–The phony Greek “stimulus” and how it affects you.

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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.

Let’s say you own bonds with a current market value of $10,000, and you agree to sell them to the federal government for $10,000.

The government instructs your bank to increase your checking account by $10,000, and you now no longer own those bonds.

Has your wealth been stimulated? Are you richer? Has the U.S. economy been stimulated?

Of course not.

Because the federal government purchased those bonds, they no longer are part of the economy. There is no economic measure that includes federal ownership of bonds. It’s as though they never existed.

Since privately-owned bonds are part of the broad money supply, the total money supply has not changed. Money merely has been shifted from bonds to a checking account.

It’s a simple asset transfer. No dollars created or destroyed.

What I have described is known as QE (Quantitative Easing). It’s what the Federal Reserve has used again and again to er, uh . . . “stimulate” the economy.

You might ask how the above process stimulates anything. Indeed you might. And while you are asking, consider this article from The Street:

ECB Announces $1.2 Trillion Stimulus Program, Bigger Than Expected
BY Pete Guest, 01/22/15

The European Central Bank has announced more than €1 trillion ($1.15 trillion) in stimulus for the eurozone, in the form of combined monthly asset purchases of €60 billion ($69 billion) until at least the end of September 2016.

The asset purchase program will begin in March, and will include investment-grade euro area sovereign, agency and EU institution securities, ECB president Mario Draghi said on Thursday.

“Investment grade” — good as money. No bad debts for those folks.

Every month, $69 billion worth of bonds, currently in private hands, will be handed over to the ECB, in exchange for $69 billion in euros. An even trade is a stimulus??

Now, if the ECB planned to add $69 billion to the EU economy — by sending money to the euro nations, no strings attached, that would be a stimulus.

But trading money for an equal amount of money is no stimulus. It’s called “busywork” — frantic, but meaningless activity as a substitute for real, meaningful action. The ECB wants to look like it is “doing something,” just as the Fed wanted to pretend it was “doing something.”

Draghi confirmed that the ECB had reached a compromise, and that euro area central banks will buy their own sovereign debt, meaning that stronger economies will not need to share the risk of heavily indebted peripheral countries.

“In addition, 20% of any losses on assets bought by central banks will be shared throughout the eurozone,” Draghi said.

If it seems to you that the above two sentences are in conflict, you’re pretty observant.

The ideal program would be unconstrained in size, would front-load the stimulus by quickly pumping a lot of money into the markets, and would be designed so that all of the eurozone economies would share the risk of sovereign bonds.

QE doesn’t pump any money. It exchanges one form of money for another. About the best that can be said is that for a very short time, more liquid euros will be exchanged for less liquid euros.

Consider it a temporary bandage that later will be ripped off, to disclose that nothing has been cured. The wound remains.

Markets had been unsteady on fears that the stimulus could be neutered by internal disputes and concerns by Germany — the eurozone’s largest economy — that stimulus might allow weaker economies to loosen their austerity regimes.

The compromise buying plan seeks to allay those fears.

And there you have it. Austerity must be maintained. To hell with the people. The more they suffer, the better, because in their suffering they become slaves of the rich.

The key is that the rich are not allowed to lose money, the poor are pressed down, down, down and the Gap between the rich and the rest is widened.

“For the eurozone, the problems they face are not problems that will disappear overnight as a result of QE,” Abi Oladimeji, head of investment strategy at Thomas Miller Investments said.

“The troika, the IMF, the EC and the ECB will have to accept the reality that Greece, basically, cannot repay its debt. Greece is not in a position to grow out of its debt. That reality has to sink in at some point.”

In essence, the troika are gangster loan sharks. They continue to lend money to someone who has no job and no assets, and tell him to get the money from his parents and children — or else.

Greece agrees to talk to creditors in EU debt progress
BRUSSELS Thu Feb 12, 2015 2:28pm EST

(Reuters) – Greece agreed on Thursday to talk to its creditors about the way out of its hated international bailout in a political climbdown that could prevent its new leftist-led government running out of money as early as next month.

Greece already has run out of money. Being monetarily non-sovereign Greece cannot create its sovereign currency out of thin air. (Like our local governments, Greece has no sovereign currency; it uses the euro.)

So where does the troika think Greece will get the euros to pay its debts? From the Greek people, of course. The poor and middle classes (aka the 99%), which have been suffering from austerity, are supposed to suffer more and more, with no end in sight.

