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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.
It’s common knowledge that:
1. Japan’s economic growth is too low, and
2. Its debt is too high, and
3. Japan can’t stimulate its economy by “printing” money, since that would cause inflation or hyperinflation.
Japan’s debt looks like this: 1,000,000,000,000,000 yen
John Schwartz — New York Times — 11 Aug 2013
A quadrillion is a million billion. Measuring any currency in quadrillions brings to mind the hyperinflation of Germany between the wars, or Zimbabwe in the last decade.
Clearly, with a debt that high, Japan must be teetering on the edge of hyper-inflation. True?
Not exactly hyper-inflation. Is this a problem?
First, a quick backstory: Deflation is said to be bad for an economy, because it encourages people not to buy.
Today, they wait for prices to fall tomorrow, then tomorrow, they wait for prices to fall the next day. This continual waiting for prices to fall inhibits growth in Gross Domestic Product.
(Would you be more or less likely to buy a house today, if you expected house prices to be lower next month?)
So nations try for a small amount of inflation — usually in the neighborhood of 2%-3% — to stimulate buying today, but not so high as to be an excessive burden.
Inflation generally is micromanaged via interest rates. The Value of money (inflation) is in part, based on Supply and Demand. Demand is, in part, based on Risk and Reward, and the Reward for owning money is interest.
The higher the interest, the greater the Demand for money (i.e. accounts that pay interest), so raising interest rates increases the Value of money. When central banks sense inflation may rise too high, they raise interest rates to increase Demand, which increases the Value of money, thus fighting inflation.
So, Japan’s inflation, after years of deflation, might be a bit higher than desired — a situation that easily could be modified by raising interest rates.
But that relatively small amount of easily-modified inflation is far less a problem than is slow economic growth.
Japan’s Economy Shrinks the Most Since 2011 Quake on Tax
By Keiko Ujikane Aug 12, 2014 9:56 PM CT Bloomberg
Japan’s economy contracted the most since the record earthquake three years ago as consumption and investment plunged after an April sales-tax increase aimed at curbing the world’s biggest debt burden.
Gross domestic product shrank an annualized 6.8 percent in the three months through June, the Cabinet Office said.
Household consumption plummeted at an annualized pace of 19.2 percent from the previous quarter, while private investment sank 9.7 percent, highlighting the damage to demand by the 3 percentage point increase in the levy.
A bit more backstory: Central Government Deficit = Economy’s Income + Balance of Payments This means, the net (after taxes) dollars created by the central government go into the nation’s economy or go abroad.
By definition, a growing economy requires a growing supply of money: Gross Domestic Product = Government Spending + Non-government Spending + Net Exports
This equation merely says that GDP is a money measure, and the less money available in an economy, the less GDP can grow.
But, central government taxes remove money from the economy, and sales taxes are among the worst kind of taxes, because they directly take money from consumers, who then are forced to spend less (Non-government Spending).
Japan’s government is Monetarily Sovereign. It has the unlimited ability to create it’s sovereign currency, the yen. It never can run short of yen to pay its bills.
The only constraint on yen creation is inflation, which can be controlled by interest rates.
So when Japan tries to stimulate its economy via increased government spending, while at the same time, increasing sales taxes, it is, in essence, giving the anemic patient a blood transfusion, while at the same time, applying leeches.
Given its absolute control over what is a moderate inflation, you may find it difficult to understand why Japan has applied leeches to its anemic economy — other than the following speculation:
Sales taxes are highly regressive, falling primarily on the lower and middle income groups. For that reason, sales taxes widen the Gap between the rich and the rest.
The Gap is what makes people rich. Without the gap, no one would be rich, and the wider the Gap, the richer they are. So the rich want, more than anything, for the Gap to widen.
Japan’s politicians, like American politicians and indeed, politicians the world over, are bribed by the rich (via campaign contributions and promises of lucrative employment later), to widen that Gap.
From a purely economics standpoint, there is no logical reason for Japan to have increased its sales taxes. They long ago proved the debt is no problem. The data is right there in front of our eyes.
But the real data is the Gap, and that is what the Japanese rich have bought.
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. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here)
10. Increase federal spending on the myriad initiatives that benefit America’s 99% (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 growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.