IMF, ECB and Greece, oh my! How the innocent are led to slaughter by the incompetent.

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.
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Exclusive: IMF, EU clash over Greece’s bailout prospects
By Dina Kyriakidou and Lesley Wroughton
ATHENS/WASHINGTON | Wed Sep 26, 2012 9:59am EDT

(Reuters) – Greece’s international lenders are at loggerheads over how to solve Athens’ debt crisis, threatening more trouble for the euro as the IMF demands European governments write off some of the Greek debt they hold.

“The problem is not between the IMF and Athens, it’s between the IMF and the EU,” one Greek official said. Already facing an electoral backlash over bailouts and austerity, EU leaders do not relish IMF proposals that they swallow tens of billions of euros of losses on their holdings of Greek government bonds.

Greece remains deeply in debt. Being monetarily non-sovereign (they have no sovereign currency), Greece has no source of incoming funds, with which to pay their debts. So my question is: Why would anyone have lent them money, and why would these lenders have expected to be paid?

They remind me of the U.S. banks that gave mortgages to people with insufficient income to pay the mortgage – with one difference. The U.S. banks didn’t care. They immediately sold the mortgages to Fannie Mae et al who bundled the mortgages into securities rated AAA (by the crooked bond rating agencies), and sold them to the crooked big banks, who in turn sold them to unsuspecting investors, who believed the AAA rating. Lenders to Greece weren’t that clever.

The Fund, brought in for its expertise, global financial firepower and reputation for imposing fiscal discipline, is for its part keen to protect the hard-earned credibility it put on the line by joining in a bailout package that set Greece a target of cutting its deficit to under 120 percent of GDP by 2020.

If there is an agency in the world, that has less economic expertise than the IMF, I’ve yet to hear about it. This is a group that thinks the treatment for anemia is to apply leeches. They insist debtor nations stop creating the money needed to pay their debts, and instead borrow more money, to go deeper into debt.

I can’t imagine who gave the IMF “credibility,” but this organization has been a disaster, with no redeeming characteristics. Loans to monetarily non-sovereign, indebted governments only exacerbate their debt situation, and Monetarily Sovereign nations don’t need loans. So what good is the IMF?

German Finance Minister Wolfgang Schaeuble, whose own creditor government has been concerned at slippage in Greece’s efforts to cut spending and raise taxes, gave a rare public hint of IMF concerns last week: “You should ask around about what the mood is like in the IMF,” he told reporters in Berlin, “In having to deal constantly with these European problems and the repeated failure of the Europeans to meet agreed targets.”

Translation: “Oh woe is us! We told the naughty euro nations to raise taxes and cut spending, thereby guaranteeing their further economic disaster. But, they have failed to meet those targets. Our life is difficult.”

Germany has overplayed its hand. It had hoped that by being a creditor to other monetary non-sovereign euro nations, it could dominate them — Germany’s World War II goal. Deutschland uber alles.

But these nations refuse to be dominated, and now are on the verge of sticking Germany with a ton of bad debt.

A restructuring – essentially requiring the ECB and European governments to take losses on nearly 200 billion euros in Greek debt they hold – could ease Greece’s burden.

Yes, that will “ease” the burden by transferring the burden from Greece to Germany.

Private investors took such a “haircut” this year, but with reforms being held up and a recession much deeper than expected, Greece seems likely to have to suffer more pain itself, or inflict more on its creditors, if it is to put its finances on a sustainable footing and resume market borrowing.

Translation: “Sustainable footing” means to borrow when there is insufficient income with which to pay back, screw the creditors (politely called a “haircut”), then borrow more. This has been the IMF/ECB “plan” for years.

Out of the Greece’s 204 billion-euro official debt, 20 billion is owed to the IMF, which would be repaid in full in the event of an official-sector restructuring. The ECB has so far refused to face any losses on the bonds it has purchased over past years to prop up Greek debt, estimated at about 50 billion.

