Twitter: @rodgermitchell; Search #monetarysovereignty
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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, and the motive is the gap.
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What parts of the following two stories are “good news” and what parts are “bad news”?
First, the “General Motors” story:
U.S. Lost $11.2 Billion in GM Bailout, TARP Report Says
By Tim Higgins Apr 30, 2014The total includes $826 million that the Treasury wrote off in March for its remaining claim in old GM. In December, the government had put the loss at about $10.5 billion on its $49.5 billion investment.
The Treasury sold its remaining shares in GM in December. While the government lost money, its exit paved the way for an influx of fresh investor capital.
Warren Buffett’s Berkshire Hathaway Inc. and State Street Corp. were among investors to buy into GM. J. Kyle Bass’s Hayman Capital Management LP also took a stake in GM.
And now, the “offshore” story:
IRS Chief Says It Can’t End Companies’ Offshore Tax Deals
By Richard Rubin Apr 30, 2014The U.S. Internal Revenue Service probably can’t take regulatory action to stop companies from lowering tax bills through deals that put their legal addresses outside the country, IRS Commissioner John Koskinen said.
Pfizer Inc. (PFE) this week proposed the biggest such deal yet, a $98.7 billion takeover of AstraZeneca Plc (AZN) that would move the largest U.S. drugmaker to the U.K. for tax purposes and allow it to pay a lower tax rate.
Pfizer would join at least 19 other companies making or contemplating similar transactions, including Chiquita Brands International (CQB) Inc. and Omnicom Group (OMC) Inc., the largest U.S. advertising firm.
Cracking down on deals in which U.S. companies move their legal address outside the country to pay lower taxes is a priority for the Obama administration, a Treasury Department official said yesterday.
The official, who requested anonymity to discuss the administration’s plans, said the transactions emphasize the need for a revision of the U.S. tax code that includes reducing rates. Earlier this year, the administration proposed making the deals, known as inversions, harder to accomplish.
The U.K.’s rate is 21 percent and will decline to 20 percent next year, with no tax on active businesses outside the country.
In contrast, the top U.S. corporate rate is 35 percent. Companies also must pay U.S. taxes when they repatriate foreign profits, after receiving credits for foreign taxes.
(Current U.S.) law prevents companies from receiving the tax benefit of an overseas merger if their existing shareholders still owned 80 percent or more of the company’s stock after the deal.
In his budget plan released this year, President Barack Obama proposed lowering the 80 percent threshold to 50 percent. That plan would raise $17 billion for the U.S. Treasury over the next decade.
Some members of Congress, including Democratic Senator Jeanne Shaheen of New Hampshire, have introduced bills that would tax inverted companies as domestic if they are managed and controlled in the U.S.
So what is the good news and what is the bad news? Regular readers of this blog know the right answers. The answers by those who do not understand Monetary Sovereignty, will be wrong.
Everything that subtracts dollars from the U.S. private sector is economically bad news. Conversely, everything that adds dollars to the private sector is good news.
Dollars going to or from the federal government are irrelevant, since the government, being Monetarily Sovereign, has the unlimited ability to create dollars and neither needs nor uses incoming dollars.
So, among the good news phrases are:
*”U.S. Lost $11.2 Billion in GM Bailout” ($11.2 billion added to the U.S. economy)
*”While the government lost money . . .” (i.e. the economy gained money)
*”IRS Chief Says It Can’t End Companies’ Offshore Tax Deals” (The IRS will take fewer dollars from U.S. corporations, i.e. from the U.S. economy.)
*”. . . move the largest U.S. drugmaker to the U.K. for tax purposes and allow it to pay a lower tax rate.” (More dollars will remain in the U.S. economy).
*” . . . includes reducing rates . . . ” [Lower taxes strengthen the economy.]
.
Among the bad news phrases are:
*”The Treasury sold its remaining shares in GM in December.” (Money was deducted from the private sector)
*”Cracking down on deals in which U.S. companies move their legal address outside the country to pay lower taxes is a priority for the Obama administration . . .” (Obama wants to reduce the U.S money supply.)
