–Will beat-down Greece become the leader of Europe?

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Mitchell’s laws:
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The more federal budgets are cut and taxes increased, the weaker an economy becomes. .
●Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.
●Austerity is the government’s method for widening the gap between rich and poor.
●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.
●Everything in economics devolves to motive, and the motive is the Gap.
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“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.” (Rodger Malcolm Mitchell, speech at UMKC, June 5, 2005)

Will beat-down Greece become the leader of Europe? The opportunity is there. They have taken the first step.

Syriza Rides Anti-Austerity Wave to Decisive Victory in Greece
By Eleni Chrepa and Marcus Bensasson Jan 25, 2015

Alexis Tsipras’s Syriza brushed aside Prime Minister Antonis Samaras’s party to record a decisive victory in Greece’s elections, after riding a public backlash against years of budget cuts demanded by international creditors.

Even with a razor-thin majority or in a fragile coalition, the result still hands Tsipras, 40, a clear mandate to confront Greece’s program of austerity imposed in return for pledges of 240 billion euros ($269 billion) in aid since May 2010.

The challenge for him now is to strike a balance between keeping his election pledges including a writedown of Greek debt and avoiding what Samaras repeatedly warned was the risk of an accidental exit from the euro.

No, the risk is staying with the euro, which demands a continuing austerity — an austerity that has not worked and cannot work, simply because national deficit cuts never have, and never will, grow an economy.

Very simply, state deficits increase a nation’s money supply, and a growing economy requires a growing supply of money. Austerity “helps” an economy the same way applying leeches “helps” anemia. (This is a lesson America has yet to learn.)

“The Greek people punished New Democracy for governing in the petty manner of the old regime’s political parties,” Aristides Hatzis, an associate professor of law and economics at the University of Athens, said by phone.

“Most Greeks voting Syriza don’t expect a spectacular change but a marginal one. A marginal one would be significant for them.”

In other words, “We economists screwed up big time. Austerity has been a total disaster. But please don’t make any big changes.” That would be embarrassing for us.

“Overwhelmingly the Greek people voted against austerity policies,” the (Syriza)party said. “This result can be the first step for progressive developments throughout Europe.

The government will implement its political program addressing the humanitarian crisis and begin the real negotiation with our European partners.”

This is Greece’s opportunity to rid itself of the bloodsucking euro, a program that stole Greece’s Monetary Sovereignty and made Greece subject to the whims of Germany and the rest of Europe.

If Greece fails, whether by timidity or ignorance, to take advantage of this opportunity, the nation will continue to slide ever deeper into depression.

Then, their European masters will claim, “See? More and more austerity is necessary,” (i.e. more and more suffering is necessary).

Greece’s collapse is officially worse than the US Great Depression

The Greek economy has been through hell over the last few years. Unemployment is an atrocious 27%. And roughly 25% of the economy has been destroyed since the peak in late 2007.

That collapse in economic output puts the Greek recession right up there with the worst depressions in recent memory.

At its trough in the first quarter of 2014—which was revised lower in today’s report—the decline in Greek GDP was roughly 33% from the peak.

That’s actually worse than the US peak-to-trough GDP decline of 27% between 1929 and 1933, during the most acute phase of the Great Depression.

monetary sovereignty

A “marginal” change (whatever that means) is not what this disaster needs. A bit less of the austerity poison will not end the suffering.

A monetarily non-sovereign government can survive long term only if it has a positive balance of payments. Like a business or an individual (which are monetarily non-sovereign), more money must come in than goes out.

Net borrowing is not sustainable for an entity that does not have the unlimited power to create its own currency.
Greece must return to Monetary Sovereignty. It must re-adopt its own sovereign currency. Greece must regain control over its money supply.

Let us pray that Greece’s leaders have the knowledge, the honesty and the courage to throw off its leech creditors, give the finger to those who wish to keep it in bondage, and save the nation.

A prediction: Within two years of re-adopting its own sovereign currency, Greece will have a more viable economy than that of any euro nation.

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. (Refer to this.)
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 and here)
10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

The Ten Steps will add dollars to the economy, stimulate the economy, and narrow the income/wealth/power Gap between the rich and the rest.
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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.
1. A growing economy requires a growing supply of dollars (GDP=Federal Spending + Non-federal Spending + Net Exports)
2. All deficit spending grows the supply of dollars
3. The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
4. The limit to non-federal deficit spending is the ability to borrow.

THE RECESSION CLOCK
Monetary Sovereignty

Monetary Sovereignty

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.

#MONETARYSOVEREIGNTY

Published by Rodger Malcolm Mitchell

MBA Northwestern, business turnaround expert, economist

Published

39 thoughts on “–Will beat-down Greece become the leader of Europe?”

