–A think piece: What if the U.S. passed a law against exporting?

Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. 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.
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Here are a few thoughts about exports. In the previous post, you read this:

When China exports to America, it expends massive amounts of energy, manpower, time and scarce resources to create products, which it sends to us in exchange for dollars, which we create at no cost, by touching a computer key. Thus, China is our slave, working and sweating essentially for nothing.

Remember also that China too, is Monetarily Sovereign. The can create unlimited numbers of their sovereign currency. So why do they want to obtain our dollars in exchange for their valuable resources? First, they don’t need dollars, and second they can get all the dollars they might want simply by buying them on the open market, in exchange for yuan.

What is true of China also is true of the U.S. When we export, what do we receive in return? Our own dollars, or a currency we can buy with our dollars, all of which the U.S. government can produce without end. The purpose of exporting is merely to import U.S. dollars. (Have you heard the expression, “Carrying coals to Newcastle”?)

The CIA Factbook tells us these were the top U.S. exports of 2011 (through October):

1. Fuel: $73.4 billion.
2. Aircraft: $70.8 billion.
3. Motor vehicles: $39.6 billion.
4. Vacuum tubes: $37.1 billion.
5. Telecommunications equipment: $33.2 billion.

All required the expenditure of natural resources and labor. Here are some specifics:

Oil – exports: 1.92 million bbl/day; country comparison to the world: 11
Natural gas – exports: 32.2 billion cu m; country comparison to the world: 9
Electricity – exports: 18.11 billion kWh (2009 est.)

Think of it. While predictions are that one day, the U.S. will run out of oil, we export 2 million barrels of this disappearing stuff, every day. What do we get in return? The same dollars our Monetarily Sovereign government has the unlimited ability to create, at no cost.

Consider excerpts from an article in http://www.ft.com:

Molycorp to start China rare earth exports
By Ed Crooks in New York

Molycorp, the Colorado-based mining group, plans to begin exports of rare earth minerals to China following its C$1.3bn (US$1.31bn) acquisition of Neo Material Technologies. Molycorp is ramping up production of rare earths, elements that are essential for many advanced technologies including smartphones and batteries, at its Mountain Pass mine in California.

China accounts for about 95 per cent of worldwide rare earth production. Because of their use in military technologies including cruise missiles and fighter aircraft, rare earths have increasingly been seen as a strategically significant resource.

Here are metals needed for a wide range of vital technologies. They are in short supply worldwide, not because they actually are rare in the earth, but because they are spread so thinly, mining them wastes a great deal of energy. Running out of rare earths could cripple our economy. But we export them.

China and the U.S. receive in exchange, their respective sovereign currencies, which each nation, being Monetarily Sovereign, can create without limit. Is this logical?

Getting back to the title question, “What if the U.S. passed a law against exporting,” there are several considerations. Without exporting, the U.S. would expend less energy and raw materials — valuable and limited commodities — while dollars are limitless and free to the U.S. government. So, from that standpoint, the tradeoff makes no sense.

Yet, for the most part, it is not the U.S. government, but private businesses, that exports. So, if the U.S. prevented all exports, many private businesses would suffer. Unless – and here’s where it really gets complicated – unless these private businesses received the same amount of dollars from the government as they profit from exporting.

With few exceptions, private industry exports in exchange for dollars. So for instance, rather than losing 2 million barrels of oil every day, what if the U.S. government simply paid the oil companies for that oil and stored it for future needs?

While the meaningless federal deficit and debt would increase, there would be no inflationary effect. Rather than dollars entering our economy from outside our borders, the same number of dollars would enter our economy from the federal government.

The U.S. government has experience with this kind of storage. The US Strategic Petroleum Reserve stores more than 4 billion barrels of oil. The Commodity Credit Corporation began buying and storing cheese back in the 1960’s. The Federal Emergency Management Agency stores powdered and canned food for emergencies. So do the Department of Defense and the Department of Homeland Security, which also store tools and weapons.

From a financial standpoint, the federal government easily could afford to buy every product that otherwise would be exported. Of course, there would be many devils in the details, mainly regarding what to buy, how much to buy and how much to pay. Quality would be a problem. Perishables, both physical and style, would be a problem. Perhaps the program would work with standardized commodities such as oil, metals, ores, sugar, water, etc.

But would the government actually have to buy and store anything? What if the government merely said, “There will be no exports of anything. No one will be allowed to sell any product or service to any foreigner. If your current business involves exporting, adjust your business. From now on, sell only to Americans.”

No doubt, this initially would cause a great upset. All major change does. But is it workable? Visualize every other nation on earth suddenly disappearing. Could America survive as a world unto itself — at least from the standpoint of exports? Native Americans didn’t export to other nations. Could a modern America do the same?

I suspect America could survive quite well without exports, particularly if the government helped ease the transition by supplying the economy with the dollars it otherwise would have received from outside our borders. And it is even more likely the nation could survive well, if the government specified only certain items that couldn’t be exported, such as: oil, coal, wood, metals, ores.

As if all of the above weren’t complex enough, we also would have to deal with world politics. If America stopped all exporting — or even stopped exporting oil — what would the rest of the nations do? Would they stop exporting to America? Probably not. Many of them would be happy not to have to deal with competition from American exports.

The world’s reaction might be related specifically to the product not being exported. If we stopped exporting wood, the rest of the world’s forests might suffer. If we stopped exporting grains or meats, some nations might face starvation.

Clearly the subject has vast implications that require far more attention than this simple blog post. But there is a bottom-line message which is:

For a Monetarily Sovereign nation, exporting has many negatives. Exporting uses up scarce resources in exchange for the freest of resources, sovereign currency. Some of those resources simply should not be exported, as they are irreplaceable. Oil is one. Natural gas, another. Most ores, yet another. Wood shouldn’t be exported, as this denudes our forests. The export of electricity uses up the energy to make the electricity.

Despite the fact that every single item of export uses up some irreplaceable asset, it is unrealistic to expect all exporting to disappear. Too many political and economic complications. I’d begin with a law against oil exports, and then add items to the list.

Meanwhile, our protectionist politicians try to restrict imports, which cost us nothing but free dollars. Ah, the irony.

What are your thoughts?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. 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

How our leaders and our teenagers take responsibility: “Don’t blame us. It’s all China’s fault.”

Here are excerpts from a brief article at Yahoo Finance, showing how our government and businesses leaders accept responsibility.

U.S. Treasury says China yuan move helpful

WASHINGTON (Reuters) – The U.S. Treasury Department said on Sunday that a wider yuan trading band could help reduce global trade imbalances if it allows more play for market forces.

“China’s decision to widen the daily trading band for its exchange rate, if implemented in a way that allows the value of the exchange rate to reflect market forces, could contribute rebalancing, which would be positive for China, the United States, and the global economy,” a Treasury Department official told Reuters.

But the Treasury said the process of correcting a “misalignment” of China’s exchange rate is still incomplete and said more progress was needed.

U.S. manufacturers complain that China’s yuan is so undervalued that it gives Beijing an unfair trading advantage and they blame it for having cost millions of lost American factory jobs.

Yes, having a “weak” (exchange rate) currency allows for more exports. But so does imposing a tax on corporate profits, one of the looniest ideas among a world of loony economic ideas foisted on us by our Monetarily Sovereign government (You know; it’s the government that neither needs nor uses tax income, because it has the unlimited ability to create its sovereign currency).

So rather than whining about China, wouldn’t we be better simply to eliminate corporate taxes? Nope, we can’t do that, because American’s believe corporations pay too little in taxes, not understanding that corporations merely pass 100% of their tax burden on to their customers and employees.

If you set out to make our corporations less competitive internationally, what is the very first thing you would do? Right. You would tax them.

Our government and the private sector leaders find it easier to find a whipping boy, China. If they took the trouble to learn MS, they would understand that this simple fact:

When China exports to America, it expends massive amounts of energy, manpower, time and scarce resources to create products, which it sends to us in exchange for dollars, which we create at no cost, by touching a computer key. Thus, China is our slave, working and sweating essentially for nothing.

Remember also that China too, is Monetarily Sovereign. The can create unlimited numbers of their sovereign currency. So why do they want to obtain our dollars in exchange for their valuable resources? First, they don’t need dollars, and second they can get all the dollars they might want simply by buying them on the open market, in exchange for yuan.

I have the same feeling you get when watching teenagers engaged in self-destructive acts. No matter how often you tell them why they should not do that, they just keep doing it.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

#MONETARY SOVEREIGNTY

–Which Presidential candidate offers the better plan for closing the income gap?

The growing income gap between the top 1% and the other 99% is too large and is bad for America. The purpose of this post is not to discuss the myriad reasons why, but rather to focus on how the gap can be reduced, and whose plan reduces it best.

There are only two ways to reduce the gap:
A. Bring down the 1%
and/or
B. Lift the 99%

That’s it. There are no other choices.

With those two options in mind, read the following excerpts to see which Presidential candidate and which party you believe is headed in the right direction.

Washington Post
Obama, Romney tax plans for ultra-rich offer window on disparate economic views
By Jia Lynn Yang, Published: April 13

If Republican front-runner Mitt Romney reaches the White House, he will push for the top 1 percent of American earners to save an average of $150,000 in taxes, according to an analysis of his tax plan by the Tax Policy Center. In a second Obama administration, these Americans would pay about $83,000 more than they do now.

For the top 0.1 percent, the difference is even more stark. Romney’s plan would save them an average of $725,000. President Obama would raise their taxes by $450,000.

Obama has repeatedly called income inequality “the defining issue of our time.” He has proposed raising taxes on millionaires, saying on Tuesday that “broad-based prosperity has never trickled down from the success of a wealthy few.”

Romney, by contrast, waves off Obama’s talk of income inequality as the “politics of envy.” He says the best way to lift people out of poverty and raise wages is to help businesses become more successful. Ease regulations on businesses and lower taxes, Romney argues, and people’s fortunes will rise.

Neither candidate has a strong record of stemming a decades-long trend in this country of widening fortunes between the wealthiest Americans and everybody else.

Obama has overseen a recovery that has overwhelmingly benefited the wealthy. A recent study showed that the top 1 percent of Americans enjoyed 93 percent of the income gains from 2010, the first year of the recovery.

In Massachusetts, Romney did little to reverse the trend of income inequality that was happening in his state. And his work at Bain Capital embodied a pure distillation of American capitalism in which higher returns for investors, not worker pay, were the highest priority.

Bottom line: Obama wants to bring down the 1% by increasing their taxes. Since all federal tax increases have the same effect – they remove dollars from the economy – the Obama plan will punish not only the 1% but also the 99%. Removing dollars from the economy will serve as an anti-stimulus, depressing the entire economy. And as is always the case, when an economy is depressed, the poor are injured more than the rich.

Romney wants to reward the 1%, under the theory that the wealthy will create jobs for the rest. He ignores the simple fact that this never has worked and never will work. The growing gap itself proves that rewarding the rich doesn’t close the gap. Reward the rich and they simply will grow richer.

In short, neither Obama nor Romney advocates solution B, lifting the 99%, and both will oversee a growing gap. Neither of them understands or cares about the facts of Monetary Sovereignty, which understanding would help reduce income inequality.

In the unlikely event either party and either candidate ever wishes to help the 99%, rather than merely consolidating personal power, here is what they will do:

1. Eliminate the FICA tax. It impacts the middle and lower classes, not only directly, but also by making employment more expensive for potential employers. For the lower classes, FICA often is greater than income taxes.

2. Medicare for everyone. Medical expenses are far more traumatic for the 99% than for the 1%, who easily can afford health insurance or even self-insurance. This act also will benefit the states by making Medicaid unnecessary.

3. Increase Social Security benefits to the point where all retired people – not just the 1% — can enjoy a comfortable lifestyle. This has the byproduct of encouraging more people to retire, opening jobs for younger people.

4. Each year, increase the standard deduction on the income tax, so that annually, fewer of the 99% will owe any tax.

5. Send a population-based stimulus payment to each state, so that the monetarily non-sovereign states can afford to improve their infrastructures, education and police and fire protections.

As for Romney and Obama, don’t let them deceive you. Both their plans will widen the gap.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

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–How the Internet can make the entire human race stupid, forever

Disclosure: While Monetary Sovereignty is based on facts, this specific post is based on opinion (mine), and much of it touches areas in which I’m not even close to being expert. So read at your own risk.

The March 31 issue of NewScientist Magazine contained an article titled, “Microbes race to throw away vital genes.” Here are excerpts:

Confronted by a deadly threat, most bacteria let someone else handle it.

According to the Black Queen hypothesis, evolution pushes microorganisms to lose essential functions when there is another species around to perform them.

For microorganisms, every ability is costly – carrying genes and making proteins uses up energy – so they benefit from losing genes if possible.

In evolution, if you don’t need it, don’t expend the energy to use it. And if you don’t need to use it, it will disappear. Because of our brains, we have adopted lifestyles that eliminate the need for previous attributes. Pound for pound, we have less muscle strength than other primates, our toes are shorter, and as for toenails – who needs ‘em? Living in shelters, we gave up on fur – our own, at least – and medicine has allowed slender-hipped women to have babies they can’t deliver naturally. Through the millennia, Our brains have changed our bodies.

The most recent invention of our brains, relevant to this discussion, is the Internet, whereby you can learn almost anything just by searching, not by thinking. When you want to know why, and when you want to know how, don’t figure it out. Just look on the Internet.

All those, who understand Monetary Sovereignty or MMT or any of the related concepts, wonder how it is possible for even modestly intelligent people not to understand the dead simple truth that a Monetarily Sovereign nation is sovereign over its own currency. It has the unlimited ability to create that currency, and never can run short of the currency needed to pay bills. No debt is unsustainable, even without taxes or borrowing.

This is basic stuff – yet millions of people don’t get it. Many reasons exist, but a newer one may be the Internet. The majority is becoming less and less accustomed to thinking and more and more accustomed to looking up what the minority thinks. Reference “federal debt” and “federal deficit” on the Internet and you will find thousands of articles urging they be reduced because they are “ticking time bombs” and “unsustainable” — completely untrue and utterly illogical.

Our brains devote specific areas to specific functions. Many observations exist regarding injury to one part of the brain, where people can’t perform certain tasks, but can do everything else. Injure Broca’s area, for instance, and you’ll lose the ability to speak. And it will be a specific loss. You may be able to say certain words, but no others.

The more accustomed we become to searching for answers on line, rather than developing the answers in our own minds, the less the logic sections of our brains will be used. And while “standing on the shoulders of giants” as Sir Isaac Newton claimed to do, may help us progress scientifically, if we repeatedly stand on shoulders, and especially the shoulders of pygmies, we may lose the special abilities that make us modern humans.

And it’s on the Internet, where pygmies live, for the Internet makes no distinction. All are welcome, the brilliant and the foolish. Facts and beliefs are equal.

Life cares only about survival and evolution cares only about procreation. So as long as we survive and procreate, without expending the effort of logic and creative thought, we will lose the ability to develop logical, creative thoughts.

Clearly, this is true for any individual. A person who never runs will lose the ability to run. A person who never does math will lose the ability to do math. Use it or lose it. But what about our children? If you never run or do math, will your children have a reduced ability to run or do math? Surprisingly, the answer is: Maybe.

Your children inherit your (and your partner’s) genes. Nothing you do during your lifetime, other than accidental permutation, changes your genes. So engaging in, or losing, a mental ability, should not affect your heirs. True? Well, not necessarily.

There is a biological study called epigenetics. It shows how not just genes, but the way genes are activated and inhibited, accounts for what we are. This explains how identical twins, having identical genes, still can be different in certain mental functions. These epigenetic differences can be passed down through generations, and some can become permanent features of a family line, and even of a species.

So bottom line, will the Internet make us stupid? There are reasons to believe that easy access to answers, including wrong answers, and the reduced need for logical analysis to develop correct answers, not only can affect us as individuals today, but actually can affect our heirs.

Over time, more and more people may rely on the work of fewer and fewer experts in a field. Not only will we benefit from the reduced need to conduct fundamental, creative thought, but the human species will suffer from decreased ability to conduct independent, creative thought. We could regress to the days when we split from the chimpanzees.

Today, we see the vast majority of the human race not understanding the simple facts and logic of Monetary Sovereignty, even when it is explained to them. I doubt epigenetics is the cause, for there are many reasons why people cannot or will not understand the clear and the obvious.

But the rise of the Internet and succeeding, similar, questionable information sources, bodes ill for the long-term future of human thought.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

#MONETARY SOVEREIGNTY

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