–Drowning Europe swims one inch toward a distant shore.

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
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The euro nations, like the U.S. states, counties and cities, are monetarily non-sovereign. Unlike the U.S. government, which is Monetarily Sovereign, they cannot create their sovereign currency; they have no sovereign currency to create. The euro is an “alien” currency, used by courtesy of the European Union.

As has been discussed often on this blog, a monetarily non-sovereign government, being unable to create money, needs money coming in from outside its borders. U.S. states survive either by receiving dollars from the U.S. government, or by net exporting to receive dollars.

This blog has stated there are two, and only two, long-term solutions for euro nations. Either:

1. Revert to their own sovereign currencies
or
2. Join together in a fiscal union (ala the United States), in which the EU supplies euros to member nations, as needed.

There are no other long-term solutions, and certainly not the “solution” currently being used: Repeated loans to excessively indebted nations plus insistence on economy-crushing austerity.

Given that those are the only two solutions, the euro nations have selected a third “solution,” a non-solution: A banking union. It supposedly will protect banks and their depositors, but will do nothing for the nations themselves or for their citizens.

The Guardian
Eurozone moves a decisive step closer to banking union
European leaders seal agreement to put the European Central Bank in supervisory authority over financial institutions in the single currency area
Ian Traynor in Brussels
The Guardian, Thursday 13 December 2012

European leaders were expected to push ahead with plans for winding up or shoring up weak eurozone banks on Thursday night, hours after sealing agreement to put the European Central Bank in supervisory authority over financial institutions in the single currency area.

In what was being hailed as one of the most important and systemic responses in three years of battling to save the currency, finance ministers early on Thursday embarked on the first stage of a eurozone “banking union”, burying acute Franco-German differences to establish the first single banking supervisor.

But more ambitious schemes, drawn up by the summit chair, president Herman Van Rompuy, to move towards a eurozone fiscal and political federation were watered down and delayed amid strong German resistance to any pooling of risk and costs among the currency’s 17 countries.

Translation: “The most important goal is to save the euro, the banks, and the wealthy, not to save the euro nations. After all, banks are owned by rich people, so we must defend them. As for the nations, who cares if the citizens suffer.”

The European commission was told to draw up legislation for dealing with weak banks over the next year and the law should come into force in 2014. There was also talk of a common eurozone deposit guarantee scheme, the third plank in the banking union scheme, safeguarding people’s savings anywhere in the single currency area.

After more than 14 hours of fractious negotiations, the ministers agreed on the single supervisor as the first stage of a more comprehensive banking union. The next two stages may turn out to be more difficult to realise because of German-led reluctance to bow to the mutualisation of risk involved. But without them, it will also be difficult to see the new regime being effective, officials and diplomats say.

It will be another 15 months before the new regime starts operating properly.

Translation: “We have taken the most minute baby step toward fiscal union, but even that baby step will take more than a year.”

Merkel did not rule out supplying “financial incentives” for eurozone countries pledging to undertake structural reforms of their economies, policed by Brussels. But she added: “This should not be misunderstood. This can’t be used as a pretext for delivering new sources of money. That’s not on for Germany.”

The leaders also disbursed more than €34bn in bailout funds to Greece, six months after it was due, while postponing a decision on a bailout for Cyprus until next month.

Translation: “God forbid we allow the EU to provide euros to impoverished nations, though this would cost nothing and is the only rational solution to maintaining the euro. Instead, we’ll lend Cyprus, a nation that can’t pay its debts, even more money to renege on later.”

Perhaps we should view any move toward real merger, however slight, as good news, although the citizens of the euro nations will continue to suffer for many years.

Meanwhile, the ministers, the bankers and their wealthy friends will do just fine, thank you.

Because of austerity, the euro nations will continue to be the “sick men” of the world, just as the U.S. will be when deficit cutting proceeds.

Rodger Malcolm Mitchell
Monetary Sovereignty

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Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY

Your handy recession predictors

Here are your handy recession predictors. Save the link to this page. The graphs automatically will update.

We tend to have recessions when the year-to-year percentage change of Gross Private Domestic Investment goes down, especially when it falls below zero:

We tend not to have recessions when the percentage change is rising.

We tend to have recessions when the total of Private Investment and Saving is on the downswing:

We tend to have recessions when the percentage change in the annual ratio between Gross Private Domestic Investment and Gross Private Savings is falling, especially when it falls below zero.

And, as we’ve seen in past articles, recessions tend to follow years of decreasing Federal Debt:

Finally, Federal Deficits – Net Imports = Net Private Savings
and
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

Given that the federal government is determined to reduce the federal deficit, which will involve reducing Federal Spending and increasing federal taxing, what do you think will happen to Gross Private Investment, the total of Investment and Saving, the ratio between Investment and Saving, and Federal Debt? What effect will there be on GDP?

You can pose that question to your favorite Congressperson and newspaper.

Rodger Malcolm Mitchell
Monetary Sovereignty

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#MONETARY SOVEREIGNTY

–Deficit reduction (austerity) destroys more American lives and families than war.