      1. Nope. I need no more proof that austerity has been a disaster and will be a disaster, as long as it continues.

        Not sure why the Greeks would hate leftist movements, since it’s the right wing that has brought them austerity.

        The real question is not left wing vs. right wing. The real question is Monetary Sovereignty vs. monetary non-sovereignty.

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  2. Prediction…

    The Greeks who are stubborn to keep their savings in banks, those who keep their savings in local currency will lose everthing. If they keep it at a bank, especially a Euro bank, their funds will be confiscated outright. If kept in local currency and at a bank, their funds will be confiscated via devaluation.

    If I were Greek, i’d either get Euros, Dollars, treasuries or gold and hide it under my mattress until the communists destroy what little is left.

    This goes hand in hand with my previous post, you would think the Greeks would hate leftist movements, yet there is not a single non left party left in Greece. The workers/voters dont see the ongoing looting, they will soon. How much was it that the ECB shelled out on the Greeks? You still need more proof?

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      1. Really?

        Prove that Greece reduced government spending.

        Prove that Europe didn’t spend more, relatively speaking, than the US….

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        1. Are you saying that Greece has not had austerity? If so, you’re the only one.

          Clearly, you have no idea about the differences between Monetary Sovereignty and monetary non-sovereignty.

          A Monetarily Sovereign nation can and should run large budget deficits. A monetarily non-sovereign nation cannot.

          Learn the difference.

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          1. Should be easy to prove, no?

            Europe is spending more than the US relatively speaking, so no, the Greek never had any “austerity”.

            I laugh when I hear people saying “see, austerity doesn’t work”. All I ask is for anyone to show me which austerity they are talking about.

            But let’s forget about that. I will put a wager that the Greek economy collapses swiftly here, and I bet the people of Greece will be worst off on their own.

            Have you read the wealth of nations? The Greeks are about to get a crash course on what it means. Simply put, our labor and productivity is our wealth. When a nation devolves to believing that the government is the one responsible for taking care of their needs, you lose the most valuable thing, labor and productivity.

            Let’s see if there is really a free lunch…

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          2. One minor clarification. Like you, I believe the euro is a failure. So the Greek will be better off in the long run, after they rediscover the wealth of nations. For now, they will go back to third world status without the euro subsidies.

            How long do you think the Germans would continue to produce for nothing. Or did you think they would continue to work for worthless Greek debt?

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          4. Maybe a nice chart showing Greek government debt would show us how “austere” the Greek government has been?

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  3. If our labor and productivity is our wealth, then how do you unit quantify them to make labor + productivity = wealth = currency? i.e., objectively back money as labor and productivity….all one and the same, no longer fiat?

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    1. Different things…

      We have a fractional reserve fiat system. Money is created via the fractional reserve procesd, fiat just means the government says we need to use it.

      Money is simply a common denominator. It doesn’t measure prices or values, instead, they are expressed in dollars.

      Increasing or decreasing the common denominator doesn’t change the numerator.

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  4. “Very simply, state deficits increase a nation’s money supply,”

    Not with Countries that have their own central bank though (the deficit is funded with bonds not money).

    And with Euro countries. Euros would flow out of one country to another. But the total number of Euros will not increase

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    1. That’s not entirely accurate. Euro’s never leave the Euro zone banking system in the first place. The Euro is also built on fractional reserve, meaning that a Euro saved in Germany could be relent multiple times to people borrowing in Greece. The same thing happens in the US, a dollar saved in Texas can be re-lent multiple times to people in New York City.

      So the issue here is not that Euros are not increasing. The problem is that all these nations have entirely different cultures, different set of laws, social programs, tax structure, etc.. This means that someone in Greece could retire with a full pension at 45 while someone in Germany gets to retire at 75 with nothing (made up for illustration purposes). The Greeks are notorious for not paying taxes as well – unlike the Germans. In such scenario, the Greek would be WAY better off than the Germans in terms of lifestyles – but the government expenditures required would be much more relatively speaking. In a scenario like this, you would have the Germans working a full life to support the laziness of the Greek.

      I can assure you that the people in those nations haven’t figured this out just yet – for they would have never accepted the Euro in the first place. Would you agree with the Euro if you were German? Of course not – you would do anything to get out of it. At this point, Germany will lose whether the Greeks remain the union or whether they leave.

      Of course, if the Greek exit the Euro, than they can do what they want – maybe they can bring down the retirement age to 25 – while the Germans increase it to 80. In such scenario, a collapse of Greece would have little to no impact on Germany. The Germans will lose massively here because they’ve given their hard labor away for useless Greek debt – but long term, the Germans are way better prepared than the Greek. When the Greek exit the Euro, they will be forced to live within their means – which means back to work – and people in the streets demanding less government spending. It’s coming…

      This is the issue in Europe in a nutshell, the rules are not the same for every nation. You will have difficulty keeping something like the Euro together for this simple fact.

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      1. You wrote: “The Euro is also built on fractional reserve, meaning that a Euro saved in Germany could be relent multiple times to people borrowing in Greece.”

        This is a common misunderstanding of the meaning of “fractional reserve” lending.

        Banks do not lend their reserves. Banks do not transfer money from their reserve account to a borrower’s account.

        Banks lend by creating money ad hoc, in the accounts of borrowers.

        U.S. bank lending, for instance, is not even limited by reserves, because reserves are readily available not only from other banks and lenders, but from the Fed.

        U.S. bank lending actually is limited by bank capital.

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          1. Capital is shareholders’ equity.

            Assets – Liabilities = Capital.

            “This money that banks create” is Deposits — a Liability.

            As the bank creates Deposits in depositors’ checking accounts (by lending), the Liability grows. The legal limit is a percentage of Capital.

            If a bank gets into financial difficulty, it cannot use Reserves to pay its debts, since reserves include deposits (Liabilities). It must use Capital.

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          2. Fair enough, I agree with this, but not with what you posted earlier. I don’t think there are any reserves anyway.

            You are actually contradicting yourself though, if banks are constrained by capit all than how is that the same as creating money ad hoc? In that scenario, our money supply would be tiny since banks are a pretty low margin business.

            Also, what are DC for? Are you also saying that banks don’t lend out money in savings account? Gosh, I would have thought the reason they took in deposits was to lens it out and pocket the difference. Am I naive?

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  5. monetary sovereignty

    DRAW THE TREND LINE

    “Government Spending in Greece decreased to 9629.70 EUR Million in the third quarter of 2014 from 10141.10 EUR Million in the second quarter of 2014. Government Spending in Greece averaged 8665.87 EUR Million from 2000 until 2014, reaching an all time high of 11137.70 EUR Million in the fourth quarter of 2009 and a record low of 7116.60 EUR Million in the first quarter of 2014. Government Spending in Greece is reported by the National Statistical Service of Greece.”

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    1. The problem we run into is that the word “reduction” and “decrease” can be many things. It can mean a reduction in the increase in spending you already have forecast – but still an increase year over year. Or perhaps it means that the increase in spending (% wise) is not as large as the prior year – but you still spending more than the previous year. Or perhaps it means what the majority of Americans think it means, that you will be actually be spending less when compared to the prior year.

      Anyway, I had to calculate Greece’s total spending by year because this is not available anywhere on the net.

      Year – Total Spend – % of GDP
      2007 – 282 Billion – 108%
      2008 – 346 Billion – 113%
      2009 – 444 Billion – 130%
      2010 – 476 Billion – 148%
      2011 – 499 Billion – 170%
      2012 – 456 Billion – 157%
      2013 – 437 Billion – 175%
      2014 – 421 Billion – 175%

      Notice the spike in spending from 2007 all the way up until 2011 – with total expenditures doubling from 282 billion to almost 500 billion. Did the situation improve for the Greeks during that spike? You tell me..

      Relatively speaking, the only year that Greece reduced spending was in 2012 – where both total spending and spending as % GDP were both lower. Although total expenditures were less than in 2011 in 2013 and 2014 – it was approximately 175% of GDP.

      Greece’s issue is not the lack of government spending – government spending is one of the issues they have instead. They also have a bunch of labor laws that should be removed, they have a massive entitlement state, etc… those are the things they will be forced to fix now – this is no longer a choice. You will see the Greek squealing like hyenas…

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      1. See the graph right above your “calculations.”

        Greece’s problem is that it surrendered the single, most valuable asset any nation can have: Its Monetary Sovereignty.

        No monetarily non-sovereign entity can survive long term without a positive cash flow. This applies to nations, cities, counties, states, businesses, you and me. We all are monetarily non-sovereign, and to survive long term, we must have a positive cash flow.

        By contrast, Monetarily Sovereign nations (U.S., Canada, Australia, UK et al) can survive forever with a negative cash flow.

        In the unlikely even you ever take the trouble to learn the differences between Monetary Sovereignty and monetary non-sovereignty, you will regret having waited so long.

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        1. You know more than I do – you were in business. So I will ask you a simply question – please provide a simple answer.

          When you refer to cash flow – are you referring to the little numbers that are printed on the bills – or are you referring to what the bills can buy? In other words, you are interested in the assets you can acquire – not the numbers. The numbers are useless without the assets behind them – aren’t they?

