Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Mitchell’s laws:
●The more federal 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 ultimately 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.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
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One of my favorite blogs, “naked capitalism,” this week included an article about the euro. It comes to essentially the same conclusions I voiced back in 2005, when I told a class at UMKC, “Because of the Euro, no euro nation can control its own money supply. The Euro is the worst economic idea since the recession-era, Smoot-Hawley Tariff. The economies of European nations are doomed by the euro.”

The euro requires every euro nation to be monetarily non-sovereign, similar financially to every U.S. state, county and city, you and me. None of us uses a currency over which we are sovereign.

So to survive long term, we must have net income (which the U.S. government does not need).

For a government, income has three sources: Taxes, borrowing and exports. But taxes and borrowing are not net income. Taxes merely circulate money within the government’s borders, and borrowing must be repaid.

That leaves net exports which includes anything that brings in money from non-residents.

The resultant mathematical problem is quite basic: All nations cannot be net exporters. So long-term, monetarily non-sovereign governments survive is by receiving money from Monetarily Sovereign governments.

U.S. states survive either from exports or from a positive balance of payments with our Monetarily Sovereign national government. The same is true for our counties and cities, which also may receive some of that federal money through an intermediary – their state.

The euro nations, not being able to create euros, are slowly growing broke – at least those who have a negative balance of payments.

The so-called solutions, recommended by economists everywhere, are to tax and borrow more, and to spend less. Since taxing and borrowing more do not add net money to the economy, the impoverished euro nations have begun to rely on spending less – less on food, less on housing, less on education, infrastructure, health – less on everything that supports the middle- and lower-income groups – a prescription for economic disaster.

European Pundits Starting to Give Up on the Eurozone
08/03/2013 – Yves Smith (Susan Webber)

We’ve been pointing out for some time that Germany has refused to budge from wanting contradictory things relative to the Eurozone.

Germany wants to continue to run trade surpluses, which are now predominantly with other countries in Europe. That means it needs to finance its trade partners’ deficits.

But Germany simultaneously does not want to do that. The only way to square that circle would be if the euro were vastly cheaper, so that Germany’s trade surplus was more with the rest of the world than with its fellow Europeans, and that countries like Spain could achieve a trade surplus with the rest of the world.

No one has entertained that as a solution, since the required level of euro depreciation would be so large as to invite retaliation from Europe’s major trade partners.

Translation: The euro nations could survive if somehow they found a way to have an positive trade balance with Monetarily Sovereign nations, like the U.S., Canada, China, Japan, Australia et al.

But despite the fact that MS nations have the unlimited ability to support the euro nations, no MS nation acknowledges it is MS.

The whole premise of the EU/Eurozone project was successive crises would force further integration.

Translation: Financial integration, in which the EU gives (not lends) euros to needy euro nations, is one of the two possible solutions to the euro mess (the other being for each nation to re-adopt its own sovereign currency).

However, only a crisis of even greater magnitude than the current crisis, will allow for financial integration. The rich don’t want it. They want the middle- and lower-income groups to suffer. They want the gap to widen, and provide a larger servant class.

European officialdom has managed to pull off years of “barely enough at the last minute” salvage operations to keep things from falling over. But the Germans have also insisted on crushing and failed austerity, and refuse to relent even as compliant periphery countries keep missing their targets and in the case of Greece, the result of breaking a country on the rack is a failed state.

Translation: It is the wealthy of Germany, in cahoots with the wealthy of the world, who want the other euro nations impoverished so the gap can be widened.

James Galbraith said, “Integration has a lot of efficiencies associated with it. In any event it creates a world in which there are cross-border interdependencies. And if you want to break them up, you can, but the price is on the order of 40%.

So that’s a good benchmark for what might happen to living standards if you suddenly went back to capital controls and trade barriers and national industries.

Galbraith predicts that if the euro nations returned to their sovereign currencies, there would be a loss of exports, resulting in a reduction in GDP. What he does not take into consideration is the fact that a Monetarily Sovereign nation always can create its sovereign currency, so does not need exports. A Monetarily Sovereign nation can be self sufficient.

Despite the considerable cost of a Eurozone breakup, that the experts are struggling to find a resolution that is acceptable politically to Germany.

