Here is what economic ignorance causes.
Economists expect the U.S. to suffer its largest-ever contraction this quarter and the unemployment rate to soar to a post-Depression record, followed by a recovery that will be moderate and drawn out.
All economists? Some economists? A few economists?
The recovery may be “moderate and drawn out” only because the federal response has been moderate and drawn out.
The stock market alone lost $1.4 trillion in just one week. This doesn’t count all the other weeks this year, and it doesn’t count all the business and personal losses.
And Congress and the President think $2 trillion will prevent a depression?? Really?
Gross domestic product will plummet an annualized 25% from April through June after a smaller setback in the first quarter and the jobless rate will hit 12.6%, the highest since the 1940s, according to the median forecasts in Bloomberg’s monthly survey of 69 economists.
Gross Domestic Product (GDP) = Federal Spending +Non-federal Spending +Net Exports.
Therefore, the more the federal government spends, the faster will GDP grow.
Add a trillion dollars in federal spending and GDP will rise by a trillion dollars. Straight algebra.
Federal spending also stimulates non-federal (private sector) spending, which further increases GDP.
Sadly, our federal government does not acknowledge it is a Monetary Sovereign. It has the unlimited ability to create U.S. dollars at no cost.
Instead, it follows the right-wing, Tea Party / Libertarian formula of spending the least it can, under the circumstances, because of irrational fears about deficits and “big” government.
Then to exacerbate the problem, the politicians continue with petty, political arguments about precisely where each dollar is to go.
The downturn looks likely to be deemed as the first recession since 2007-2009 by U.S. business-cycle arbiter National Bureau of Economic Research. The second half of the year will see a resumption of growth, according to the survey, though economists say the deck is stacked against a snap-back.
The Fed is expected to keep interest rates near zero until the first half of 2022.
The low-interest-rate myth continues. The popular belief is that low interest rates are economically stimulative because they make borrowing cheaper.
But low interest rates have a negative side: They reduce the amount of interest the federal government pays on its Treasury Securities, i.e. the amount of interest money the government pumps into the economy. This reduction directly cuts GDP.
As the above graph demonstrates, high interest rates correlate with high GDP growth and low rates correlate with low GDP growth.
As interest rates trended up, through 1980, the GDP growth trended up. Then, as interest rates trended down, the GDP growth rate trended down.
The above graph is similar to the previous graph except it shows total interest paid rather than interest rates. The result essentially is the same.
On average, the more interest the federal government pays, the more GDP grows.
“Even if the economy starts to re-open in mid-May, more than 20 million Americans will have lost their job with the economy likely having contracted around 13% peak-to-trough, more than three times deeper than the global financial crisis,” James Knightley, chief international economist at ING Financial Markets, wrote with his forecast submission.
“It will be a gradual re-opening of the economy, so a return to ‘business as usual’ is many months away.
Throw in crippling financial losses and a legacy of defaults and it means we estimate U.S. economic output won’t return” to the late-2019 peak until mid-2022 at the earliest, Knightley said.
People “lose their jobs” because companies cannot afford to maintain payroll. As the companies run short of money, their people run short of money. When consumers run short of money, they buy less, so more companies run short of money, in a self-strengthening helix descending to depression.
To cut the helix, the government must give (not lend) money to businesses and to consumers.
“Crippling financial losses and a legacy of defaults” are symptoms of a lack of money.
See the commonality? The overarching problem facing the economy is a shortage of money — which the federal government could solve with sufficient deficit spending.
The U.S. federal government has a massive built-in advantage, that if used properly, would eliminate recessions and depressions. Unlike state and local governments and unlike euro-nation governments, the U.S. government is Monetarily Sovereign.
It has the unlimited ability to create U.S. dollars and to give those dollars any value it chooses.
There is no excuse for a company to fire people because it has run short of payroll dollars if the government simply will provide per-employee financial support.
There is no excuse for “crippling financial losses” if the government will pump dollars into the economy.
We are at war with our financial enemies: Recession and depression. The U.S. government has an ultimate weapon to use against these enemies: Monetary Sovereignty.
Instead, it chooses to fight with sticks and stones — little sticks and tiny stones. And it leaves the battle to the monetarily non-sovereign states, counties, and cities. The army has departed the battlefield, leaving the women and children to fight empty-handed.
The government is in a war against the enemies, recession
As a result, we will lose the war, and the American people will suffer.
Rodger Malcolm Mitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell
THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
The most important problems in economics involve:
- Monetary Sovereignty describes money creation and destruction.
- Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.
Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)
The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.