–The selling of science in America. How to make economic facts penetrate closed minds.

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity 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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A word may mean one thing to scientists and something completely different to lay people. Consider “theory.” In everyday usage, “theory” means speculation, as in, “That’s just a theory.” But a scientific “theory” is a whole body of facts that leads up to a scientifically acceptable belief. For an idea to be labeled a theory, it must have been researched and tested by many scientists, and based on undeniable facts.

What the layman thinks of as a “theory,” actually is a hypothesis, which is a suggested solution based on limited facts: An educated guess. So for instance when the scientifically ignorant deride Evolution as “just a theory,” they misuse the word, perhaps intentionally.

In economics, “debt” and “deficit” have different meanings and different implications, depending on whether the subject is a Monetarily Sovereign government or a monetarily non-sovereign entity. Among my quibbles with MMT (Modern Monetary Theory) is its name. It’s not a theory. It’s a statement of facts about how our Monetarily Sovereign government works, the same facts Monetary Sovereignty uses — the same facts politicians, media and economists deny or ignore. A few of these facts are:

1. The federal government creates dollars by paying its bills
2. Without federal deficits there would be no dollars; surpluses reduce the money supply
3. Taxes destroy dollars
4. Neither taxes nor borrowing help the federal government pay for its spending.
5. Today’s and future taxpayers will not pay for today’s federal spending.
6. A Monetarily Sovereign nation can pay any bill of any size at any time, and cannot be forced into bankruptcy.
7. No agency of a Monetarily Sovereign can be forced into bankruptcy without the consent of the government
8. Bank lending creates bank reserves that form the basis for further bank lending.
9. The federal debt is the total of outstanding T-securities and not functionally the total of federal deficits.
10. State, county and city governments finances are unlike federal finances.
11. Greece’s and Italy’s finances are unlike U.S. finances in that they can be forced into bankruptcy.
12. The debt/GDP ratio does not measure the federal government’s ability to service its debts.

None of these are theories or even hypotheses. They are undeniable statements of fact, which somehow have been unable to penetrate the mainstream. In this vein, I want to call your attention to a marvelous article in the October 29th edition of NewScientist magazine, titled, “Don’t tell it so straight,” by Peter Alhous.

Today’s post cannot begin to do justice to this excellent article, so I’ll merely quote a few lines, and urge you to buy a copy or read the article at http://www.newscientist.com/article/mg21228361.600-science-in-america-selling-the-truth.html.

. . . a classic example of the “deficit model” of science communication . . . assumes that mistrust of unwelcome scientific findings stems from a lack of knowledge. Ergo, if you provide more facts, scepticism should melt away. This approach appeals to people trained to treat evidence as the ultimate arbiter of truth. The problem is that in many cases, it just doesn’t work.

True. It has not worked for MMT or for Monetary Sovereignty

People aren’t empty vessels waiting to receive information. Instead, we all filter and interpret knowledge through our cultural perspectives, and these perspectives are often more powerful than the facts.

One of the most powerful cultural perspectives is personal experience, which is misleading when applied to federal financing. Another cultural perspective comes from “expert” opinion.

Dan Kahan of Yale University . . .(explained that) we have a strong interest in mirroring the views of our own cultural group. . . In one experiment, . . when presented with balanced arguments for and against giving the HPV vaccine to schoolgirls, 70 per cent of (liberals), and 56 per cent of conservatives, thought it was safe to do so.

Kahan then attributed the arguments to fictional experts described so as to make them appear (appropriately) either liberal or conservative. (This) drove the two camps a little further apart. But, crucially, swapping the messengers around had a dramatic effect: 58 per cent of liberals and 61 per cent of conservatives rated the vaccine as safe.

These findings suggest that one way to change people’s minds is to find someone they identify with to argue the case. Climate scientists have almost certainly been badly served by allowing former Democratic vice-president Al Gore to become the dominant voice on the issue. His advocacy will have convinced liberals, but is bound to have contributed to the rejection of mainstream climate science by many conservatives.

MMT and MS need someone of high stature to present the facts, which alone cannot penetrate. And this may be particularly true with someone from “the other side.” President Nixon was able to open trade with China, because he was known as a hard liner. A “soft” Democrat probably couldn’t have done it.

