Mitchell’s laws:
●The more 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.
==========================================================================================================================================
Answer: Run a balanced federal budget.

The federal deficit (red line, below) has exceeded $1 trillion since early in the recession, and the most recent figures show the deficit to be about $1.2 trillion. The reason the deficit is this high: The recession.

Curing a recession requires stimulating Gross Domestic Product (GDP). And GDP = Federal Spending + Non-federal Spending – Net Imports. So curing a recession requires a combination of increased Federal Spending plus reduced taxing (to increase Non-federal Spending), i.e. increased Federal Deficit Spending.

Notice, that in the formula for GDP, Net Imports (shown by the green line) is deducted. This is because Net Import dollars flow out of the country. (By the way, the graph shows an addition of net exports. Net imports and net exports, both being net, actually are the same thing, and because the data are provided as a negative, we need to add them.)

The most recent figures show Net Imports to be somewhat greater than $500 billion. This means that in order for GDP to grow, there first must be enough federal deficit spending to make up for the $500+ billion lost through Net Imports. The bigger the Net Imports, the greater must be Federal Deficit Spending, just to make up for the loss of dollars.

So, the difference between Federal Deficit Spending and Net Imports represents the dollars the federal government adds to the domestic economy. For want of a better name, call that “Net Deficits,” which is shown by the blue line (above), and the most recent data show “Net Deficits” to be about $600 billion.

Is $600 billion a big number in federal government terms? I’ll let you decide. It’s about half the so-called “deficit” that has the debt hawks all in a tither. It’s about ten times the assets of one citizen, Bill Gates. It’s small when compared with GDP:

But there is a larger point to be made — or rather, several larger points:

1. So long as the U.S. continues to be a net importer, it always will be necessary for the federal government to deficit spend, just to break even on our money supply. But breaking even on our money supply, while our population grows (nearly 1% per year), would mean there are fewer dollars available for each man, woman and child in America. So to keep the economy from contracting, deficit spending at least must exceed Net Imports and population growth.

2. Those who wish for a “balanced budget,” actually are wishing the U.S. economy would contract $500 billion per year — at an approximate cost of $5,000 annually, to every household in America. (Compare this with the “debt clocks” that claim the debt costs Americans, when in fact, the debt benefits Americans.) Reducing the deficit reduces GDP.

3. The U.S. federal government, being Monetarily Sovereign, has the unlimited ability to deficit spend, forever. Contrary to popular “wisdom,” there has been zero relationship between federal deficit spending and inflation.

4. The world’s net import/export is zero. Our imports are other nation’s exports. The U.S. pumps %500+ billion into the world’s economies. Were the U.S. to become a net exporter, the entire world would suffer — particularly the monetarily non-sovereign nations, all of which survive long term on net exports.

The terms “balanced budget,” “live within our means,” and “don’t spend what we don’t have” sound oh-so prudent, and they are — for you and me, and the states, counties, cities and euro nations, all of which are monetarily non-sovereign. But when these ideas are applied to a Monetarily Sovereign government, they are totally imprudent — disastrous, actually.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

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

Mitchell’s laws:
●The more 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.
==========================================================================================================================================

Gosh, it seems like years ago since we read this:

Pressure Builds on Deficit Panel to ‘Go Big,’ Beyond Its Mandate, in Cuts
By Jackie Calmes, Published: September 12, 2011

WASHINGTON — Led by President Obama, pressure is building on the new Congressional committee on deficit reduction to “go big” — beyond its mandate to shave as much as $1.5 trillion from budget shortfalls over 10 years.

A group of at least 57 prominent business executives and former government officials have signed a petition in support of a greater deficit reduction, which they are to release at a news conference on Monday. Among them are former treasury secretaries, budget directors and economic advisers to eight presidents; former Congressional leaders; and executives of top companies.

Their letter reflects a broad sense of urgency in both parties, and among economists and businesses, that the nation must put in place long-range measures to shrink future deficits.

Only a $1.5 trillion dollar cut? President Obama was a piker. The notorious CRFB published this:

GO BIG
The Committee for a Responsible Federal Budget — along with many other lawmakers, business leaders, former government officials, and organizations — is calling on leaders in Washington to enact a comprehensive deficit-reduction plan of at least $4 trillion to put the U.S. back on a sustainable fiscal path. In order to stabilize and reduce debt as a share of the economy, lawmakers will have be bold and “go big.”

Yes, GO BIG was all the rage. Politicians were falling all over themselves, each trying to demonstrate their inner John Wayne by going bigger than the next guy.

