–Has the IMF admitted the obvious? Close, but no cigar.

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.
•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money.
•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.
•The single most important problem in economics is
the gap between rich and poor.
•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.
•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..


In a speech ten years ago, 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.”

Since that date, this blog repeatedly has said, in various ways, “For the euro nations, long term survival requires one of two, and only two, events:”

“1. Adopt some form of a sovereign currency, and become Monetarily Sovereign
2. The EU give (not lend) euros to its member nations as needed (i.e. political merger).

And now late, to the party, comes the International Monetary Fund:

The I.M.F. Is Telling Europe the Euro Doesn’t Work

The International Monetary Fund’s memo on Greek debt sustainability, explain(s) why the I.M.F. cannot participate in a new bailout program unless other European countries agree to huge debt relief for Greece, has provided the “Emperor Has No Clothes” moment of the Greek crisis, one that may finally force eurozone members to either move closer to fiscal union or break up.

The I.M.F. memo amounts to an admission that the eurozone cannot work in its current form.

It took them all these years to admit the obvious — that monetarily non-sovereign nations (nations that cannot control their money supply) must have income — money coming from outside their borders — in order to survive long term.

You are monetarily non-sovereign. You must have income in order to pay your bills, long term. You can drain your savings for a while, but eventually your savings will run out.

Businesses are monetarily non-sovereign. Long term, they must have income. They too, can drain their savings, but only for a while.

Cities, counties and states are monetarily non-sovereign. Long term, they must have income, too. Taxes won’t suffice, for taxes are not income. They are a drain on citizens’ savings.

For cities, counties and states, income can take three forms:
1. Net exports of goods and services
2. Tourism
3. Payments from a higher government (Cities receive from counties and states; states receive from a Monetarily Sovereign federal government)

When a nation takes on the euro, it surrends the single most valuable asset any nation can have: Its Monetary Sovereignty.

More valuable than natural resources, population or education, Monetary Sovereignty allows a nation to buy anything and to pay any bill.

One might have hoped that at long last, the IMF finally will have admitted this most basic of all economics facts.

It lays out three options for achieving Greek debt sustainability, all of which are tantamount to a fiscal union . . .

Yes, a fiscal union, like a United States of Europe.

But just as we hoped to believe the IMF has begun to say the obvious, it disappoints us:

. . . an arrangement through which wealthier countries would make payments to support the Greek economy.

Not coincidentally, this is the solution many economists have been telling European officials is the only way to save the euro — and which northern European countries have been resisting because it is so costly.

The three options laid out by the I.M.F. would have different operations, but they share an important feature: They involve other European countries giving Greece money without expecting to get it back.

No, no, no.

Where would the “other European countries” obtain the euros they would be expected to give to Greece and the other impoverished euro nations? Answer: They would have to give less to their own citizens.

To save the euro, a failed concept, the IMF has proposed a sure-to-fail concept: Monetarily non-sovereign nations supporting other monetarily non-sovereign nations, requiring austerity for all.

The rich people who run Europe are not satisfied with enslaving some of Europe’s citizens. They have hatched a plan to enslave all of Europe’s citizens, even those in nations that, to date, have avoided recession and depression.

The troika [European Commission (EC), the European Central Bank (ECB)and the International Monetary Fund (IMF)] together are Monetarily Sovereign. They have the unlimited ability to create euros.

They have the unlimited power to give (not lend) euros to member nations, thus growing the economies of those nations.

Already having impoverished much of the eurozone, the IMF proposes enslaving the entire eurozone.

One of the debt relief options proposed by the I.M.F. is “explicit annual transfers to the Greek budget,” that is, direct payments from other governments to Greece, which it could use to make its debt payments.

A second option is extending the grace period, during which Greece would be relieved of the obligation to make interest or principal payments on its debt to European countries, through the year 2053 — at the expense of Greece’s creditors, most of which now are other European governments.

The third option floated by the I.M.F., (is) a cancellation of a portion of Greece’s debts (to other nations).

The memo makes clear what the real cost to Europe of continued eurozone membership for Greece is: If European governments want to keep Greece in, they’re going to have to put up a lot of money in one non-loan form or another, money they will give Greece that they never get back.

The entire concept is ludicrous. Greece is deeply in debt. Its money supply has been drained.

Greece cannot pay its debt out of income, because it has no net source of income, and being monetarily non-sovereign, it cannot create euros.

The IMF “solution”: Force other monetarily non-sovereign nations to drain their own money supplies.

In short, rather than trying to make all euro nations rich, the IMF proposes to make all euro nations poor.

It is a concept that even the uneducated would realize is stupid . . . except for one thing: The troika is not stupid. They know exactly what they are doing.

The goal is power. By impoverishing more euro nations, the troika (the only entity with the unlimited power to create euros) increases its own relative power.

Why settle for just the Greek people crawling and begging for food, clothing and housing, when one can have all Europeans on their knees, at your mercy?

It is a cruel plan devised by cruel people, who have seized on the opportunity to conquer Europe, not by force of arms, but by force of money — a bloodless coup that will dominate a continent.

Is it any wonder that the thought of Greece, freeing itself from the chains of euro-austerity, had the troika in such a panic.

Unfortunately, the government of Greece seems to have failed its own people, and sold them into slavery.

The Greek people voted to free themselves. They voted against austerity. They tried.

