation. “A plan B now should include a compulsory jobs guarantee for the long-term unemployed and a temporary VAT cut to boost family incomes and our struggling high streets,” the shadow chancellor said. “We should also bring forward infrastructure investment including building thousands of affordable homes and establish a British Investment Bank to boost lending to small businesses.”

Possibly helpful, sort of helpful and very helpful. The jobs guarantee possibly could help – or ever hurt — depending on the details. The temporary VAT cut will help, but why make it temporary? Make it permanent. And government spending on infrastructure definitely will help.

Like American politicians, UK politicians pretend their nation is not Monetarily Sovereign, so the middle- and lower-income classes must pay the price. Austerity always, always, always widens the gap between rich and poor, by crushing the poor.

That is the true purpose of austerity, as ordered up by the 1%.

My question is, if every time austerity happens, recession happens, how long will it take the voting public to realize that austerity causes recessions, which in turn, punishes the 99%, and that the politicians are paid by the upper 1% to widen the income gap?

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


17 thoughts on “–It happens here, there and everywhere. Is this really so hard to understand?

  1. Q. How long will it take the voting public to realize that austerity always causes recessions, and that the purpose of austerity is to crush the 99%?

    A. It will take forever, or until the public realizes that the U.S. government creates its money on keyboards, out of nothing. Until then, the public will remain confused, irrational, selfish, and enslaved.

    (As an alternative answer, see Mitchell’s Law #4: “Until the 99% understand the need for federal deficits, the upper 1% will rule.”)

    Money is the lifeblood of any modern society. And yet, half the public would rather be “right” about money than be prosperous. The other half of people would rather whine than be prosperous. For example, yesterday the subject of the economy came up during a conversation I had with a 30-year-old male. The guy was confused, so I started to explain the facts of MS until I saw that he had no interest in the subject. He asked questions, but he didn’t want answers. He didn’t want facts and solutions. He just wanted to whine about the economy.

    In short, some people are stupid but smug. They think they have everything figured out, and their “truths” are ridiculous.

    Other people remain intentionally helpless and confused, since it gives them an excuse to whine.

    Srill other people combine both personality types, e.g. the MORONS who claim that all money in the U.S. economy is created as bank loans, and that the U.S. government gets all its money from banks as loans.

    During Fiscal Year 2013 the U.S. government expects to spend $3.8 trillion, of which $2.9 trillion will be distributed with no connection to the selling of T-securities.

    Where will that $2.9 trillion come from? According to IDIOTS like Ellen Brown and her devotees, private banks will lend it to the U.S. government.

    These clowns absolutely refuse to listen to reason.


  2. When will people start viewing pieces of paper as a measure of exchage, nothing more, and stop looking at it as pieces of paper with value because they look pretty, have distinct smells, and have dead presidents on them?

    Roger, you know this full well. Dollars aren’t really worth anything, it’s the limit of dollars as a medium of exchange that makes them valuable. It’s the limit of dollars vs oranged, vs food, vs homes, vs cars, vs everything else. So why make it seem like value can be printed into existence when you know that’s not the case.

    The dumb regular joe will read the above and think just thar, when a basic first grade math will prove otherwise. You want newly printed dollars because it benefits you, than say that. We are not all dunkies.


  3. Hmmmmm….

    Very good point and i know it’s a trick question. First off, i think we have a different view of the world. My view is that free markets drive productivity, drives creativity, drives wealth, drives purchasing power, drives lower poverty rates. My view is that politicians, in general, want to good for society, but fail to see how their actions have negative consequences. I think you also make the same mistake. You think printing as much money as possible will help the needy ones, it wont. It will definately destroy the productive ones and you will be in worst shape. Having said that, i think we both want the same in the end, the good for humanity.

    So here’s the answer. More supply of $ + demand for that money simply means that money will be chasing a limited amount of goods and services anyway. Also proof to me how there is more demand for currency when interest rates are at zero. There is zero demand for money. I won’t argue about inflation, you tell me what has happened with education costs due to subsidized education and medical costs due to subsidized medical industry.

