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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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:
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
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
Monetary Sovereignty
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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)
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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 
Now we have Tim Geithner telling us the taxpayers made a profit from the financial bailout
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I hope Roger is referring to all types of higher education like trade schools and not just college, since college is not for everyone and somebody has to do the skilled trades work.
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Yes, although as with all advanced education, trade schools need to keep abreast of technology. Machines now do much of the machining.
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The beauty of using debt to impoverish the 99% is that it makes the 99% insist on being saddled with more debt forever. It makes them reject any suggestion that the federal government provide college tuition, or debt relief.
“I have paid on my student loan debt for decades, and now you suggest that students should no longer pay? Why should other people be spared the agony I have had to endure? It’s NOT FAIR!”
I have seen this in reader comments. Any suggestion of debt relief makes readers resentful. It’s like they’re all in a torture chamber, and any suggestion of escape is condemned as “not fair.” Thus, the gap continues to widen. Any narrowing of the gap is “not fair.”
“I have paid the rich all my life! Why shouldn’t you have to pay as well? It’s not fair!”
Thus, the 1% rule the 99% because the 99% insist on it.
By the way, the student loan scam is increasingly global, just like austerity. That’s why there has been a mass privatization wave of schools in China (a nation that is less “communist” than the Koch brothers). Privatization always widens the gap.
In Chile the student loan scam is even worse than in the USA. For many years the people of Chile considered educated to be a right, but when the US installed the genocidal dictator Augusto Pinochet in 1973, Pinochet privatized colleges (i.e. gave them to the rich). Since then, the cost of education in Chile has been the highest in the world, when adjusted for per-capita income.
At one private college (the Universidad del Mar) the profiteering became so out of control that the university had to close down, yet its previous owner continues to collect on student loan debt. And previous students can’t even get their academic records from the university.
On 12 May 2014, Chilean activist Francisco Tapia broke into that university and burned promissory notes representing $500 million worth of student debt. In a five-minute video posted on YouTube, Mr. Tapia told his fellow students, “You don’t have to pay another peso of your student loan debt. We must lose our fear of being thought of as criminals because we’re poor. I am just like you, living a lousy life. I live it day by day. This is my act of love for you.” Francisco Tapia faces up to five years in prison for his stunt. Meanwhile the corrupt owner of the (now-closed) university has vowed to sue each student individually to make them keep paying.
There were only eight universities in Chile when Pinochet privatized higher education. Since then, the number of universities, institutes, and centers for technical learning exploded into the hundreds, because the student loan scam is so profitable. Privately owned universities advertise on television, in newspapers, on the subway, and on billboards. Their ads are as familiar as Coca-Cola’s. Anyone can enroll, and get saddled with student loan debt.
You’d think that college students would be eager to hear about the facts of Monetary Sovereignty. But I see no indication of this.
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Your comment about “fairness” is quite good. The concept is the basis for much right-wing thinking.
“Don’t give to the poor, because it will make them dependent” is just a quasi-plausible excuse for “I had to work for it; why should they get a free ride?”
“Fairness” is a device, used by the .1% to make the 99.9% do the dirty work of the .1%.
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Yes, we see this same “fairness” thing in the slogan, “There is no free lunch.”
If you are not extremely rich, then it is “not fair” for you to ask for any kind of “free lunch,” such as government aid.
This is simply another way the peasants police themselves, in order to sustain the ever-widening gap.
The higher you are on the social ladder, the more your “lunch” is indeed free. When the CEO of a fast food chain collects 230,000 times what the average worker is paid, that is a free lunch. When Wall Street gamblers get continually bailed out with trillions of government dollars, that is a free lunch. When rich people acquire public assets for little or nothing, that is a free lunch. And so on. I can think of endless examples.
Meanwhile average people become poorer every day, which is only right and just, since any alternative would be “unfair.”
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The populace wants the GAP below them widened and the GAP above them narrowed, not realizing that widening the GAP below them provides the rationale for widening the GAP above them.
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== Off topic ==
I want to draw a parallel between MS and men wearing hats.
