Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Just when I thought President Obama was starting to get it, he proves again he is clueless about our economy.

Washington Post: 8/18/11: ALPHA, Ill. — President Obama has decided to press Congress for a new round of stimulus spending and tax cuts as he seeks to address the great domestic policy quandary of his tenure: how to spur job growth in an age of austerity.

O.K. Stimulus spending and tax cuts. Lookin’ good.

The president is thinking about proposing tax cuts for companies that hire workers, new spending for roads and construction, and other measures that would target the long-term unemployed . . . Some ideas, such as providing mortgage relief for struggling homeowners, could come through executive action.

Excellent. One could argue about which kind of stimuli and tax cuts would be best or fastest (I favor eliminating FICA), but any increase in federal spending and any reduction in taxes will help.

Obama also plans to announce a major push for new deficit reduction, urging the special congressional committee formed in the debt-ceiling deal this month to identify even more savings than the $1.5 trillion it has been tasked with finding.

What??! More spending, less taxes – and even more deficit reduction? Will someone please teach this man arithmetic.

In packaging the two, he will make the case that short-term spending can lead to long-term savings. “We can’t afford to just do one or the other. We’ve got to do both,” Obama said . . . He did not reveal details. But . . . he will pressure Republican lawmakers this fall to back off their objections to additional spending in the short term.

Ah, so short term deficit increases will lead to long term deficit reduction. Sounds like Reaganomics in reverse: Cut taxes to increase tax collections. I suspect the philosophy goes like this. Stimulate the economy now. Then later, when the economy recovers, raise taxes and cut spending, so the economy can be sent back into a recession, thereby reinforcing the “cycle” myth of economics.

No, economic cycles are not normal or inevitable like the seasons. Economic “ups” and economic “downs” are created by politicians. There is no reason whatsoever, why we can’t have steady growth all the time. “Cycles” are an excuse for economic ignorance.

Democrats have expressed frustration that the White House allowed Republicans during the debt-ceiling negotiations to focus solely on deficit reduction while not pushing harder for steps that would energize the economy.

Gee, I wonder why the Tea/Republicans would want to do that? They couldn’t be so cynical as to want to ruin the American economy before the 2012 elections, could they?

“We should not have to choose between getting our fiscal house in order and jobs and growth,” Obama said.

“Fiscal house in order” – he still doesn’t understand the difference between Monetary Sovereignty and monetary non-sovereignty. Or is he just pandering to the ignorant public?

A Gallup poll released Wednesday showed that just 26 percent of Americans approve of the president’s handling of the economy. More than a third, according to a Washington Post-ABC News survey last month, said he has made economic matters worse.

The public doesn’t know economics, and the people don’t understand the causes, but they sure understand the results of Obama’s economic non-policies. Yes, he has made things worse.

Many voters, particularly independents, . . . want to see serious deficit reduction — a goal that might seem at odds with any program to boost spending.

The President has only himself to blame. All along, he should have explained why federal deficits are different from private deficits. By agreeing with the Tea Republicans that the deficit is too high, he has tied his own hands.

Republican lawmakers signaled Wednesday that they are unlikely to embrace any new spending.

Of course. They don’t give a damn about America. Their sole concern is to win office by strangling Obama.

We must put an end to the policy uncertainty constantly being driven by this administration,” House Majority Leader Eric Cantor (Va.) wrote in a memo to colleagues. “That means stopping the discussions of new stimulus spending with money that we simply do not have.”

“Money we do not have”?? Our Monetarily Sovereign government has run out of money?? What a load of crap. When Rick Perry directed the word “treasonous” at Ben Bernanke, he should have directed it at the Tea/Republicans. Intentionally harming the U.S. to gain personal benefit, is the very definition of treason.

A wide range of independent economists agree that the best prescription for the ailing recovery is pairing efforts to boost the economy now, which would include spending increases and tax cuts, with efforts to tame the national debt over the coming decade, through spending cuts and tax increases when the economy is in better shape.

And that is why the economy is in such bad shape. The “wide range of independent economists” simply does not know what it is talking about. Why is boosting the economy considered a temporary exercise? Why not grow the economy all the time? And “tame” the national debt is a meaningless term, akin to “unsustainable.” Typical media term signifying nothing.

And how about the wide range of MMT and Monetary Sovereignty economists who know “taming” the debt is nuts?