How a message is framed in relation to the cultural biases of the intended recipients is crucial to its persuasiveness. Opponents of evolution have learned this lesson well. After failing to get biblical creationism taught in science classes, they came back with the “scientific” concept of intelligent design, and two key talking points: “evolution is just a theory” and “teach the controversy”.

Not only were these frames attractive to the religious right, they were also difficult for scientists to counter without seeming to endorse censorship.

For MMT and MS the framing might be love of country and/or love of our children. The nation and our children would have a brighter future if our leaders understood these factual descriptions of economics.

Two different ways of presenting the same information about temperature records (were tested on ) people who identified themselves as “strong Republicans” sceptical about human-caused climate change. One was in the form of a line graph, the other plain text.

The text had little effect, but the graph made the strong Republicans more likely to acknowledge that global warming is both real and a consequence of human activities.

Taken together, studies of communication provide a recipe to allow science to better inform US political debate: find frames that work with broad sections of the population and stick closely to those narratives; seek allies from across the political spectrum who can reach out to diverse audiences; and remember that a graph can be worth a thousand words

MMT and MS should find frames (patriotism and/or love of children??), allies (especially someone who heretofore has been known to be strongly anti-debt) and simple graphs to illustrate facts.

I welcome your suggestions.

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

–Remember Europe? Once important; soon austere.

As we watch in sorrow and amazement, the great European nations slowly fade into a distant memory, hung on their own petard, the euro. All those once-viable, once-powerful nations, melting, melting like the Wicked Witch of the West.

There is Greece:

Greece: Austerity Bill Passed, Despite Protests
Huff Post, Nicholas Paphitis and Derek Gatopoulos 10/20/11

ATHENS, Greece — Greek lawmakers passed a deeply resented new austerity bill Thursday, caving in to the demands of international creditors in order to avoid a national bankruptcy, as a second day of riots left one protester dead and more than 100 people wounded.

The austerity measures won 154-144 in the 300-member parliament despite dissent from a prominent Socialist lawmaker who voted against a key article of the bill. The vote was expected to pave the way for a vital euro8 billion ($11 billion) payout from creditors within weeks so Greece can stay solvent.

And Italy:

Uncertainty over Italy’s future slams markets
Markets’ Berlusconi rally proves short-lived as Italian borrowing rates again spike higher
Pan Pylas, AP Business Writer, On Wednesday November 9, 2011

LONDON (AP) — Uncertainty over who will lead Italy through the debt crisis once Premier Silvio Berlusconi resigns slammed European stocks and bonds on Wednesday, pushing Rome’s borrowing rates to worrying new highs.

Tuesday’s news that Berlusconi had finally bowed to pressure and would resign once new austerity measures are passed had helped markets in the U.S. and Asia higher. Berlusconi had been perceived as part of the problem in the political deadlock gripping Italy.

And Spain.

Spain and the euro crisis
A great burden for Zapatero to bear
The Spanish prime minister has become a reluctant convert to reform—but maybe too little, too late
Jan 20th 2011 | MADRID | The Economist

José Luis Rodríguez Zapatero, the Spanish prime minister . . . said,“There is something worse than the lack of a broad consensus about how to implement reforms and that is, especially at this moment in time, a lack of reform.”
[…]
Spain’s road to recovery is still fraught with dangers. […] The need for reform and austerity is urgent. As Portugal teeters on the verge of a bail-out, Spain yo-yos anxiously. It has just had to pay a steep 5.5% on a €6 billion ($8 billion) syndicated bond. Spain’s fellow euro members are looking for broader solutions to their sovereign-debt crisis, in which Spain (by virtue of its size) is by far the biggest risk.
[…]
Elena Salgado, the finance minister, trimmed the budget deficit from 11.1% of GDP in 2009 to under 9.3% in 2010. She aims to get it to 6% this year. Spain’s national debt is below the euro-zone average and less than America’s and Britain’s.
[…]
The government has dragged its feet on reform in the past. A so-called sustainable economy law, which Mr Zapatero announced in May 2009, is still stuck in parliament.

And Portugal.

