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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.
Let’s say you want to cook your food by building a bonfire on the rug in the middle of your dining room. But you know that this could burn the house down.
How would you solve the problem?
You could coat all your walls with fireproofing material. You could trade your wooden furniture for steel furniture. You could put bricks between the fire and the rug.
You could stash a few dozen fire extinguishers all around, within easy reach. You could tell the fire department to be on alert. You even could close all the windows and doors to deprive a spreading fire of oxygen.
You could try any number of crazy solutions.
Or, you simply could forget about the stupid bonfire, and cook your food on the kitchen stove.
Because the euro deprives euro nations of their most valuable asset — their Monetary Sovereignty, they have have lost control over their money supplies, so have run short of money to sustain, much less to grow, their economies.
With bonfires roaring in the euro nations’ dining rooms, the EU and ECB twist and turn and pretend to try in every possible way, to save a truly horrible idea.
(In a June 2005 speech, I said, “Because of the Euro, no euro nation can control its own money supply. The Euro is the worst economic idea since the recession-era, Smoot-Hawley Tariff. The economies of European nations are doomed by the euro.”)
Now we have the next bit of ECB twisting and turning and “problem solving”:
The European Central Bank (ECB) took the unprecedented step on Thursday of declaring a negative interest rate for deposits, in effect charging banks to park money with the ECB.
The move was part of a series of measures to combat the euro zone’s growth-sapping disinflation.
No, it isn’t disinflation that saps the euro zone’s growth. It’s the euro that saps the euro zone’s growth.
At its June monetary policy meeting, the ECB cut the rate on its deposit facility for banks to minus 0.10 percent, from 0 percent. This is the first time a major global central bank has moved rates into negative territory.
ECB President Mario Draghi (said,) “The measures will contribute to a return of inflation rates to levels closer to 2 percent.”
The ECB lends to banks at low interest rates, in order to encourage them to lend to households and non-financial corporations.
As usual, the ECB has everything bass-ackwards. Banks are failing to lend, because households and corporations can’t or won’t borrow — not because interest rates are high (they already are low), but because the economy is so bad and the future looks worse.
Businesses and individuals borrow in anticipation of future income. But when the economy is dropping like a boulder, no one can count on enough future income to warrant borrowing — not the borrower and not the lender. No one.
Until now, the EU’s favorite “solution” to the euro disaster has been to lend euros to insolvent euro nations — nations that, being monetarily non-sovereign, have no means by which to pay the euros back.
So when the debts come due, the EU:
1. Criticizes the euro nations for being profligate and wastrel
2. Demands that spending be cut ever more (thereby starving the lower 99.9% income group and further destroying the infrastructure)
3. Lending the “profligates and wastrels” even more unpayable euros, thereby creating ever greater indebtedness and dependency.
Then the process repeats.
There are two, and only two, solutions to the euro problem:
1. The euro nations return to Monetary Sovereignty by re-adopting their own sovereign currencies
2. The EU joins politically (like a United States of Europe), in which the EU gives, not lends, euros to euro nations as needed — just as the U.S. government gives dollars to our monetarily non-sovereign states (by deficit spending).
Don’t imagine for one minute, that every single economist in the EU and the ECB is so stupid, they cannot see the folly of the euro. If you can see it, and I can see it, they can see it.
So, why do they do it?
Quite simple: They are paid to do it by the upper .1% income group to widen the income/power GAP between the rich and the rest.
The corollaries in America are the Tea and Libertarian Parties, both of which insist on “smaller government” — code for reduced spending that would have benefited the 99.9% and reduced taxes on the upper .1%.
The euro is a powerful weapon against the middle- and lower classes, turning the euro nations into slave nations, at the pleasure of the rich.
What’s happening in Europe is a prelude to what will happen in America as the “small government, anti-deficit, pro-rich” crowd widens the GAP between the rich and the rest, with cuts in the spending that benefits the populace and reductions in the taxes on the wealthy.
The house is afire in Europe, and some embers are glowing on the American rug.
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.