Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
●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, and the motive is the gap.
According to Bloomberg’s Ian Katz, things are looking great:
Obama’s Shrinking Budget Deficits Silence Foreign Fiscal Critics
By Ian Katz Apr 13, 2014
The Congressional Budget Office is projecting the 2014 deficit will be the lowest in six years and down more than 60 percent from the record $1.4 trillion in 2009. With the annual April 15 tax filing deadline looming, the U.S. has received about $80 billion more in income taxes this fiscal year than it had 12 months earlier.
Translation: Whoopie! That’s an additional $80 billion removed from the economy.
The Treasury’s coffers are swelling as the almost five-year economic expansion gains momentum, generating more corporate and personal income-tax revenue and reducing spending on social services. Stronger growth, in turn, will depend less on government spending to fuel growth than it has in the past.
Translation: Never mind that the U.S. Treasury has no “coffers.” (We all should write to Bloomberg’s Mr. Katz, and ask him, “Exactly how much money is in the Treasury’s ‘coffers’?”)
GDP = Federal Spending + Non-federal Spending – Net Imports. With “more corporate and personal income-tax revenue and reducing spending on social services,” where will the dollars come from the grow the economy? Don’t ask.
Corporate tax revenue may climb further as accelerating growth and declining unemployment boost sales and earnings.
Translation: More dollars will be pulled out of the economy.
(Last October) IMF Managing Director Christine Lagarde warned that failure to lift the (U.S.) debt limit risked triggering a global recession. The administration of Barack Obama and Republicans in Congress eventually agreed to end the 16-day shutdown and suspended the $16.7 trillion limit.
Translation: Er, uh, see it’s like this: Debt and deficits are bad and should be reduced. But failure to allow for more deficits and debt risks “triggering a global recession.” Perfectly illogical.
Now, Michael Darda, chief economist at MKM Partners LLC in Stamford, Connecticut, estimates the U.S. deficit fell to 2.9 percent of gross domestic product in the first quarter from a peak of more than 10 percent in 2009.
Among the reasons, he said in an April 11 note: “a sustained, albeit moderate, economic recovery” and the 2013 automatic spending cuts and tax increases known as sequestration.
Translation: As everyone knows, spending cuts and tax increases grow the economy. If we could cut spending to $0, and increase taxes to 100%, that would grow the economy even faster.
The deficit will shrink to $514 billion this year from $680 billion in 2013, according to the CBO, After that, the deficit will start rising every year, reaching $1 trillion by 2022.
The increase will be driven by “dramatically” rising Medicare and Social Security payments needed to care for an aging society, said Jersey of Credit Suisse.
Translation: To keep filling the non-existent Treasury “coffers,” Medicare and Social Security benefits will need to be reduced — and reduced, and reduced — until those non-existent “coffers” are full. But, of course, since there are no “coffers,” and so we can’t know how much is in them, we never can know how much money needs to flow from the private sector to the Treasury.
The only solution is to keep cutting the private money supply until there is none left.
For now, a slower pace of decline in the budget deficit will provide a tonic for the economy because fiscal “drag” — the contractionary effect of reduced fiscal stimulus — is abating, says Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.
“If the projected declines over the next couple of years were larger as a percentage of GDP, they would be giving rise to more fears about fiscal drag,” he said.
Translation: Its good that the deficit, which we are glad to see decline, will decline less, because the decline causes fiscal drag. In short, we want “fiscal drag” (to fill the Treasury’s “coffers”), but we are glad there will be less fiscal drag.
(Treasury Secretary Jacob J.) Lew, in his April 11 statement, said the U.S. expansion “is expected to strengthen further this year as private-sector demand increases, the fiscal drag lessens, and household balance sheets and the housing market continue to improve.”
Translation: It’s kind of like magic. We cut deficits, which puts fewer dollars into the economy. Having fewer dollars causes the private sector to spend more. This makes fiscal drag lessen and the housing market improve.
If we did the opposite, that is, add more dollars to the economy, the private sector would spend less.
It’s all so simple, really. Ask the writer, Mr. Katz.
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
Vertical gray bars mark recessions.
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.