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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.
As readers of this blog know, the single biggest economic problem facing America and the world, is the increasing GAP between the rich and the rest.
Over 70% of the (college graduate) students have student loans. They will start their career, if any, with an average student loan balance of $33,000.
Even when adjusted for inflation, it’s about twice as much as 20 years ago. Back then, only 43% of students graduated with student loans.
After decades of red-hot tuition and fee increases, working your way through college in four years, has become a pipedream.
Briefly, this states two problems:
1. The increased cost of college
2. Federal lending rather than giving money, for education.
Though local governments are monetarily non-sovereign, and unlike the federal government, are limited in their ability to pay their bills, still they pay for K-12 education. They understand the need for education.
But K-12 no longer is sufficient in this increasingly sophisticated world. To compete today, America needs college-educated citizens.
In the July, 2010 post titled, “One step toward long-term economic growth: Government offer free college education,” we said:
In SOLUTION FOR THE GAP, I suggested that the long-term solution for unemployment was not for the government to be the “employer of last resort,” as Modern Monetary Theory (aka neo-chartalism) suggests, but rather for the government to be the “educator of first resort.”
That is, the government should pay not only for elementary, middle and high school, but also for college and advanced degrees. Further, I suggest that the government pay a wage for college attendance, to encourage the impoverished who might otherwise have to decide between work and education.
Low skilled jobs are disappearing from the economy. Those without an advanced education will be at an increasing disadvantage. Merely putting people to work in such jobs can indeed address a short-term money problem, but it can exacerbate future economic problems.
Someone earning a living wage as a Walmart greeter, may be less motivated or have less opportunity to attend college, and so forever be relegated to low-paying jobs or increasingly, no job at all.
While many people do not wish to attend, or do not have the aptitude for, college, the government should do everything possible to facilitate college attendance, as a way to prepare for the future economic growth of America.
From the standpoint of America, this makes perfect sense, but from the standpoint of the upper .1% income/power group it is an anathema. The current system, which combines unaffordable and growing college costs, with unpayable and growing student loans, is the perfect vehicle for creating a large and growing servant class for the .1%
It is a guaranteed GAP widener, which is why the “Ten Steps To Prosperity (below), includes these Steps:
Continuing with the Wolf Richter article:
Next year, the Class of 2015 (will be the most indebted ever). Among the reasons for this fiasco: the way colleges are paid liberates them from both free-market and governmental constraints. They can charge whatever they want and get away with it because students can just go ahead and borrow it.
And through the student loan programs, the government is simply aiding and abetting colleges in extracting ever more money from the future lives of their students.
There is not one economic reason — not one — why our Monetarily Sovereign federal government — a government with the unlimited ability to create its own sovereign currency — lends money to its citizens, rather than simply giving them money.
And to make a terrible situation even worse, these loans are far more difficult to discharge in bankruptcy than are other personal loans.
In effect, students are locked into a permanent “debtors prison” of the government’s making.
The entire program of high tuition plus student loans is a disaster based on the BIG LIE, the lie that the federal government’s finances are like personal finances, and that federal spending is unaffordable, unsustainable and will cause Weimar-style hyperinflation.
The problem we face is the absolute fact that the upper .1% income power group, and the politicians — perhaps the least patriotic people on earth — endorse the BIG LIE and create a widening GAP, both of which rely on an economically-ignorant public.
In America, the GAP destroys more middle- and lower-class people than guns, which is why the .1% loves both.
Rodger Malcolm Mitchell
Ten 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. Tax the very rich (.1%) more, with much higher, progressive tax rates on all forms of income. (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.