–The “Extend and Pretend” austerity magic show. How to end debt by borrowing.

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.


The U.S. is Monetarily Sovereign. It has the unlimited ability to create its sovereign currency, the dollar.

Given this unlimited ability, it can pay any debt denominated in dollars. If you sent a legitimate $100 trillion invoice to the U.S. government, it could pay that invoice instantly, with no difficulty.

Contrary to the debt hysteria you may read in the newspapers or hear on TV, debt absolutely is not a burden to a Monetarily Sovereign nation.

By contrast, Spain is monetarily non-sovereign. It does not have the unlimited ability to create its sovereign currency, for one simple reason. It has no sovereign currency. It uses the euro, the supply over which it has no control.

And that is Spain’s big problem. No matter how it twists and turns, its supply of euros is limited and deficient. It’s short of euros. And, it owes more euros than it can pay.

So how can Spain find enough euros to pay its bills? Their amazing solution: It simply borrows more euros. That way, it can satisfy today’s creditors, while assuring the problem will continue to grow.

If you are deeply in debt, and have no adequate source of income, the solution is not further borrowing. You know that. I know that. Spain does not.

Here are excerpts from the Los Angeles Times:

Spain exits bailout program
By Lauren Frayer, January 23, 2014

Spain exited its international bailout program Thursday, amid a tentative economic recovery marred by persistently high unemployment.

The Spanish government heralded the bailout exit as a milestone, but acknowledged more progress was needed in a country with a jobless rate of 26%.

“I look not only at the future but also the present with hope,” Prime Minister Mariano Rajoy told parliament. “Although the unemployment figures in Europe, and in particular some member countries such as Spain, are still unacceptably high, I believe we can say that the worst is over and that we are now on the path to recovery.”

Yes, the worst is over. I am out of a job and owe a million dollars. But I just borrowed two million from gangsters, and I won’t have to pay it back until later. Problem solved.

Europe offered a credit line of up to $137 billion; Spanish banks ended up tapping $56.6 billion of that over the past 18 months.

Thursday’s exit means that Spanish banks will no longer have access to bailout loans. And they must still pay back what they’ve borrowed, with interest, over the next 15 years.

Because Spain’s banks have not solved their underlying economic problems, they will need more help in the future. But they are precluded from getting any more loans. So who is going to back them up? The Spanish government? Puleeeze!

Spain still faces serious problems. Economists say it could be years before jobs return. And there are fears that Spanish banks, buoyed by the bailout loans and improving confidence, are not writing down their bad real-estate debt as swiftly as prescribed.

Does this surprise anyone — except maybe the Spanish people?

“The big game that politicians and bank CEOs are playing is ‘extend and pretend.’ If we pretend that our banks are really healthy, then eventually all the assets underlying things on our balance sheets will regain value, and we won’t actually have to take such big losses,” said Megan Greene, chief economist at Maverick Intelligence in London. “That’s the game everyone in Europe has been trying to play.”

I like that phrase: “Extend and pretend.” It describes the entire eurozone “strategy.” Keep borrowing far into the future, and keep pretending the euro is a viable currency.

Greene said she believed that Spain would eventually need additional aid, if the reality of its banks’ balance sheets came to light.

Of course. Borrowing to cure debt really doesn’t have a proven record of success.

Spain was the cheapest (euro nation) to rescue. Its bailout was unique in that loans were earmarked for financial institutions, not government coffers. However, the rescue money is officially on the Spanish government’s tab, which has helped push up the level of public debt.

And how will that debt be paid? How, indeed.

From El Pais

Foreign investor confidence in the country has been restored, albeit with the jobless rate still unacceptably high at 26 percent.

Foreign investors are happy. They are being paid with borrowed money. Meanwhile, the average people suffer.

The quality of the banks’ assets continues to deteriorate with the non-performing loan ratio moving above 13 percent in November for the first time on record, while the slump in the property market after a decade-long boom that ended around the start of 2008 has yet to fully run its course.

So, again the banks will fail, more austerity will be needed, pressing down on the backs of the poor.

“The government has no plans to increase the VAT rate,” Finance Minister Cristóbal Montoro said. “We already did so in this legislature and what we are hoping for is increased collections as consumption picks up.”

Austerity always demands that ever more money be pulled from the private sector — especially from the poor and what remains of the middle — to feed the insatiable money-hunger of the government and the rich.

The people don’t mean anything; it’s the government and the rich that matter.

The gap between the rich and the rest will continue to widen, as per the plan. It’s all part of the EU and Spain “Extend and Pretend” austerity Magic Show.

Rodger Malcolm Mitchell
Monetary Sovereignty

Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)


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 Monetary Sovereignty

As the federal deficit growth lines drop, we approach recession, which will be cured only when the lines rise. Federal deficit growth is absolutely, positively necessary for economic growth. Period.


One thought on “–The “Extend and Pretend” austerity magic show. How to end debt by borrowing.

  1. Hooray! Spain has “exited the bailout program!”

    TRANSLATION: The Spanish government cannot borrow any more money from the Troika, or from Spanish banks. Therefore the government must now borrow by selling bonds.

    But don’t worry “Foreign investor confidence in the country has been restored.”

    TRANSLATION: The vultures are circling. Spain already has more than $50bn worth of orders for a new 10-year government bond. This means another $50 billion in debt, which means more austerity and “bailouts” (i.e. debt bombs). The austerity will open the door to more privatization, in which the vultures will grab valuable public assets for little or nothing. Spain will continue to be destroyed.

    In southern Spain, three quarters of young people are without work. The corporate media calls this a “recovery.” Even “progressives” claim that austerity is finally “working.” True, things will get much worse before they get worse, but prosperity is just around the corner. Just a few more leeches and the anemia will be cured.

    Last Monday (20 Jan 2014) Spanish police arrested a man in the garage of his house outside Toledo, and grabbed €310,000 in counterfeited notes. The man, 66, had been operating for two years. If you’re going to create money out of thin air (and use it to enslave whole nations) then you had better do it with a computer keyboard. Printing notes is illegal, unless you pass out the notes as loans.

    Corruption, however, is not illegal. The northern city of Burgos (Spain) is $680 million in debt, yet hotel owners have arranged for the city’s people to go another $11 million in debt to convert a street into a tree-lined boulevard. Since the city of Burgos cannot pay this debt, the hotel owners will take private ownership of the boulevard when it is finished. Sweet!


    One bit of amusement comes from up north, in Finland, whose self-righteous government has long enjoyed scolding countries like Spain. Now, because of the euro currency, Finland’s economy has been contracting for the last two years, and its unemployment has been exploding. Nokia had to sell its cell phone business to Microsoft, and today Nokia reported plunging fourth-quarter sales and shrinking profit margins. Prime Minister Jyrki Katainen has vowed to impose more austerity (spending cuts and tax increases), which will lead to more debt and austerity.

    Corporate management is exploiting the situation to crush Finnish workers as never before, saying that if workers accept further cuts in wages, then Finland’s economy will recover by exporting to…ah…wherever. Of course, lower wages will further kill the consumer economy, but so what? This is a “recovery.”


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