The IMF and ECB first must be paid in full. Then the other creditors can fight over the scraps. The irony: The ECB is the only entity that can create euros, so is least in need of being paid back.

“It is now clear to the IMF that Greece will need more time or more money or both,” a troika official told Reuters.

Greece has asked for an extra two years to meet interim targets and European leaders appear to agree. Stournaras, the finance minister, told Reuters on Tuesday that such an extension would cost an additional 13-15 billion euros, which could be covered without further pain for European taxpayers.

What about Greek taxpayers? This is an example of IMF economic brilliance. They now have discovered that a monetarily non-sovereign nation, with no source of income, needs more money. Who’da thunk it? So Greece will be allowed more time to meet its target of further impoverishing its citizenry.

Soon, the citizenry will rise up, and the sounds of the Guillotine will be heard in Greek-land.

Such a gap could be covered through the issuance of more short-term debt, by seeking lower interest rates from the ongoing bailout loans or a rollover of debt held by the
ECB.

More IMF brilliance: Provide more short term debt to a debtor that cannot pay its debts. Or ask lenders, who already are on the hook for Greece’s bad debts, to lower interest rates on those bad debts.

A senior Greek government official told Reuters, however, that the IMF preferred to see Europeans take losses on some of their previous loans to Athens, blocking any agreement: “The IMF wants an official-sector restructuring but we can’t do that,” the official said. “No one else wants it.”

Translation: “You euro nations take the losses. We at the IMF won’t, despite the fact that we helped create the problem. Then, after you take losses on existing loans, give Greece more loans.”

Disputes within the rescue mission, however, also reflect deeper concerns about Greece’s ability to slash its debt-to-GDP ratio from a current level around 160 percent and to recover the confidence of private investors willing to buy its bonds.

The statement is senseless. They want to lower the debt/GDP ratio, so they can sell more debt, which would increase the debt/GDP ratio? Huh?

In any event, the debt/GDP ratio is completely meaningless. It doesn’t predict solvency or prosperity. It doesn’t predict anything. But being useless explains why the IMF and the crooked rating agencies love it.

“Lots of … bankers in the chorus seem to indicate they would be quite happy for Greece to leave the euro.”

Amen to that. Within two years of leaving the euro, Greece will be well on its way to prosperity – if its leaders understand Monetary Sovereignty – while those nations, still burdened with the euro, sink ever deeper into despair.

You are watching a euro train wreck — in agonizingly slow motion. As always, the only long-term solutions are:
1. Greece and all other euro nations, re-adopt their own sovereign currencies
or
2. The euro nations form a fiscal federation, in which the EU provide euros as needed.

Meanwhile, the innocent citizens suffer. It’s a foretaste of what debt hawks are doing to the U.S.

Rodger Malcolm Mitchell
Monetary Sovereignty

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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

–Wanted for the Most Powerful Job on Earth: Competence and Courage. No Cowards Need Apply

Many of you have faced this political problem: Do you agree with the boss when you know the boss is dead wrong? Do you not merely agree, but speak earnestly in favor of the boss’s wrong ideas, knowing those ideas will lead to economic disaster?

And if you do the political thing, and agree and fight for the boss’s wrong ideas, and the disaster occurs, who is to blame? And what does that make you?

Washington Post
Romney’s tongue-tied eloquence
By Fareed Zakaria, Published: September 26, 2012

Peggy Noonan eloquently voiced what many conservatives believe when she said that Romney’s campaign has been a “rolling calamity.” And yet, shouldn’t it puzzle us that Romney is so “incompetent” (also from Noonan), given his deserved reputation for, well, competence?

He founded one of this country’s most successful financial firms, turned around the flailing Salt Lake City Olympics and was a successful governor. How did he get so clumsy so fast?

In fact, the problem is not Romney but the new Republican Party. Given the direction in which it has moved and the pressures from its most extreme — yet most powerful — elements, any nominee would face the same challenge: Can you be a serious candidate for the general election while not outraging the Republican base?