When did Americans stop wearing hats in public? There are countless claims about this, all of which are debatable. Some people say that the spread of automobiles killed hats. Others say that men stopped wearing hats because men were no longer ashamed of being bald. And so on. The theories are endless, wacky, and all of them are sheer guesses.
Here are the facts: throughout US history, almost all American men and women of all ages and races wore hats in public, even children. Hats started to disappear in January and February 1942, shortly after the USA entered World War II.
Beginning in large cities like LA, Chicago, and New York, young males of draft age made a point of not wearing hats in public, since hats signified their military uniforms, which they wanted to forget when they were home on leave.
By the late 1950s, men’s hats were considered an “old guy” thing, and almost no one under the age of 50 wore them. By 1966, men’s hats were pretty much extinct. Hence the disappearance of hats occurred over a 25-year span.
How do I know all this? Why am I right, and countless other people wrong?
Simple: I did some empirical research. I have studied hundreds (thousands?) of old photos. It’s a hobby of mine to see how places have changed. The photos clearly show the years when American men and women routinely wore hats in public, and when they stopped.
MY POINT…
Most people’s views about culture, society, and politics are sheer guesses. It is the same with their views regarding Monetary Sovereignty. When the average person says, “inflation!” he is merely guessing. He does no empirical research. Indeed he is hostile to empirical facts. (Examples of empirical facts include the charts and graphs that Rodger sometimes includes in his posts.)
The facts are right in front of us, but most people pass their entire lives in a dream state. What they call “facts” are guesses. Their “common sense” is nothing more than an emperor’s-new-clothes style of delusion.
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Guns are expensive. How many poor people do you know that actually own one? If they do own one it is most likely used for hunting people, right Roger?
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Chicago’s South and West Sides are loaded with poor people — and with guns. Every day, these poor people shoot each other, after which there is a march, led by a minister, protesting the murders.
There are several marches, every week. Pretty solid evidence proving: The more guns, the more gun murders.
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We need more people like you Rodger.
The only thing I would change is that instead of having the government do the “helping” – do it yourself.
Free education? Call Rodger.
Free food? Rodger
Free housing? Rodgerino
Free blah..? Rodger
It’s so easy to be a “great” citizen, when what you are giving does not belong to you. I wait for the day when these “great citizens” pull up their sleeves and start giving their time and money to help their neighbors.
Aside from that – how many more professionals do we need when there are no jobs for them?
The liberal solution is patch, patch, patch everything. Some people can’t afford to go to college? Given them cheap loans. Now that prices have gone through the roof because of the same loans, now they want “free” college.
I will sit here to see how the hell you can provide “free” education when you need college professors and administrators. And the last time I checked, Rodger, the don’t work for free. Oh yeah, I forgot, people work for pieces of paper – not the real things they purchase with those useless pieces of paper. For someone with banking background – you are a real joker Rodger.
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Those “useless pieces of paper” are what create jobs. But, if you feel those “pieces of paper” are “useless,” please send me all of yours.
What I propose giving doesn’t belong to you either. It doesn’t belong to anyone. The federal government creates it ad hoc. No charge.
You need to understand the differences between Monetary Sovereignty and monetary non-sovereignty.
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I’d believe if you were a moron off the street. But a banker spewing such non-sense?
I was about to write a response – but there is no point. You know full well what issuing currency will do to it’s value. You know that issuing un-backed currency is fraud.
Quatloosx,
Why don’t you start thinking for yourself and stop believing the nonsense being spread by communists like Castro and Maduro? Inequality? I bet you live MUCH better than many in Mexico, maybe the Mexican government should confiscate all your belongings and “give” then away. You are another one that knows full well that everything you write is pure lies. What’s the point Quatloosx – is someone paying you?
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Intuition is not a good substitute for facts.
You should read: Federal deficit spending doesn’t cause inflation
As for “unbacked” currency, all currency in the history of the world has had the same backing: The full faith and credit of the issuer.
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Such idiocy is exactly why the gap continues to widen, and poverty continues to deepen.
RODGER: Check out these photos of inequality in Mexico. They look fake, but they are not. I’ve been there. I saw it. I saw the same scenes in India and Indonesia. In fact, these scenes occur all over the world. The bottom photo shows São Paulo Brazil.
http://www.konbini.com/en/inspiration/mexicos-segregation-wealth/
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== Off topic ==
[1] VOLUNTARY SLAVES
Lehigh Valley straddles the border between eastern Pennsylvania and western New Jersey. The area was once home to companies like Mack Trucks and Bethlehem Steel, but now consists of gambling casinos and dollar stores.
Lehigh Valley has an online news blog called Lehigh-valley-live. Yesterday a reader from Washington PA sent a brief (250-word) letter to the blog in which he gets many of the facts of Monetary Sovereignty correct, or at least partly correct. He says things like “The United States is a monetarily sovereign nation that could eliminate all its debt whenever it wants to by just printing more money.”
For a moment I thought that maybe Americans were starting to wake up.
Then I saw 28 responses from other readers, all of which attack the first reader. Their staggering stupidity proves once again that average Americans are enslaved because THEY WANT TO BE.
http://www.lehighvalleylive.com/opinion/index.ssf/2014/05/letter_fed_can_print_more_mone.html
[2] APPLES AND ORANGES
Politicians and the corporate media keep the peasants submissive by randomly interchanging the words “federal deficit” and “national debt.”
In one sentence we are doomed by the “federal deficit.” In another sentence we are doomed by the “national debt.” In one sentence the two “perils” are identical. In another sentence they are different.
An example is the article below from the Washington Post, which says that both “perils” could be reduced via “immigration reform,” whatever that means.
It’s all garbage, designed to justify more austerity and the ever-widening gap between the rich and the rest.
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/05/15/one-bipartisan-way-to-reduce-national-debt-immigration-reform/
The UK Telegraph likewise conflates “national debt” with “government deficit.”
http://www.telegraph.co.uk/finance/economics/10849333/Interest-bill-on-UKs-1.27-trillion-debt-to-hit-1bn-a-week.html
So does the UK Mail online. One article says that UK peasants need more austerity because the UK government is now spending £1billion a week on interest in T-securities. The article calls this a “debt bombshell.” (Translation: if the peasants want more equality, they must have more austerity.)
http://www.thisismoney.co.uk/money/news/article-2636745/Government-borrowing-rose-2bn-month-bringing-national-debt-1-27trillion.html
Of course, the UK and US governments do not “spend” at all, since they have no money to begin with. They create money by crediting accounts.
Moreover the UK government does not even create the money for interest payments on the “national debt.” Instead, the Bank of England creates it out of thin air, just as the Fed creates the money to pay interest on T-securities.
Furthermore, a third of outstanding T-securities are owned by the US and UK governments.
Imagine being $17.5 trillion in debt to yourself. Oh the humanity!
By the way, Rodger says that interest on T-securities is a good thing, since it puts money into the economy.
I disagree. That money goes into the financial economy, not the real economy. Since the financial economy is a deadly parasite on the real economy (i.e. we all exist to serve the casino), the stronger the financial economy becomes, the weaker the real economy becomes. Thus, the financial economy continues to set records, while the real economy continues to die.
The magazine US News and World Report also conflates “federal deficit” with “national debt.” An article says we do indeed need more austerity, but not right this minute.
http://www.usnews.com/opinion/economic-intelligence/2014/05/16/too-much-deficit-and-debt-reduction-too-soon-will-wreck-the-recovery
This is the “deficit dove” lie. Deficit doves (e.g. Paul Krugman) are more venomous than deficit hawks, since they pretend to be populists in order to justify more austerity.
Also pernicious are deficit monkeys – that is, MMT fools who claim there is “no proof” that the rich pay their lackeys to impose austerity. I call them monkeys because of their “hear no evil, see no evil, speak no evil” silliness.
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I own (or rather, did own) T-securities, and collected interest, with which I paid bills and saved.
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