Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Yahoo Finance
US trade deficit hits $52.6 billion in January
US trade deficit widens to three-year high of $52.6 billion in January as imports hit record
By Martin Crutsinger, AP Economics Writer | Associated Press

WASHINGTON (AP) — The U.S. trade deficit surged to the widest imbalance in more than three years in January as imports hit an all-time high, reflecting big demand for foreign-made cars, computers and food products.

U.S. exports to Europe fell, raising concerns that the debt crisis in that region could dampen U.S. economic growth.

Economists are looking for the deficit this year to widen from last year’s $560 billion imbalance, reflecting in part the economic woes in Europe, which represents about 20 percent of America’s export market. A wider deficit can depress economic growth because it usually means fewer export-related jobs.

In January, the politically sensitive deficit with China rose 12.5 percent to $26 billion. Last year, the deficit with China hit a record $295.5 billion, the highest deficit ever recorded with a single country.

At a time of high unemployment in the United States, political pressure is growing to impose economic sanctions on what critics see as China’s unfair trade practices such as a currency regime that keeps the yuan undervalued against the dollar, making Chinese goods cheaper in U.S. markets and American products more expensive in China.

So there you have it. Our problems are not of our own making. It’s all China’s fault.

Now let’s get real. Why does a trade deficit negatively affect unemployment and economic growth? The answer is quite simple: Money supply. A trade deficit removes dollars from the U.S. economy.

Remove dollars, and consumers have fewer dollars to spend, which means less sales volume for businesses, which means less profits, which means job cuts. In short, unemployment is not caused by “shipping jobs overseas,” as so often is claimed. We’re shipping dollars overseas, and this dollar loss reduces consumer spending. When consumers don’t spend, we have unemployment. Period.

Now, you rightly may ask, how is it possible for a nation — a Monetarily Sovereign nation having the unlimited ability to create dollars — how is it possible for that nation to run short of dollars?

Answer: It isn’t possible, except for one small detail: Economic ignorance. Congress doesn’t know the U.S. is Monetarily Sovereign, so it restricts dollar creation. Then it blames the resultant job loss on China (and President Obama, if you’re a Republican).

No, Congress. No, Republicans. The job loss is not China’s fault; it’s yours. Those dollars, you easily can create, are flowing to China, and you’re not replacing them fast enough.

So here’s the plan — no, not developed enough to be called a “plan” — call it a “concept.” Every quarter, the federal government should replace the trade deficit. It should send the amount of the trade deficit to the American consumers, dollar for dollar.

It could be in the form of mailed checks — something resembling the very first stimulus attempt in 2008. The result: Consumers would continue to have spending money, businesses would continue to thrive and hire employees, and at long last, Congress could stop blaming China for its own mistakes.

Now is that so hard?

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

#MONETARY SOVEREIGNTY

Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

One thing I love about economics: Every time you think you’ve heard every argument, a new one emerges. Though many (most?) of these new arguments are specious, I enjoy reading and even printing them, because they help to visualize the facts of Monetary Sovereignty.

There’s an old saying, “The best way to learn a subject is to teach it.” For the past 15 years I’ve been teaching economics, and the effort has taught me more than if I had spend that same time continuing in formal classes. Why? Much more variety. Classrooms teach the professor’s beliefs.

Recently, I heard from someone named “Pete,” who seems to be an ardent environmentalist. To argue with Pete is like arguing with a religious fundamentalist. Truth blends with fiction, outrageous claims and exaggerations pop up and need to be addressed.

The whole thing turns into a whac-a-mole argument, leading to even more outrageous exaggerations and outright denials of fact, drifting further and further from point. (At one point he doubted people live longer today than in the distant past, and demanded I supply data.)

Nevertheless, I participate in such arguments (and admittedly, instigate them) because I learn from the nuggets of truth hidden in the hyperbole. Unlike debt-hawks, Pete seems to agree that Monetary Sovereignty — the government’s unlimited ability to pay for anything — does in fact lead to economic growth. This takes him orders of magnitude beyond popular ignorance.

But, Pete’s argument is that growth itself is bad, so even though Monetary Sovereignty, more specifically, federal deficit spending, begets technology, which begets economic growth, he feels this is a bad thing, not a good thing.

He provides a long list of bad results, mostly involving chemicals in our environment, to prove that humans have put way too many chemicals into the air, water and food, and killed too many animals. I agree.

But what is the trade-off? A dreamy return to a mythical, idyllic lifestyle, living naked in the forest, eating berries? Yes, some chemicals are bad; but some are good. Some medicines fail; some succeed. Some inventions bless us; some curse us.

How do we differentiate unless we progress? Can we learn in advance every side effect, and if so, how? Will we cope with the future? When the next big meteor or pandemic or ice age hits, will humans survive it — or even prevent it?

I grow impatient with people who feel progress must be linear — no bad experiments, no bad results, no bad surprises. I grow impatient with people who would junk democracy because there are crooked politicians, or blame business because some businessmen care more about profits than consumer safety.