Why won’t Romney, an intelligent man, fluent in economics, explain his economic policy? Because any sensible answer would cause a firestorm in his party. It is obvious that, with a deficit at 8 percent of gross domestic product, any solution to our budgetary problems has to involve both spending cuts and tax increases.

Here, Mr. Zakaria flies wildly off track. Spending cuts and tax increases are absolutely, positively guaranteed to lead to recessions and depressions. It’s a mathematical certainty, as expressed in the formula readers of this blog know so well:

GDP = Federal Spending + Non-federal Spending – Net Imports.

But there is something more fundamental at work. Apparently, Romney knows his Republican base is wrong, and he knows that decisions agreeing with that base will adversely affect America. So, what should he do? Agree with the base, hoping to be elected, knowing he will destroy our economy? Or disagree with the base, not get elected, and possibly save America?

Our soldiers make an even more extreme form of that decision: Bravely stand and fight and possibly die saving your platoon, or like a coward, run away to save yourself, assuring that the rest of your platoon will die?

Is the personal glory of the Presidency worth hurting America?

Ronald Reagan agreed to tax increases when the deficit hit 4 percent of GDP; George H.W. Bush did so when the deficit was 3 percent of GDP. But today’s Republican Party is organized around the proposition that, no matter the circumstances, there must never be a tax increase of any kind.

The Simpson-Bowles proposal calls for $1 of tax increases for every $3 of spending cuts. But every Republican presidential candidate — including Romney — pledged during the primaries that he or she would not accept $10 of spending cuts if that meant a dollar of tax increases.

Just a reminder that taxes reduce the “Non-federal Spending” part of the above equation, and thereby reduce GDP growth. So the no-tax-increases pledge is a good idea. The bad part of the idea is that cuts in Federal Spending reduce GDP growth. Simple mathematics dictates that tax increases economically are identical with spending decreases — both reduce GDP growth.

So Romney could present a serious economic plan with numbers that make sense — and then face a revolt within his own party. His solution: to be utterly vague about how he would deal with the deficit. Were he to get specific, he would be committing ideological blasphemy. So instead he talks about freedom and capitalism.

Said another way: Romney could tell the truth, save America, and possibly doom his own ambition to become President. Or he can, as he has, agreed with the Republican base, enhancing his personal ambition, but dooming America’s future.

He has chosen his route. What does that say about him?

Romney’s own inclinations are obvious. In 2002, he refused to take Grover Norquist’s “no tax” pledge. But by 2006, the ground had shifted and he raced to become the first presidential candidate to commit to it.

One of numerous Romney flip-flops, trying to “agree with the boss” to the detriment of America.

The same pattern has emerged on immigration. On ABC’s “This Week” last Sunday, Republican strategist Nicolle Wallace urged Romney to reach out to Hispanics by reminding them of Obama’s poor record on immigration reform. Except that the Republican Party is now strongly opposed to a path to citizenship for illegal immigrants.

Romney has curried favor within the party by opposing the Dream Act, supporting Arizona’s harsh law under which police check people’s immigration status at will and proposing “self-deportation” as a way to get rid of undocumented immigrants. As with the deficit, he has a plan — but it’s secret.

Romney has tried to run a campaign while not running afoul of his party’s strictures. As a result, he has twisted himself into a pretzel, speaking vacuously, avoiding specifics and refusing to provide any serious plans for the most important issues of the day.

Here is a man who even disavowed his own signature political achievement — “Romneycare” — just to curry favor with the Republican political base.

Ironically, Romney already “ran afoul of his party’s strictures” — at least somewhat. The Republican base really wanted a nutcase like Michele Bachmann or Newt Gingrich. The base was cool on Romney. But, even after winning the nomination, he caved to the pressure, and went along with what this “intelligent man, fluent in economics” (according to Zakaria) knew was wrong. His personal ambition exceeded his patriotism. Romney first; America second.