In August we published two posts about this phenomenon of phoolishness: (Trying to survive in this world of debt-hawk finger pointing and voter remorse. GO BIG!! and Congress in Wonderland: Cut the deficit, but don’t cut the deficit. And it’s all their fault. If you haven’t read those articles, you might give them a try.

It now occurs to me, that only two months later, we don’t hear “GO BIG” any more. Suddenly, the realization has set in, as those two little words, “go big” — have been replaced by two other little words — “fiscal cliff.”

In August we showed how the so-called “fiscal cliff” would come from a puny deficit reduction of just $560 billion, and here these politicians and businessmen had been asking for a $4 trillion dollar “GO BIG” deficit reduction. Now “go big” seems magically to have disappeared from the political lexicon.

Such is the intelligence of the American public: Little, two-word slogans can have more effect than all the facts in the world.

We’ve spend fifteen years explaining that when the federal government spends more dollars than it receives in taxes (federal deficit), this adds dollars to the economy (economic surplus). And when the government taxes more dollars than it spends (federal surplus), the economy runs a deficit. Yes, a federal deficit = an economic surplus, which is the only way the economy can grow. And cutting the deficit cuts economic growth.

Now, this shouldn’t be too hard to visualize. Dollars flowing to the government, flow out of the economy, and the fewer dollars the economy has, the less chance it has for growth. Duh!

But the American public didn’t get it. No, it took two words — “fiscal cliff” — to make a point we’ve failed to make for fifteen years. Well, O.K., whatever it takes.

But wait. Both Obama and Romney, and the Republicans and the Democrats, and the media and the old-line economists, have kept right on saying the federal deficit should be reduced. Yikes!

So here’s where we are. Try to follow closely. This is your sanity test:

A “go big,” $4 trillion deficit reduction will “put us on a sustainable fiscal path,” far better than a mere $1.5 trillion deficit reduction. But an even smaller, $500 billion deficit reduction will send us over a “fiscal cliff.” And the economy will grow more if there is an economic deficit than a federal deficit, because people can run short of dollars, while the federal government cannot run short of dollars.

If you understand the above paragraph, please seek immediate psychiatric help. Your doctor will give you medication to calm you when the depressions (financial and emotional) hit.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

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

Mitchell’s laws:
●The more 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.
==========================================================================================================================================

Background: Our Washington politicians are owned by the upper 1% income group, which wants the income gap between them and the other 99% to increase. That is the primary mission of the rich.

To accomplish that goal requires increasing the net incomes of the 1% compared to the net incomes of the 99%. Comparative income is far more important than absolute income.

Reduced federal spending not only leads to recessions, but punishes the 99% far more than the 1%, because the vast majority of federal spending benefits the 99% more. Spending for Medicare, Medicaid, Social Security, defense, etc. all account for a greater percentage of the 99%s income.

GDP (Gross Domestic Product) is the most commonly used measure of our economy.

New York Times
Leaders at Work on Plan to Avert Mandatory Cuts
By Jonathon Weisman, Published: October 1, 2012

WASHINGTON — Senate leaders are closing in on a path for dealing with the “fiscal cliff” facing the country in January, opting to try to use a post election session of Congress to reach agreement on a comprehensive deficit reduction deal rather than a short-term solution.

Senate Democrats and Republicans remain far apart on the details, and House Republicans continue to resist any discussion of tax increases. But lawmakers and aides say that a bipartisan group of senators is coalescing around an ambitious three-step process to avert a series of automatic tax increases and deep spending cuts.

Translation: The “fiscal cliff” would be caused by a combination of spending cuts and tax increases. To avoid the “fiscal cliff,” Congress plans to institute spending cuts and tax increases. Understand?

First, senators would come to an agreement on a deficit reduction target — likely to be around $4 trillion over 10 years — to be reached through revenue raised by an overhaul of the tax code, savings from changes to social programs like Medicare and Social Security, and cuts to federal programs.

Translation: “Deficit reduction target” is identical with a Net Private Savings reduction target (Federal Deficits – Net Imports = Net Private Savings). “Overhaul of the tax code” is identical with increase in taxes collected. “Changes to Medicare and Social Security” is identical with cuts to Medicare and Social Security.

GDP is calculated this way:
GDP = Federal Spending + Non-federal Spending – Net Imports.

Therefore, deficit reduction = GDP reduction = slower growth, or recession or depression.