*”The U.K.’s rate is 21 percent and will decline to 20 percent next year, with no tax on active businesses outside the country. In contrast, the top U.S. corporate rate is 35 percent. Companies also must pay U.S. taxes when they repatriate foreign profits, after receiving credits for foreign taxes.” (Not only does the U.S. government take more from the private sector than do other governments, but these taxes make U.S. industry less competitive in world markets).
*”President Barack Obama proposed lowering the 80 percent threshold to 50 percent. That plan would raise $17 billion for the U.S. Treasury over the next decade.” (The U.S. economy would lose $17 billion.)
*” . . . the top U.S. corporate rate is 35 percent . . . ” (The highest in the world, taking the most money out of the U.S. economy.)
*”. . . members of Congress . . . have introduced bills that would tax inverted companies as domestic if they are managed and controlled in the U.S.” (More money would be taken from the U.S. economy).
Bottom line: The next time you read or hear that the federal government “lost” money, that probably is good news, particularly if the private sector made money. But if the federal government “made” money, that’s bad.
[The situation is different for state and local governments, which are not Monetarily Sovereign.]
Rodger Malcolm Mitchell
Monetary Sovereignty
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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)
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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.
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Rodger says, “Everything that subtracts dollars from the U.S. private sector is economically bad news. Conversely, everything that adds dollars to the private sector is good news.”
That would be true if the financial economy were the same as the real economy. In reality, adding dollars to the private sector can help or hurt the real economy.
Dollars help the real economy if they actually go to the real economy. Dollars hurt the real economy if they go mainly to the rich, who use the dollars to gamble in the markets. The financial economy is a deadly parasite on the real economy. When dollars go mainly to the rich (e.g. Wall Street bailouts, zillion-dollar contracts for weapons makers, and so on) they feed the parasite, and help maintain the depression. In that case, the more the US government spends, the more it worsens the depression. It’s a question of where the dollars go to.
Therefore, everything that adds dollars to the private sector is good news…as long as the dollars stay in the real economy. Everything that adds dollars to the private FINANCIAL sector is bad news.
I would rephrase Rodger’s sentences thus…
“Everything that widens the gap is bad news for the real economy. Everything that narrows the gap is good news for the real economy.”
The gap means not only inequality, but the supremacy of the financial economy over the real economy. The latter aspect is what will destroy the USA. The casino mind-set is the rot from within. Everyone existing to serve the useless casino. Everything geared to maintaining the speculation in tulip bulbs.
I suspect that this same process is what destroyed the Roman Empire. Rich people using their money to buy politicians, and to gamble in various markets, while the real economy was left to rot.
I call it “financialization.” Or alternately the “cabbage patch syndrome.” Paper profits at the expense of civilization.
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I buy your concept. However, dollars going from U.S. corporations to the federal government represent a loss to the overall economy for several reasons.
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Aren’t corporations just people?
I mean, do corporations breath? Do they eat? Do they take their families for a vacation? Do they drive? Do they live in a home?
Isn’t wealth an insurance policy for future PRODUCTION?
Money may buy politicians, but only people can create that future production. Without that production, the rich/wealthy are the same as everyone else.
The interesting piece is that the US has been doubling the money supply every few years – where is the wealth?
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[1] “Money may buy politicians, but only people can create that future production. Without that production, the rich/wealthy are the same as everyone else.”
>> The rich always need slaves to bring them food and take out their trash. Therefore the rich always allow some slaves to survive. And since the slaves never catch on, the game never ends.
[2] “The interesting piece is that the US has been doubling the money supply every few years – where is the wealth?”
>>The US government is actually decreasing the money supply (in the real economy) via austerity. Average people are short of money. That’s why we are stuck in a depression that is intentional and gratuitous. The purpose of austerity and economic depressions is to widen the gap between the rich and the rest.
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I agree Rodger, but I still think some clarification is warranted.
You say, “Dollars going from U.S. corporations to the federal government represent a loss to the overall economy for several reasons.”
I say that confusion arises if we use terms like “overall economy,” since it conceals the difference between the financial economy and the real economy. Because of this difference, government “spending” can widen or narrow the gap, depending on which economy the money goes into.