Excerpted from the Washington Post:
The GOP’s problem: The cuts they want aren’t the cuts they can get
Posted by Ezra Klein on December 13, 2012

The Republicans know President Barack Obama will not agree to cut in the area they want to cut: aid to the poor. Obama is willing to cut Medicare and Social Security, and Republicans are internally conflicted over those programs.

Translation: “We politicians are employed by the rich, so we don’t care that every day, Americans die from inadequate health care, and every day, families are destroyed by poverty – more death and destruction than are caused by war.

“The Republicans want to start with the lowest income group and work their way up. Unfortunately, a poor person can vote – though the Republicans have been attempting to change that.

“The Democrats want to cut the old people first, and screw the poor later. Unfortunately, those old people insist on voting.”

Think back to Mitt Romney’s proposed budget. The only big cuts Romney ever proposed were to programs that aid the poor. He wanted to cut Medicaid, food stamps, and housing assistance. He wanted to get rid of the tax cuts enacted in the stimulus to help the poor — his tax plan raised taxes on the poorest Americans. He wanted to repeal all the spending in Obamacare, most of which goes to lower-income Americans.

About two-thirds of the cuts in Rep. Paul Ryan’s budget came from programs for the poor.

That leaves Medicare and Social Security. It’s possible that the negotiators will enact a backdoor, but significant, cut to Social Security by changing the government’s measure of inflation. But they’re not going to come at Social Security from the front. It’s too politically potent. Even Ryan’s budget left Social Security alone.

Just imagine if the politicians had the courage and the honesty to admit that deficit reduction (austerity) destroys more American lives and families than war. There would be no need to cut Medicare, no need to cut Social Security, no need to cut food stamps, housing assistance or other aids to the poor, no need for crumbling roads, bridges and dams, no need to cut public broadcasting – and no need for high federal taxes. . .

Every man, woman and child could have good health care insurance, adequate food and shelter, a good education. America’s roads, bridges and dams could be repaired. The hurricane damaged East Coast would not have to suffer the Republicans’ delay in providing funds. Our military could upgrade. The post office would not have to cut service and employees. More intensive financial supervision could eliminate crooked banks and brokers.

All these and more, would be possible. Instead, we watch as our nation is whittled down by the budget cutters, whose goal is not to strengthen America, not to “save” Security and Medicare, not to “get our fiscal house in order” – no, the sole purpose is to increase the gap between the rich and the rest.

We have a chance to make a difference. We can spread the truth . We can influence the future of America. Write, call, march, demand, threaten. Make our feelings known. We can keep the rich from taking over our lives.

Or we can just follow along and let it happen to us. Just as the wealthy want.

“Never send to know for whom the bell tolls; It tolls for thee.”

Rodger Malcolm Mitchell
Monetary Sovereignty

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#MONETARY SOVEREIGNTY

–What is the purpose of the charitable tax deduction? Who will be hurt if it’s reduced?

One might think reducing the charity tax deduction punishes rich. Nonsense. The rich will continue to give the same net (gross donation – tax deduction) dollars. Sadly, a greater share of those dollars will go to the federal government.

A billionaire giving ten million dollars, and paying the highest marginal tax rate, receives a $3.5 million tax deduction. It’s the net contribution of $6.5 million that actually comes out of his pocket. The rich know what their net outflow will be and what they will have left after making their contributions. They have people who keep track of those things.

Reduce the tax deduction, and the rich won’t absorb the loss. They simply will give less and the government will receive more. The charities would absorb the loss. So President Obama’s desire to reduce the charitable tax deduction for the rich, merely will reduce net contributions to charities.

And to whom do charities give: The poor, the needy, the 99.9%.

So while some of the 99.9% might exult at seeing the charitable reduction reduced for the rich ($250 thousand a year is “rich”???), in fact this means nothing to the rich. It is the middle and lower classes that will suffer.

Thus, we have another in a long string of Obama initiatives to widen he income gap between the rich and the rest.

But there is a fundamental question that never seems to be addressed. What has been the historical purpose of the charitable tax deduction? The answer: To encourage private charitable giving.

Those who hate “big government,” and who believe the private sector is best equipped to determine which charities are most beneficial to the nation, logically should want the charitable deduction to be even bigger. But even the conservatives don’t understand what’s happening.

There are only three alternatives:
1. More help from the private sector
2. More help from the federal government
3. Less help for the needy.

By reducing the charitable deduction, and cutting federal spending, which direction will we go? No rocket science necessary.

Washington Post
White House, nonprofit groups battle over charitable deductions
By Jerry Markon and Peter Wallsten, Thursday, December 13, 11:06 AM

The White House and the nation’s most prominent charities are embroiled in a tense, behind-the-scenes debate over President Obama’s push to scale back the nearly century-old tax deduction on donations that the charities say is crucial for their financial health.

In a series of recent meetings and calls, top White House aides have pressed nonprofit groups to line up behind the president’s plan for reducing the federal deficit and averting the year-end “fiscal cliff,” according to people familiar with the talks.

