What do Greece and Chicago have in common? Yes, that. But what else?

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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 ultimately 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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What do Greece and Chicago have in common? First, they both are monetarily non-sovereign.

Unlike the U.S., UK, Canada, China, Japan, Australia et al, neither Greece nor Chicago can create their sovereign currency. Why? Neither has a sovereign currency.

Greece uses the euro and Chicago uses the dollar, which are, to them, “alien” currencies. By contrast, the Monetarily Sovereign nations mentioned above, each has a currency over which it is sovereign.

Each can create as much or little of its sovereign currency as it wishes, and give any value to that currency it wishes. None ever can run short of its sovereign currency, even if all national government taxes were 0. That is what “sovereign” means.

O.K., you knew that. But, what else?

You also may have known that a monetarily non-sovereign entity cannot survive long term without more money coming in than going out.

You are monetarily non-sovereign. You can’t survive long term without more money coming in than leaving you. A company too, being monetarily non-sovereign, needs more income than outgo to survive long term. States, cities, counties and euro nations have the same requirement.

But what happens when a city or a euro nation has more outgo than income, year after year. Well, it could raise taxes, i.e. take more money from the citizens. But that is only a short-term, and ill received measure.

Eventually the citizens run short of money, and become a bit restive (as in bloody riots and Guillotines). So the monetarily non-sovereign entity eventually resorts to another short-term fix: It sells pieces of itself.

Christian Science Monitor, 2009
The great sell-off: Chicago auctions city assets
The city is auctioning private assets to the highest bidder. But private ownership of parking meters stirs a backlash.

No city in America beats Chicago when it comes to selling public assets – garages, bridges, even parking meters. the Windy City under Mayor Richard M. Daley has sold or leased out public institutions such as the Chicago Skyway ($1.83 billion), underground garages beneath Grant and Millennium Parks ($563 million), and, more recently, city parking meters ($1.15 billion).

That’s not exactly chump change, especially for a city still grappling with a $469 million budget shortfall from last year, not to mention an estimated $300 million deficit this year.

“It’s fraud; it’s extortion,” says Sam Wolfson, owner of String-A-Strand, a crafts-supply store in the Lincoln Square neighborhood, where meter rates have jumped from one quarter to four quarters for one hour.

There are two problems with selling piece of yourself.

1. You may run out of pieces, without solving the income/outgo imbalance.
2. You may sell your profit-making pieces, which exacerbates the income/outgo imbalance, and steals even more money from taxpayers.

And, oh yes, there’s a third problem:

3. The populace might become thoroughly irate at crooked politicians (are those synonyms?) forcing ever-higher taxes AND higher costs for services.

In Chicago, the sale of assets not only didn’t solve any long-term problems, but forced users to pay far more for tolls and parking.

[As an aside, the politicians usually tell the taxpayers a little white lie: That privately owned services are more efficient than public ownership, which is true right up until the private, for-profit services raise prices sky high — generally on the first day after the sale.]

Greece faces collapse of second key privatisation
By Kerin Hope in Athens, June 27, 2013

Greece is struggling to avoid the collapse of a second big privatisation deal, amid threats and pressure from bidders for the state gaming monopoly to change key terms of the deal they agreed last month.

The problems with the €700m sale of Opap (Greek Organization of Football Prognostics) threatens to add to tension with Greece’s international creditors, who fear the slow pace of privatisations will require further spending cuts to keep the country’s bailout programme on track.

Greece’s privatisation agency, Taiped, failed to deliver one flagship privatisation this month when Gazprom unexpectedly pulled out of the bidding for the state natural gas supplier Depa.

Taiped has pulled off one sizeable deal this year: the €400m sale of Desfa, the natural gas grid operator to Socar, the state gas operator of Azerbaijan.

A review of Greece’s bailout by the IMF this month found that income lost through slippage of the privatisation programme would contribute to a hole in Athens’ budget and “additional financing will need to be identified”.

Now ask yourself. Why does Greece have a state gaming monopoly? Right. It’s an alternative to raising taxes, but accomplishes the same thing: It takes money from the poor private sector and gives it to the public sector.

But if Greece sells its monopoly, the money will go from poor private to rich private, and the Greek government will have to beg taxpayers for more money.

The IMF continues to coerce Greece into selling its income-generating assets, as a “solution” to its past and future budget shortfalls.

This would be akin to the neighborhood bakery selling its ovens hoping to cover past and future operating losses. And the people in Greece are buying this IMF nonsense!

I pity the current mayor of Chicago, Rahm Emanuel, who inherited this mess from the previous mayor, Richard Daley. Emanuel cannot control the monetary non-sovereignty problem. Only the federal government can do that. (The state government could help, but it has its own monetary non-sovereignty problems.)

