Image result for breaking chains

It takes only two things to keep people in chains:
The ignorance of the oppressed and the treachery of their leaders.

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We divert your attention from Donald Trump’s angry focus on kneeling vs. standing, while less important things like Puerto Rico’s suffering, the ridiculous GOP “no-health-care” bill, and threats of war with North Korea are left unattended.

Recently I saw an article in Reason.com that had me shaking my head:

Why We Need To Shrink the National Debt, And Fast!
Too much debt slows economic growth and reduces living standards.
Nick Gillespie & Mark McDaniel | September 25, 2017

It was big news when our national debt recently passed the $20 trillion mark. What’s less understood is exactly why having such a massive debt is a bad thing. The short answer is that too much debt slows economic growth, reducing living standards.

The sheer size of the existing debt is deeply worrying to economists on both the left and the right, who agree that when debt reaches 90 percent of GDP for five years in a row it means painfully slow growth, creating what’s called a “debt overhang.” 

A group of progressive economists affiliated with the University of Massachusetts predicted in 2013 that a debt burden at that level would result in an annual growth rate of just 2.2 percent, which means economic stagnation and anemic job growth.

(Earlier this year, one of those researchers co-authored a paper walking back that claim).

Pause for a moment to consider what you just have read: Three paragraphs telling you how “deeply worrying” the federal debt is, and the “painfully slow growth” it will cause, followed by one little parenthetical sentence taking it all back.  Huh?

The paper that took it all back said this:

“We provide a comprehensive assessment of the relationship between public debt and GDP growth in the postwar advanced economies.

“We use the timing of changes in public debt and growth to account for endogeneity, and find little evidence of a negative relationship.

“Semi-parametric estimates do not indicate any threshold effects. Finally, we reconcile our results with four recent, influential papers that found a substantial negative relationship, especially when public debt exceeds 90 percent of GDP.

“These earlier results appear to derive mostly from peculiar parametric specifications of nonlinearities, or use of small samples which amplify the influence of outliers.

Said in English, the paper from which Nick Gillespie & Mark McDaniel took their information was wrong; the author later admitted it was wrong, and Gillespie and McDaniel knew it was wrong, and still, they published their article referencing the wrong information.

Why did they do it? Because in their hearts they believe that something called “debt” must be bad; it simply must. After all, it’s debt, isn’t it, and debt always is bad, right?

That is what passes for economics these days.

Messrs. Gillespie & McDaniel compounded the crime by quoting none other than Carmen Reinhart and Kenneth Rogoff, whose infamous 2010 research paper “Growth in a Time of Debt” was found to contain an embarrassing mathematical error negating their silly conclusion that austerity aids economic growth.

Well duh, you mean taking money out of an economy doesn’t grow the economy? Who’da thunk?

Oh, but it gets worse:

Countries like New Zealand, Canada, and Germany have demonstrated that when governments reduce debt good things happen.

Uh, I hate to remind Messrs. Gillespie & McDaniel, but as the graph (below) shows, none of the three have reduced debt over the past decade.

Also, Germany should not be mentioned together with Canada and New Zealand; their finances are completely different.

Canada and New Zealand are Monetarily Sovereign, while Germany is monetarily NON-sovereign. The former is not burdened by national debt, while the latter is.

People who don’t understand the differences between Monetary Sovereignty and monetary non-sovereignty should not write articles about economics.

Barack Obama, and George W. Bush were leaders who lacked the integrity to do what’s best for the country by keeping spending and debt in line. President Donald Trump also shows no interest in explaining to the public how runaway debt chokes off the future.

That’s a failure which we’ll all be paying for for a very long time to come.

Under Obama, the “runaway debt” has “choked off the future” by giving us a powerful, nine-year expansion. If that is choking off the future, please give us more of it.

Bottom line: Reason.com is a Libertarian website wanting you to believe that federal tax increases and spending decreases somehow grow an economy.

Since both tax increases and spending decreases take dollars out of the economy, the Libertarians hope you will believe the incredibly foolish argument that the fewer dollars in the economy, the more the economy will grow.

The formula for economic growth is:

GDP = Federal Spending + Non-federal Spending + Net Exports

So, by what magic of mathematics can GDP grow with less money in the economy?

The example we like to give is applying leeches to cure anemia. It simply cannot work.

Addendum: Reason.com, just today, had the gall to re-publish the following article from 2012:

To Revive the Economy, Cut Federal Spending
Obama and Boehner are both big spenders. That’s the problem.
Nick Gillespie & Veronique de Rugy

In a paper released this year, economists Carmen M. Reinhart, Vincent R. Reinhart, and Kenneth Rogoff said that periods of “debt overhang” – when accumulated gross debt exceeds 90 percent of a country’s total economic activity for five or more consecutive years – reduce annual economic growth by more than one percentage point for decades.

Can you believe it? Back in 2012 they wanted spending cuts to “revive” an economy that had been growing for four years.

Now, it’s 2017. Spending has continued to grow; the economy also has continued to grow — for nine years — and Reason.com publishes the same article that was wrong in 2012 and remains wrong in 2017.

Whew, talk about not learning from your errors!

Anyway, what’s the use? Economic reality means nothing to Libertarians. “We believe what we believe and please don’t confuse us with facts.”

It is ever thus.

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

THOUGHTS

•All we have are partial solutions; the best we can do is try.

•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 no matter how much it taxes its citizens.

•The more federal budgets are cut and taxes increased, the weaker an economy becomes..

•No nation can tax itself into prosperity, nor grow without money growth.

•Cutting federal deficits to grow the economy is like applying leeches to cure anemia.

•A growing economy requires a growing supply of money (GDP = Federal Spending + Non-federal Spending + Net Exports)

•Deficit spending grows the supply of money

•The limit to federal deficit spending is an inflation that cannot be cured with interest rate control. The limit to non-federal deficit spending is the ability to borrow.

•Until the 99% understand the need for federal deficits, the upper 1% will rule.

•Progressives 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 the rich and the rest.

•Austerity is the government’s method for widening the Gap between the rich and the rest.

•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..

MONETARY SOVEREIGNTY