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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, and the motive is the gap.
Some people claim economics isn’t a real science, but rather more of a “rule-of-thumb,” “by-guess-and-by-golly,” “my intuition is better than your intuition, because I came from a famous school” game. Let’s see if we can prove them wrong.
Look at this graph produced by the Board of Governors of the Federal Reserve System, one of the most authoritative sources of economic data in America:
Here is an close-up of the most recent official recession:
Looking at these two graphs, particularly the 2nd one, when would you say the most recent recession began and ended?
You might say it began at the start of the first quarter of 2008, and ended in the 2nd quarter, 2009. Think again.
Economic statistician Julius Shiskin suggested several rules of thumb for defining a recession, one of which was two down consecutive quarters of GDP. Some economists prefer a definition of a 1.5% rise in unemployment within 12 months.
In the United Kingdom, recessions are generally defined as two consecutive quarters of negative economic growth, as measured by the seasonal adjusted quarter-on-quarter figures for real GDP.
The exact same recession definition applies for all member states of the European Union.
But the Fed graph includes none of those rather specific measures. No, the Fed relies on the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER).
(Yes, there is an entire Committee devoted to nothing more than dating what they call “business cycles.” Yes, there is nothing cyclical about recessions. But, why quibble about exact terminology in a science?)
This is the official definition determined by that eminent Committee:
The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
“Significant decline” (What is “significant”?)
“Economic activity” (What activity?)
“Spread across the economy” (How “spread”?)
“More than a few months” (What is “few”?)
“Normally visible” (Not always?)
And some unspecified combination of GDP, real income, employment, industrial production and sales.
So there you have it. The “science” of economics has produced its detailed, accurate definition of a key event in any economy.
You now have absolute proof that economics not only is a real science, but that economists can be trusted to know what they are talking about, just like real scientists. Perhaps there is a lesson for all of us. Economics is like religion: The fewer facts we have, the more certain we are.
I understand that next year, the NBER plans to refine the process to make it even more rigorous. They’ll flip a coin.
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.