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. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Richard Koo is chief economist for the Nomura Research Institute. He is one of the very few prominent economists, not with the University of Missouri, Kansas City, who understands Monetary Sovereignty. Recently, he was interviewed by MONEY magazine senior editor, Kim Clark. The interview ran in the October 11th issue. I urge you to read it.

According to Clark, Koo says:

“Government spending is the key to getting the economy back on track — and that 2009’s massive stimulus package didn’t go far enough.”

Actually, I predicted back in an April 9, 2008 letter to the Chicago Tribuen, that the various stimulus plans were too little, too late.

Here are some excerpts from the Koo interview:

Clark: Some people look at Japan and say the government spent huge sums on public projects and there was no real growth, so spending didn’t really cure the economy.
Koo: The early ’90’s recession in Japan was far worse than people realize. Commercial real estate prices nationwide in Japan fell 87% from the peak. Imagine U.S. housing prices down 87%. The fact that the Japanese government halted what could have been an enormous drop in GDP in the early ’90’s speaks to the success of its economic policies.

Clark: But Japan did suffer a major recession again in 1997.
Koo: The Japanese made a horrendous mistake in 1997. The Organization for Economic Cooperation and Development and the International Monetary Fund said to Japan, “You are running a huge fiscal deficit with an aging population. You’d better reduce your deficit.” When the government cut spending and raised taxes, the whole economy came crashing down. I see exactly the same pattern in the U.S. today. If the government acts to cut the deficit while people are continuing to pay down their debts, then we could have a second leg of decline that could be very, very ugly.

Sound familiar? Japan cut its deficit and a major recession resulted. This is why I have predicted a major U.S. recession or depression for 2012.

Clark: So are you saying that the stimulus package didn’t go far enough?
Koo: Obama kept the economy from falling into a Great Depression. . . The economy is still struggling, so people say that money must have been wasted. Not true. The expiration of the package is behind the economy’s weakness now. Yes, the Bush tax cuts were extended . . but tax cuts are the least efficient way to support the economy . . .because . . . a large portion will be . . . used to pay down consumer debt. Government spending is much more effective.

Clark: Congress recently committed to slash our defict by $2.5 trillion . . .
Koo: (In Japan), the cutback caused a second recession. Think about the Great Depression; war spending is what finally pulled the economy out. The Japanese government didn’t do enough spending in the early 1990s and added another 10 years to the problem. If the U.S. avoids that mistake, maybe in a couple of years you will be out of this mess.

Here we have Japan, a Monetarily Sovereign nation just like the U.S., that went through exactly what we are going through, and made exactly the same mistakes we are making. What have our politicians, media and old-line economists learned from Japan’s experience. Apparently, nothing.

Are you angry enough to write to your political leaders and your favorite media? If not, when?

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: Reduced money growth cannot increase economic growth. To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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For those who do not yet understand Tea Party economics, here is a primer. Tea Party economics is the belief that reducing the money supply, by increasing taxes and/or by federal spending reductions, will stimulate the economy.

From Stephen Gandel’s, “State Budget Cutbacks: A Job Market Drag?” 9/19/11: “Even if government doesn’t kick in its normal share of hiring, the economy can still be put on a path of recovery. It’s businesses that matter most and need to be pushed the most to hire.”

O.K., seems reasonable. How do we “push” businesses to hire? Some sort of incentive would be needed. Tax reductions? But tax reductions would increase the deficit.

From Ed O’Keefe’s, “To save money, federal agencies to start buying in bulk” 9/19/11: “Starting this week, several federal agencies and departments will pool their purchases of office printers, copiers and scanners in hopes of collectively saving $600 million in the next four years, administration officials said late Friday.”

I guess we won’t push the manufacturers of office printers, copiers and scanners to hire. When we cut $600 million from their income, they’ll fire.

From Zachary Goldfarb’s, “Obama’s debt-reduction plan: $3 trillion in savings, half from new tax revenue” 9/19/11: “President Obama will announce a proposal on Monday to tame the nation’s rocketing federal debt, calling for $1.5 trillion in new revenue as part of a plan to find more than $3 trillion in budget savings over a decade, senior administration officials said. . . Combined with his call this month for $450 billion in new stimulus . . . “

Ah, so that’s the plan. We’ll take $3 trillion out of the economy; then we’ll add 15% ($450 billion) back into the economy, and call that a “stimulus.”

Maya MacGuineas, president of the Committee for a Responsible Federal Budget: “We believe the Super Committee should ‘go big’ and exceed its mandate and actually stabilize the debt. We appreciate the President’s proposal to ‘go medium’ and that he has laid out real specifics, but clearly, much more will be needed.”

How will stabilizing the debt (aka “spend less and tax more”) “push businesses to hire”?

House Speaker John Boehner: Tax increases “destroy jobs.”

Yep, by removing money from the economy, tax increases destroy jobs, the same way that federal spending cuts destroy jobs.

Chicago Tribune editors, 9/19/11: “Our first preference has been for dramatic deficit reductions, with a 3- or 4-to-1 ratio of spending cuts and revenue increases

Perfect example of Tea Party economics: A dramatic reduction in the money supply . . . to stimulate the economy.

Same Chicago Tribune editors as above: 9/19/11: The immediate problem is low demand and the grim reality is that no one really knows a reliable way to raise it. Given time, it will come back.

Well, the way to raise demand is to put more money into the pockets of consumers. But why do that when the Tribune assures us the economy will come back all by itself – while we raise taxes and cut federal spending to drain dollars from the economy. What, me worry?

More Chicago Tribune. “ . . .(a) more realistic formula (is to) . . . address the spending binge of the last few years, a job that, as Boehner acknowledges, will require curbs in entitlements like Social Security and Medicare.”

Yes, cutting payments to consumers like retired people, sick people, doctors, nurses and hospitals should do a great deal to stimulate the economy.

So now you know what “Tea Party economics” means: Reduce the money supply to stimulate the economy. In short, apply leeches to cure anemia. What a wonderful, magical solution.

I award the Tea Party and all those mentioned above a solid 5 dunce caps (out of 5), for total, unmitigated economic ignorance. By the way, for all you debt hawks: I never will run short of dunce caps, even though I continually run a dunce cap deficit. I am dunce cap sovereign, just as the federal government is dollar sovereign. Get it?

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.
==========================================================================================================================================================================

Millionaire tax sought by Obama is panned by GOP as ‘class warfare’
Republican leaders accuse President Obama of trying to incite class warfare by proposing the ‘Buffett rule’ — a new tax on people making $1 million or more.
By Jim Puzzanghera, Los Angeles Times, September 18, 2011

Reporting from Washington— Top congressional Republicans on Sunday accused President Obama of trying to incite class warfare with his proposal for a new tax on millionaires and said they would not support the measure because it would hurt economic growth.

Republicans are correct on both counts. Class warfare has been a mainstay of Democrats’ politics for at least 80 years and taxes hurt economic growth by removing money from the economy.

“Class warfare … may make for really good politics, but it makes for rotten economics,” House Budget Committee Chairman Paul D. Ryan (R-Wis.) said on “Fox News Sunday.” “We don’t need a system that seeks to prey on people’s fear, envy and anxiety. We need a system that creates jobs and innovation and removes these barriers for entrepreneurs to go out and rehire people.”

. . . Senate Minority Leader Mitch McConnell (R-Ky.) said wealthy individuals such as Buffett were free to pay more taxes, but the government shouldn’t impose an increase on people who help provide the investments that create jobs . . . “ we don’t want to stagnate this economy by raising taxes.“

Absolutely correct. Tax increases of any kind, whether on the rich or on the poor, remove money from the economy, and are anti-stimulative. And heaven forbid the politicians ever “prey on people’s fear, envy and anxiety.”

But Sen. Lindsey Graham (R-S.C.) said Obama’s millionaire proposal was simply a political move that would do little to reduce the budget deficit. . . .”The truth of the matter is if you raise taxes on billionaires and millionaires it adds a de minimis amount of money to the Treasury to pay off the debt.”

Thank goodness for that. Every dollar of reduced deficit is a dollar stripped from an economy that desperately needs dollars.

Sen. Richard J. Durbin (D-Ill.) showed the tack his party might take when he slammed Republicans for not supporting Obama’s $447-billion jobs bill. “I think his team put together a positive good plan.”

Just one little problem with all this talk: There is no financial difference between a tax increase and a spending cut. Financially, they are identical. Both reduce the deficit; both reduce the money supply. Both are anti-stimulative. Both will result in a recession or depression.

So here we have the Tea/Republicans, the Democrats, the President, the media and the old-line economists all clamoring for debt reduction, but both agreeing the economy needs “jobs and innovation and (removal of) barriers for entrepreneurs to go out and rehire people.”

The Tea/Republicans want spending cuts, while complaining that a tax increase would “stagnate the economy.” The Democrats also want deficit reduction, but with spending increases. If you think you have just fallen down the rabbit hole in Alice’s Adventures in Wonderland, you’re right. There is zero logic being expressed here.

It will be fascinating to see how all the parties, especially the old-line economists, who should know better, play with sophistry, to confuse you into believing:

Tax increases are bad
Spending increases are bad
Deficits are bad
And the economy needs to be stimulated.

A pox on all their houses. I award three dunce caps to all involved, but specifically to President Obama, Representative Paul Ryan, Senator Mitch McConnell, Senator Lindsey Graham, Senator Dick Durbin, the media and the old-line economists (Hello University of Chicago and Harvard Nobel winners.)

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.
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Well, my congressman, Robert Dold is trying. He almost, but not quite, gets it. I continue to wonder: Why is this so hard? Here is part of a letter he just sent me:

Last week the President laid out his plan to create jobs. I was pleased to hear that the President joined me in endorsing payroll tax relief – similar to legislation that I have already put forward – as a way to spur the hiring of unemployed workers. My bill is straightforward and helps employers grow and hire. For every unemployed worker a company hires, my legislation would suspend the payroll tax for the business and employee for one year.

Rep. Dold, businesses will not hire people and pay additional salaries, just to get a FICA deduction. Businesses hire people when business improves. Why restrict this to hiring unemployed people? And if it is any incentive at all, it’s an incentive to fire current workers and hire unemployed workers.

This will not only help businesses create more jobs, it will put unemployed people back to work. From my experience as a small business owner, I am confident that this measure will provide a significant incentive that helps American businesses take the calculated step of bringing on a new employee.

He was a small business owner?? Really? And in his small business would he have said, “Hmm, I can hire a worker I don’t need at 6.5% less salary than I ordinarily would not pay. Sounds good”? Or would he have said, “I need an employee, but that 6.5% tax keeps me from hiring”? No wonder he no longer is in business.

While there is still much more work to be done, I am certain that temporarily reducing the payroll tax to 0% would be an effective component of our overall efforts to get this economy moving again.

And why make the cut a temporary reduction. Why not make it a permanent elimination? After all, FICA doesn’t pay for anything — not Social Security, not Medicare, not anything — so why is this most regressive tax continued? It should be abolished, thereby putting money in the pockets of almost all working people and businesses.

Our Monetarily Sovereign government should support Social Security and Medicare. It can and it should.

Even an “experienced small business owner” doesn’t quite get it, but he’s trying. To read “Ten Reasons to Eliminate FICA,” click this link.

Just one little dunce cap for Rep. Dold, who almost is there.

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