White House allies . . . said Wednesday that the president faces a stiff political test in explaining to voters the merits of short-term spending and long-term reduction of the federal deficit.

Yes, especially since he has spent the past three years saying the exact opposite.

Rep. Chris Van Hollen (Md.), one of six Democrats on the newly formed “supercommittee” that will try to find ways to cut the debt, said Obama will have to “clearly articulate why those twin goals work together and why they do not work at cross purposes.”

He added: “The good news is that the American people seem to be in the same place that the right policy would dictate. Clearly they want to focus on jobs and the economy, but they also recognize the need to develop a long-term plan to reduce the deficit.”

Hey Chris, you’re on the supercommittee. You’re supposed to find ways to cut the debt. You’re supposed to understand how those goals really do work at cross purposes. And Mr. President, you agreed to the supercommittee. What were you thinking?

“You’ll hear a lot of folks . . . say that government is broken. Well, government and politics are two different things,” Obama said . . . “Government is Social Security. Government are teachers in the classroom. Government are our firefighters and our police officers. . . . America is going to come back from this recession stronger than before. . . “I’m also convinced that comeback isn’t going to be driven by Washington. . . it’s not either-or.”

Can you imagine more confused rhetoric than this? “Government is Social Security and firefighters”?? “Government and politics are two different things”?? This is the double talk we should expect from the man who is supposed to cure our ills?

God bless help America.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

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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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
========================================================================================================================================================================================================

Washington Post: BERLIN — The economy of Germany, Europe’s headline performer, slowed to a virtual standstill over the past three months . . . The discouraging news came just hours before German Chancellor Angela Merkel and French President Nicolas Sarkozy called for closer European coordination in setting economic policy and new steps to discipline governments whose lax budget practices prompted the debt crisis.

No, the crisis was caused by the euro-zone nations being monetarily non-sovereign. They cannot control the supply of their currency, the euro. I predicted this on June 5, 2005: “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.”

. . . Merkel and Sarkozy . . . proposed that countries harmonize their tax policies, adopt a new tax on financial transactions and commit to balancing their budget . . .

Balancing their budgets assures a recession or depression, by eliminating euro supply growth. A growing economy requires a growing money supply.

The abrupt slowdown in Europe’s largest economy comes at a time when Germany is expected to fund a major portion of the emergency loans extended to struggling neighbors such as Greece, Ireland and Portugal. . . . The new figures call into question whether Germany can remain the economic engine that officials in the United States and elsewhere have been counting on to power Europe’s recovery.

Germany’s economy was strong because it was a net exporter, i.e. a net importer of euros. That was the only way a monetarily non-sovereign nation could increase its money supply.

“Trend growth is not that high,” said Thomas Mayer, chief economist for Deutsche Bank. “It would have been false to think that Germany would turn into a loco-motive for Europe. That is not a viable proposition.”

Right. It’s asking the blind to lead the blind.

According to a release from the Federal Statistical Office of Germany, flagging investment and household consumption were behind the slowdown — particularly disappointing for those, including U.S. officials, who have urged Germany to stoke local demand. . . .

Investment and household consumption “flagged,” because Germany now is short of the euros it formerly had acquired via exports.

Also discouraging were new figures released Tuesday for the entire region that uses the euro. Growth for the second quarter was only 0.2 percent, reflecting government austerity programs and slowing global economic activity.

If you want to kill a nation, austerity is the way to do it. (Hello, Tea/Republicans. Are you watching?)

Although the crisis in Europe is ostensibly driven by high levels of government debt and annual deficits, it is also rooted in slow growth, with nations such as Italy and Spain struggling to expand fast enough that their tax base keeps up with their commitments to citizens and bondholders.

Visualize trying to bail a rowboat having a big hole in the bottom.

Germany’s growth in the past few years offered an example to weaker economies. . . Germany revised its labor and tax rules to become globally competitive. Its stable of large multinationals benefited as China and other fast-growing developing nations snapped up German capital goods and high-end products.

Right. Exports were the key, because they brought in euros.

Figures released last week, however, showed that German exports in June were down significantly from the month before and manufacturing dropped to its lowest level since October 2009.

In a country that has been spared the riots and demonstrations of Greece and Spain, the slowdown may reinforce a public sentiment — reflected in some opinion polls — that Germany should go no further in risking its own financial health to help its weaker neighbors.

Now, visualize bailing your neighbors’ sinking boats, and tossing the water into your own boat.

