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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.
Readers of this blog have read about two fundamental beliefs expressed here:
1. A monetarily non-sovereign government requires net infusions of money from outside its borders, in order to survive and grow long term.
2. The single greatest problem facing the world’s economies is the growing Gap between the rich and the rest. (“Rich” meaning money, wealth and power)
Here are two articles referring to those beliefs:
1. Monetarily non-sovereign governments cannot control the supply of their sovereign currency, because they have no sovereign currency.
The U.S. government and the governments of Canada, China, Australia, Japan et al are Monetarily Sovereign. Being sovereign, they have the unlimited ability to create their own sovereign currencies.
The U.S. never can run short of money with which to pay its bills.
Even if all federal taxes fell to $0 or rose to $999 trillion, neither event would affect the U.S. government’s ability to spend.
By contrast, the governments of Illinois, Cook County, Chicago and the euro nations are monetarily non-sovereign. They have no sovereign currencies. They cannot create money to pay their bills. They can and do run short of money.
The eurozone economy stalled last quarter after 12 months of weak growth, underscoring concerns that the region is mired in a deep rut of high joblessness and weak consumer prices that could worsen amid tension in Ukraine and the Middle East.
Gross domestic product in the 18-member currency bloc was flat in the second quarter compared with the first, (with) 0.2 per cent growth in annualised terms, down from the first quarter’s 0.8 per cent pace. European equity markets fell and safe-haven government bond markets rallied early Thursday as national figures trickled out in advance of the region-wide figures.
The weak recovery leaves the eurozone lagging other advanced economies such as the US and the UK, which have experienced firmer, albeit uneven, expansions. Those economies have recouped the output lost in the aftermath of the global financial crisis in 2008 and 2009.
The eurozone has yet to do so and remains 2.4 per cent below its pre-crisis peak, leaving it vulnerable to outside shocks from Ukraine, Russia and elsewhere that could tip it back into recession.
Because the euro nations voluntarily surrendered their former sovereign currencies, they now cannot create money. Their economic growth demands that they all have more exports than imports — a practical impossibility. They have no way to add money to their economies and to lift themselves out of recession.
The report will likely put added pressure on the European Central Bank (ECB) to do more to spur growth and boost inflation, which at 0.4 per cent is far below the bank’s target of just under 2 per cent. In June, the ECB cut its key interest rates and introduced a new program of cheap loans to banks that are intended to be passed on to businesses.
The ECB’s approach to money shortages is to lend money. But loans must be repaid, and monetarily non-sovereign governments have no ability to make repayment. The loans merely drive the nations deeper into debt. (Visualize the result of lending money to a person who never will have income.)
France’s finance minister Michel Sapin wrote: “The truth is that, as a direct consequence of sluggish growth and insufficient inflation, France will not meet its public deficit target this year despite a complete control of spending,”
The key words are, “deficit target” and “control of spending.” A deficit target (i.e. a reduced deficit target) requires increased taxes and/or reduced government spending — both of which are recessionary.
Gross Domestic Product = Government Spending + Non-government spending + Net Exports
But taxes reduce non-government spending, so by formula, reduced deficits always must reduce GDP (barring increases in Net Exports). So the fixation on deficit reductions absolutely, positively must be recessionary.
The US returned to strong growth in the second quarter after a disappointing, weather-induced contraction during first three months of the year, while China has resorted to a variety of stimulus measures to shore up flagging growth, registering a pick-up in its year-to-year expansion to 7.5 per cent in the second quarter from 7.4 per cent in the first.
The U.S. and China, being Monetarily Sovereign have the unlimited ability to stimulate their economies (though even in the U.S. there is a fixation on deficits — an unnecessary fixation — that has slowed the recovery.)
2. The Gap between the rich and the rest
Chicago Tribune, 8/12/14
The U.S. has regained the 8.7 million jobs lost in the recession, but the average wage has dropped 23 percent, according to a U.S. Conference of Mayors study released today.
The report, “U.S. Metro Economies: Income and Wage Gaps Across the U.S.,” also found a widening income gap between the rich and poor, with the highest earning 20 percent of households gaining the most.
“While the economy is picking up steam, income inequality and wage gaps are an alarming trend,” said Kevin Johnson, conference president and mayor of Sacramento, Calif. The organization expects the trend to continue.
The average annual wage of jobs lost in 2008-09 was $61,637 nationally, while the average wage of jobs added through the second quarter of this year was $47,171.
The Gap between the rich and the rest is exacerbated by:
*Taxes impacting the lower income groups: FICA, sales taxes, gas taxes real estate taxes, Social Security taxes and higher taxes on salaries vs. dividends and capital gains.
*Insufficient and/or reduced benefits for Social Security, unemployment, SNAP, school lunches, aids to education, aids to housing
*Reduced wages for new or existing jobs.
The first three of the above factors are caused by austerity laws specifically designed to widen the Gap by cutting the federal deficit.
Congress and the President, having been bribed by the rich (via campaign contributions and promises of lucrative employment later) repeatedly pass the laws that widen the Gap.
Their pretext is that in some unknown way, the federal government will find the federal deficit so burdensome it could run out of money to pay its bills — a financial impossibility.
The fourth factor is a result of recessions (caused by austerity), which force desperate people to accept low-paying jobs, together with inadequate support for education and training, which would allow more people to create businesses or take sophisticated jobs.
The bottom line:
The rich care only about widening the Gap, for it is the Gap than makes them rich. (If there were no gap, no one would be rich, and the wider the Gap, the richer they are.
The rich bribe the politicians to pass laws that will widen the Gap. They bribe the media (via ownership) to publish articles praising deficit reduction, the result of which is a widening of the Gap.
And they bribe university economists (via contributions to university foundations) to provide “scientific” support for federal austerity.
Together, these are known as “The Big Lie.”
And, as you can see, the bribes and The Big Lie are working.
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.