If those efforts failed, another plan would take effect, probably a close derivative of the proposal by President Obama’s fiscal commission led by Erskine B. Bowles, the Clinton White House chief of staff, and former Senator Alan K. Simpson of Wyoming, a Republican. Those recommendations included changes to Social Security, broad cuts in federal programs and actions that would lower tax rates over all but eliminate or pare enough deductions and credits to yield as much as $2 trillion in additional revenue.

Translation: If Congress fails to cut spending and increase tax collections (either of which would cause a recession or depression), another plan would cut spending and increase tax collections (thereby causing a recession or depression).

House Republicans, favored to retain control regardless of the presidential and Senate results, have not been part of the Senate talks so far and could be difficult to sway to back a package with significant new revenue even if it wins bipartisan Senate support.

Democratic leaders are already signaling a major stumbling block: they will accept no deal that extends Bush-era tax cuts for the rich, even for six months.

Translation: Both parties want to increase the income gap; Republicans want to increase it faster.

Other senators, like Lindsey Graham, Republican of South Carolina, have counseled a more incremental approach to head off mandatory deep military cuts next year. Senator Richard J. Durbin of Illinois, the second-ranking Democrat, had suggested finding enough savings for a six-month delay on taxes and cuts to give negotiators more time.

Translation: Since nothing has been done in the past six months, more time is needed to do more nothing.

But Mr. McConnell compared the government to a ship sinking under the weight of Medicare and Social Security and said that temporarily holding off the automatic budget cuts and tax increases would not avert a disaster.

“Even if we rearrange the chairs, fix the tax thing, fix the sequester, the ship’s still going down,” he said in an interview. “I want to deal with it altogether. The next best opportunity is the end of the year.”

Translation: Budget cuts and tax increases are necessary to cause the recession the 1% wants. But we Republicans refuse all tax increases, which leaves only budget cuts. However, we don’t want cuts to the military budget, which leaves only cuts to Medicare and Social Security, the prime benefits to the lower and middle classes. That is the best way to increase the income gap.

On Monday, the nonpartisan Tax Policy Center released a new study estimating that if nothing is done, the expiration of all the Bush-era tax cuts would raise taxes by more than $500 billion next year alone, an average increase of $3,500 per household. Middle-income families, it said, would see taxes rise by an average of almost $2,000.

Translation: Congress intentionally created this situation, so that “solving it” by reducing tax increases and spending cuts actually would look like a benefit. If the 99% is told their taxes would increase $2,000, and Congress heroically steps in to increase taxes “only” $1,000, the stupid 99% will be happy.

Senator Tom Udall, Democrat of New Mexico, said figures like those and forecasts anticipating a recession if nothing is done have prompted some consideration for postponing any tax increases or spending cuts for a year. But he said lawmakers want to lock in action on the deficit now.

Translation: Big spending cuts and tax increases will cause a big recession. So let’s lock in smaller spending cuts and smaller tax increases, so we can have a smaller recession.

“You have to have the framework of a plan,” he said. “We need to find something that’s going to make us come to the table and put our fiscal house in order.”

Translation: No matter what we do, it only will be a first step. “Fiscal house in order” means no deficit, or better yet, a surplus, thus guaranteeing a depression.

House Speaker John A. Boehner of Ohio says he will not accept any deal that raises tax rates or “decouples” the Bush-era tax rates by extending some but allowing others to expire.

Translation: We have to protect the rich. Hey, we’re Republicans. What did you expect?

Senators have also failed to agree on a mechanism to enforce a deficit reduction plan. Mr. Durbin has suggested that if Congress cannot agree on changes to the tax code, entitlements and spending in six months, the automatic spending cuts and tax increases should go into effect.

Translation: This is the same “fiscal cliff” facing us today, but delayed six months. How’s that for a solution?

But the bipartisan group of senators says that medicine has already proved too tough to swallow. Instead, the backstop should be an acceptable deficit reduction program like Simpson-Bowles.

Translation:Suddenly, Simpson-Bowles, which was so bad, neither party wanted it (and it has to be really bad for both parties to hate it) — suddenly, it has become a viable alternative.

Bottom line: No matter how Congress and the President twist and turn, there is one simple fact that will not go away: GDP = Federal Spending + Non-federal Spending – Net Imports.

There is no way to remove money from the economy without hurting the economy. Period.