Translation: Experts are struggling to find a resolution acceptable to the very rich.

“The idea of a common currency union is a big mistake, an adventurous, reckless and mistaken goal which will not unite Europe but, instead, divide it”. Lord Dahrendorf, 1995.

The good Lord Dahrendorf is 100% correct. They should have listened to him.

I now believe that Lord Dahrendorf was right. Right not only then but, even more so, today.

I had observed how a small economy which had totally collapsed could be successfully turned around in only a few years with the right domestic economic leadership and the right support from abroad. And I thought the same could happen easily in Greece. Well, it’s not happening in Greece because the country does not have the right economic and political leadership nor the right support from abroad.

Actually, collapse is exactly what the political leadership wants. It creates a larger pool of the servant class. Anyway support need not come from abroad. It could have come from the EU in the form of spending, not lending.

The eye opener was the book “The Euro-Liars” by Hans-Olaf Henkel, whose argument is, like Lord Dahrendorf said almost 20 years earlier, that the Euro does not unite Europe but, instead, it splits it. Henkel argues that the Euro not only limits (if not destroys) economic potential in the South but also in the North.

The Euro, as it was designed, does not fit the cultures of countries like Greece, Portugal and Spain (Henkel also adds Italy and France!). Neither is today’s Euro suitable for the North because it makes it too easy for Germany & Co. to export.. If Germany & Co. were not in the Euro, they would have to become even more innovative and productive to remain competitive in the world and their surpluses would most likely come down.

The problem is not so-called “culture,” (a euphemism meaning northern Europeans like to work harder than southern Europeans). It’s a matter of Monetary Sovereignty, or rather, the lack of it, that dooms all euro nations.

My original optimism about Greece was based on the following logic: a long-term economic development plan (at least for 10 years) would be necessary to build up domestic economic value creation (and/or repatriate it through import substitution);

A shift of the necessary foreign funding from loans to direct investment by foreign private sectors in the Greek private sector; EU-incentives to facilitate that (such as guarantees for the political risk including a Grexit);

Possibly temporary ‘infant industry protection’ (incentivating the repatriation of monies held by Greeks abroad and/or limitations on capital outflows).

This is not happening (and I no longer have the hope that it will happen) because the EU never thought in those terms and Greek leadership never showed the will or, more importantly, the capability to effect the necessary reforms.

Translation: “I blame Greece for its problems, when I should blame the EU and the demand for loss of Monetary Sovereignty, which makes long-term survival impossible”

As Prof. Galbraith argues, austerity alone is not the solution; neither is stimulus alone the solution. It would require a ‘European Initiative’ comparable to what the US government might do in a similar situation.

A United States of Europe with a federal government? Who would elect that government? Would national governments appoint it or would voters Europe-wide elect it? A Finn campaigning for election in Greece? A Greek in Germany?

The present EU as a role model for a future federal government? An EU which currently seems more outside of Europe than part of it? An EU which tells us which shape cucumbers must have; what kind of light bulbs we can buy; what kind of bathroom fixtures?

Since I have about 10.000 qm of grass to take care of, I am particularly interested in the latest EU regulation which will tell me what type of machinery I can use during which hours of the day/week!

One can imagine thousands of such objections, but the original 13 colonies faced exactly the same problems. The result was the United States of America.

So, I admit defeat in my belief that ‘European policy-makers would come to grips with fundamental economics’. They seem incapable of that.

All those ideas which aim at solving the Eurozone’s problems through generating aggregate demand are pipe dreams. They might work in the United States of America with a strong federal government but they are pipe dreams in a Europe of administrators, technicians and bureaucrats focusing on national interests, all speaking in different languages and different directions.

Translation: Although 13 colonies, run by administrators, technicians and bureaucrates, focusing on state interests, having different beliefs and fighting a war with a dominant foe, were able to create the Unites States of America, the European nations can’t do it.

Perhaps, what Europe needs is a dominant foe that could unite them.

Note to Europe: The United States of America exists. The model exists. The solution exists.

Sadly, your will does not exist. Your rich are too greedy. They want that gap widened.

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 (Click here)
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. Click here
6. Salary for attending school (Click here)
7. Eliminate corporate taxes (Click here)
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Mitchell’s laws:
●The more federal 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 ultimately 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.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
=====================================================================

“Everything in economics devolves to motive.”

