–The new paradigm: Disemployment. Less work; more life.

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●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.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

Today, I saw these headlines:

“Waste Management will trim some management”
“Telenor to cut 2000 jobs in India”
“Alcatel-Lucent Plans to Cut 5000 Jobs”
“Mangano cuts 200 jobs”
“Morgan Stanley plans further staff cuts”
“Fairfax to shed 1900 staff”
“China’s ZTE May Cut Employees”
“HP confirms layoffs; Cutting 500 jobs”

If you think this is symptomatic of a world-wide recession, you’re right – but only somewhat. It’s also symptomatic of something else. Consider these articles:

JCPenney to get rid of check-out counters and clerks, use self check-out machines and RFID chips
Posted: 07/19/2012, By: Ann Geyser, newsnet5.com

TAMPA -CEO Ron Johnson said JC Penney it will remove check-out counters in stores and replace them with a system that won’t require clerks. Shoppers will be able to use self check-out machines, similar to those found in grocery stores. Johnson told “Fortune” magazine he hopes to phase out check-out counters by 2014.

Translation: “We don’t need people to do what computerized machines can do.”

A Day Job Waiting for a Kill Shot a World Away
Heather Ainsworth for The New York Times

HANCOCK FIELD AIR NATIONAL GUARD BASE, N.Y. — From his computer console here in the Syracuse suburbs, Col. D. Scott Brenton remotely flies a Reaper drone that beams back hundreds of hours of live video of insurgents, his intended targets.

By 2015, the Pentagon projects that the Air Force will need more than 2,000 drone pilots for combat air patrols operating 24 hours a day worldwide. Until this year, drone pilots went through traditional flight training before learning how to operate Predators, Reapers and unarmed Global Hawks. Now the pilots are on a fast track and spend only 40 hours in a basic Cessna-type plane before starting their drone training.

True, drones cannot engage in air-to-air combat, but Colonel Brenton said that “the amount of time I’ve engaged the enemy in air-to-ground combat has been significant” in both Reapers and F-16s.

Translation: As computerized equipment improves, people need less training time. Though today, drones cannot engage in air-to-air combat, tomorrow they will. Every day, computerized machined do the work people formerly did.

At the start of the Industrial Revolution, it was feared machines would cause unemployment by doing “people” jobs. That didn’t happen. The machines actually helped create jobs, not just because machines needed to be guided by human hands, but by increasing the need for “back office” hands. Slowly, machines forced people from blue collar to white collar work.

Today, we are in the Computer Revolution, and the rules have changed. Not only can machines do the blue collar work; they can do the white collar work; they can be creative; they can answer questions as Watson did.

In the May 16th post, “Coming soon to a world near you: Economics for cyborgs. Humans as a transition species” we spoke of humans being a transition species. Eventually, computerized machines will be able to do almost every physical and mental task humans now can do.

The immediate question is: What will happen during the transition?

As computers become smarter, the U.S. standard 8-hour day, with 2-3 week vacation plus various holiday, no longer is sustainable. The nation neither needs nor wants that much human labor.

Business doesn’t want it, because human labor usually is less efficient and more costly than machine labor. People don’t want it, because we wish to pursue our own personal interests rather than an employer’s interests.

The trend takes us on two divergent paths:

1. Unintentional massive unemployment, with growing starvation and homelessness
or
2. Shorter work day/year.

The first, unintentional unemployment, leads to poverty. The primary purpose of employment is to obtain dollars with which to pay for goods and services, many of which are necessary for, or at least contribute to, a happier life.

The second, shorter work day, has begun in some nations. Eurofound published a report showing the “Average collectively agreed normal weekly hours, 2010”. Some examples:

Greece, Hungary, Poland: 40 hours; Ireland: 39; Spain: 38.6; Italy: 38; Germany: 37.7; UK: 37.5; Denmark: 37; France: 35.6

Clearly, there is nothing sacred about the 40-hour week, or any workweek length, but this leads to the problem of pay. Will companies pay less for a less than 40 hours of work?

If workers now receiving, for instance, $20 per hour for a 40 hour week ($800 per week), and later go to, for instance, 30 hours a week, will they still receive $20 per hour — a 25% pay reduction to $600 per week? Why not?

