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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In 2008, when the stock market, and virtually every other market, crashed, President Obama undertook a series of economic stimuli. Though, as I predicted back then, those timid steps were proved to be too little and too late, they did prevent the recession from turning into a depression, and until recently the economy was beginning to creep out of its funk.

Of course, “stimulus” is just another word for deficit spending, i.e. pumping money into an economy that is starved for money. But incredibly, the President of the United States has no idea how the economy works (seems impossible, doesn’t it?), so equally incredibly, he voluntarily surrendered his only tool for saving the economy: Federal deficit spending.

Recently he made a pitiful gesture toward solving the economy’s most financial and emotional problem: Unemployment.

Obama seeks aid to help military veterans get jobs By Julie Pace, The Associated Press, 08/06/2011

WASHINGTON — President Barack Obama on Friday proposed tax credits and training programs to help thousands of U.S. service members returning from wars in Iraq and Afghanistan find jobs in the shaky economy at home.

The president announced his proposals after a report showed the nationwide unemployment rate remained over 9 percent.
[…]
He asked Congress to authorize a “Returning Heroes” credit for 2012-13 that would give companies that hire unemployed veterans a tax credit of up to $2,400. It would be $4,800 if the veteran has been unemployed for six months or more. Obama also called for an extension of the “Wounded Warriors” tax credit, which gives companies hiring vets with service-related disabilities a $4,800 credit. If the veteran has been unemployed for six months, it increases to $9,600.

The administration said the tax credits would cost the government about $120 million.

Oh, please. $120 million! Are you serious? The federal government is projected to spend $3,833,861 million this year. That’s 3 trillion, 833 billion, 861 million, and Mr. Obama would like to take that “all the way up” to $3,833,961 million — a pathetic three thousandths of one percent. Wow, talk about a timid step being too little, too late.

And if I know our President, he will try to convince the Tea/Republican party he really isn’t increasing the deficit, because as everyone knows, he already (foolishly) said he wouldn’t.

But wait, toward the bottom of the same article, we find:

Obama challenged Congress to work after its August recess on legislation to extend a tax break on Social Security payroll taxes, to further extend unemployment insurance and to pass a program for “putting construction workers back to work rebuilding America.”

Could this be the FICA holiday (or better yet, elimination) I called for way back in 2009? (“Ten Reasons To Eliminate FICA” ) And wouldn’t this increase the dreaded deficit Mr. Obama swore not to increase?

And what about extending unemployment insurance: doesn’t that also increase the deficit? And more construction work; further increase in the deficit? OMG, has the President belatedly understood this fundamental economic formula:

Federal Deficits – Net Imports = Net Private Saving.

And does he belatedly understand that deficit growth is the only way to get out of a recession and the only way to grow the economy?

One can hope so, but good luck Mr. President. You already have said the deficit is too high. And you must deal with those economically ignorant Tea/Republicans, not to mention your economically ignorant Democrats, all of whom not only agreed with you that the deficit is too high, but that austerity (aka “poverty”) is the way America wishes to live.

So how are you going to get yourself out of this jail you so foolishly built for yourself? How are you going to add money to an economy that is starved for money and headed for depression, without seeming to add money. How about:

“Pay no attention to that man behind the curtain.”

If you pull this one off in time for the election (that’s all that matters, isn’t it?), you indeed will be the wizard behind the curtain.

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

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Quote from Fox News, 8/6/11:

For the first time in history, Standard & Poor’s downgraded the U.S.’s vaunted Triple-A rating to double A+ after the market’s close on Friday night, a rating it has held at S&P since 1941.

The rating was dropped to double-A+, S&P says, because of its deepening concern that Washington, D.C. cannot get a grip on the nation’s finances in the mid – to long-term, as well as fears that the economy could weaken, and that interest rates could spike higher, causing interest costs on the debt to rise. S&P also cited a weakening federal revenue picture as part of its reasons behind its downgrade.

Let’s examine this one line at a time:

“For the first time in history, Standard & Poor’s downgraded the U.S.’s vaunted Triple-A rating to double A+ after the market’s close on Friday night, a rating it has held at S&P since 1941.”

Think of it. S&P rated the U.S. AAA all through World War II, during which the federal debt was much higher relative to the size of the economy, and when we were being attacked by two powerful enemies, who very well could have defeated us. Today, with a relatively lower debt, and much greater national security, the U.S. is downgraded to AA+.

“S&P says, because of its deepening concern that Washington, D.C. cannot get a grip on the nation’s finances in the mid – to long-term . . . “

What does “get a grip on” mean? No one really knows. Does it mean the federal government will not be able to service its debts? No. As a Monetarily Sovereign government, it can service any size debt denominated in it sovereign currency, the dollar (100% of the federal debt is denominated in the dollar). In fact, the federal government has the power to eliminate all federal debt tomorrow, merely by crediting the bank accounts of all T-security holders. No T-securities = no federal debt = no debt worries.

Or perhaps S&P is not worried about the debt, but rather worried about the deficit??? If so, S&P may not understand the lack of functional connection between debt and deficit (we could have either without the other), but for certain they do not understand this basic equation in economics: Federal Deficit – Net Imports = Net Private Saving. If they did understand that equation, they would know that reducing the deficit reduces saving, which slows the economy.

“. . . as well as fears that the economy could weaken, and that interest rates could spike higher, causing interest costs on the debt to rise.”

Yet another thing S&P doesn’t understand: As a Monetarily Sovereign nation, the U.S. has the unlimited ability to service any debt including any amount of interest. In fact, there actually is a slight, but positive, relationship between federal deficits and GDP growth. The probable reason: Federal interest payments add stimulus dollars to the economy. Further, there is no historical relationship between federal deficits and interest rates.

“S&P also cited a weakening federal revenue picture as part of its reasons behind its downgrade.”

Finally, S&P does not understand that unlike spending by the states, counties and cities, spending by a Monetarily Sovereign nation is not constrained by revenue. If federal taxes fell to $0 or rose to $100 trillion, neither event would affect by even one dollar, the federal government’s ability to spend.

Someday, someone will ask the officers of S&P how their evaluation of France (a monetarily non-sovereign nation that hangs at the edge of bankruptcy, yet incredibly has been gifted with an AAA rating) compares with their evaluation of Monetarily Sovereign United States, a nation that unlike France can pay any bill, and time. Can you visualize the officers of S&P looking at each other and mumbling “Duuuhhhhh. . .”?

And that might be the smartest thing they will have said all year.

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

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
========================================================================================================================================================================================================================

Just when you thought Standard & Poor’s couldn’t get more disfunctional, they outdo themselves. You remember S&P, don’t you? They are the people who became famous for giving AAA ratings to absolute junk, helping to cost investors hundreds of millions of dollars.

Now, showing neither shame nor remorse, they have downgraded United States debt from AAA to AA. In S&P’s opinion, this puts the federal government’s credit at a lower level than that of such companies as:

US Bancorp
XTO Energy
State Street Corp.
Citigroup
Bank of America
GE Capital
Wells Fargo
JP Morgan Chase
Goldman Sachs
Keybank
John Deere
West Corp.
GMAC
KFW International
Johnson & Johnson
Microsoft

Long after these companies — and S&P — have disappeared, the U.S. government still will be here, paying its bills, with no difficulty whatsoever. The Monetary Sovereignty of the United States will overcome the economic ignorance of Congress and the President.

But, if you feel safer buying the bonds of these firms than buying United States T-bonds, T- notes and T-bills, I have a bridge in Brooklyn I would like to sell you. And if you believe anything S&P says in the future, I have two bridges to sell you.

S&P didn’t downgrade the U.S. It downgraded itself. But don’t worry. This will have zero effect on our economy. It’s a publicity ploy by S&P.

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