Close. But no cigar.

Rodger Malcolm Mitchell
Monetary Sovereignty

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 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.

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.


15 thoughts on “–Has the IMF admitted the obvious? Close, but no cigar.

  1. Europe moves to restore funding to Greece after bailout vote

    European Union finance ministers also approved 7 billion euros ($7.6 billion) in bridging loans to keep Greece afloat, allowing it to make a bond payment to the ECB next Monday and clear its arrears with the International Monetary Fund.

    Translation: EU gives ECB 7 billion euros, while increasing Greece’s debt by 7 billion euros. The punishing austerity of the Greek people will deepen.

    Rich lenders say, “Thank you, EU.”


  2. A euro story:

    EU loan shark: You owe me 1,000 euros. Pay me or I will break your legs.

    Greek citizen: But I don’t have 1,000 euros. Because of your austerity, I don’t have a job, don’t have income, can’t afford food, and I’m behind in my mortgage.

    EU loan shark: That proves what a deadbeat you are. Here’s what I’ll do for you: I’ll lend you the 1,000 euros for one week. You can pay me what you owe me today. Then, next week, you’ll have to pay me 1,100 euros.

    Greek citizen: How will I do that, with no job and no source of money?

    EU loan shark: Feed your children less. Sell your house and live in the street. This is all your fault for being poor.


  3. The suggestion of the ECB giving Euros to Greece makes the most sense, but let’s rename the currency the “Seuro.


  4. And I really thought Varoufakis has some insight on Monetary Sovereignty because James Galbraith is one of his advisers.


  5. The troika is operating short sighted, ever worsening the problem down the road as bailouts will grow bigger with each cycle. Yet the will of the voter remains subverted and, ironically, isn’t Greece the birthplace of democracy??

    I wonder what the voters will do the next time and how long will they continue to take the short end of the stick before they realize their vote means nil. Katie bar the door. We haven’t seen the end of their misery and rebellion. Greece is in for a revolution — a welcome event in disguise.

    Other Euro nations will not follow, I feel, unless they get to the same point as Greece, then their hands will be forced, IMO. They’ll go along to get along only for so long then opt out. The “your owe” experiment will gradually dissolve back to independence and monetary sovereignty.


    1. From the link…
      “… If Berlin pursues its scorched-earth policy too zealously, Greece may implode totally, taking the rest of the EU and NATO with it…..”

      The article has a common thread of EU/NATO implosion. A major confrontation is coming. I agree they have a plan. Whether it succeeds is another question.

      I also wonder if– like our own South– Germany has retained an inferiority complex from having lost two world wars.


  6. Rodger,

    Suppose you’re one of the ministers in the current Syriza gov’t, how would you propose a methodical transition from euro to drachma?

    What are the short-term pains to be expected from such a transition? Would that mean not being able to buy imported necessities like oil and food?


    1. Here is the short-form version:

      Print paper drachmas for general use. Declare the drachma to be the official currency of Greece.

      Require that all domestic euro-based debts be paid in drachmas on a one-to-one basis.

      Require all taxes to be paid in drachmas.

      Since bank accounts are bank debts, all withdrawals would be paid in drachmas.

      Greece, as a sovereign nation, will tell all its creditors they have two choices: Accept drachmas or receive nothing.

      Issue drachma bonds with sufficiently high rates of interest to make them more attractive than euro-based bonds, and to prevent inflation.

      Pay generous social benefits in drachmas — health care, retirement, food for the poor, housing, education. Pay government employees in drachmas.

      Although the EU speaks of the “Grexit” being a disaster, the fact remains that more than a dozen nations gave up their sovereign currencies, and the world survived. One nation reclaiming its sovereign currency would be a tiny blip on the financial radar screen.

      Within a year or two, Greece would be one of the more prosperous nations in Europe — no austerity — unless it keeps the same politicians it now has.


      1. By adopting the bargaining position that Greece will stay in the euro no matter what, Tsipras is proving everyone right that he’s a spineless incompetent twerp that needs to resign.


      2. Spineless for believing that Greece could not stand on its own without being tethered to the euro heartland of Wolfgang.


  7. Ex-FM Varoufakis agrees with your diagnosis: http://www.opednews.com/Quicklink/The-Euro-Summit-Agreement-in-Best_Web_OpEds-Agreements_Debtor-Nation_Economy-Built-On-Debt_Greece-Debt-150720-439.html but for reasons that are not quite clear, never proposed a sovereign money complementary currency when he had the chance, even though he had worked such a system out BEFORE becoming FM, and had plenty of economists encouraging him to do so, and me, in an interview I did with him BEFORE he became FM (see link within link)


    1. How true, although I disagree with one statement: “The Troika means to break Greece, and always has.”

      I believe the Troika means to milk Greece, and always has.

      Think of the Troika as loan sharks, who take as much they can get from their victim, before killing him for not paying up.


  8. Ostensibly, the whole idea of the Euro was that of a common currency which would allow for international – regional convergence. Instead they got divergence on account of widely differing cultures and ways of life. Greece “should” pay back what they borrowed, but how do you do that without a way to grow the economy? The poor southern Europeans are seeing Greece as a crystal ball into their own futures.

    The whole idea has feet of clay. Only a matter of time before Germany gets their vampire-empire asses handed to them unless they develop a MS based model.


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