    Politicians, as much good as they want to promote, fail to see this. If i remember correctly, what has always made the US much much much much better than the other countries around the world was that view the founding fathers left us. They were ran away from their native lands because of their different believes. So they left of with a constitution that values each and everyone irrespective of color, social status or believes. When a politician decides that he/she is over the constitution and makes a decision good for a small or large group of society, that politician is disrespecting the constitution and our values. When you decide to print to spend on things, you as a politician think it’s good, you are dosrepecting the constitution and our values. If the constitution is irrelevant to today’s issues, than let’s have a talk and amended.

    Looking back through history and how we as a nation became the most powerful in the world, if i had to chose on smarts between our founding fathers and todays’ politicians, i’d say our fathers were geniuses and today’s politicians are rats. No longer is there a respect for others, if it appeaces a few and they like it, they do it. You still have people willing to defend that piece of paper and if today’s cowards don’t change their way soon enough, they will come.


    1. 1.) “Free markets drive productivity, creativity, wealth, purchasing power, and also lower poverty rates.”

      >> There has never been a “free market.” There have only been rigged markets exploited by the rich, or else controlled markets (in communist nations) exploited by bureaucrats.

      2. ) Politicians, in general, want the good for society, but fail to see how their actions have negative consequences.

      >> Wow. So politicians don’t lie, and don’t work for the 1%, aye? But you also say that politicians are “rats.” Indeed, you contradict yourself so often that you could be a politician.

      3.) “You think printing as much money as possible will help the needy ones. It won’t. It will definitely destroy the productive ones and you will be in worst shape.”

      >> Yes, we must have more austerity. Always more.

      4.) “There is zero demand for money.”

      >> Exactly. No one wants money. Not me, not you, not Wall Street, not anyone. And millions are not dying of hunger and disease because they have no money.

      5.) “ I won’t argue about inflation, you tell me what has happened with education costs due to subsidized education and medical costs due to subsidized medical industry.”

      >>Yes, lifelong debt servitude from over $1 trillion in student loan debt is not enough. We must have more debt and more poverty. Always more. Enough is never enough.


      1. You may want to read up on the history of gold and silver versus fiat currencies. The proof is there for everyone to see.

        In terms of US politicians it’s not a contradiction. If a politician decides to do good for a group in society, they are still rats, even if they predicate the truth. The government is by all and for all, not 25%, not 65%, not 99%, it’s for all.

        Austerity? The word suggest not feeding someone. But you miss the bigger point. You say millions are dying of hunger due to no money. Please have an open mind when reading the following. Those poor folks are not hungry because there ‘isn’t enough money’. They are hungry because there isn’t enough food. They are cold because there isn’t enough clothes. They are homeless because there isn’t enough homes.

        Again, you need to stop seeing money as food, clothing, housing, cars. It is not those things. It’s a ruler, a cup, a measure. The water is what makes us all wealthier, not the cups.

        You can print zillions of dollars, nothing will change, the poor will be poorer, tne rich will be richer. The government, whether you want to believe it or not, is a conduit of purchasing power from the poor and middle classes to the rich. I can’t say it loud enough how you want the government out of your way and free markets behind you.


    2. “So they left of (sic) with a constitution that values each and everyone irrespective of color, social status or believes.”

      Actually, the Constitution was written mostly by a bunch of wealthy people, especially landowners, who were more interested in maintaining their own power and status in society than anything else. It wasn’t exactly like, “Hey. Look at what we wrote. Now everyone in society, including women, slaves, Native Americans, etc., are all now totally free and have exactly the same rights and status as us.” No, as we all know the reality was far different from that.

      The people who actually fought the American Revolution (which could actually be more properly referred as the first American Civil War as approximately as many of the colonists were loyal to England as were for independence) on the ground, were told they were fighting for certain principles and “inalienable rights of man” (that were only later enshrined in the Constitution). So it would have been a bit difficult for the Founding Fathers to then turn around and tell them, “Oh by the way we just kiddin’ bout that whole freedom for all kinda thing, our real intent all along was to maintain y’all in a state of servitude to us here at the top of the heap. Now get back to work!”.

      This fact does not necessarily diminish the truths and values contained in the US Constitution, and the fact that so many groups of people have been able to use it to secure their basic freedoms and human rights is testament to its inherent value (but actually tells us little about the intent of its original authors. For that one has to look much closer at the historical record).