The financial economy (i.e. Wall Street and “the markets”) is a lethal parasite on the real economy, and the gap between the two economies keeps widening, just like the gap between rich and poor. There is inequality between individuals, and between the two economies. Just as the poor exist to serve the rich, so does not real economy exist to serve the financial economy. Or so it has been since the 1990s.
The financial economy is a deadly cancer. Government money is toxic if it mainly feeds the cancer. Government money is healthy if it reduces the cancer by going to the real economy, or by narrowing the gap between the two economies. The trillions of dollars then went to Wall Street bailouts were toxic, since they fed the cancer, and widened the gap.
All government spending and taxing does one of three things: it widens the gap, narrows the gap, or sustains the gap in its current state. The status of the gap depends on where the money is spent, and where it is taxed from. After World War II, government spending narrowed the gap, thereby creating an American middle class. Today government spending and taxing widens the gap, on net balance. This is done via austerity, and by payouts to the rich and to Wall Street.
Any dollars that go from the REAL economy to the federal government (e.g. taxes and tariffs) are a loss to the real economy. However the REAL economy’s losses are the FINANCIAL economy’s gains. For example, when austerity depresses the real economy, the masses submit to privatization; even beg for it. Rich people buy public assets for a tiny fraction of their worth, and then use those assets as gambling chips, thereby widening the gap between rich and poor, and between the two economies.
Put another way, the loss of dollars from the private REAL economy is bad news for the 99%, but good news for the 1%, since it widens the gap. Conversely, the loss of dollars from the private FINANCIAL economy is good news for the 99%, since it narrows the gap.
Therefore, should we tax the financial sector in order to narrow the gap, and stop feeding the cancer? Possibly. What if taxes on speculation were so high that speculation became unprofitable? Wouldn’t the rich be forced to once again seek their profits by developing the real economy? Wouldn’t they be forced to again become industrial capitalists, rather than financial capitalists? This might (I say MIGHT) be a step in the right direction. Or maybe not. Certainly the best option is not to tax, but to increase deficit spending, as long as the money goes to the real economy, and not to the cancer.
Of course there should be no federal taxes at all on the real economy. No gasoline taxes, FICA taxes, income taxes, or any other taxes. There should be no dollars of any kind flowing from the real economy to the federal government. None.
I’m saying that I would modify your original assertion by a couple of words…
ORIGINAL
Everything that subtracts dollars from the U.S. private sector is economically bad news. Conversely, everything that adds dollars to the private sector is good news.
MODIFIED
Everything that subtracts dollars from the private real economy is bad news for the 99%. Conversely, everything that adds dollars to the private real economy is good news for the 99%.
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Hoooorrrraaaayyyy!!!!!!!!!!!!!!!! You made my weekend.
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My take on wealth is that it is really knowledge and knowhow. Doubling the money supply doesn’t produce real wealth. Real wealth doubles with scientific understanding and breakthroughs which leads technology which leads mass production which leads society. Interestingly, financial wealth is something people want to enlarge, and science, especially electronics, is making everything lighter, smaller and more powerful.
I’d like to see the money world unified with the scientific world. Currency is primarily 90% stored electric current, but that’s where it stops. If ever there was a way that currency could be backed by science, you would see a dollar that could buy a week’s worth of groceries.
But that would mean the end of the Gap and mass suppression. Our monetarily specialized, sociopathic suppressors couldn’t tolerate our success.
They’re winning, but only for the moment.
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While I agree with Rodger, it must be pointed out that what is good for the economy as a whole might be inherently unfair. For example, in http://en.wikipedia.org/wiki/Solyndra we read in the first paragraph that Solyndra cost taxpayers $500M. Of course, it did not cost taxpayers anything, and the economy benefitted from this.
This is not to say that it was fair to give Solyndra the money, while another similar company received nothing. It is understandable that some people are upset or jealous. Separating the fairness aspect with what is better for the economy is one of the challenges of understanding Monetary Sovereignty.
To Rodger’s credit, his nine steps to prosperity are a model in fairness.
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This week’s This Week In Crazy
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