In part, the White House is seeking to win the support of nonprofit groups for Obama’s central demand that income tax rates rise for upper-end taxpayers. There are early signs that several charities, whose boards often include the wealthy, are willing to endorse this change.

Why would any charities endorse deficit reduction? It’s in the last sentence: “. . . boards often include the wealthy.” Yes, as we have seen in previous posts, deficit reduction (austerity) widens the income gap between the rich and the rest.

But the White House is also looking to limit the charitable deduction for high-income earners, and that has prompted frustration and resistance, with leaders of major nonprofit organizations, such as the United Way, the American Red Cross and Lutheran Services of America, closing ranks in opposing any change to the deduction.

Studies have shown that people would donate less if the deduction were reduced but estimates of the effect vary widely

“It would be devastating,’’ said Jatrice Martel Gaiter, executive vice president for external affairs at Volunteers of America, which has paid Patton Boggs — Washington’s most lucrative lobby shop — nearly $200,000 to lobby on the charitable deduction and other issues in the past year. “Of course people want to say they are giving out of the goodness of their hearts, and of course they are, but the tax deduction makes our heart larger and our goodness even better.’’

Many people would continue to give the same – mostly members of the lower 99.9% income groups. They still would drop a dollar into the Salvation Army kettle; they still would give $100 to the church. But unquestionably, the big donations would shrink.

Obama has proposed capping the value of deductions for individuals earning more than $200,000 ($250,000 for families) at 28 percent, regardless of their tax bracket. This would include deductions for mortgage interest and state and local taxes, along with charitable contributions.

Currently, the tax code allows people who itemize deductions to deduct their charitable contributions at their maximum marginal tax rate. So, for example, if someone in the highest tax bracket — now a 35 percent tax rate — gives $100 to charity, the donor saves $35 in taxes. If the deduction were capped at 28 percent, the donor would save only $28 dollars.

Ultimately, people are concerned with what they have left in their own pockets, after all expenses and contributions. Tax them more for contributions and they’ll contribute less.

Capping deductions at 28 percent — including those for charitable contributions, mortgage interest and state and local taxes — would raise $574 billion in new federal tax revenue over 10 years, according to White House estimates.

This transfers $574 billion out of the private sector, most of it coming from charities and their beneficiaries, the poor.

Obama has dismissed the charities’ contention that his plan would substantially damage their fundraising. White House officials, including Chief of Staff Jacob Lew and senior adviser Valerie Jarrett, have recently been telling nonprofit leaders they would face far graver danger under Republican deficit-reduction plans.

“You see, our plan only cuts off one of your feet, unnecessarily; the Republicans would cut off both of your feet, unnecessarily. So you should be happy with our plan.

Obama aides this week also signaled a willingness to overhaul corporate taxes as an enticement for the chief executives of major U.S. companies to speak out in favor of raising individual income taxes, and a number of prominent executives have begun backing the tax plan in recent days.

Can you believe it? “Prominent executives” like the idea of reducing corporate taxes while increasing individual taxes. Who’d a thunk?

Frustration stems in part from what some nonprofit leaders describe as a philosophical disagreement between Obama and the non-profit sector. The president has framed the tax deduction as a benefit for the wealthy, they say, while in their view the deduction is a benefit for charities that use the money to help the needy.

Reduce the tax deduction, and the rich will give less. No harm to the rich. All the harm is to the charities and ultimately to the people who need service from charities. Once again, Obama, the great liberal, works to widen the gap between rich and poor.

“Obama said. “Well, if you eliminated charitable deductions, that means every hospital and university and not-for-profit agency across the country would suddenly find themselves on the verge of collapse.”

A flat-out admission that reducing the charitable deduction will impact charities and as a result, impact those who need charities. But wait, here’s Obama making the opposite claim:

When the president proposed reducing the charitable deduction in 2009, initially to help pay for his health-care overhaul initiative, he said there was “very little evidence” that the change would significantly affect giving. Speaking at a press conference, he said the deduction “shouldn’t be a determining factor as to whether you’re given that $100 to the homeless shelter down the street.’’

So, according to Obama, charitable deductions are vital but not very important. Got it?

And finally, there is the Bill and Melinda Gates Foundation, to which Warren Buffett has contributed massively:

“Buffett’s gift came with three conditions for the Gates foundation: Bill or Melinda Gates must be alive and active in its administration; it must continue to qualify as a charity; and each year it must give away an amount equal to the previous year’s Berkshire gift, plus another 5 percent of net assets.

Do you think tax considerations aren’t important to charitable givers? Warren Buffett sure thinks they are.

Bottom line: The greater the tax deduction, the more the private sector will determine charitable giving. Reducing the charitable tax deduction will not hurt the rich. It will hurt the middle an lower classes, who benefit from charities. It will increase the gap between rich and poor. Federal bureaucrats will have greater power over charities. America will be diminished.

Yet another needless casualty of austerity.

Rodger Malcolm Mitchell
Monetary Sovereignty

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#MONETARY SOVEREIGNTY

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