The same question appears if we visualize annual job sharing, in which, for example, one person works January – June and a second person works July – December. No matter how hours, days or months are split, it is hard to imagine why employment matching population growth will not lead to reduced per-person salaries.

Although worker productivity continues to rise, workers themselves are not more valuable to employers. The rise in productivity is due to the computerized machines “digging holes faster,” not because people have learned to run the machines faster. Human work is becoming less necessary.

So, the total available work must be spread to more humans. By federal law, there could be shorter days (8 hours), shorter weeks (down from 5 days) or shorter years (fewer weeks of work).

This leaves the question: How do we maintain per-person income in the face of reduced need for human labor? I suggest the answer lies with our Monetarily Sovereign government.

One approach would be for the government to provide a “citizen salary” for every man, woman and child in America. In essence, the government could be an “employer” that pays all Americans a salary for life — a extension of Social Security — sufficient to provide a moderate quality of life.

Other approaches would be for the federal government to provide benefits people now must pay for:

*Free Medicare for all
*Discounted food
*Discounted clothing
*Reduced federal taxes
*Reduced sales and other local taxes (made possible by federal subsidies to local governments)
*100% free college education
*Additional salary for people who wish to work in areas most likely to improve the quality of life for Americans: Research & Development in Medicine, Biology, Physics, etc.

This proposal lacks details, and many devils lurk in those details, but we must face the fact that human labor will be less necessary in the future, while human needs will continue. There simply will not be sufficient job-related pay to spread among a growing population. Unemployment will be a growing problem, which will cause more frequent and more severe recessions, in turn causing more unemployment.

Yes, we can attempt the Chinese solution to population growth, but that seems to cause hardship, when our goal should be the improvement of our lives.

The new paradigm will be disemployment. We must recognize this inevitability and begin to formulate plans to deal with it. Else it will reduce our lives to misery.

If not this, what? If not now, when?

Rodger Malcolm Mitchell
Monetary Sovereignty

==========================================================================================================================================
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 exports

#MONETARY SOVEREIGNTY

–Et tu, Netanyahu? Israel joins the ranks of suicidal nations

We know that both President Obama and Mr. Romney are ruled by the upper 1% income group, and though Obama makes some weak pretense at supporting the lower 99%, Romney is more honest. He makes no secret of his desire to spread the income gap between rich and poor. His vow to dismantle Obamacare (aka Romneycare) is only the more egregious of his cut spending, cut benefits, cut aid to the poor genuflection to the Tea right.

Similarly, the entire, monetarily non-sovereign, euro zone is in thrall of economy-devastating austerity (i.e. austerity for the poor, not for the rich), and will continue to slice away at government spending until the 99% begin to erect guillotines and do some slicing of their own.

Then there is the UK. It does not remember why it wisely rejected the euro and remained Monetarily Sovereign, retaining the unlimited ability to create it’s own sovereign currency. So, wrongly thinking the finances of a Monetarily Sovereign government are like the finances of monetarily non-sovereign people, it embarked on a serious austerity plan. It cut its deficits.

Now it is shocked – shocked! – that cuts in government deficts impoverish the citizenry. As UK citizens receive less money, they spend less, which in turn, impoverishes businesses, which then fire people, who then have even less money to spend. And on and on we go, in the downward helix of deficit cuts, to depression.

The record of deficit cutting austerity approaches perfection. Wherever it is tried it succeeds – succeeds, that is, in tanking the economy. Around the world, dozens of anemic economies have had the leeches of austerity applied, and as the financial blood is drained, the doctors scratch their heads and wonder why their patients sicken and die.

And now comes Israel:

Israel eyes austerity after prosperous year
By Jean-Luc Renaudie | AFP

Prime Minister Benjamin Netanyahu, who has long boasted how Israel has avoided the fiscal fate of Spain and Greece, is poised to unveil tough austerity measures likely to hit the underprivileged. The measures will aim to make up part of the budget deficit that has climbed to 4.0 percent of Israel’s GDP — twice that which was expected for 2012.

Translation: “Because we have not become Spain and Greece, I must cut deficits to make us into Spain and Greece.”

Sound familiar? The dreaded budget deficit, which by mysterious coincidence, seems to rise in lock step with economic growth, now is being blamed for — what? — economic growth? Or just being misnamed “deficit”?

Never mind that a government deficit = private sector surplus, and the bigger the deficit, the more money people spend, and the more businesses grow.

And everywhere the dreaded deficit is “cured,” the underprivileged suffer, but isn’t that the whole point?

Taxes on cigarettes and beer have already been hiked this week, and according to media reports the government will also be raising VAT from 16 to 17 percent and introducing a 2.0 percent income tax rise in households with an annual income of at least a million shekels ($245,000, 199,300 euros).

Also expected is a combined 700-million-shekel ($171 million) cut from the budgets of all ministries with the exception of defence, education and welfare. A spokesman for Netanyahu told public radio on Thursday that the projected measures would raise the annual tax burden of each Israeli household by 1,740 shekels ($426/347 euros).

But these could only be the beginning, with Finance Minister Yuval Steinitz preparing an additional series of tax rises for 2013.

Translation: “See, it goes like this. We’ll raise taxes, which will take money out of the private sector. And we’ll spend less, which will put less money into the private sector. By draining the private sector of money, we’ll crush the economy — well, not the whole economy. The rich will be all right. It’s the poor who will be crushed, which will give the rich even more power. Simple, huh?”

“There are no free lunches,” Netanyahu said this week in an attempt to justify the austerity plan.

This is known as “governing by slogan.” Sounds wise; means nothing.

“Those who say that we can spend lavishly… endanger the state of Israel and could easily lead it to the brink of bankruptcy, as is the case of leading European economies,” Netanyahu said.

Er, ah, excuse me, Ben, but the euro nations are monetarily non-sovereign, and cannot control their money supply. They can be bankrupt. Israel is Monetarily Sovereign, has the unlimited ability to create shekels, so never can be forced into bankruptcy.

Ah, details, details.

Israeli officials also fear that the major international rating agencies, which had hitherto provided Israel with a clean bill of health, will lower their ratings.

Oh, woe! Lower ratings would mean Israel would pay a higher rate on borrowing — which as a Monetarily Sovereign nation, it doesn’t need to do. Further, a Monetarily Sovereign nation has the unlimited ability to pay any interest rate.

So, the problem is . . . ?

Until now, the Jewish state had effectively escaped the sub prime crisis of 2008 and the beginning of the current crisis in the eurozone. “To ensure stability, we must take unpopular measures,” said Harel Locker, director general of Netanyahu’s office.

Translation: “Heaven forbid we continue to do what has worked. To ensure stability, we must change the very thing that gave us stability.”

And even within the coalition, several religious and ultra-nationalist parties denounced the “anti-social” character of Netanyahu’s plan for 2013, an election year. It is the planned increase in Value Added Tax (VAT), which will affect all Israelis, that has come in for the harshest criticism.

One of the main critiques levelled at Netanyahu is his intention to give a huge “gift” to multinationals by halving the taxes on monies earned in Israel and which are transferred abroad, from 25 percent to 12 percent.

See the pattern? Social programs (for the 99%) will be cut. The VAT (which mostly punishes the 99%) will be increased. Taxes on multinationals (affecting the 1%) will be halved. It’s the same the world over.

In a defensive statement on Thursday, Netanyahu said that “even after the steps we will take, families in Israel — middle-class and underprivileged — will remain with more money in their pockets” thanks to measures such as free education from the age of three, tax benefits for working families and free dental care for children.

And central bank chief Stanley Fischer was quoted as saying that Netanyahu’s planned measures were “very serious progress” which displayed “very responsible leadership by the economic decision-makers.”

Translation: “We’ll take 10 shekels from your left pocket and put 5 shekels in your right pocket. Stanley Fischer says this is good for you, so it must be. Would Stanley lie to you?”

Clearly, Israel has learned a great deal from American politicians, about how to screw the 99%. All of this is possible only because the 99% has been kept ignorant by the 1% — not just ignorant, but resolutely ignorant. (Try explaining Monetary Sovereignty to your friends, and you’ll see the meaning of “resolutely ignorant.”)

Bottom line: Deficit cuts (aka “austerity) will destroy Israel, especially the 99%, as deficit cuts have destroyed every nation where they have been implemented, and even now are destroying America.

Rodger Malcolm Mitchell
Monetary Sovereignty

#MONETARY SOVEREIGNTY

The cattle, dumb, drooling and defeated, obediently slump into the slaughterhouse, with never a “moo” in protest.

Today, Congress continues its politicized debates about the best way to destroy health care and the American economy. With friends like these, who needs enemies?

Every economist is familiar with this equation:

Federal Deficits – Net Imports = Net Private Saving

It describes how money flows in the economy. Every economist also knows this equation:

GDP = Private Consumption and Investment + Federal Spending – Net Imports

Both equations tell you: When federal deficits are reduced, fewer dollars are created, the saving rate in reduced and the economy suffers. None of this is hypothesis or prediction or guess-work. These equations simply are the actual facts of federal financing. They cannot be debated. They are as certain as Assets = Liabilities + Equity.

Yet the media, the politicians, the old-line economists and the public, at the behest of the upper 1% income group, deny these fundamental truths. Here is yet another example:

Detroit Free Press

Health care overhaul will reduce deficits, Congressional Budget Office finds
By Ricardo Alonso-Zaldivar and Andrew Taylor, July 25, 2012

WASHINGTON — President Barack Obama’s health care overhaul will reduce, rather than increase, the nation’s huge federal deficits during the next decade, Congress’ nonpartisan budget scorekeepers said Tuesday, supporting Obama’s contention in a major election-year dispute with Republicans.

Republicans insist the plan will raise deficits — by trillions, GOP presidential candidate Mitt Romney says. But that’s not true, the Congressional Budget Office said.

The CBO gave no updated estimate for deficit reductions from the law, approved by Congress and signed by Obama in 2010. But it did estimate that Republican legislation to repeal the overhaul — passed recently by the House — would itself increase the deficit by $109 billion from 2013 to 2022.

Translation: “To hell with facts. Deficit reduction is good for America. Fewer dollars help expand he economy. Applying leeches cures anemia. A drought helps crops grow. Trust us.”

Tuesday’s budget projections were the first since the U.S. Supreme Court upheld most of the law last month. The CBO said the law’s mix of spending cuts and tax increases would more than offset new spending to cover uninsured people.

As expected, the budget office said the law will cover fewer uninsured people because the Supreme Court ruled that states won’t have to sign on to a planned expansion of Medicaid for their low-income residents.

Thirty million uninsured people will be covered by 2022, or about 3 million fewer than projected this spring before the court ruling, the report said.

Translation: “To reduce deficit spending by our Monetarily Sovereign government – a government with the unlimited ability to create dollars – about 3 million more people will do without health insurance. Two great results — slower growth for the economy and poorer health care for millions of Americans.”

As a result, taxpayers will save about $84 billion from 2012 to 2022.

Translation: “Don’t tell anyone this secret, but there is no historic relationship between federal taxes and federal spending, so taxpayers will save nothing. Nothing. But, because the public is stupid, we’ll keep feeding them this nonsense. They never will catch on.”

Democrats immediately hailed the findings as vindication for the president. “This confirms what we’ve been saying all along: The Affordable Care Act saves lots of money,” said Senate Majority Leader Harry Reid, D-Nev.

Translation: “To the degree the ACA cuts deficit spending, your savings will be lower. You’ll learn to like being poorer.”

Republicans said they remain committed to repealing it, anyway. When combined with other budget-cutting measures, GOP leaders say that repeal ultimately will reduce deficits. Romney says that if elected, he will begin to dismantle the law his first day in office.

Translation: “Not only do we want to cut the deficit, which will reduce GDP growth, but we want to cut health care coverage for millions of people. Now, if only we could cut Social Security benefits, we’d have a perfect trifecta to increase the income gap between the upper 1% income group and the lower 99%.”

Bottom line: The federal government can and should provide fully-paid Medicare to every man, woman and child in America. It would improve health care for you, for your friends, family and neighbors, stimulate economic growth, and reduce unemployment.

But, the cattle, dumb, drooling and defeated, obediently slump into the slaughterhouse, with never a “moo” in protest.

