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.
●Everything in economics devolves to motive.
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On April 9, 2013, a group called “Chicago Booth” asked professors from MIT, Harvard, Yale, Berkeley, Chicago and Princeton to rate the following statement::
Countries that let their debt loads get high, risk losing control of their own fiscal sustainability, through an adverse feedback loop in which doubts by lenders lead to higher government bond rates, which in turn make debt problems more severe.
The question is so poorly written it cannot be answered. Sadly, these professors, each from a distinguished school, didn’t object. They all answered.
Some of the problems are:
1. It is a three-phrase question, and each phrase changes the possible answer.
2. No definition is given for “their debt loads” (The whole nation’s or just the central government’s?)
3. No definition is given for “high,” nor for “higher bond rates.” (Higher than what?)
4. “fiscal sustainability” is not clear (Ability to pay bills? Ability to prevent inflation? Ability to grow economically? Ability to prevent recession, depression, stagflation, poverty?)
5. “doubts by lenders” (Doubts of what? Repayment? Inflation?)
6. “debt problems” (Specifically, what are the debt “problems” that becomes “more severe”?)
7. In total, the question assumed the answer (“Agree”) and the professors dutifully went along, without thought or concern, like little automatons.
The question might have been written by a high school freshman. But, as nonsensical as the question was, the answers were even worse.
Every one of these professors agreed with the statement! Yikes!
The closest anyone came to even approaching reality, was David Autor and possibly David Cutler, both of whom might understand the difference between Monetary Sovereignty and monetary non-sovereignty. But even they agreed with the statement.
The others’ answers were completely clueless. Aaron Edlin was so sure of his wrong answer, he added the supercilious comment, “Does gravity make bricks fall when dropped?” One is left to wonder when he last learned anything new.
And these people, from “top” schools, are teaching our children. What a disgrace for the U.S. educational system, when even our “best” schools turn out such wrongheadedness.
To my knowledge, there is one school (thankfully) in America, that teaches real economics: The University of Missouri, Kansas City.
The rest seem to teach a flat-earth philosophy, and if the following group is typical, our economics students, and indeed our nation, will suffer for many years.
Here are the professors and their responses. The number indicates 1-10 the strength of their agreement. In a few cases, they added a comment:
Daron Acemoglu MIT Strongly Agree 7
Alberto Alesina Harvard Strongly Agree 10
Joseph Altonji Yale Agree 7
Alan Auerbach Berkeley Agree 7
David Autor MIT Agree 6
This is generically true, but we don’t the threshold where it matters. And not clearly true for countries that borrow in their own currency.Katherine Baicker Harvard Agree 3
Marianne Bertrand Chicago Strongly Agree 3
Raj Chetty Harvard Agree 4
Judith Chevalier Yale Strongly Agree 8
“Risk” is the operative word here; it is hard to forecast ex ante at what point the negative feedback loop will become problematic.Janet Currie Princeton Agree 4
David Cutler Harvard Agree 3
Lots of particulars matter, including who it is owed to and whether the country has its own currency.Angus Deaton Princeton Strongly Agree 7
Darrell Duffie Stanford Strongly Agree 10
In perfect transparent markets, the market clears at an appropriate yield in one step. In actuality, price discovery involves feedback.Aaron Edlin Berkeley Strongly Agree 10
Does gravity make bricks fall when dropped?Barry Eichengreen Berkeley Uncertain 7
Much depends on other factors like growth of the denominator of the debt/GDP ratio, which will vary with policies & circumstances.Ray Fair Yale Strongly Agree 5
Pinelopi Goldberg Yale Agree 6
Michael Greenstone MIT Agree 7
Tough question is definition of “high”. See Rogoff/Reinhardt for best evidence. Does “high” differ for country w global currency, like US?Robert Hall Stanford Strongly Agree 8
Simple math…interesting that it has not happened to Japan, however.Bengt Holmström MIT Agree 8
Caroline Hoxby Stanford Agree 9
Kenneth Judd Stanford Agree 4
The debt load may be a factor in reputation but the US has experienced great increases in debt in the past without suffering these problems.Anil Kashyap Chicago Strongly Agree 9
The only question is when the tipping point kicks in. Japan will face trouble after Europe is sorted out, as might the UK and maybe then USPete Klenow Stanford Strongly Agree 7
Jonathan Levin Stanford Agree 6
Yes, but clearly conditions vary – right now US can borrow easily with high debt, but some euro countries cannot.Eric Maskin Harvard Agree 8
William Nordhaus Yale Agree 7
Maurice Obstfeld Berkeley Strongly Agree 10
Government vulnerability will depend on the maturity of its debt (more short term debt means more exposure) and the size of its deficit.Emmanuel Saez Berkeley Uncertain 5
José Scheinkman Princeton Did Not Answer
Richard Schmalensee MIT Agree 3
Hyun Song Shin Princeton Agree 7
Nancy Stokey Chicago Strongly Agree 10
With debt/GDP around unity, a substantial risk premium can be the difference between the debt load being “sustainable” and “unsustainable.”Richard Thaler Chicago Agree 3
Yes I suppose so, but what of it?Christopher Udry Yale Agree 3
Luigi Zingales Chicago Strongly Agree 6
Throughout America, there are continuing efforts to test our students to determine what they are learning. Clearly there needs to be similar testing of teachers, to determine what they are teaching.
If this were our best and our brightest, America would be doomed.
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 
Take heart. Most economics professors are morons, but this “survey” is not valid. It is propaganda by the U. of Chicago Booth School of Business whose “Initiative on Global Markets” is a group of 41 professors carefully chosen for their dedication to austerity. Since everyone in the group is an austerity fanatic, no one disagreed with the survey’s assertion, or objected to its nonsensicality.