To be awarded with the Presidency of the United States, and all that position’s powers and honors, you should at least display the courage of our fighting men and women — people who die for what they believe, and are not rewarded with the powers and honors of the Presidency. You will be expected to make difficult and correct decisions, each of which will have massive effect, not just on your platoon, but on the entire United States — indeed, the entire world.

What kind of leader will you be if you lack the competence and courage to stand up for what you believe is right, and against what you believe is wrong? Why would you accept the rewards of a leadership that requires you to send your people over a cliff?

For the sake of personal ambition, Romney has sold his soul to the devil. After the election, what will he see when he looks in the mirror?

Wanted for President of the United States: Competence and Courage. No Cowards Need Apply.

Rodger Malcolm Mitchell
Monetary Sovereignty

P.S. Please: Spare me the “Obama is just as bad” comments. He isn’t.

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#MONETARY SOVEREIGNTY

–No need to visit Spain. Spain is coming to visit you.

In “Travel to Spain to see a culture of dependency” we discussed how the starving Spanish feed themselves and their children with rotting food dug from dumpsters. Because of deficit reduction, aka “austerity,” the unemployment rate in Spain ranges from “relatively low” in Girona (14%) to 25% for the country as a whole. About 22% of Spanish households exist in poverty.

Now let’s talk America:

New York Times
Soaring Poverty Casts Spotlight on ‘Lost Decade’
By Sabrina Tavernise
Published: September 13, 2011

WASHINGTON — Another 2.6 million people slipped into poverty in the United States last year, the Census Bureau reported Tuesday, and the number of Americans living below the official poverty line, 46.2 million people, was the highest number in the 52 years the bureau has been publishing figures on it.

And in new signs of distress among the middle class, median household incomes fell last year to levels last seen in 1996.

Economists pointed to a telling statistic: It was the first time since the Great Depression that median household income, adjusted for inflation, had not risen over such a long period, said Lawrence Katz, an economics professor at Harvard.

As we continually mention (even at the bottom of each post), here is how Gross Domestic Product, the prime measure of economic growth, is calculated:

GDP = Federal Spending + Non-federal Spending – Net Imports

So, by definition, economic growth requires federal and non-federal spending growth. That is why deficit reduction, which involves spending decreases and tax increases, always must reduce economic growth and lead to recessions and depressions. It’s a mathematical necessity.

People who deny the adverse effect of deficit reduction, also would deny that taking one apple from a dozen, leaves only eleven apples.

The bureau’s findings were worse than many economists expected, and brought into sharp relief the toll the past decade had taken on Americans at the middle and lower parts of the income ladder. It is also fresh evidence that the disappointing economic recovery has done nothing for the country’s poorest citizens.

Readers of this blog know deficit reduction hurts the middle and lower classes much more than the upper classes, thereby increasing the gap between the so-called “1%” and the “99%.” This is not accidental. It is by design.

The 1% are perfectly happy to see their own fortunes decline so long as the gap increases. That is the goal of the 1%, and the bought-and-paid-for politicians and media are happy to further that goal, by spreading the lie that deficits are “too big” and “unsustainable” and “the federal government must live within its means.”

Of course, the exact opposite is true: Federal deficits are too small. They easily are sustainable. And being Monetarily Sovereign, the federal government has the power to create any amount of “means” it wishes.

The report said the percentage of Americans living below the poverty line last year, 15.1 percent, was the highest level since 1993. (The poverty line in 2010 for a family of four was $22,314.)

The past decade was also marked by a growing gap between the very top and very bottom of the income ladder. Median household income for the bottom tenth of the income spectrum fell by 12 percent from a peak in 1999, while the top 90th percentile dropped by just 1.5 percent.

The rich are overjoyed. Their income fell 1.5%, but the gap increased. Exactly what they wanted.