      So it might be safe to say that the 1% has now come closer to realizing the true dreams of (many) of the Founding Fathers in maintaining their own status, liberty and freedom at the expense of the rest of society (regardless of what the US Constitution does or doesn’t say about this issue) than at any other time in this country’s history.


  4. “You think printing as much money as possible will help the needy ones,
    As much money as possible?? Where did you get that?. The federal government could create a trillion trillion dollars tomorrow. I don’t think it should.

    But there is no question the economy is short of money, which is why stimulus efforts help. Unfortunately, the stimulus efforts have been too little, too late, which is what I predicted way back in 2008.

    “I won’t argue about inflation,”
    But that is exactly what you are arguing about . . . in addition to philosophy about founding fathers, the constitution and the history of America.

    Anyway, much to the chagrin of the “printing-money-causes-inflation” folks, there has been no relationship between federal deficit spending and inflation. Sorry.


  5. Hmmmm… again…

    You cannot stimulate people to produce wealth and purchasing power by stealing from them. That was the philosophy of the founding fathers.

    Let’s say federal spending did not cause inflation, that should not be the point or focus. Unless you feel the government should take the role of the all mighty and do what feels right… what appears right…what makes a few happy.

    Creating money, in an economy like today, shifts purchasing power from one hand to another, there is no way around that fact. Some will get a free lunch, while another pays for it. I am amazed that nobody can figure out that this ‘stimulus’ requires printing new currency and that it devalues the currency, which by simple logic means corporations will stay away in higher margin countries. Simple logic tells me the balancing the budget will return margins to those corporations as such, they will return. It amazes me that nobody can figure out why after so much productivity, automation enhancements, prices don’t seem to reflect those improvements. Are we so naive to think producers will return when margins are higher elsewhere. The answer is clear, higher deficits mean less jobs and prosperity, a balance budget means more jobs and more prosperity. We are looking for solutions exactly in the wrong place, more money. More ‘stimulus’ when we know it’s food we eat, more ‘stimulus’ when we know it’s cars we drive, more ‘stimulus’ when we know it’s in homes we live, more ‘stimulus’ when we know it’s clothing we wear. Maybe i just don’t get it.

    There are clear differences between a republic, the united states – thanks to our founding fathers, and a totalitarian states. In totalitarian states, decisions are made by the few enlightened ones that know what’s ‘good’ for everyone else, in a republic politicians are voted in by all, and decisions are SUPPOSED to be by all and for all. Again, the founding fathers showed much respect and sophisticated knowledge of economics than the ‘know it all’ of today. You would think otherwise after 200 years.


    1. 1. “Both the young Alexander Hamilton (savviest of the founders regarding finance) and his mentor Robert Morris (the wartime Congress’s superintendent of finance and America’s first central banker) believed that a domestic debt, supported by federal taxes collected from all the states, would unify the country. It would concentrate wealth, and yoke that wealth to a consolidated government. The goal was a nation capable of grand projects — ultimately an economic empire to compete with England’s….
      In letters written before the Constitutional Convention to George Washington, another supporter of sustaining federal debt via taxes, Madison made clear the nationalists’ shared desire to shore up public credit by throwing out the Articles of Confederation and forming a nation. Edmund Randolph opened the convention by charging the delegates to redress the country’s failure to fund — not pay off, fund — the public debt by creating a national government with the power to do so….
      The founding alliance that made federal debt a supporter of nationhood, and nationhood a supporter of federal debt, came about in direct opposition to a radically egalitarian, communitarian movement that is in many ways the intellectual antecedent of modern social-contract liberalism.
      The radicals of that movement — evinced in episodes such as Shays’ Rebellion — wanted to devalue the merchant class’s crushing loans to ordinary people; disconnect bondholders and bankers from government; prevent widespread foreclosures; more tightly regulate business; and disseminate, rather than concentrate, American wealth.”-William Hogeland, from his book, Founding Finance

      2.The fledgling United States government was extremely weak after the Revolutionary War. They were incapable of collecting taxes properly and needed the all the support they could get from private wealth (landowners, etc).

      As such, they agreed to hand over the state’s balances to a newly created privately-owned central bank (although ONE SINGLE GUY, also known as Andrew Jackson, vetoed the charter renewal of said National Bank in 1835), and allowed it to issue banknotes backed by the government’s taxing/lawmaking authority, in exchange for a guarantee that the private shareholders of the bank would support the government’s currency by holding it in the form of interest-bearing debt. In addition, the bank would support the development of private credit through the nascent banking system.