          I am willing to bet that a government with a balanced budget would last longer than one with a negative cash flow for the simple fact that people are keeping what they earn. In contrast – a government with a negative cash flow has to fund the gap by issuing debt and stealing it from people via devaluation.

          Granted, I don’t think you will see Americans hitting the streets any time soon because the amount of devaluation is small when you look at it at an annualized level. When you look at the entire damage done through the years, the amounts are substantial.

          The simple fact is that the dollars you were saving when you entered the workforce are now worth something like 15 to 20 cents cents. What happened to the rest Rodger? Hmmmm…

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          1. Your understanding is back the front. Govt deficits for a monetary sovereign country make the non Govt sector better off. Which is obvious really. If I receive a salary of $50,000 and pay no tax I am better off than if I pay $20,000 tax so the Govt can balance their books. Esp when their is unemployment and very low inflation

            Govt deficits are essential in times of economic downturn. And really for countries that have an aging population that are saving for their retirement.

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      2. Apologies, the above amounts are inaccurate – but the story remains the same – Greece did not decrease spending. The data on the internet is so inconsistent, it’s almost impossible to find the same numbers across different sites. Below I basically compared the National Debt of the current year with the national debt of the previous year. As you can see, the debt has consistently gone up year after year up until 2011 from 224 Billion to 500 billion – double. The same story as I posted.

        Year Debt to GDP GDP National Debt % Change YoY
        2004 98.60% 228.0 224.808
        2005 100.00% 240.1 240.1 7%
        2006 106.10% 261.7 277.6637 16%
        2007 107.40% 305.4 327.9996 18%
        2008 113.00% 341.6 386.008 18%
        2009 130.00% 321.0 417.3 8%
        2010 148.30% 294.2 436.32826 5%
        2011 170.30% 289.9 493.68267 13%
        2012 157.20% 248.4 390.51624 -21%
        2013 175.10% 241.7 423.25172 8%

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        1. Yes, Greece is deeply in debt, which is a problem for any MONETARILY NON-SOVEREIGN entity. You also are a MONETARILY NON-SOVEREIGN entity. Wouldn’t you be in trouble if you were deeply in debt?

          By contrast, the U.S. is a MONETARILY SOVEREIGN entity. Debt is meaningless to a MONETARILY SOVEREIGN entity, because it has the unlimited ability to create its own sovereign currency.

          As I continue to say, again and again, a monetarily non-sovereign entity can survive long term, only if it has a positive cash flow. A Monetarily Sovereign entity can survive long-term, even with a negative cash flow.

          I’m not sure why you refuse to learn the difference, but it is exhausting trying to educate someone who refuses to learn.

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  6. This is like Abbot and Costello doing “Who’s On First.” Total lack of understanding or refusal to understand between two parties. Either way the seemingly intelligent and articulate party refuses to make the final leap. Dense! Stubborn! and won’t go away. Just hang around at keep stepping in it.

    MS is a description of a financial reality and a financial solution. If you don’t like it give us your answer to today’s problems. Or are you of the school of hard knocks that says humanity is doomed to struggle into eternity?

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  7. LMAO, you said, “Fair enough, I agree with this, but not with what you posted earlier. I don’t think there are any reserves anyway.”

    Apparently your desire to disagree is greater than your desire to learn. You might be better to ask questions than to make silly statements.

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    1. There are no reserves, the same money has been re-lent multiple times – there is only a mirage of reserves. Bank credit GROWTH is limited by bank capital because banks will lend as long as their capital is sufficient to keep the lights on. That’s it.

      However, banks do NOT lend capital – if they did, our money supply would be tiny as I said above. As an example, JPM earned 18 billion in 2013 – do you think that JPM only lent out 18 billion (profits for the year) in 2013? Keep dreaming.

      Banks take in trillions worth of deposits, lend out the majority and keep a fraction, that’s the meaning of fractional reserve.

      What most people don’t realize is that the same dollar that you deposited at the bank gets lent out to someone using Bank of America, who gets lent out to someone at Citibank, who gets lent out to someone in Wells Fargo.

      So – who owns the dollar? The person at JPM, Bank of America, Citi or Wells? According to our laws only one person could be the owner. That’s how debt grows in the system… and that’s why when there is a decrease in asset prices – the margin calls will wipe out a bunch of debt and cause tons of bankruptcies. It’s simply the system trying to restore the right order.

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  9. Let me add that Bill Mitchell has pointed out Germany was given a large write down of it’s debt obligations in 1953, something equivalent to 80% of its GDP.
    Now that cat is out of the bag, Angela Merkel and other austerity proponents no longer have a leg to stand on.

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  10. So, I agree. Greece could’a done it. But didn’t. Why? Is Syriza a double agent or was he buffaloed, or what?

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