This year is not likely to be any better, economists said. Stimulus money has largely ended, and state and local governments have made deep cuts to staff and to budgets for social programs, both likely to move economically fragile families closer to poverty.

Why has stimulus money ended? That’s right: The lie that deficits must be reduced.

Minorities were hit hardest. Blacks experienced the highest poverty rate, at 27 percent, up from 25 percent in 2009, and Hispanics rose to 26 percent from 25 percent. For whites, 9.9 percent lived in poverty, up from 9.4 percent in 2009. Asians were unchanged at 12.1 percent.

Most blacks probably will vote for Obama, but for the wrong reason: Not because he’s less likely to cut federal spending, but because he’s black (or ½ black). Most Hispanics also will vote for Obama, also for the wrong reason: Because he’s more sympathetic to immigrants.

But poor or middle class or unemployed whites – who will they vote for? Unaccountably, they make up a large part of the Romney vote. And he is the man who tells them they live in a “culture of dependency,” as his excuse for wanting to cut federal deficits.

In truth, both candidates have said they want to reduce the deficit, though Obama is less likely to do so. With both candidates in the pocket of the rich, voting choices are limited, to say the least. So the electorate needs to learn up then speak up. Occupy Wall Street had the chance, but though they speak up, they have not learned up, so their words are meaningless.

Last year, about 48 million people ages 18 to 64 did not work even one week out of the year, up from 45 million in 2009, said Trudi Renwick, a Census official.

“Once you’ve been out of work for a long time, it’s a very difficult road to get back,” Lawrence Katz said.

More “culture of dependency” members, too lazy to look for work, according to the “religious” right.

“We’re risking a new underclass,” said Timothy Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin, Madison. “Young, less-educated adults, mainly men, can’t support their children and form stable families because they are jobless,” he added.

With cuts to unemployment compensation, food stamps, Medicaid, Medicare and for older people, Social Security, how will these people find food, clothing and shelter? The same way people in Spain do: Digging through dumpsters and flopping in abandoned buildings.

When enough men can’t support their wives and children, society is just one step away from riot and insurrection. America is not immune.

The report also said the number of uninsured Americans increased by 900,000 to 49.9 million. Those covered by employer-based insurance continued to decline in 2010, to about 55 percent, while those with government-provided coverage continued to increase, up slightly to 31 percent. Employer-based coverage was down from 65 percent in 2000, the report said.

All of the above could be prevented and cured by steady increases in federal deficit spending, which the government can and should do. But when I tell this to one of those most affected by deficit reduction — middle and lower income, white Americans — they often get angry and spit out, “What about inflation?” then illogically mention the pre-WWII Germany and Zimbabwe hyperinflations.

I only can shake my head in wonderment. The German and Zimbabwe hyperinflations were not caused by government spending, but rather were the cause of government spending. And as for the U.S., our inflation rate has remained close to the Fed’s intentional target of 2% – 3% – and when it has risen above that, the cause was not related to federal spending, but rather to oil prices.

These poor people are more worried about an inflation that rarely happens, and easily is controlled by the Fed, than they are about something that is upon us and is killing us at this very moment. They act like a drowning man refusing to be pulled from the water, because the air is cold and he doesn’t want to catch a chill.

In summary:

1. Reductions in deficits have led to nearly every depression and recession in American history.
2. Increases in deficits have cured every recession and depression.
3. Deficits have not caused inflations, which in any event, easily are cured by interest rate control.
4. Mathematically, GDP growth requires federal deficit growth
5. Deficit reduction increases the gap between the rich and the rest of us, which is exactly what the rich want.

Aside from that, deficit reduction is a wonderful idea – especially if you’re rich – and live in Spain. But even if you’re not rich, but still would like to visit Spain, don’t worry.

Look out your door. Spain is coming to visit you — in a ship named “Deficit Reduction.”