      The same thing happened in England with the creation of the Bank of England. The king destroyed his currency (i.e. “bankrupted” himself) by overspending on war with France (tryin’ to steal some gold, no doubt), and so turned to the aristocracy for support. They agreed to hold his liabilities in the form of interest-bearing debt on condition that he give them exclusive possession of the state’s balances, and allow them to issue banknotes in his name.

      reference(s) : http://en.wikipedia.org/wiki/Bank_of_England


  6. Sorry, flash,

    You keep saying, “I am amazed that nobody can figure out that this ‘stimulus’ requires printing new currency and that it devalues the currency,” which if you looked at the link I gave you, simply is not true.

    I recognize that facts will not sway your intuition, so I’m going to let you have the last word without response.


    1. When a person seems incorrigible, I usually give him a response or two, in the hope that he might be open to alternatives. If he shows that he is not open, then he puts himself on my permanent ‘ignore’ list.

      One person just put himself on my list.


  7. Roger,

    I will give you the answer of today’s sorrows without destroying the currecncy….


    That’s all. Let priced drop instead of trying to inflate things. That will leave purchasing power of those busting their behind, the poor and middle class.

    Government spending is a funnel of purchasing power from the poor and middle class to the rich and you know it. How can you live with yourself?


  8. Rodger: I like your posts very much. You write very well and i agree with really everything. I would like to suggest you write a post about how the government spends really using nothing but electronic $points. For example, if the government owes me $1000 it sends me a check or wire transfer. When the check clears, the Fed marks down one of the Treasuries two reserve accounts at the Fed and marks up my bank accounts reserve account. Then my bank marks up my bank account by $1000. So, except for the physical notes and coins the treasury supplies banks when they order it (and pay for it using $points from their reserve account) everything the government does is on the big electronic spread sheet we call “reserves.” When the government paid me my $1000 it did really increase any net financial assets in the economy. My banks assets increased (more reserves) but so do their liability (my deposit account). Only when the bank lends does the nation’s money supply increase.

    It is true that inflation slowly eats a way at the dollar. But, I am an engineer and my daughter is going to graduate from engineering school in May. My staring salary in 1971 was $12,600. If you inflate my starting salary to 2013, my daughter’s starting salary is nearly identical in today’s dollars. But she can buy far more quality goods and services than I could in 1971. The point is that our standard of living has increased. There hasn’t been any “loss” – their has been a “gain” in purchasing power through higher productivity.


  9. John,

    If I understand your request, I think you already answered it. You also might look at: https://mythfighter.com/2010/08/13/monetarily-sovereign-the-key-to-understanding-economics/

    I have one small quibble with your comments. You said, “Only when the bank lends does the nation’s money supply increase.”

    Actually, the instant your checking account is marked up, the “money supply” increases. When your bank lends, the “money supply” is increased again.

    I put the words “money supply” in quotes, because there are several different money supplies: M0, MZ, M1, M2, M3, L and Debt Outstanding Domestic Non-financial Sectors, with the later being the most inclusive.


  10. If your checking account increases it is because someone else’s (e.g. your employer) goes down so so net increase in money for the whole economy. Only when a bank makes a loan from thin air and creats a deposit does the money supply increase (with the exception of Fed loans)


  11. John1025,

    Actually, that’s not quite correct.

    When the federal government pays for anything, it sends instructions (not money) to the recipient’s bank. The instructions tell the bank to increase the numbers in the recipients bank account. This creates dollars, i.e. increases the money supply.

    For instance, your Social Security payment is handled that way. The government instructs your bank to increase the balance in your checking account, which makes the money supply increase.

    Any positive balances in federal accounts are not part of the money supply.

    Also, if by “Fed loans” you mean the purchase and sale of T-securities, this has no effect on the money supply. When you purchase a T-security, you instruct your bank to debit your bank checking account and credit your T-security account at the Federal Reserve Bank.

    This is identical with transferring dollars from your checking account to your savings account. No new dollars created.

    To “pay off its debt,” the federal government merely transfers dollars from your T-security account to your checking account. Again, no new dollars created.


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