–My humble apologies to Larry Summers. Or not.

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.


As you know, Larry Summers is almost perfect. He has screwed up virtually everything he has touched (except raking in dollars for himself), to wit (from Wikipedia):

“Summers was on the staff of the Council of Economic Advisers under President Reagan.”

“He also served as an economic adviser to the Dukakis Presidential campaign in 1988.”

“He said, ‘There isn’t a risk of an apocalypse due to global warming or anything else. The idea that we should put limits on growth because of some natural limit, is a profound error and one that, were it ever to prove influential, would have staggering social costs.'”

“There was a scandal when it emerged that some of (Summers’s) Harvard (Russian adviser) project members had invested in Russia, and were therefore not impartial advisers.

“Summers pressured the Korean government to raise its interest rates and balance its budget in the midst of a recession.”

“Summers was a leading voice within the Clinton Administration arguing against American leadership in greenhouse gas reductions.”

“As Treasury Secretary, Summers led the Clinton Administration’s opposition to tax cuts proposed by the Republican Congress.”

“Summers hailed the Gramm-Leach-Bliley Act in 1999, which lifted more than six decades of restrictions against banks offering commercial banking, insurance, and investment services (by repealing key provisions in the 1933 Glass–Steagall Act).”

He said, “The parties to these kinds of contract (derivatives) are largely sophisticated financial institutions that would appear to be eminently capable of protecting themselves from fraud and counterparty insolvencies.”

And let’s not even get into his Harvard debacles. The list of Summers’s idiocy goes on and on. The above is but a short sample. The man is an economic clown.

So when I heard he was angling to be Chairman of the Fed, I appropriately was horrified, though not surprised. (See: OMG! Please Say It Isn’t True. Not Sleepy Summers, Again!!)

Well, it looks like I may have to eat my keyboard. Here are excerpts from an article in zerohedge.com:

The Phrase That May Break (Or Make) Larry Summers As The Next Fed Chairman
Submitted by Tyler Durden on 07/25/2013

Lawrence Summers made dismissive remarks about the effectiveness of quantitative easing at a conference in April, raising the possibility of a big shift in US monetary policy if he becomes chairman of the Federal Reserve.

“QE in my view is less efficacious for the real economy than most people suppose,” said Mr Summers according to an official summary of his remarks at a conference organised in Santa Monica by Drobny Global, obtained by the Financial Times

Right on target, Larry. QE, if anything, is a negative for the economy. It’s primary effect is to reduce long-term interest rates, which means the federal government will have to pay fewer interest dollars into the economy. That’s less stimulus, folks.

So, history shows low rates are negatively correlated with GDP growth.

QE does not, as many people erroneously believe, add dollars to the economy. It adds to excess bank reserves, which to become additional dollars, must translate into additional lending. But U.S. banks are not reserve constrained. They are capital constrained.

Banks can get all the reserves they want at near zero %. So why would adding reserves stimulate lending, borrowing or business? It doesn’t.

Mr Summers clearly believes fiscal policy is a more effective tool than monetary policy, admitting, “more of what will determine things going forward will have to do with fiscal policy and that there is less efficacy from quantitative easing than is supposed.

“Monetary policy” is supposed to relate to money supply, but the execution of monetary policy has focused on reduced interest rates, with (as you’ve seen) the false belief that low rates increase the money supply by stimulating bank lending.

Fiscal policy” refers to taxing and spending. Less taxing and more spending (i.e. deficit spending) stimulates an economy.

So Summers is exactly correct about what would grow the economy, which means he’s in trouble with the Obama administration.

Our conservative-in-liberals’ clothing President, who is in the employ of the rich, has indicated on many occasions, that he wants to do as little as possible to help the middle- and lower-income groups, while fooling them into voting for him.

Remember, Obama is the one who allowed the most regressive tax in US history (FICA) to rise about 25%, fired many thousands of government workers and repeatedly has stumped for reductions in Social Security benefits and other spending that would help the underclasses (his “Grand Bargain.”)

So, I am conflicted. Do I root for someone with a solid history of failure? Or do I root against someone who, unique in Washington, seems to “get it” with regard to deficits? Do we lose in either event or do we win in either event?

Meanwhile, Larry, please accept my apologies.

Ah, maybe not.

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. 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


6 thoughts on “–My humble apologies to Larry Summers. Or not.

  1. QE inflates the value of certain financial assets (socks) and real estate. That’s why it was used. The stock market indexes have gone up as a result. In a certain way this has appeased those whose 401ks were devastated, including retries. Of course it stimulates people into thinking they should noes buy homes or condos.

    QE also benefits the big banks , as you have pointed out. They will be able topmost larger profits.

    It does not,however, significantly increase spending on goods and services and does not lead to increased employment.

    Classically fiscal policy – more government spending, and putting more money into people’s pockets (including govt job programs) – has stimulated the mainstream economy.


  2. “But U.S. banks are not reserve constrained. They are capital constrained.”

    Can you direct me to a missive of yours that explains the difference?



  3. Hey, Rodger. What do you want to bet that Summers has been reading/watching Warren Mosler in the last six months?


  4. Hi Rodger ~ You were right the first time. Leopards don’t change their spots. Summers is just singing a new song in hopes of gaining traction with folks upset by austerity (sequester). Politics. If he gets the job he will only sing songs approved by the 1% and Pete Peterson. Glad you finished with “maybe not.”


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