Economics is a science based partly on human psychology, which is why effect does not rise smoothly from cause, and prediction is elusive. Any theory in economics, that ignores human psychology, is lacking.

We humans, being social animals, form societies. Most societies have Leaders and Followers. In human societies, Leaders have special powers.

Evolution has taught Followers they benefit when their Leaders are strong and effective and care about the well-being of Followers. So Followers are motivated to believe their Leaders have those traits.

Caring most often is a function of proximity or shared experiences. Typically, we care most about our parents, spouses and children. They are closest to us.

Sliding down the list, we may care for other close relatives, friends, close neighbors, far neighbors, people sharing similar life experiences and very distant relatives.

Well down the list, might be strangers sharing our religion and nationality, followed by strangers, not of our religion or nationality.

Followers are motivated to close the Gap between them and their Leaders, which can include physically being close or communicating with, or sharing some life experience with, Leaders. Followers feel more comfortable when they can “touch” their leaders, literally or figuratively.

By contrast, evolution has taught Leaders to strive to widen the Gap between them and their Followers, lest the Followers not respect the Leaders’ superiority, or even challenge the Leaders for power.

PROTOCOLS
Leaders create protocols to widen the Gap. In Japan, the Follower bows lowest, while the Leader may barely nod. Popes and kings wear crowns and special robes. They live in castles, and they demand special forms of address, all to separate themselves from their Followers.

Leaders address Followers by first names, while Followers respond with “Mr.” or “Sir” or “Dr.” or “Senator” or “Excellency.” That is how the Gap is maintained.

American leaders may be rich, famous and/or have a powerful position in society. Your boss is a Leader and you are a Follower, except when you are a Leader and your assistant is a Follower.

You may not think about it consciously, but there are protocols that separate you from your boss and separate your assistant from you. Followers follow protocols to strengthen and to gain favor with (i.e. come closer to) their Leaders. Followers obey commands and demonstrate appreciation for their Leaders. (No one ever was fired for giving the boss a gift or laughing at the boss’s jokes.)

Leaders follow protocols to strengthen the fealty of their Followers (i.e. small gifts called “social spending”), while widening the Gap between them and their Followers.

So, there is the conflict of Leaders widening the Gap with Followers, while maintaining them as servants, and Followers trying to close the Gap, while pleasing Leaders. It is a conflict marked by Followers’ envy and needs vs. Leaders’ contempt and needs.

YOUR FRIENDS AND NEIGHBORS
Typically, the vast majority of your friends and neighbors are in financial circumstances similar to yours.

You probably live in a neighborhood matching your wealth. Poor people are geographically restricted by finances. But even rich people, who can live anywhere, prefer to live among other rich people and associate with other rich people.

This is no accident. It is a matter of comfort. The rich feel uncomfortable when a poor person comes close, except in the role of servant. Even then, protocols are followed to maintain or widen the Gap.

THE RICH AND THE POLITICIANS
America’s primary Leaders are first the rich and then the politicians, who are controlled by the rich (via campaign contributions and promises of lucrative employment.)

Both have similar desires: The rich want an underclass, tame enough to accept hard work for moderate-to-minimal reward, and not to demand more power or proximity.

The politicians, servants of the rich, want an underclass, tame enough to accept lies about the need for minimal reward, and not to demand more power or proximity.

Over time, the rich developed worldwide, the BIG LIE – the ridiculous-on-the-face-of-it lie that a sovereign nation can run short of its own sovereign currency. This is the lie that keeps the underclasses in chains.

MONETARY SOVEREIGNTY
Even a few seconds of thought should be sufficient to make one realize, a Monetarily Sovereign nation, which invented the laws that created its currency, always has the power to create more of that currency. The federal government does it, daily.

Why then do Americans believe President Obama when he lies that “America must live within its means”? Why do Americans believe Congressman Boehner when he lies that, “America is broke”?

We are genetically disposed to rely on our Leaders and part of that reliance is the tendency to accept what they tell us.

Only a few more seconds of thought should be sufficient to show how a sovereign nation can prevent or create inflation by giving its sovereign currency any exchange value it chooses. Many nations arbitrarily have changed the exchange value of their sovereign currency.