The shift by Tsipras marked a potential first step towards resolving a crisis that has raised the risk of Greece being forced to abandon the euro, which could spark wider financial turmoil.

How awful. Greece could abandon the euro, re-adopt its own sovereign currency, and thereby eliminate any possibility of running short of money or of forcing austerity on its people.

What could be worse — worse for the rich — who might lose the slave labor of the Greek people. No more kneeling down by desperate people, who will do whatever they are told, in order to acquire a few crusts of bread.

Yes, the rich do not want that sort of “financial turmoil.”

Tsipras won election last month promising to scrap the 240 billion euro ($273 billion) bailout, end cooperation with the “troika”, reverse austerity measures that have cast many Greeks into poverty and negotiate a reduction in the debt burden.

Or, just get the hell out of the euro, the worst financial idea since answering Email letters from a Nigerian prince.

Chancellor Angela Merkel said, “Europe always aims to find a compromise, and that is the success of Europe. Germany is ready for that. However, it must also be said that Europe’s credibility naturally depends on us respecting rules and being reliable with each other.”

Translation: Hitler was stupid to try to dominate Europe with war. We’ve found a much better solution: Enslave you with a currency you can’t control, and keep you in perpetual austerity.

Deutschland über alles!

But lest you offer too much of your pity to the Greeks, French, Spanish and the rest of the euro nations (most of which will follow Greece in supplication), remember this: You are hardly better than the Greeks:

–Your government, particularly the Republican party, has brainwashed you that austerity is prudent and necessary.
–You have been brainwashed that FICA funds Social Security and Medicare
–You have been brainwashed that federal government financing is like local government financing or your own financing.
–You have been brainwashed that the federal government “can’t afford” [insert project or payment here].

So you believe Social Security, Medicare, Medicaid and all other aids to the poor and middle classes are “unsustainable,” without tax increases or benefit decreases.

And so long as you believe these lies, the rich own you, your family and your friends.

And when you ask yourself why you have so much difficulty saving money, or paying your mortgage, or putting your children through college — and why you will starve when you retire, while the 1% live luxury — the answer is this:

You believe the BIG LIE, just like the Greeks.

Rodger Malcolm Mitchell
Monetary Sovereignty

The 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. Federally funded, 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)

Initiating The Ten Steps sequentially will add dollars to the economy, stimulate the economy, and narrow the income/wealth/power Gap between the rich and the rest.

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.

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.


14 thoughts on “–The phony Greek “stimulus” and how it affects you.

    1. Yes, aside from the facts that:

      — FICA does not pay for Social Security

      –There is no Social Security Trust fund (It’s an accounting fiction)

      — The day the Supreme Court, Congress and the White House run out of money, SS will run out of money. (All are federal agencies of the federal government, which cannot run short of dollars.)

      –The author is completely clueless about the differences between Monetary Sovereignty and monetary non-sovereignty

      . . . aside from those facts, it’s not a bad article, because at least it debunks the right wing’s desire to completely destroy SS.


  1. Surely the fact that the fed owns no bonds is because it only issues them when needed and so they go via auction straight into the private sector accounts at the Federal reserve.
    Also are the Toxic assets held in Treasury, the ones bought under QE?


    1. Not sure what point you are making.

      QE is the purchase of T-securities from the private sector. Dollars that exist in private T-security accounts at the Fed are transferred to private checking accounts at private banks.

      No new dollars needed.

      Toxic asset purchases would add dollars to the economy, because presumably, these assets essentially are worthless.


      1. I thought QE swapped toxic assets from the banks with fresh T securities. This would mean the new assets [yes not new money] would improve the banks asset base[which limits their ability to lend] while the toxic debts were parked in Treasury until something could be done with them. Yes? No?


      2. Also you yourself said the Fed has no money and no need of money. It’s in the private sector. Wouldn’t that imply money is created on demand only?
        I assume when you said that the private bank accounts at the fed are not counted -because it’s the private banks money[?] so does that imply the Fed does not comply with client money rules?
        So where is the $2.3 trillion [oct 2013] in excess deposits stored?


        1. The federal government has no money and needs no money. When the federal government pays a bill, it sends instructions (not dollars) to the creditor’s bank. Only when the bank obeys those instructions, and increases the balance in the creditor’s checking account, are dollars created. So technically, the federal government created no dollars; the bank did.

          The Fed is a quasi public, quasi private agency of the federal government. Fed-“owned” dollars, like Treasury-owned dollars, are not part of the money supply.

          However, private accounts at the Federal Reserve Bank are part of the money supply. Your T-security account at the FRB is owned by you, not by the Fed, and is part of the money supply.