Financial Times, October 13, 2011
Portugal announces more austerity measures
By Peter Wise in Lisbon
Portuguese employees will have to work longer, lose bank holidays and forfeit more than a month’s wages in holiday bonuses to combat pressures to leave the euro, the prime minister announced on Thursday night.

In a televised address to the nation, Pedro Passos Coelho outlined the country’s toughest austerity package to date in an effort to avert what he described as a “national emergency”.

And Ireland.

Ireland Plans 12.4 Billion Euros of Austerity Through 2015
Bloomberg, By Finbarr Flynn and Joe Brennan – Nov 4, 2011 11:51 AM CT

Ireland plans 12.4 billion euros ($17.1 billion) of austerity measures over the next four years as it pushes on with a fiscal program to reduce the deficit and insulate it from the crisis in Greece.

There is “no easy path forward,” Finance Minister Michael Noonan said in Dublin today as he published the government’s Medium-Term Fiscal Statement. He is planning a 3.8 billion-euro adjustment in 2012 after a 6 billion-euro budget in 2011. The government also cut its 2012 growth forecast to 1.6 percent from 2.5 percent.

A quote, variously attributed to Albert Einstein, Rita Mae Brown or Narcotics Anonymous, is apt here: “Insanity is doing the same thing over and over again but expecting different results.” Every euro nation believes its salvation comes from reduced government spending combined with increased government taxes, in short, reduced deficits – in short, austerity.

That fact that a reduced deficit – austerity — never has saved an economy, cannot save an economy and always will lead to economic disaster, does not seem to trouble the economists who preach it again and again.

Austerity is ignorance. Austerity is poverty. Austerity is a depression. Austerity is misery for a nation’s citizens, their children and their grandchildren, far into the future. Austerity is a trip to third-world status, or worse. Austerity is bleeding a patient to cure his anemia.

Deficit reduction cannot save Europe. Even were deficits reduced to zero, the euro’s fundamental weakness would continue: Monetarily non-sovereign nations, being unable to create unlimited money, cannot survive long-term without money coming in from outside their borders. This is an absolute law in economics.

There is no magical, long-term solution. No amount of deficit reduction, no amount of austerity will save monetarily non-sovereign nations. Austerity is insanity and death.

And austerity is the goal of America’s Congress and President and the special committee to reduce the deficit.

Remember Europe?

Remember America?

I award 5 dunce caps to all those who believe reduced government deficits will stimulate economic growth, reduce unemployment and save a country from recession.

(I now am running a 1070 dunce cap deficit. Yet I feel no need for austerity. Fear not. I have plenty of dunce caps I can award to politicians, media, economists and the Tea Party.)

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

MONETARY SOVEREIGNTY

–What would happen if Greece returned to the drachma?

What would happen if Greece abandoned the euro? I don’t know. No one does, though everyone has opinions, and most of those opinions include words like “disaster,” “panic” and “bankruptcy.” So since opinions are free, I’ll give you mine, and mine does not include those words. Not at all.

The key to a smooth transition from euros to a Monetarily Sovereign currency, the drachma, is to create sufficient demand for the drachma to prevent excessive inflation.

Let’s say the Greek government announced that heretofore:

1. The drachma would be the official currency of Greece. The Greek government would exchange one drachma for one euro, in unlimited amounts. Accounts at Greek banks that currently are stated in euros, would be stated in drachmas.

2. Payments by all Greek governments, local and national, would be made in drachmas, not in euros. This would include payments on domestic and foreign debt, payments of government salaries, and payments for goods and services. The payments would be made at the rate of one drachma for one euro.

3. Domestic business must pay salaries and domestic suppliers in drachmas

4. Taxes paid to the Greek government and to any sub-governments must be made in drachmas, not in euros.

5. Greek banks would domestically lend only drachmas, and all domestic creditors, including banks, must accept drachmas in payment for debts.

6. The Greek government would continue to issue bonds, not because it needs to borrow, but to help regulate interest rates, which in turn, help regulate demand for drachmas. The bonds would carry a high enough interest rate to create demand for drachmas.

What does this accomplish? Greece would become Monetarily Sovereign. Its “debt problem” instantly would disappear, as it would have the unlimited ability to pay any bill of any size, any time. Demand for the drachma would be established, to mitigate against inflation.

So tell me, how do you feel this compares with the short-term, borrowing/austerity “solutions” advocated by the IMF and the EU? Personally, I think its much better, partly because it actually is a long-term solution, not a short-term palliative.

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

MONETARY SOVEREIGNTY

–Why don’t the facts penetrate? Why don’t we get it? Why don’t we want to get it?

Those who understand Monetary Sovereignty continually wonder why the facts don’t seem to penetrate. The concept is so simple and straightforward, yet not one person in a thousand is willing to examine those facts, much less understand them or agree with their implications. Why?

I can remember an incident from the time I was five years old, and memory being what it is, I probably remember it wrong. The memory is of a family picnic. My uncle had built a bonfire, and my parents, uncles and aunts threw branches and leaves into it, which made the fire flare up in a big roar.

We kids loved it, but were not allowed to throw things into the fire, because it was considered dangerous. I recall whining about this, so after a time, my father said, “O.K., you can throw sand into the fire.” Thrilled, I picked up a handful of sand and threw it in, but the fire didn’t grow. So I threw another handful and another, but instead of flaring up, the fire grew smaller.

Finally, much to my dismay, the fire went out, and all the fun went out with it. I thought I was building the fire, but I was putting it out. And on the drive home, when I realized what I had done, I felt so sad. I fundamentally misunderstood the difference between wood and sand. That’s what I remember. That feeling of sadness and betrayal and ignorance.

And now I look at the American people, exactly 99% of whom are “99%ers,” demanding that federal spending be reduced, and taxes be increased – that Social Security be cut to save it, and Medicare and Medicaid and the military – in effect, throwing sand on the economic fire, and I empathize in advance, the sad, betrayed feeling they will have, and the feeling of ignorance.

So a fundamental misunderstanding about the nature of things may be part of it.

“Forgive them father, for they know not what they do.” I forgive them, but will they forgive themselves, when or if the realization sets in?

Then there are those of you who are parents; you know the drill. Something happens when your child becomes a teen: Based on your experience, you tell your teenage child to do something or not to do something, and what is the reaction? Anger at your interference? Disgust at your foolishness?

No matter that you have clear facts on your side. The teen brain doesn’t want to hear facts; he (or she) wants to hear what his contemporaries say. He wants to follow in the herd. He doesn’t want to think; he wants to feel. There is safety in the group.

And now I look at the American people. The facts of Monetary Sovereignty are irrefutable, but the people don’t want to hear facts. Their reaction to those facts is anger at this interference in their preconceived notions, disgust at the foolishness of those trying to explain the facts. The people not only want to follow the herd, they want to follow in the middle of the herd. They don’t want to think; they want to feel – safe.

Perhaps the teen brain has an evolutionary benefit, allowing humans to ignore facts in favor of group adhesion. And all of us retain vestiges of this teen-brain, even into our dotage. Our teen brain cheers passionately for our favorite sports team, when our logical brain tells us that team’s success will have zero practical benefit for us.

So teen brain may be part of it.

And then there is the “too-good-to-be-true” syndrome. Bad experience has taught us cynicism is wiser than optimism. The hard way seems more noble than the easy way. Politicians boast about their humble beginnings, as though climbing the ladder from the very bottom is superior to climbing it from the middle. And working for something is superior to having it given to you. And “if it seems to good to be true, it probably is.”

Monetary Sovereignty seems too good to be true. The federal government can pay any debt. In fact, it creates more money simply by paying its debts. Taxes are unnecessary. Borrowing is unnecessary. Bankruptcy is impossible. And all the while, inflation can be prevented. We can have Medicare for everyone. Education for everyone. A much richer Social Security. An end to poverty. We can have it all.

This cannot be. Our world is turned upside down. All we have been taught and all we believe is wrong. This is too good to be true; it cannot be true. It is Pollyanna.

So cynicism may be part of it.

In answer to the question, why don’t the facts penetrate — why don’t we get it — part may be that fundamental misunderstanding about the difference between people’s finances and the federal government’s finances. Part may be the teen brain. And part may be cynicism.

Put them all together and they spell “austerity,” for us, for our children and for our grandchildren. This will be our legacy. This is how we will be remembered.

Or maybe there’s something else. Searching. Searching.

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

MONETARY SOVEREIGNTY

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