Rodger Malcolm Mitchell
Monetary Sovereignty

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#MONETARY SOVEREIGNTY

–Travel to Spain to see a culture of dependency

In case you didn’t know it, “deficit reduction” is identical with“austerity.” Here is what austerity, aka deficit reduction, has brought to Spain:

Excerpts from the New York Times
Spain Recoils as Its Hungry Forage Trash Bins for a Next Meal

MADRID — On a recent evening, a hip-looking young woman was sorting through a stack of crates outside a fruit and vegetable store here in the working-class neighborhood of Vallecas as it shut down for the night.

The woman, 33, said that she had once worked at the post office but that her unemployment benefits had run out and she was living now on 400 euros a month, about $520. She was squatting with some friends in a building that still had water and electricity, while collecting “a little of everything” from the garbage after stores closed and the streets were dark and quiet.

She is one of the people the U.S. religious right wing disparages as lazy, free loaders – people who have adopted what wealthy Mitt Romney sneeringly calls “the culture of dependency.” It’s the rich guy’s way to blame the victim.

As Spain tries desperately to meet its budget targets, it has been forced to embark on the same path as Greece, introducing one austerity measure after another, cutting jobs, salaries, pensions and benefits, even as the economy continues to shrink.

Sound familiar? This is exactly what the budget cutters in the U.S. are doing. The difference – and a major difference it is: The U.S. is Monetarily Sovereign. It controls its sovereign currency the dollar. So we do not need to cut spending.

Spain is monetarily non-sovereign — like our states and cities. Spain has no sovereign currency. So it needs to live within its ability to tax, just as you, being monetarily non-sovereign, need to live within your ability to earn.

Most recently, the government raised the value-added tax three percentage points, to 21 percent, on most goods, and two percentage points on many food items, making life just that much harder for those on the edge.

The value added (VA) tax is a consumption tax. It is designed to punish the poor, those people who spend a greater percentage of their income on taxable items. The rich, like Romney, don’t worry about a tax on consumables; the rich spend most of their money on investments. No tax there.

At the huge wholesale fruit and vegetable market on the outskirts of this city, men and women furtively collect items that had rolled into the gutter.

“It’s against the dignity of these people to have to look for food in this manner,” said Eduardo Berloso, an official in Girona, the city that padlocked its supermarket trash bins. Mr. Berloso proposed the measure last month after hearing from social workers and seeing for himself one evening “the humiliating gesture of a mother with children looking around before digging into the bins.”

Mr. Berloso prefers that people starve rather than be humiliated.

The Caritas report also found that 22 percent of Spanish households were living in poverty and that about 600,000 had no income whatsoever. All these numbers are expected to continue to get worse in the coming months.

Last fall, the U.S. Census Bureau, reported the percentage of Americans living below the poverty line last year, 15.1 percent, was the highest level since 1993. (The poverty line in 2010 for a family of four was $22,314.)

The report also said, “The past decade was also marked by a growing gap between the very top and very bottom of the income ladder. This year is not likely to be any better. Stimulus money has largely ended, and state and local governments have made deep cuts to staff and to budgets for social programs, both likely to move economically fragile families closer to poverty.”

Yes, these lazy people have adopted a “culture of dependency.”

In Girona, Mr. Berloso said his aim in locking down the bins was to keep people healthy and push them to get food at licensed pantries and soup kitchens. He said 80 to 100 people had been regularly sorting through the bins before he took action, with a strong likelihood that many more were relying on thrown-away food to get by.

But Mr. Berloso’s locks created something of an uproar across Spain, where the economic crisis is fueling more and more protests highlighting hunger. A group of mayors and unionists in southern Spain, where unemployment rates are far above the average, recently staged Robin Hood raids on two supermarkets, loading carts with basic foods and pressing them to donate more food to the needy.

The dumpster locks help keep people from that “culture of dependency,” and move them toward the self-sufficiency of starvation.

Some politicians say Girona’s locks are really all about protecting Girona’s image. The city of about 100,000 derives most of its income from tourism.