But, I have no pity for the Greek government (though my heart goes out the the Greek people.) The government could solve the problem tomorrow, simply by taking back its most valuable former asset: Its Monetary Sovereignty.

Simply dump the euro and reinstate the drachma. The process would be no more difficult than was the original foolish surrender of the drachma to adopt the euro.

Will Greece do it? The rich people don’t want it, because it instantly would solve Greece’s financial problems. An impoverished populace is easier to dominate.

The people — the poor people — they have been poisoned with so many lies, they don’t know what is best for them. (Something like the American public). They may already have been beaten down into acquiescence (Also, something like the American public).

Whenever you read or hear the word “privatizing,” know that it means selling public property to rich, political graft payers, explained by the myth that private ownership always is more efficient than public ownership.

Privatization might delay, but definitely will exacerbate, financial income/outgo imbalances. And it has no financial benefit to a Monetarily Sovereign nation.

Is privatizing being proposed, or has it already happened, in your state, county, city or village? If so, heaven help you.

Your politicians won’t.

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. Click here
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%

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY

16 thoughts on “What do Greece and Chicago have in common? Yes, that. But what else?

  1. Hey Rodger,
    Combine your examples with the corruption and disaster that is the red light photo enforcement system (what else should one expect from a private equity type like Rahm) and maybe, just maybe we Chicagoans will have finally learned our lesson…..although I doubt it.

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    1. 1.The system was “inherited” by Emanuel. However, it looks to be a pretty sweet skim:

      “Until the allegations were published by the Tribune, Redflex was positioned as a leading contender for Emanuel’s new program to sprinkle the city with automatic cameras to tag speeders in school and park “safety zones.” Emanuel’s administration accused the company of covering up the wrongdoing allegations and disqualified it from bidding on the speed camera contract. Now the company faces the potential loss of its long-standing red-light program in Chicago, which has generated about $100 million for the company and more than $300 million in ticket revenue for the city.”-David Kidwell, Chicago Tribune, Feb, 2013

      2. It’s lights out for red-light cameras.

      “The nation’s second-largest city (Los Angeles) decided Wednesday to shut down its traffic enforcement cameras because the program is losing $1.5 million a year. There also were questions about whether the tactic actually saves lives.

      With a 13-0 vote, the City Council voted to stop issuing photo traffic enforcement tickets as of midnight Sunday, when a contract with an Arizona-based contractor expires.

      “The program as we know it no longer exists in the city as of July 31,” Councilman Dennis Zine said.

      City Hall will review procedures with the vendor to remove cameras at 32 intersections and deal with existing tickets.

      However, officials won’t learn until later if the phase-out will cost the city more money, or if the vendor, American Traffic Solutions, must perform the work for free.”-HuffPo , Los Angeles, July, 2011

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  2. Great piece Mr Mitchell…

    Some states were irresponsible and spent more then they took in. No one month or two, not a year or two, many years, while the businesses on those states benefited from the recklessness.

    Some other states were fiscally responsible and lived within their means. Businesses and even people on these states didnt fair as well, but are not in a mess and their taxes for sure are not going to be jacked up, at least not by the state and their cities.

    So here you go Mr Mitchell, you propose we devalue the currency and hurt the poor old state that was fiscally responsible, while “helping” the states that were fiscally irresponsible. Hurray…. way to go sir, very patriotic.

    Oh yeah, I forgot, it’s oil prices that causes inflation…. sure it is Mr Mitchell, sure it it is…

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  3. Oh one thing I forgot to mention. This is exactly the way things work today. The states in the North get all the goodies from the government, all kinds of welfare help while the states in the south get nothing.

    Those states are not poorer because they are right wing, they are poorer because their wealth is funneled to the poor and rich people in the north. If you don’t believe me go and check which states get more Federal assistance and benefits. See which schools get more assistance, etc….

    You say the truth by saying that the poor always get shafted, but it’s not because there is a lack of government handouts, it’s the opposite. There are handouts, paid for by the workers for the benefit of the rich and the lazy.

    The sickening ones are the left wing sickos.

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    1. Work can produce tangible and physical wealth … and tangible services. Work CANNOT produce financial assets, unless that means building a printing pressing and printing your own promissory notes.

      The Red States are generally the largest RECIPIENTS of Federal Dollars, sometimes via Welfare, sometimes via juicy military contracts and like NASA which LBJ brought to Houston.

      We are all in this together, and a shortage of Dollars after the collapse and contraction of Finance (credit dollars) leads to a general decline EVERYWHERE, some worse than others, some faster than others, and, as always, a few gainers from Depression and/or disasters.

