How not to run a Brexit

Some facts:

1. The Value of a currency is based on the Supply and Demand for the currency vs. the Supply and Demand for goods and services.
2. The Demand for a currency is based on Risk and Reward.
3. The Reward for owning a currency is interest.

That is why, to fight U.S. inflation (i.e. increase the value of the dollar) the Fed increases the Reward for owning dollars (i.e. increases interest rates), which increases the Demand for dollars.

4. A growing economy requires a growing supply of money.

That is why, to stimulate the economy, Congress and the President increase deficit spending, which pumps more dollars into the economy.

Carefully balancing the creation of dollars with interest rates stimulates the economy without inflation.

Keep those 4 points in mind as you read the following excerpts from an article in CNN Money:

Brexit rescue: Bank of England slashes interest rates
by Mark Thompson

The Bank of England has cut interest rates for the first time in seven years, and will revive a broader economic stimulus program to try to limit the damage from June’s Brexit vote.

Rates were cut to a record low of 0.25%, which should reduce mortgage rates for some homeowners and make it cheaper for companies to borrow.

Savers, pension funds and banks, on the other hand, are likely to suffer.

“Following the United Kingdom’s vote to leave the European Union, the exchange rate has fallen and the outlook for growth in the short to medium term has weakened markedly,” the bank said Thursday. “

The Bank’s concern is: The exchange rate has fallen. So what does the Bank do? It reduces the reward for owning pounds, thereby guaranteeing a further decline in the exchange rate. Counter-productive and non-sensical.

The bank also said it would pump £70 billion ($92 billion) into the economy by printing money to buy bonds issued by the British government and companies.

The bank’s program of quantitative easing — already worth £375 billion — has been on hold since July 2012.

Bonds issued by the British government were purchased by the public. The money used to purchase those bonds did not disappear.  It was deposited in bond accounts owned by the public.

These bond accounts are very much like bank savings accounts. Just as money continues to exist when it’s deposited in a savings account, money also continues to exist when it’s deposited in a government bond account.

When the bank of England buys those bonds from the public, it merely transfers existing pounds from the public’s bond accounts back to the public’s checking accounts. No new money is “printed.”

By purchasing those bonds from the public, the government reduces the amount of interest money it would have pumped into the economy.

Contrary to what the Bank of England (and the Fed) claim, “Quantitative Easing” is anti-stimulus. It moves money around without adding any, and in fact, reduces the stimulus that government interest payments provide.

Recent surveys of business activity, confidence and optimism suggest that the United Kingdom is likely to see little growth in GDP in the second half of this year.”

There’s a 50% chance of a recession over the next 18 months, according to the National Institute for Social and Economic Research.

Based solely on the BOE’s efforts, there is a 100% chance of recession, and it may come sooner than 18 months.

Rather than uselessly buying its own bonds, and adding nothing to the economy, the government should cut taxes and increase spending, according to some version of the Ten Steps to Prosperity (below).

The Monetarily Sovereign British never can run short of its own sovereign currency, the pound. In theory, this should provide a huge advantage over the euro nations, which are monetarily non-sovereign, and cannot control their money supplies.

Sadly though, the British government promotes the false notion that its debt is unsustainable, and austerity (deficit reduction) is the path to economic growth.

Taking money from an economy, in an effort to grow that economy, is like applying leeches to cure anemia.

One only can pity the British people, who are forced to live under such misguided rule. Of course, we Americans are exposed to the same Big Lie from our leaders.

Pity us.

Rodger Malcolm Mitchell
Monetary Sovereignty

Ten Steps to Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
This article addresses the questions:
*Does the economy benefit when the rich afford better health care than the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-tranferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be an good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.


5 thoughts on “How not to run a Brexit

  1. Q. Why does everyone insist on believing the Big Lie?

    A. Because most people (not all) indulge in an attitude of “Screw you; I’ve got mine.” This attitude is justified by the Big Lie, which absolves people from having to think or care. People’s use of the Big Lie is mindless and automatic. It is a self-destructive habit, like alcoholism.

    EXAMPLE: “Free college? How will you pay for it?”

    EXAMPLE: “Increase federal spending? Zimbabwe!”

    EXAMPLE: “Single payer-health care? Communism! Unsustainable! National debt crisis!”

    Most people (not all) resent the idea of the government helping anyone below them in the social pecking order. Therefore most people use the Big Lie to justify crushing their “inferiors.” (“There is no money for social programs that help the poor.”)

    In other words, most people use the Big Lie to maintain their position in the social hierarchy. They use the Big Lie to righteously bemoan the symptoms while not having to address the disease. (“I’m not racist. I’m just saying there is no money to help Black people.”)