One often hears the question, “How is man unique?” I suggest the answer is, “Man progresses.” Lions, tigers and bears do not progress. They are what they were and always will be. Nature may have changed them, and may change them in the future, but they will not change themselves. They are victims of what is. They settle for darkness; humans invent light bulbs.

To progress is to be human, as is to err. To learn from history, and to act on your learning, is to be human. To overcome intuition is to be human. To discover by (as Newton said) “standing on the shoulders of giants” is to be human.

Humans reach for the hills, for the mountains, for the stars. That reaching, reaching, failing, then reaching more is progress. Without it, we are no more than the lions, tigers and bears.

Animals eat eggs. Humans eat omelettes, and to the dismay of many environmental extremists, omelettes require egg breaking. Two steps forward; one step back. That is the reality of our growth.

The hope for humankind is not a reversion to nature or mean austerity or an end to economic growth. We must seek solutions to the problems that face us, some of which we have caused ourselves.

The Pete’s of the world disagree. They come from a culture where pessimism is oh, so much cooler than optimism. But, I believe in us. I believe we will find solutions to disease and pain and global warming, and poverty and hunger and the extinction of our species. I believe in human progress.

But progress demands money. I know of no other path. Those who deny Monetary Sovereignty — those who deny the absolute need for growth in federal deficits, i.e. money creation — they deny us the money we need for progress.

For the sake of a pessimistic present, they deny us an optimistic future. In essence, they deny us what makes us human.

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

#MONETARY SOVEREIGNTY

Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

For years I’ve said the euro nations have two, and only two, solutions to their economic problems:

1. Federalism (The U.S. system): The European Central Bank give (not lend) euros to euro nations
or
2. Monetary Sovereignty: Each nation return to its sovereign currency.

There is widespread feeling these two solutions would be too chaotic compared with austerity and loan “modification” (aka default).

Yahoo News
Analysis: Greek default may be gift to other euro strugglers
By Mike Dolan | Reuters

LONDON (Reuters) – Greece’s tortuous debt restructuring and threat of retroactive laws to compel reluctant creditors heaps regulatory risk onto investors but may make voluntary sovereign debt revamps more attractive and likely for other cash-strapped euro sovereigns and their creditors.

Thursday could mark a climax of the Greek debt workout with private creditors due to respond to an offer that would see them effectively write off more than 70 percent of the face value of their bonds in return for new debt with a series of sweeteners.

With Greek government bonds currently trading at less than 20 cents in the euro and the risk of a total wipeout if Greece decided to unilaterally refuse all payments, a majority will likely go for it. Legally-binding majorities are another matter.

Athens said this week it aims for 90 percent acceptance but if the takeup is at least 75 percent then it would consider triggering so-called “collective action clauses” retroactively inserted into the bonds issued under Greek law — about 85 percent of the 200 billion euros being restructured.

Those clauses in practice force all affected creditors to comply.

But it’s this distinction between debt issued under domestic laws and that sold under internationally-accepted English law that some say has consequences for other troubled euro nations eyeing Greece’s so-called Private Sector Involvement, or PSI.

In essence, English-law Greek bonds, as is the case for many emerging market sovereigns, trade as if they were senior to local-law debt — at almost twice the price in fact right now. That’s because the terms of foreign-law bonds cannot be altered by an Athens parliament, and agreement for debt swaps is needed bond-by-bond, unlike local laws that aggregate majorities across all debtors and make blocking minorities more difficult to muster.

A paper released this week by Jeromin Zettelmeyer, deputy chief economist at the European Bank for Reconstruction and Development, and Duke University Professor Mitu Gulati reckons this legal gulf could well encourage other debt-hobbled euro zone countries and their creditors into mutually acceptable and beneficial debt restructurings.

This would involve an agreed switch in the legal status of the debt in return for relatively modest haircuts.

“Holders of local-law governed bonds in other euro zone countries that are perceived to be at risk might want to make a trade for English-law governed bonds,” the economists wrote. The sovereign gets a chance to reduce a crippling debt burden while bondholders get greater contractual protection in any future restructuring.

Given that the Greek precedent of retroactive legislation vastly increases the allure of foreign-law bonds, which credit rating firm Moody’s says now make up less than 10 percent of all euro zone government bonds, a window of opportunity may open up.

“Effectively, this is a large gift from the Greeks to the parts of the euro zone that face debt crises. By conducting its debt exchange in the way it did, Greece has in effect resurrected the plausibility of purely voluntary debt-reduction operations in Europe.”

Even the 10-year debt of fellow bailout recipient Ireland, which many investors reckon has the underlying economic capacity to go back to the markets next year, is still trading at less than 90 cents in the euro and many doubt its imminent market return.

“We expect that Ireland will need a second financing package beyond 2013,” economists at Citi said on Monday. What’s more, if Europe’s new fiscal pact is rejected by voters in a planned referendum there in the coming months, Ireland would lose access to the financial backstop of the European Stability Mechanism and likely unnerve many investors.

Yet voluntary debt swaps with some debt relief stemming from more modest haircuts than Greece may well be the best way to ensure these two countries avoid outright default and return to private financing in a reasonable amount of time.

And if such exchanges were wholly voluntary, it would also mean credit default swap insurance would not pay out. One danger is that the prospect of countries opting for such a swap may scare creditors in larger countries like Italy and Spain where currently no bond haircut is expected by the market, thanks in large part to the ECB’s liquidity injections.

And the upshot for many economists is that there will be a longer-term price to pay for governments for tinkering with the rules of the game, as many investors view it, via the likes of retroactive bond legislation and obfuscation of CDS markets.

“Investors will expect a premium for bearing this regulatory risk,” Morgan Stanley’s Manoj Pradhan told clients in a note, adding that only central bank liquidity floods were now obscuring the resultant higher financing costs and there would be a dangerous blurring of lines between macro and market risks.

That’s the answer? To protect monetarily non-sovereign nations, screw the private sector — the bond holders. And this convoluted, byzantine Whac-a-mole is less chaotic for the euro nations, their people and their lenders than adopting federalism or becoming Monetarily Sovereign?

Translation for all of the above: “Lenders: If you voluntarily accept a screwing now, we promise not to screw you as much next time. Otherwise, we’ll screw you worse now and even worse yet, later. What’s your voluntary choice?”

Unless the euro nations find solutions #1 or #2 (above), you can be sure that 10, 20, 50 years from now, these nations will have continued with their borrow/default/austerity convulsions. Of course, I’m dreaming when I say, “10, 20, 50 years.” There is no possibility the EU will continue to exist with its current rules. The people will wise up and revolt.

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

#MONETARY SOVEREIGNTY

Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

Here’s what Mitt said:

By increasing our annual naval shipbuilding rate from nine to 15, I intend to restore our position so that our Navy is an unchallengeable power on the high seas.

Restore our position? When did we lose it?

Just as Reagan sought to defend the United States from Soviet weapons with his Strategic Defense Initiative, I will press forward with ballistic missile defense systems to ensure that Iranian and North Korean missiles cannot threaten us or our allies.

Star wars, again? Remind me, how did it work out for Reagan?

As for Iran in particular, I will take every measure necessary to check the evil regime of the ayatollahs. Until Iran ceases its nuclear-bomb program, I will press for ever-tightening sanctions, acting with other countries if we can but alone if we must.

Tighter sanctions? Isn’t that what President Obama is doing? Aren’t those what you’ve been criticizing? And specifically what sanctions are not already being applied? And if the U.S. acts alone, what prevents Russia, China et al, from giving Iran all the aid it needs?

But at least our 6 extra ships will defeat the Iranian navy.

I will speak out on behalf of the cause of democracy in Iran and support Iranian dissidents who are fighting for their freedom.

Speak out on the cause of democracy? Please don’t scare those mullahs. And specifically, how will you support Iranian dissidents?

I will make clear that America’s commitment to Israel’s security and survival is absolute. I will demonstrate our commitment to the world by making Jerusalem the destination of my first foreign trip.

Well that surely will make the Palestinians give up their demands and Hamas undoubtedly will stop firing rockets into Israel. How come nobody thought of that, before?

Most important, I will buttress my diplomacy with a military option that will persuade the ayatollahs to abandon their nuclear ambitions. Only when they understand that at the end of that road lies not nuclear weapons but ruin will there be a real chance for a peaceful resolution.

You’re going to start a war with Iran? Sure, why not? The wars in Iraq, Pakistan and Afghanistan turned out so well. Vietnam, too. When you send Americans overseas to die, will you lead the charge?

My plan includes restoring the regular presence of aircraft carrier groups in the Eastern Mediterranean and the Persian Gulf region simultaneously. It also includes increasing military assistance to Israel and improved coordination with all of our allies in the area.

“Increasing” “Improving.” This is a plan?

We can’t afford to wait much longer, and we certainly can’t afford to wait through four more years of an Obama administration. By then it will be far too late. If the Iranians are permitted to get the bomb, the consequences will be as uncontrollable as they are horrendous. My foreign policy plan to avert this catastrophe is plain: Either the ayatollahs will get the message, or they will learn some very painful lessons about the meaning of American resolve.

Bush used the same scare tactics to get us into Iraq. Let’s get real. Whether Iran has one nuclear bomb or fifty, it never will use them. The mullahs like to send kids on suicide missions, but they themselves don’t want to die.

A nuclear reprisal would obliterate Iran. The Supreme Leader knows this. North Korea is crazier than Iran, and they won’t use nukes either. So before you and the other brave, tough patriots start sending our children to be maimed and killed, try to use what little common sense the “religious” right has left.

Way, way back, when I was young, we used to call big mouths, “coat holders.” They were the guys who would say, “Let’s you and him fight, and I’ll hold your coats.”

Calm down, Mitt. Is winning the Presidency so important it’s worth killing for?

Here’s one for you, killer. You earned it:

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

#MONETARY SOVEREIGNTY