      With the collapse of Finance and vaporization of some $11 Trillion of financial assets — but not the private debt obligations that created those financial assets — why is anyone surprised that the REAL economy was hit hard too. It didn’t have to be hit hard, but the conservative ideology blocked the US Govt which has the power from using it’s power to reverse the financial hit on Americans … except for saving Wall Street “job creators”.

      The Quantity Theory of Money has been thoroughly debunked. If it were true, the rapid expansion of bank lending based on fictional asset values and outright fraud, esp post 2000 and post 2004, would have caused skyrocketing hyper-inflation across America.

      Total private debt hit 300% of GDP double that of the Roaring 20s before the Great Depression halted credit expansion. Some $42 Trillion outstanding.

      If the QTM was true and “money printing” caused hyper-inflation, where was that in 2007? We had INTENTIONAL inflation of housing asset values, pushed up to ridiculous prices by bank lending and “creative finance”. We saw an astronomical rise in the notional Derivatives market, “bets” fueled with by all that credit-money.

      But we didn’t see anything resembling domestic hyper-inflation across the board from all that endogenous bank-created credit-money sloshing around the system.

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    2. Quantity Theory of Money, the idea that printing more money is a straight devaluation of all money, was written by Irving Fisher in the 30s. However, in his own work, he debunked that idea, saying it should NEVER be applied to a real dynamic economy.

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        1. Rodger,
          By the way, the conv between you and Jason on that link, I learned from Warren and/or I think Randy the difference btw the economists’ understanding of “genuine” inflation which is Demand-Pull inflation, contrasted with mere CPI increases, which are skewed and politicized one way or another to make a point.

          Demand-Pull inflation is essentially when Deficit Spending by Govt is competing with the Private sector Consumer Spending and Business Spending for limited resources, such limited as Human Labor, at a state of full employment. Warren said that hasn’t existed in the US since World War One.

          The purpose of taxes is, therefore, I think a wry statement by Warren, is to *cause unemployment*. Blunt and a bit shocking to state, no?

          Mosler and others also discussed the bogeyman of inflation in the 70s, which was “cured” by Paul Volker by wiping out some 55,000 businesses and countless jobs … yet “Americans wanted that” apparently before they knew what the anti-inflation dogma would bring them. I read that stalwart GOP conservatives like Jack Kemp were in near-revolt against Reagan (albeit somewhat quietly?) because of Reagan approving Volker pushing base interest up to peak 21.8%.

          Mosler’s response was that this inflation or “stagflation” was the effect of the Oil Embargo and related price hikes in energy. That also makes sense why it was called STAG-flation instead of IN-flation. With ordinary demand-pull inflation, you’d expect productivity, jobs, wages to all be rising in tandem with prices. With Stag-flation, disposable income was reduced by artificially high energy costs (relative to previous).

          That’s why Volker’s ANTI-QE had to be so damn brutal. (Mosler said the Fed also tried to make it more brutal by refusing to provide reserves to banks until there was nearly a credit-freeze, then relented as they discovered they couldn’t easily reduce the volume of lending by strangling reserves.) They SAID they were trying to “sop up excess money” (and people still praise him), but the problem was not that workers were too rich or had too much credit, again it was OIL.

          Mosler credits some dereg in domestic oil and nat gas markets as bringing down prices and part of the reason the Great Moderation was unleashed … the other being Greenspan doing a reversal of Volker.

          Today, they try to apply some of these same “principles” to entirely different conditions, especially private household and business debt overhang that set new records bigger than 1929.

          Since I’m NOT an economist, I feel free to borrow part of that from Steve Keen, part from Mosler, part from other MMT people, part from you, whatever fits.

          My main point being that you and Warren don’t really disagree on inflation, not even on Demand-Pull inflation which can probably be thwarted by trending towards a Balanced Budget, that is IF such Demand-Pull inflation existed. For mainstream economists, it comes down to everything looking like a nail because they only have ideological hammers. (most charitable explanation … but Warren says he has spoken to them at internal meetings where they could speak freely and they display gross ignorance there too)

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  4. And yet Greek people (and the other European nations) seem perfectly happy with Euro based on recent polls.

    Also, back in 2011, what did Greeks do en masse when the media (ignorantly) predicted Greece would have to leave the Euro? Why they withdrew as much Euro cash as they could, preferring the security of a stable currency to a hugely devalued prospective new-Drachma.

    You do not yet realise the huge leap forward mankind has made with the launch of the Euro. Finally, money is removed from political influence, no more devaluations to bail out the debtor governments. Economic reality is forced onto governments, they have no choice but to get their house in order.

    Socialism no more!

    Watch it unfold, you will be amazed at how strongly Europe comes out of this, with its currency intact, whilst the US/UK/Japan lose it all via currency collapses.