    Consider “liberals” who bemoan the mass incarceration of Blacks. If “liberals” really cared about this problem, then they would study the nature of money. How it is created. Where it comes from. Where it goes. Who controls it. And so on.


    “Contrary to what the Bank of England (and the Fed) claim, ‘Quantitative Easing’ is anti-stimulus. It moves money around without adding any, and in fact, reduces the stimulus that government interest payments provide.” ~RMM

    The purpose of QE is to juice Wall Street at the expense of Main Street.

    QE is anti-stimulative for the real economy. That is, QE inhibits the production and consumption of goods and services.

    However QE is indeed stimulative for the financial economy (i.e. for the stock market, the bond market, for some commodities markets, and so on).


    “The bank also said it would pump £70 billion ($92 billion) into the economy by printing money to buy bonds issued by the British government and companies.” ~ CNN

    Nonsense. CNN’s chatter about the Bank of England buying UK Treasury bonds is a distraction whose purpose is to sustain the lie that monetarily sovereign governments must borrow all of their money from bankers.

    In reality the U.K. government can inject more money into the economy by spending it (i.e. by crediting bank accounts, thereby creating money out of thin air).


    “Bonds issued by the British government were purchased by the public.” ~ RMM

    In part, yes. However the Bank of England itself buys many U.K. Treasury securities (as does the U.S. Fed) in order to keep reserves balanced in the overall banking system. These Bank purchases are mere accounting maneuvers in which the left hand borrows from the right hand, and vice versa. Therefore much of the U.S. and U.K. governments’ “national debt” consists of money that these governments owe themselves.

    Meanwhile the rest of the “national debt” consists of money that investors have deposited in Fed savings accounts. This deposited money is temporarily removed from the economy. It still exists, but as non-spendable reserves.

    If we want to convert our reserves into spendable money, then we must sell our T-security to someone in exchange for money, or else we must wait until our T-security matures.

    All this is mere banking stuff. As Rodger says, the crux of the matter is that monetarily sovereign governments can create infinite spending money out of thin air, and therefore do not need loans or tax revenue.

    No monetarily sovereign government program (that uses the government’s own currency) can ever go “bankrupt” or be “unsustainable,” unless politicians and bureaucrats intentionally starve a federal program as a prelude to privatizing it.


    “By purchasing those bonds from the public, the government reduces the amount of interest money it would have pumped into the economy. “ ~ RMM

    Huh? I thought that the government issued bonds that are bought by the public (and by the central bank).


    “Sadly though, the British government promotes the false notion that its debt is unsustainable, and austerity (deficit reduction) is the path to economic growth.” ~ RMM

    One of the core purposes of austerity is to remove government-created money from the economy, thereby enhancing the profits of the private banking and finance industry (which bribe the politicians). The less money there is in circulation, the more we are forced to seek loans from banks, and from “payday loan” sharks.

    When a society becomes overly dependent on loans (as opposed to government-created money), all money in the economy works its way the top, gravitating upward through various lenders at various levels in a kind of debt-osmosis. If this phenomenon continues long enough, the society collapses. That’s where the UK and USA are heading.


    1. “By purchasing those bonds from the public, the government reduces the amount of interest money it would have pumped into the economy. “ ~ RMM

      Huh? I thought that the government issued bonds that are bought by the public (and by the central bank).”

      You are correct that the government issues bonds, which are bought by the public. On those bonds, the government pays interest to the public.

      When the central bank purchases those bonds, the government no longer pays interest to the public. This reduces the amount of interest money it would have pumped into the economy.

      That is why QE is anti-growth.


        1. The article by Mark Thompson said,

          “The bank also said it would pump £70 billion ($92 billion) into the economy by printing money to buy bonds issued by the British government and companies.”

          That is known as “Quantitative Easing.”

          With QE, the government purchases bonds from the public. The problem is,the bank doesn’t “print” any money. It simply transfers existing dollars from government bond accounts back to the checking accounts of bond holders.

          The Fed used QE multiple times, to give the impression it was “doing something” to stimulate the economy. In fact, QE does not stimulate. It is recessive.



    Q. Why does AARP falsely claim that Medicare and Social Security are “unsustainable”?

    A. Because AARP is a lobby for the private insurance industry that masquerades as lobby for seniors.

    For example, AARP has been a paying member of the notoriously right-wing American Legislative Exchange Council (ALEC) since at least 2014.

    AARP was a “trustee level” sponsor of the ALEC annual meeting in Indianapolis from 27-29 July, 2016.

    ALEC (connected with the Koch brothers) and AARP are dedicated to getting a “balanced” federal budget, privatizing Medicare and Social Security, getting rid of public-employee pensions, and pushing laws that would make prescription drug prices even higher for seniors.

    ALEC does this by writing right-wing legislation, which politicians at the state and local levels submit as bills.

    More info here…


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