“The social workers or civil agents could refer people to the food distribution center without having to lock bins,” said Pia Bosch, a Socialist councilor in Girona. “It’s like killing a fly with a cannonball.”

But referring people to food distribution centers, where they can obtain free food, just fosters that dreaded “culture of dependency.”

The unemployment rate is still relatively low in Girona — 14 percent over all, compared with 25 percent for the country as a whole. But more and more families have no income. Of the 7,700 unemployed in Girona, Mr. Berloso said, 40 percent have now run out of benefits.

Many, he said, were “people who never expected to find themselves in this position.”

On a recent morning, Juan Javier, 29, who had come to collect milk, pasta, vegetables and eggs from one of the distribution centers, was one of the few clients who would discuss his circumstances. A former printer, he has been out of work for two years. “I would like to have a job,” he said, “and not be here.”

In a nearby soup kitchen, Toni López, 36, waited quietly for a free lunch with his girlfriend, Monica Vargas, 46, a beautician. The couple recently became homeless when they fell two months behind on their rent. “All our lives we have been working people,” Mr. Lopez said. “We are only here because we are decent people. The landlord was knocking on the door demanding the rent, so we said, ‘Here, here are the keys.’”

Think this can’t happen to you, in America? It shouldn’t, but it can. Our politicians, funded by the richest 1%, are determined to cut federal spending: Fire federal workers (that already has begun). Cut Social Security benefits and tax the ones that remain. (That too, already has begun.)

Cut Medicare. (Romney vowed to do that.) Reduce the military (The vast majority of its expenses are for salaries).

Deficit reduction, wherever it is implemented, always, always, always causes a downward economic helix, in which suffering is in inverse relationship to money. Those with the least suffer the most.

The richest 1%, with the help of the politicians, the media and the compliant economists, have brainwashed the 99% into believing federal financing is like personal, kitchen-table financing, where affordability is an ever-present issue. But for the Monetarily Sovereign U.S. government — unlike the governments of Spain, Italy, Illinois, Chicago et al — affordability never is an issue.

For the U.S. government, there is no amount of spending that is “unsustainable.” The U.S. government does not need to “live within its means.” These are concepts appropriate to you and me — we don’t have a sovereign currency — but not appropriate to a government having a currency over which it is sovereign.

The federal deficit is not too high; it is too low. Economic growth requires a growing federal deficit. One of the most basic equations in economics is:

Gross Domestic Product = Federal Spending + Non-federal Spending – Net Imports.

To grow GDP we always must increase Federal Spending and/or increase Non-federal Spending. That requires increasing the deficit. Straightforward mathematics the 1% hopes you never understand.

Every depression in U.S. history began with a reduction in deficit spending.

From 1919 to 1929, the U.S. ran either a surplus or a balanced budget. During that time, we had 3 recessions, culminating in the Great Depression — cured by spending for World War II:

Today, the politicians, the media and the old line economists, all under the thumb of the 1%, want us to take more of that bitter, deficit-reduction medicine — the medicine that already has destroyed so many lives all over the world.

And like sheep, marching into the slaughterhouse, we willingly and without question, place our necks on the chopping block. In fact, some will fight angrily against any who dare to warn of our coming doom. You can page through this blog to see the outraged rebuttals.

It’s happening in Spain and Greece and other euro (monetarily non-sovereign) nations. The Spanish and Greeks are not victims of a “culture of dependency.” They are victims of their own governments. Before their leaders recklessly adopted the euro and became monetarily non-sovereign, which forced them into deficit reduction, these people were not eating out of dumpsters.

What happened was simple: They were told they needed to cut their government’s deficit spending. And they believed. And this belief has led to their downfall.

And it will happen here, if we naively accept the deficit reduction lie so willingly adopted by our fellow sheep, and if we demand to lay our own heads on the 1%’s chopping block.

Rodger Malcolm Mitchell
Monetary Sovereignty

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#MONETARY SOVEREIGNTY

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