Merkel and Sarkozy . . . called for what Sar-kozy termed “a true economic government for the euro zone” . . . Compared with some of the more dramatic steps that European officials have taken to address the debt crisis, such as establishing a trillion-dollar bailout fund last year, the proposals offered Tuesday were more evolutionary, Merkel said. By bringing the economic and social policies of the euro nations into sync, the region could “regain confidence step by step,” she said.

The proposals were short on details, and some analysts said they had heard similar ideas before. Over the years, European leaders, particularly from Germany, have offered various ways to control euro-zone spending, but to little effect. National parliaments would still have to approve the proposed measures, such as constitutional amendments to require a balanced budget, and governments would still have to live up to them.

“. . . bringing economic . . . policies into sync . . .” almost sounded like they understood the problem, and were going to combine the euro nations into one Monetarily Sovereign United States of Europe. That would have been one of the two possible solutions (the other being to disband the EU. Unfortunately, they still are talking about non-solutions like balanced budgets. Visualize using leeches to cure anemia.

“They have not given any details on what they feel economic governance should look like,” said Daniela Schwarzer, an expert on European integration at the German Institute for International and Security Affairs. And if the new economic council meetings amounted to no more than the latest in a long series of summits, she said, “that is nothing substantially new.”

They are as clueless as the U.S. Congress and President. Our sole advantage: We are Monetarily Sovereign (though our leaders have not figured that out.) So we can’t go bankrupt, unless our government wants it.

The monetarily non-sovereign euro nations can go bankrupt, and that grim future unnecessarily will drive down the U.S. economy. “Unnecessarily,” because a Monetarily Sovereign nation has complete control over its economic growth, if it is wise enough to use that control.

Recessions are unnecessary in a Monetarily Sovereign nation. Tell that to Congress.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

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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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
====================================================================================================================================================================================================

How soon will we suffer the Tea/Republican/Obama riots in the streets?

An interesting article ran on Washington’s Blog. I’ll quote from parts of it, but I can’t do it justice here. I urge you to go there to read the entire article.

The essence is that austerity combined with a large gap between the wealthy few and the rest of the population, an inevitable result of “cut-deficit” preaching by the Tea/Republicans and President Obama, will lead to riots in the streets, sabotage and other forms of serious civil unrest.

Guest Post: Austerity and Runaway Inequality Lead to Violence And Instability
By Washington’s Blog

A study this month by economists Hans-Joachim Voth and Jacopo Ponticelli shows that – from 1919 to the present – austerity has increased the risk of violence and instability:

From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble cross-country evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability.
[…]
Studying instances of austerity and unrest in Europe between 1919 to 2009, Ponticelli and Voth conclude that there is a “clear link between the magnitude of expenditure cutbacks and increases in social unrest. With every additional percentage point of GDP in spending cuts, the risk of unrest increases.”

“Expenditure cuts carry a significant risk of increasing the frequency of riots, anti-government demonstrations, general strikes, political assassinations, and attempts at revolutionary overthrow of the established order. While these are low probability events in normal years, they become much more common as austerity measures are implemented.”
[…]
The relation between austerity and riots is so clear that former IMF chief economist and Noble prize winning economist Joseph Stiglitz coined a phrase to describe what happens after the International Monetary Fund demands austerity in return for loans to indebted countries: “The IMF Riot”.
[…]
The military must be prepared . . . for a “violent, strategic dislocation inside the United States,” which could be provoked by “unforeseen economic collapse,” “purposeful domestic resistance,” “pervasive public health emergencies” or “loss of functioning political and legal order.” . . . “widespread civil violence,” the document said, “would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.”

As I suggested, read the entire post, the essence of which can be summarized: Civil unrest occurs when:

1. The government cuts spending
and
2. The gap between rich an poor grows.

As we have said throughout this blog, the drive to reduce the federal deficit is a combination of ignorance about Monetary Sovereignty and madness, supported by zero data, and based on faulty, obsolete assumptions about economics. Congress and the President have not created a deficit reduction committee. They have created a Riot Production and America Destruction Committee.

Sadly, the politicians’ response will be to call out the military, and ruthlessly suppress the population even further, rather than to solve the fundamental problem by federal deficit spending to stimulate the economy, create jobs and lift the lives of the underclasses.

Thus, do all great nations fall at the hands of their leaders. America is no exception.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

==========================================================================================================================================
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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY