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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.
Reader “Questioner” sent in this comment:
Canada has a balanced budget and a surplus – will this actually be harmful for their economy since they are Monetarily Sovereign?
The above article includes these comments:
Canada’s Conservative government looks set to comfortably balance its books in 2015 or even sooner, its latest budget showed on Tuesday, with cuts in spending on the public service more than offsetting a series of modest new expenditures.
Finance Minister Jim Flaherty acknowledged the budget would be narrowly balanced this coming year, but said he preferred to have a “nice clean surplus next year”.
The government estimates a bigger-than-expected C$6.4 billion surplus in 2015-16. In the year ending March 31 of this year, the deficit is pegged at C$16.6 billion.
The Conservatives, in power since 2006, plunged into a deep deficit in 2008 as they pumped out stimulus money to deal with the recession after having cut taxes earlier. Previously, the Canadian government had an 11-year string of budget surpluses.
What is a net budget surplus? It is the central government removing more money from the private sector than the government puts back in. This reduces the private sector’s money supply. The private sector is people and businesses. Does anyone really believe it is a good idea to take money from people and businesses? Remember:
Gross Domestic Product = Government Spending + Non-government Spending + Net Exports. By formula, cuts to any of those terms, cuts GDP.
Because a large economy has more money than does a small economy, reducing the money supply makes an economy smaller. This is what the Canadian economists are so proud of.
Notice that when things got tough, the Canadian government ran a “deep deficit” to cure the recession. Why? Because to grow an economy requires growing the money supply. The “deep deficit” worked. It stimulated economic growth.
In fact, the “deep deficit” worked so well, the Canadian government will revert to taking money out of the private sector! Yikes!
But wait, what about that “11-year string of budget surpluses”? Didn’t that reduce the money supply in the Canadian private sector?
There is that one other source of money: Net Exports. For those 11 years (and much more), Canada ran trade surpluses, a positive balance of trade. It’s exports exceeded its imports. Net money was coming in:
Today, Canada no longer is running those surpluses. It has begun to run trade deficits.
Bottom line: Canada’s politicians have decided to turn Canada into an impoverished euro nation. Despite being Monetarily Sovereign, and having the unlimited ability to create its sovereign currency, Canada pretends to be monetarily non-sovereign.
Canada’s politicians spread The Big Lie, that Canada’s finances are like personal finances, and running a surplus (taking money from people and business) is prudent economics.
And the Canadian people, accepting The Big Lie, will suffer greatly, and not understand why.
Rodger Malcolm Mitchell
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. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (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
THE RECESSION CLOCK
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.