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●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.
Why was Detroit forced into bankruptcy? Here are excerpts of what Jonathan Toban, writing for the right-wing blog, Commentary, said:
Why Liberals Won’t Face Facts on Detroit
Jonathan S. Tobin, 07.23.2013
Conservatives have rightly asserted that what happened to the Motor City was an inevitable result of liberal policies.
The example of liberal governance that Detroit (and Greece) provides shows that the liberal social welfare project is a one-way path to insolvency with desperate consequences not only for taxpayers and bondholders but to the ordinary citizens that liberals purport to want to help.
The above is 100% ignorance, but rather than explain why now, let’s first hear more from Tobin:
Detroit may be just the first of many other large cities that will find themselves in similar predicaments. Even New York, which unlike Detroit faced and overcame not altogether dissimilar problems involving debt and urban blight in the last generation, may eventually be put in the same position unless something is done to deal with a bill for retiree medical benefits that dwarfs that of Detroit.
Unlike Tobin’s previous paragraph, the above is 100% true, but continuing . . .
A bailout of Detroit (would) set a precedent that can’t be repeated elsewhere because there just isn’t enough money to pay for every city that will eventually face similar problems. Liberals would like us to ignore (this), because they are confident that the federal leviathan will always be able to squeeze enough cash out of productive citizens to pay for the left’s follies.
What Greece showed Europe and what Detroit tells Americans is that sooner or later the well of public funds will run dry if obligations to liberal constituent groups continue to grow unchecked.
Americans (must) do some hard thinking about a society where virtually everyone has their snouts in the collective trough of big government.
And so, once again, Tobin returns to ignorance, for it is clear he has not the slightest understanding of the differences between Monetary Sovereignty and monetary non-sovereignty.
As a hint to new readers, the U.S. government is Monetarily Sovereign. It is sovereign over the dollar, its currency. It can create an unending stream of its sovereign currency, the dollar, and it can determine the value of each dollar. That is what is meant by “sovereign.”
By contrast Detroit, New York and Michigan, and every other state, county and city in America, as well as Greece and all the other euro nations are monetarily non-sovereign. None of them can create an unending stream of their sovereign currencies, for one simple reason: None of them has a sovereign currency.
Detroit et al are not sovereign over the dollar. Greece is not sovereign over the euro. In essence, the dollar and the euro are “alien” currencies, used courtesy of the Monetarily Sovereign U.S. government and the Monetarily Sovereign European Union.
It is an absolute rule of economics that a monetarily non-sovereign entity cannot survive long-term without money coming in from outside its borders. You and I are monetarily non-sovereign. To survive long term, we must have income. We could not survive by paying taxes to ourselves.
Similarly, no city, county or state in America can survive long term by taxing itself. Nor can Greece.
What happens when a monetarily non-sovereign entity has insufficient money coming in from outside? It must borrow. And if the situation persists, it must borrow again. And again. And one day, it no longer can borrow, at which time it goes bankrupt.
This is true even if the entity is bare-bones frugal. Even if you were to live in a tent and eat garbage, you eventually would run out of money, unless you had an income. So to blame your bankruptcies on your spending “follies” would not only be ridiculous, but mean-spirited in a “blame-the-victim” sense.
So how do states, counties and cities survive the fact that all cannot have a positive balance of payments? Where do they get the dollars coming in from outside their borders? Clearly, Tobin doesn’t know.
The answer is: A few states may have a positive balance of payments vs other nations, but the primary source of outside money is federal deficit spending in each state — the very thing Tobin and his ilk wish to end.
And why do they wish to end federal deficit spending? Because they claim “the well of public funds will run dry.” This single oft-repeated myth demonstrates Tobin’s abject ignorance of economics, for a Monetarily Sovereign entity never can run short of its sovereign currency. Never.
Before someone compounds Tobin’s ignorance by shrieking, “Printing money would cause inflation,” remember two things:
1. By that shriek the “someone” has admitted the federal government cannot run short of dollars, and inflation, not running dry, is the “problem,” and
2. Only under the rarest of circumstances can dollar-creation cause inflation. In fact, despite massive deficits since 1971 (when the U.S. became Monetarily Sovereign), dollar creation never has been associated with inflation.
Why this counter-intuitive truth? The value of a dollar, and indeed the value of just about everything, is based on supply and demand. So while increasing the supply of dollars seemingly would cause inflation, this can be prevented by increasing the demand for dollars, which the Fed successfully has done by raising interest rates. So-called “debt hawks” always seem to focus on supply, conveniently forgetting about demand.
Return now to Detroit. What really happened to them? They were pretty much a one-industry town, and when they lost that industry, they lost their source of outside money. The people became jobless and needed even more help, but without an income, Detroit had to borrow and borrow, and finally ran out of borrow, while the people’s needs grew.
It was not the fault of “liberal policies” and it was not the fault of people who became needy, because they lost their jobs. These people were not sloths looking for freebies. They do not, as Tobin cruelly claims in comparing them to pigs, “have their snouts in the collective trough” — so casually mouthed by someone fortunate enough to have a well-paying job.
They are ordinary people, like the people you’ll meet in every town and village in America.
So whose fault is Detroit’s predicament? It is the fault of the federal government and the conservative Tea Party heartless agenda, which pushes spending cuts of benefits to the people.
The federal government could and should give (not lend) dollars to Michigan and indeed, to every state. And the states should dole out those dollars to their counties, and the counties to the cities, until every monetarily non-sovereign government in America has a net, positive balance of payments.
The government easily can create the necessary dollars, and the government easily can prevent inflation. There is no reason not to do both..
And what is the Tobin / conservative solution? Cut spending on all the things the less fortunate need: Food, shelter, education, health care, retirement security, police, etc.
The conservative solution is to chop these people down, so they starve in the streets, to teach them a lesson. It’s a solution typical of a rich man’s disdain for a poor man.
Ignorance is excusable. We all have it. But thoughtless and abject cruelty — the kicking of people when they are down — the sheer, stupid ruthlessness against helpless and innocent men, women and children — that is intolerable, Mr. Tobin.
May you, one day, fall victim to circumstance and be the subject of your own wrath, and may there be no government “trough” into which you can bury your snout.
Rodger Malcolm Mitchell
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