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•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..
Sorry for the platitudes, but the markets really did drop like a a stone and rise like a rocket — and many people would like to know why.
Ask any stock broker, any economist or any financial media writer, what the market will do tomorrow (let alone next week or next year) and you will get answers. The problem is: All the answers will be different.
If these people knew, they wouldn’t be stock brokers, economists or financial media writers. They would be sailors — on their own yachts, moored near their own mansions on their private islands.
First, the economies of the world are quite complex — more than complex: Chaotic. Remember the bit about the butterfly flapping its wings in Brazil which causes a hurricane over Florida? That’s chaos theory.
Chaos is a mathematical expression of the fact that in some circumstances, small occurrences can have huge effects on seemingly unrelated events.
The stock market is a classic example of chaos, in that all sorts of events — profits, losses, murders, speeches, sales, weather, diseases, etc. or lack thereof can move, not just individual stockes, but the market as a whole.
Why should your favorite American stock go down because China fails to meet one analysts’s expectations about exports? Probably no simple, straight-line reason. But “A” causes “B,” which in turn causes “C” . . . and by the time you get all the way back to “Z” the effect has become magnified — or disappeared.
(Think of the “Telephone Game,” in which one person whispers a message to another person, who in turn whispers to a third person. And by the time you get to the 20th person, the message has changed in a completely unpredictable way.)
Chaos prevents us from deducing what effect a change in cause “A” will have on “Z.”
But it’s even worse than that.
The prices on the stock market are not based on cause and effect. They are based on predicted causes and their predicted effects. In essence, millions of people are saying, “I predict millions of different “A’s” will happen, and if all those different “A’s” happen, then I predict “B’s” will happen to the stock or the stock market as a whole.”
So, as if chaos were not bad enough, we are faced with chaotic predictions about chaos. (Will that butterfly flap its wings, and if so, how many times, how high, where and when?)
But, it’s even worse than that.
Most stock trading, which affects pricing, is not based on the myriad fundamentals of the world’s economies, but rather on computer-based logarithms, not in any way connected to reality (or the multiple realities in which we live.)
Those computers make millions of trades every second, and not one of those trades can be justified on any rational basis. A stop was hit. An arbitrary support was breached. A trade was executed 1/8th of a second after another trade, and not before.
And then the next computer “seeing” the previous trade, has arbitrarily been programmed to react in certain ways, except under certain sets of circumstances, in which case it will react in different ways — and so the little snowball rolls downhill, picking up a random assortment of stones, twigs, branches trees and other snowballs, then stops — or not.
Even rear vision is not 20/20. Ask those aforementioned stock brokers, economists and financial media writers why the market has moved the way it has, and you will receive explanations that are just as wrong as their predictions.
Consider the weather. It is a chaotic system.
We know the weather can’t be predicted accurately much past three days. We safely can predict that January weather in Chicago will be, on average, cooler than July weather in Chicago — except there actually have been some January days that were warmer than some July days.
But even explaining yesterday’s weather can be a chore. Ask the meteorologist why the high was 72F and the low was 60F and he/she will tell you about high and low pressures, jet streams, wind directions, clouds, solar flares, etc. Then ask him/her why those highs, lows, jet streams, etc. came into being, and he will be flummoxed.
None of the above is to say that all prediction is impossible. Back in 2005, is said in a speech, “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.”
I had no idea when or exactly how. And in fact, ten years later not one European nation has been “doomed,” though clearly the eurozone is in deep trouble, and Greece is teetering on the “doom” edge.
And at the bottom of this post you will see “Recession Clocks” which show you that reduced deficit spending leads to recessions and increased deficit spending cures recessions.
But exactly when will the next recession arrive? I don’t know. I suspect it will be around 2020, but that’s just a WAG (Wild Ass Guess), based on the history of a recession every ten years or so. It could come sooner, though probably not later.
Bill Clinton’s surplus caused a recession, and if Barack Obama achieves his surplus, I expect that to cause a recession, too.
I predict there then will be a fight about whether to stimulate the economy with deficit spending (Democrats) or by cutting taxes on the rich (Republicans).
I know the current reductions in deficit spending will lead to a recession, not only because they always have, but because cutting deficit spending reduces money growth, and money growth is part of Gross Domestic Product growth.
And, I knew the euro would be a disaster, because it forced countries to surrender the single most valuable asset they had: Their Monetary Sovereignty. You can’t give up such a valuable asset without suffering economic damage.
So don’t ask your favorite stock broker, economist, financial media writers or me what the market will do next week, next month or next year. We don’t know. The Fed doesn’t know. The politicians don’t know. Nobody knows, not even the TV meteorologist.
Don’t believe anyone who says they know.
Don’t even ask us why the markets went crazy this week. We don’t know that either, though we will be happy to give you many explanations.
You will be far smarter to buy:
1. Heavy clothing for Chicago’s winters.
2. Light clothing for Chicago’s summers.
3. ETF’s that charge low expenses, no commissions and cover the biggest and best growth companies, plus perhaps a bond ETF for a bit of diversity.
(SCHG has been very good to me.)
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 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.
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.