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  5. Greek unemployment rises to 27.9%
    Associated Press 9:43 a.m. EDT September 12, 2013

    ATHENS, Greece (AP) — Unemployment continues to rise in recession-hit Greece, with the overall rate reaching 27.9% in June. Even worse, 58.8% of people under age 25 are out of work.

    The Greek Statistical Authority reported Thursday that the jobless rate had risen from 24.6% the previous year.

    Yes, a “huge step forward.” I predicted that huge step in a May, 2010 speech.(See: The Meteorology of Economics)

    Years of emergency taxes, pay cuts, and other austerity measures implemented as a condition of international bailout loans have hammered Greece’s private sector.

    They don’t understand Monetary Sovereignty and you don’t understand austerity and Socialism.

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    1. Ah, but you seem to think government can create jobs and prosperity, whereas in fact history shows that this is done by entrepreneurs with capital to invest and a good idea! (Henry Ford for example).

      High unemployment is merely economic reality, what you get when government debts and over spending are removed from the picture. (Having said that, U6 is hardly a ringing endorsement of US printing is it!). There is no such thing as a free lunch, and no pennies from heaven, they must be earned here on earth (earned, not borrowed or printed).

      The great leap forward is the forced shrinkage of all that you love and believe. the Europeans have realised that capitalism is what grows economies, and socialism strangles it.

      Watch in horror over the next few years as Japan, the UK and finally the US collapse in a heap, their currencies worthless. I do hope you socialists aren’t too upset by the impact on your living standards? All whilst Europe grows anew with a stable currency.

      Yes, it will be fun to watch it all unfold, as even now the cracks are starting to appear.

      Good luck!

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  6. Sadly, you are clueless about what socialism is. (Clue: It isn’t government spending. It’s government ownership. Huge difference.)

    Sadly, you do not understand GDP = Federal Spending + Non-federal Spending + Net Exports.

    Sadly, you accept an astounding 27.9% unemployment and 58.8% of young people out of work as “economic reality.”

    Sadly, you do not understand, nor wish to understand, Monetary Sovereignty, the basis for all modern economics.

    Instead, you’ve heard a slogan, “There’s no such thing as a free lunch,” and you accept that as economics knowledge. Well, there is such a thing as a free lunch. You can find it here.

    Fortunately (for you), the UK was wise enough not to surrender its sovereign currency and adopt an alien currency, the euro. Otherwise, you might be one of the 27.9% (and growing).

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    1. Last comment from me, as I hate to waste our time, we will never agree.

      The ‘free lunch’ you refer to is not free. A devalued currency costs those who save in that currency, they pay for rescuing those in debt, mostly governments. Ask the middle classes in America, or (maybe) those who saved in Zimbabwe? Or Weimar Germany? Or countless dozens of other countries in the past 50 years….guess what.. they all had the wondrous monetary sovereignty. Fat lot of good it did them.

      The laws of mathematics cannot be denied, QE will cause currencies to crash, and the dollar will be the daddy of them all. Good. An end to US meddling in the world. The world is already walking the other way. Just a matter of time.

      The martial state you have to live through before you escape to the other side will be entirely free too, just like your lunches, so you enjoy all of that. Big brother will look after your every need.

      PS, in the case of America, those net exports would be a big old negative (another free lunch no doubt, courtesy of the rest of the world, bless their generosity), the reason why the gold window was shut in 71. Watch as the ECB/BIS reopen that window. And the world is no longer generous.

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  7. Perfect.

    I wondered how long it would take for you to mention Weimar Germany and Zimbabwe.

    It has become a standing joke among economists, that anyone mentioning those two hyper-inflations as evidence that government spending causes inflation, instead has given evidence of economic ignorance.

    Further evidence of economic ignorance is the belief that using gold as money is economically beneficial. So you are three for three:

    1. Since 1972, when the U.S. went off the gold standard, there has been zero relationship between federal deficit spending and inflation.

    2. Germany’s hyper-inflation had nothing to do with government deficits, but rather because of the harsh punishment from the Allies, post WWI. They demanded — you guessed it — gold.

    The hyper-inflation lasted 3 years, immediately after which Germany built and paid for the greatest war machine the world ever had known. How did they do it? Deficit spending.

    3. Zimbabwe’s hyper-inflation was caused by Robert Mugabe, who stole farm land from farmers and gave it to people who did not know how to farm. The predictable shortage of food started an inflation, exacerbated by government stealing.

    4. The U.S., being Monetarily Sovereign (which you still don’t wish to learn about), does not need the world to be generous. Despite consistent negative Net Exports, Federal Spending has made GDP grow.

    It probably is good that you don’t wish to write any further, because you sure don’t wish to learn any further.

    Like

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