Speaking of non-sensicality, a Washington Times editorial correctly refers to Grand Theft Cyprus as a bank robbery – but the editorial blames the Cyprus heist on THIS…
“The White House and the Cypriot government share the same faith in the Keynesian dogma that prosperity comes from spending and not from savings.”
Wow. That’s so simple it must be true! It’s common sense!
However, a man at the back of the auditorium raises his hand and asks, “Just out of curiosity, is that PERSONAL spending and saving? Or is it GOVERNMENT spending and “saving”?
The crowd gasps. Murmurs fill the air. Security guards taser the man, cuff him, and drag him out. He asked a forbidden question.
Austrian school clowns never clarify their terms. It’s the only way they can justify their garbage.
http://www.washingtontimes.com/news/2013/apr/18/grand-theft-cyprus/
A refusal to define your terms is necessary if you want to be a politician or the head of a central bank. Below is a video of Mark Carney, a Goldman Sachs sleaze-ball who is head of the Bank of Canada. On 1 July 2013 Mr. Carney will become head of the Bank of England. Carney rightly says that central banks cannot create or sustain growth by themselves. What then is needed for sustainable growth? You and I know that it’s government spending, but Carney says, “Fiscal adjustment and fundamental structural reform.” What does that mean? Carney doesn’t say. (If he did, he could not be a central bank head.)
The average person hears this garbage and thinks, “Banking and economics are beyond me. If they say we must have austerity, I guess they’re right.”
Thus, he spends half his time believing he is too stupid to figure this stuff out, and the other half thinking he is a genius, and YOU are an idiot. He wants austerity, as long as it harms YOU and not him.
And so everyone is crushed by austerity.
http://www.reuters.com/video/2013/04/18/reuters-tv-central-banks-alone-cant-fix-economy-car?videoId=242318371&videoChannel=117851
Christine Lagarde of the IMF refuses to define her terms. She often praises the Bank of Japan for its “stimulus,” when in fact it is quantitative easing. QE is only a “stimulus” for the rich, and for the financial economy. QE does nothing for the real economy, except to camouflage the ever-widening gap between the rich and the rest.
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FRANCE FALLS ON ITS SWORD
The French and German governments are both arrogant, but it’s nice to see one of them (France) commit suicide to serve the other (Germany). The French government is planning new tax increases and 60 billion euros in spending cuts, claiming that the worsened depression will create jobs and “growth.”
(The euro-zone is a black comedy, a theatre of the absurd, as hilarious as it is hideous.)
French labor unions and left-wing groups whine about the ever-worsening austerity, but they don’t want to dump the euro-currency, because then they could not exploit the peripheral nations. Meanwhile Germany exploits France and the peripheral nations alike.
When Troika bankers and German politicians have destroyed all of Europe, and nothing is left to steal, they will start eating the German masses.
http://www.english.rfi.fr/economy/20130418-french-government-plans-cuts-tax-rises-balance-budget
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THE SMOG OF AUSTERITY
In a past post, Rodger noted that austerity is probably causing genetic damage to the human species.
Austerity is also causing environmental destruction. Cities across the euro-zone (especially in Greece) are covered with clouds of smoke that leer over rooftops, choke lungs, and glow in the night. Reason: because of austerity, no one can afford regular fuel for warmth or cooking. Therefore hoards of people are cutting down forests, and burning the trees as fuel. People are also burning their furniture, their doors and cabinets, and any other combustible item they can scrounge. The result is a severe smog epidemic.
In normal times, this would send thousands of people to the hospital. But this is the Age of Austerity. Health care is being privatized, so that only the rich can afford it.
The solution is to dump the euro. But if politicians did that, they would be kicked off the Troika payroll.
http://www.theatlantic.com/business/archive/2013/01/the-fog-of-austerity-this-smoke-cloud-is-the-ultimate-symbol-of-greeces-depression/272626/
French and Spanish politicians have asked their Troika masters if they can please run slightly larger budget deficits than the politicians had promised. As Troika bankers and bureaucrats listen, they feign anger, and try not to burst into laughter. Finally the bankers agree, out of the goodness of their hearts. They know that since France and Spain have no Monetary Sovereignty, the larger their deficits, the greater their debt — which means more wealth and power for the Troika bankers and bureaucrats. Sweet!
“There, there. Of COURSE you can run larger deficits, and accelerate the debt / austerity death spiral. Otherwise will you ever recover?”
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I don’t where some people have been the last 20 to 30 years. I mean, the majority of our professors have endorsed the fed’s careless policies and our government’s reckless spending.
This reason for our sorrows is not ‘lack’ of something, for we’ve forced debts down our thoats. Our government have taken the credit card and gone on a shopping spree.
Sir, you’ve lived through, perhaps you lived in abundance where it doesn’t matter. Here you sit today telling us how these professors are stupid for not returning to what they’ve supported for years, which you yourself know it’s the case. At some point in my time on earth, i’ve decided to care more about those around me than myself, my pockets, a party, an agenda.
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Please keep your ignorance to yourself. The only dangerous debt that has been created since 1971 is the private sector debt. There is no such thing as public sector debt for the US.
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I’m also not surprised you skip france and the other eastern europe nations. Very convinient.
I’m sure Yves, the reckless socialist which won’t stop at anything but shooting people to push her agenda, loves you guys.
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Again, please leave your out of paradigm and clueless comments for some ignorant gold buggery comment board. No informed person would consider comparing currency using nations like the Eurozone member states to sovereign currency issuing nations like the USA. Go away
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Flash,
It’s probably a good idea to post your comments PRIOR to your nightly drinking binge.
Cheers,
Six
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Click to access Haring63.pdf
So many delusions lead to no solutions.
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