          The intricacies of federal accounting blur these realities:

          –QE creates no dollars. It merely exchanges assets. (Your dollars in your T-security account are exchanged for your dollars in your checking account.) The sole stimulus effect is that checking account dollars are more liquid than T-security account dollars.

          –Paying off federal debt, neither creates nor destroys dollars; It too, merely exchanges assets.


  2. Roger it’s also a fact you can go to the trust fund’s website and check the numbers.
    Now i know you say that because they always cover their bills and can never go broke, it’s also a fact that they show the government’s total debt.

    I don’t know how people can be convinced that everyone is lying or ignorant without facts that can’t be disputed.

    I’m convinced that your ten step plan is a better way but that doesn’t mean the established system is a lie it’s just how it’s setup.

    Rather than claiming everyone is lying just say you’ve got a better setup 🙂


    1. penny,

      The government’s total debt is nothing more than the total to T-security accounts at the Federal Reserve Bank. Everyone at the Fed knows this. It’s a fact.

      It also is a fact that the “debt” is paid off when the FRB transfers existing dollars in these T-security accounts to the checking accounts of T-security holders. No new dollars are needed to pay the debt.

      That too, is a fact.

      Therefore, the federal debt is not, and never can be, a burden or “unsustainable.” That is a fact.

      Further, the federal government pays its bills by sending instructions (not dollars) to creditors’ banks, telling the banks to increase the balances in the creditor’s checking accounts.

      Thus, dollars are created ad hoc, by the simple act of paying a bill. That too is a fact.

      Former Chairman Bernanke, when asked whether the government could run short of dollars, said dollars were created by the press of a computer key. So he knows the truth.

      There was a time when I thought people simply didn’t understand.

      And while that is true of the populace as a whole, I cannot believe every member of Congress and every one of their assistants, the President, all of the Counsel of Economic Advisers, the entire Federal Reserve, and all the media and the vast majority of economists — I can’t believe every one of them doesn’t understand the simple fact of economics that federal financing is unlike non-federal financing.

      To my mind it is impossible that not one of them doesn’t understand Monetary Sovereignty. And this is even more unlikely, since all of MMT and I repeatedly tell them the facts, for at least the past 15 years.

      So if their ignorance is not unintentional, it must be intentional.

      And since the great majority of these people owe their livelihoods to the rich, and since the Big Lie helps widen the Gap, between the rich and the rest, I leave it to you to draw your own conclusions.

      Anyway, it will be interesting to see what Stephanie Kelton is able to accomplish as Chief Economist on the Senate Budget Committee (Democrat).

      As an MMT writer, she knows these facts, and I assume she will communicate these facts to her fellow committee members — so if these facts don’t make it out of committee, that will be ample proof of lying.

      And that’s a fact.


  3. You hit on the true evil of QE, that its described as “stimulus” and “money printing” when it obviously is not. So when QE does nothing positive for the broader economy (it does raise the value of financial assets because it essentially shrinks the supply of financial assets people can invest\save in), it adds to the so-called “evidence” that people use to claim that stimulus and money printing dont work.

    When in fact, if the Govt actually stimulated the economy with money printing (aka deficits) then the economy would most assuredly be doing better as you have often described with the world’s most basic economic equation:

    GDP = Govt spending + Non-Govt spending – net Imports

    Deficits by definition either increase Govt spending directly or Non-Govt spending through tax cuts, this shit is not that complicated.


    1. You are right. This shit is not that complicated, but it can be counter-intuitive because federal finances are different from personal finances.

      Even then, people would “get it” if only they weren’t being bombarded with the Big Lie.

      The President of the United States said,

      “So, after a decade of rising deficits, this budget asks Washington to live within its means, while at the same time investing in our future.

      It cuts what we can’t afford to pay for what we cannot do without. That’s what families do in hard times. And that’s what our country has to do too.”

      When he says the government should “live within its means,” and “it cuts what we can’t afford to pay for” and “that’s what families do,” he’s saying federal finances are like personal finances.

      In short, he’s lying, lying, lying — and because all the politicians, the media and the mainstream economists tell the same Big Lie, the people believe.

      Authority makes believers of us all.


  4. The government must live within it means. Its means is the legal ability to send instructions to increase bank accounts ad hoc. Therefore, the government’s “means” is as limited as much as I’m limited in making legal 1-800 phone calls, no charge! The equipment, the electricity and my finger tips are my limits.


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