Rodger Malcolm Mitchell
Monetary Sovereignty

Sadly, I must award three dunce caps to the American people, who have allowed the media, the politicians and the old-line economists to get away with saying that taking dollars out of the economy benefits the economy. Think, people, think.

#MONETARY SOVEREIGNTY

–Loans, deposits, fiscal prudence and financial nuttiness, all rolled into one.

Visualize this: You deposit $1000 into your bank savings account.

What have you done? You have lent your bank $1000. That money was not a gift; it was a loan. Your bank now owes you $1000, plus interest. Your deposit has increased your bank’s total debt by $1000.

There is zero difference between a “deposit” and a “loan.” They are identical in every way.

Banks love to be in debt. In the old days, a bank would give people toasters, if people would lend it money.

Like all debt, your loan to your bank creates dollars. When you deposit (lend) that $1000 into your bank savings account, you still own $1000. Remember, it was not a gift. But now the bank also has $1000, which it invests to make more money.

So where there were $1000, now there are $2000. You have created $1000, and added it to the money supply, simply by lending to (depositing with) your bank.

Banks brag about their indebtedness. Big banks tell the world how much they owe. “We have $10 billion in deposits (debts).” Banks advertise to get people to lend to (deposit with) them.

The media, the politicians, the old-line economists and the debt hawks do not criticize banks for accepting too many deposits (borrowing too much money). When your bank borrowed that $1000 from you, no one said that debt (deposit) is “unsustainable.” No one told the bank its deposits (debts) are too high and it should “live within its means” by not accepting more deposits (borrowing more money).

No one published a debt clock showing how much of the bank’s debt you supposedly owe, when it is the bank that owes you.

At some time after you have lent your bank money, you will decide you want your money back. As the banks creditor (“depositor” and “creditor” are synonyms), you will say, “I want to end the $1000 loan (deposit). Give me back my money.”

The bank can return your $1000 in several ways. One way: It can give you a check for $1000, which you will deposit in (lend to) your checking account — perhaps at the same bank. Or, it simply can debit your savings account loan and credit your checking account loan (Checking accounts also are loans to banks).

I hope I have beat this dead horse enough to make the point: A loan is a deposit; a deposit is a loan. “Loan” and “deposit” have exactly the same meaning. The total of deposits is the total debt.

Now, let’s say that instead of lending your bank $1000, you decide to lend the U.S. government $1000. How will you do it? You will reduce the size of your bank checking account and deposit $1000 into your T-security account, at the Federal Reserve Bank. You have reduced your loan to your bank and increased your loan to the federal government.

You have caused the federal debt (deposits) to increase $1000. But, the Federal Debt is nothing more than a total of deposits in the Federal Reserve Bank.

The media will express concern about the size of the federal debt (deposits). The politicians will look for ways to reduce the federal debt (deposits). The old-line economists will write articles saying the federal debt (deposits) are too high. The debt-hawks will put up signs warning about the size of the federal debt (deposits).

All of these people will want you to transfer dollars back from your T-security account at the Federal Reserve Bank, to your private bank checking account. They will want you to reduce the size of your deposits with the federal government, while you increase the size of your deposits with private banks.

They even will put up debt clocks showing how much of the federal government’s debt you supposedly owe, when it is the federal government that owes you.

Now consider the irony. The federal government is Monetarily Sovereign; private banks are monetarily non-sovereign. Financially, the federal government is much stronger than any private bank.

Banks can and do become insolvent, and be unable to repay their loans (deposits), but fortunately, most bank loans (deposits) are guaranteed by the federal government (FDIC). So the irony is, the media, the politicians, the old-line economists and the debt hawks want you and your fellow Americans to increase your lending (deposits) to private banks, while you reduce your lending (T-securities) to the financially most powerful entity in America, the federal government.

They call it, “fiscal prudence”! I call it “financial nuttiness.”

Next time a media writer, politician, old-line economist or debt-hawk says the federal debt is too high, ask him why he thinks the nation is safer when private bank deposits increase while Federal Reserve Bank deposits decrease. Ask why private banks should borrow more so the federal government’s bank can borrow less.

Then smile while he stumbles for an answer.

Rodger Malcolm Mitchell
Monetary Sovereignty

#MONETARY SOVEREIGNTY

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