The deficit-reduction goal is both harmful and unnecessary for a Monetarily Sovereign nation.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

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

Mitchell’s laws:
●The more 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.
==========================================================================================================================================

Why the Polish people are smarter than the Polish government, the European Union (EU) and the International Monetary Fund (IMF):

Poland was smart enough to retain the single, most valuable asset any nation can have: its Monetary Sovereignty. Rather than adopting the euro, over which it would have no control, Poland retained the złoty, over which it has total control.

It can create them at will, pay any bill of any size, and change their value whenever needed. Poland is sovereign over the złoty, just as the U.S. is sovereign over the dollar. By contrast, the euro nations use an “alien” currency, over which they have no control, which is the fundamental reason why they are in financial trouble.

Global Property Guide
Feb 27, 2012
Poland, the Exceptional East European?

With Europe in meltdown, is Poland an exception? Europe’s sixth-largest economy has strong domestic demand, and has not yet adopted the euro: so it was able to devalue the zloty to maintain competitiveness. Poland’s economy grew by 3.8% in 2011, and is expected to grow by 2.5% in 2012 and 2.5% in 2013 (OECD forecast November 2011).

While most of Europe is struggling to avoid a double-dip recession, the Polish economy is growing. Its depreciated currency makes its products attractive to buyers.

Workers are moving back to Poland, according to recent OCDE data. Unemployment was 9.6% in 2011, and is expected to rise to 9.9% in 2012, but this is lower than in many European countries. Migration dynamics are a fundamental demand driver for urban housing markets, particularly for urban areas such as Warsaw, Krakow and Wroctaw characterized by significant in-migration rates.

Poland’s relatively strong economic position is highlighted by Bloomberg, which calculates that Polish government bonds provide a better risk-adjusted return than German Bunds and US Treasuries.

Attention: Polish government: Your “relatively strong economic position” comes from your being MONETARILY SOVEREIGN. You can control your money supply. So, if it isn’t broken, don’t fix it.

Wikipedia

Conditions of Poland’s accession to the European Union oblige the country to eventually adopt the euro, though not at any specific date and only after Poland meets the necessary stability criteria. Serious discussions of joining the Eurozone have ensued.

However, article 227 of the Constitution of the Republic of Poland will need to be amended first, so it seems unlikely that Poland will adopt the Euro before 2019. Public opinion research by CBOS from March 2011 shows that 60% of Poles are against changing their currency. Only 32% of Poles want to adopt the Euro, compared to 41% in April 2010

Let’s see now: Our monetarily non-sovereign euro neighbors are in the toilet. We Poles are Monetarily Sovereign over our currency, the złoty, and are in a “relatively strong economic position.” So what shall we do? Shall we give up the złoty, surrender our Monetary Sovereignty and join the euro nations by adopting their alien currency? Hmmm. . .

Thousands of Poles protest pro-market reforms
By VANESSA GERA
Associated Press / September 29, 2012

WARSAW, Poland (AP) — Thousands of Poles blew horns, prayed and waved flags in downtown Warsaw on Saturday to show their anger over a new law which will gradually raise the retirement age to 67 for all Poles from 60 for women and 65 for men.

Dubbed ‘‘Wake Up, Poland,’’ the protest is an expression of the deep anxieties gripping many Poles as the government tries to lower state debt by embracing pro-market reforms that are weakening the social safety net.

Police had no estimate yet for the number of protesters, but private broadcaster TVN24 said tens of thousands turned out.

Quick summary: A Monetarily Sovereign nation has the unlimited ability to pay its bills. Nevertheless, it thinks its deficit is unsustainable, so it decides to take money from its citizens (who need money) and give it to the government (which doesn’t need money, because it creates money.) The government gradually raises the retirement age to lower state debt, and it weakens the social safety net.

Sound familiar?

Apparently, the Polish government (like the U.S. government) doesn’t realize it is Monetarily Sovereign, so it acts like a nation already stuck with the euro.

The Polish people probably don’t understand Monetary Sovereignty either, but they know enough not to want the euro and the cuts in social services that monetarily non-sovereign (i.e. euro) nations are forced into. This says the Polish people are smarter than the Polish government, the EU and the IMF — and the U.S. government, for that matter.

It seems they also are smarter than the American people, who continue to buy into the absolute nonsense (promulgated by the upper 1% income group) that the U.S. federal deficit and debt are too high, when in fact, they are too low.

If Poland resists the siren song of the failed euro, the failed EU and the failed IMF, and begins to use its Monetary Sovereignty, rather than act like a euro nation, it soon will be the strongest nation in Europe. But that’s a big “IF.”

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

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