Why then do Americans believe Fed Chairman Bernanke when he pretends inflation is something that could happen beyond America’s control, and that he heroically is working to control it?

The reason is simple: Our Leaders have brainwashed us into believing only their strong hands separate us from chaos, despite the clear facts that it is our Leaders who, consciously or not, create chaos, as a Gap-widening measure.

One is reminded of young girls who stay enslaved by their pimps, because in their innocence, they believe their pimps protect them from a cruel world. It’s what their pimps tell them. It’s what our pimps tell us.

ANTI-ABORTION
Consider contraception and anti-abortion laws, which never seem quite strict enough for some politicians. These actually are economic laws, but with a moral veneer.

The rich pay no attention to such laws. They buy abortions at will. But the poor are trapped by these laws.

Of what value to humankind is forcing poor women to deliver unwanted and unaffordable children into this world? One can debate about when a zygote becomes a sentient human being, but that debate is a digression from the underlying motive for all contraception laws: To create a larger, more compliant underclass.

Pro-”life” is the cover story into which a great many innocent, well-meaning people have bought. The unfortunate poor, chained to unwanted children, will work hard and cheaply (empowering the rich). And they will need government support for survival (empowering the politicians).

What better way to enslave the poor than to force unaffordable burdens on them, then to be their only means of survival, so they must beg the rich and the politicians for help.

It’s perfect.

BUYING THE STAIRWAY TO HEAVEN
Humans have been taught to bribe those in power. The ultimate power is God, so “He” universally is bribed via prayer and contributions to a church.

The motive for the rich is adoration from contemporaries and envy from the poor. But, when poor people give to a wealthy church, the Leaders gain power, while the poor are told they must continue to ingratiate themselves with the all-powerful God, a God whose needs apparently are infinite. The poor never must stop giving.

The Leaders tell the poor that support of the religion is the sole path to heaven. The poor are impoverished further, and the Leaders, being the intermediaries between God and the poor, gain power.

In many religions, the Leaders wear costumes and create customs, to widen the Gap between themselves and their Followers. The Leaders write and lead the prayers the Followers are compelled to read and recite, repeatedly.

Repetition implants the rules. It is a classic brainwashing technique.

As always, the underclass follows power, while power distances itself from the underclass. To Leaders, the Gap is of foremost importance.

THE QUESTION
When anyone in power – any rich person, any business superior, any politician, and cleric – speaks about money or economics in general, the first question you should ask is, “Why? What is the motivation? How will this widen the Gap between him and those with less power?”

Power corrupts, and the corrupted tell lies to extend their corruption. When any President, any Congressperson, any cleric, any person more powerful than you tells lies, they all lie for the same reason: To maintain or widen the Gap between them and you.

THE BASIS FOR ECONOMICS
Money is not the real goal of the rich, nor even of the middle class. The real goal is to widen the Gap.

No matter where in the wealth rankings people find themselves, their natural desire is to widen the Gap from those having less, and to narrow the Gap with those having more. The rich, however, have far more power to widen the Gap, which is why the GINI ratio continues to rise.

If you have a million dollars, and everyone else also has a million dollars, there is no Gap and you are not rich. But if you have a thousand dollars and everyone else has but one dollar, the Gap is huge and you are rich. It is the Gap, not wealth itself, that makes you rich.

President Obama tells lies to create and widen the Gap. He wants the best Presidential Library. He wants the best legacy. He wants history to separate him from other Presidents. He wants to hobnob in the homes of the rich and famous. He wants his family to have the same.

President Obama will not come to visit your house, but he may go to Bill Gates’s or Warren Buffett’s estate. What is his motivation?

Why would he prefer to spend time with Bill and Warren than with you? Because he doesn’t want to be near you. He wants to be near them. He wants to increase the Gap below him and narrow any Gap that may exist above him.

Meanwhile, you too, would like to visit Bill and Warren as a Gap narrowing measure, but you don’t want poor people coming to your house. You too want to widen the Gap below you and narrow the Gap above you.

This is the psychological basis for all economics: Motivation and the Gap.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here and here)
10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

The Ten Steps will add dollars to the economy, stimulate the economy, and narrow the income/wealth/power Gap between the rich and the rest.

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY