Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity 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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This is a note to those who have fallen for the Tea Party’s, anarchist nonsense that “government is the problem,” and the Republican’s suck-up-to-the-rich nonsense that there is too much government regulation, which is stifling the economy. I recommend this article titled: Tiny Rule Change at Heart of MF Global Failure

Here are a few excerpts:

Laurie R. Ferber has quite a resume. She is currently the general counsel of MF Global Holdings Ltd., the New York-based futures and commodities brokerage that filed for bankruptcy on Oct. 31, listing some $40 billion in liabilities.
[…]
Before that, she spent more than 20 years at Goldman Sachs Group Inc., where first she was general counsel for J. Aron & Co., a commodities business that Goldman Sachs bought in 1981, and then was the co-general counsel of Goldman’s principal business, known as FICC — for Fixed Income, Currency and Commodities — when J. Aron was merged into the rest of Goldman’s fixed-income division.

But at the moment, her greatest significance may be as a long-time advocate for revisions to a little-known and vastly underappreciated Commodities Futures Trading Commission rule called Regulation 1.25.

Before 2000, the rule permitted futures brokers to take money from their customers’ accounts and invest it in a number of approved securities limited to “obligations of the United States and obligations fully guaranteed as to principal and interest by the United States (U.S. government securities), and general obligations of any State or of any political subdivision thereof (municipal securities.)” That is, relatively safe securities with high liquidity.

The banks, however, pushed the CFTC to expand the investment options that would allow firms to practice “internal repo.” In this scheme, money is taken from customer accounts and invested short-term in a variety of securities, with the futures brokers reaping the not- insignificant financial rewards from their customers’ money.

And, lo and behold, such efforts were successful. In December 2000, the CFTC agreed to amend Regulation 1.25 “to permit investments in general obligations issued by any enterprise sponsored by the United States, bank certificates of deposit, commercial paper, corporate notes, general obligations of a sovereign nation, and interests in money market mutual funds” — in other words, riskier investments that could make more money for Wall Street.

Then, in February 2004 and May 2005, Regulation 1.25 was further amended and refined to the liking of Ferber and the banks. In the end, the door was opened for firms such as MF Global to do internal repos of customers’ deposits and invest the funds in the “general obligations of a sovereign nation.”

This practice, of course, may well be the centerpiece of the MF Global disaster.
[…]
In a nifty bit of Washington irony, about a year ago, shortly after the Dodd-Frank Bill was passed, the CFTC proposed vastly restricting the way customer money could be invested. . . Unsurprisingly, the reform effort went nowhere. Equally unsurprisingly, one the many comment letters from financial professionals to urge the CFTC to keep the status quo came from Laurie Ferber.

Too much regulation? Too much government? Ask the Tea Party. Ask the Republicans. No, better yet, ask the thousands of people who have lost billions of dollars to crooked financial companies, for lack of regulatory oversight – you know, that stifling stuff that keeps the rich from cheating the poor.

On the same web page, you will find an editorial from Jesse’s Café Americain:

History shows that it is never the initial criminal action that brings down a government, but it is always the subsequent coverup and obstruction of justice that destroys careers and cripples administrations and their parties.
[…]
The ideological fantasy that government is the problem, and simply getting rid of it is the answer, is a great propaganda slogan for white collar criminals to promote, but it makes little sense in the real world of flawed human beings and a persistent rogue element in any society.

For it is the constant weakening of regulations by the banks and their lobbyists that led to the financial crisis and the looting of the public trust. If the criminals have corrupted the policeman, one does not get rid of the police department as a solution . . . One reforms what has been corrupted, and prosecutes the criminals more vigorously.

The problem is the weakening of government by corruption. And the solution is reform, not more of what went wrong with the rule of law, replacing it with lawlessness.

The danger is that when, in the name of libertarian reform or some other misguided anarchist movement, the laws are knocked down, and the social fabric is torn, very often the worst of us, the truly ruthless opportunists, put forward their ‘strong men’ or a ‘great leader’ to bring back order and act as the law, or merely preside over the law of the jungle.

And then begins the real descent into hell.

A brilliant analysis, and one you should remember the next time a politician tries to convince you that the solution to your problems is to cut spending on regulations, untie the hands of business, and let the good times roll.

In summary, you are being lied to. You are being lied to when you are told the federal deficit is too high, as the media claim. No, Social Security and Medicare should not be cut to “save” them. No, payroll taxes should not be increased. No, the federal government is not “broke,” as John Boehner famously lied, nor is it “living beyond its means,” as Barack Obama continues to lie. No, big government and all those nasty business regulations are not the problem, except for cheaters.

The problem is the 1%, whose control over the politicians, the media and the university schools of economics. They preach the lies, because in every case, the so-called solution benefits the 1% at the expense of the 99%.

And the greatest irony of all: When those of us, who understand Monetary Sovereignty, Modern Monetary Theory and other factual descriptions of our economy, try to explain the truth, the response from 98% of the 99% is something along the lines: “Everyone knows that’s stupid and you’re stupid, too.

Or as Bruce Dold, editor of the Chicago Tribune wrote to me last week, “Thanks again for your thoughts, Rodger. As we’ve discussed before, the editorial board takes a different view on the supercommittee and the importance of deficit reduction.”

The possibility that Bruce Dold and the editorial board of the Chicago Tribune are part of the 1%, surely has nothing to do with their view.

Anyway, the 99% don’t reach for, or even recognize, a life saver when it is thrown to them, even as they drown cursing in this man-made, economic disaster. Their blood is in the water and the sharks still are hungry.

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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================
Perhaps it is my perverse sense of humor that forces me repeatedly to ask debt-hawks the following question (which they never answer):

Read these two important equations in economics:

Gross Domestic Product = Federal Spending + Private Investment + Private Consumption + Net exports

Federal Deficits – Net Imports = Net Private Savings

Based on these equations, how do federal tax increases and/or spending cuts (aka deficit reduction) reduce unemployment or grow the economy?

The clear answer is, “They don’t.” But, consider the Committee for a Responsible Budget, whose president is Maya MacGuineas, and who continually demands the deficit reduction super committee to “go big” — i.e. cut $4 trillion, rather than “just” $1 trillion from the federal deficit.

Maya MacGuineas on “Debt Reduction Done Right”
November 17, 2011

Putting in place a deficit reduction plan to bring the debt back down to around 60 or 65 percent of GDP over a decade creates the opportunity to grow the economy in a number of ways that will not be achieved either through one-off stimulus measures or incremental spending cuts.

Those who understand Monetary Sovereignty are aware the debt/GDP fraction is meaningless. It measures nothing and provides zero information regarding the health of an economy. Go to http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt for a list of countries and their debt/GDP. See if you can see any pattern of economic health by debt/GDP.

Ms. MacGuineas begins her defense of debt reduction with a meaningless goal. But it gets better:

First, it would take off the table the risk of a fiscal crisis. I know that only a few years ago, comparing the U.S. to Greece seemed inflammatory and absurd. However, recent events – including the well-deserved downgrade and the paralysis of our political system – now show the possibility of a full-blown fiscal crisis to be not nearly as remote as we would have liked to believe. Only by charting a new fiscal course will we remove that risk.

Yes, comparing a Monetarily Sovereign U.S. with a monetarily non-sovereign Greece is inflammatory and absurd, almost as inflammatory and absurd as paying any attention whatsoever to S&P ratings. You remember S&P, don’t you? They are the ones who gave AAA ratings to worthless mortgage schemes and to monetarily non-sovereign France, while lowering the U.S. rating, and all the while, accepting money from the very companies they rate.

And to which “fiscal crisis” does Ms. MacGuineas refer? Does she mean the U.S. being unable to create enough of its own sovereign currency to pay its bills? Or does she mean the fiscal crisis caused by debt ceilings along with forced spending reductions and tax increases, i.e. deficit reduction?

Second, implementing fiscal reforms that are comprehensive in nature, rather than incremental, offers the opportunity to restructure our budget and tax systems in ways to promote growth. The key here is switching from a consumption-oriented to an investment-oriented budget.

Let’s parse this gobbledegook: “fiscal reforms” is her synonym for “cut the deficit” and “comprehensive” means “big.” So she is saying big deficit cuts are better than small budget cuts. Why? Because they “promote growth.” How? She never says.

Given those two undeniable equations in economics, deficit cuts simply cannot promote economic growth. But Ms. Macguineas and her group just know in their guts that deficits are bad, cutting them is good, and if its good, it must promote growth, and the more cuts, the more growth.

Anyway, she’s paid to believe that. Here are other comments she makes:

Our debt as a share of the economy is higher than it has ever been in the post-war period, and we are on track to continue adding to it forever.

I certainly hope so. If the economy is to grow forever, the money supply must grow forever, and if the government continues to be required by law, to create T-securities in the same amount as the deficit, the debt must grow forever.

By the end of the decade we could easily be paying interest payments of nearly a trillion dollars per year, which can be described as nothing other than a tremendous waste.

Or, more correctly, those interest payments can be described as a tremendous economic stimulus.

We know not only is the debt already probably a drag on the economy, but that at some point, unless changes are made, it will lead to a fiscal crisis.

“Probably,” Ms. Macguineas? “At some point?” Do I detect a bit of uncertainty there? Or just lack of evidence?

High debt levels harm the economy by diverting capital away from productive investments.

If federal debt is the legal result of federal deficits, which add to the money supply, how does this “divert capital away” from anything?

Higher interest payments in the budget squeeze out other priorities – whether they are other spending or lower taxes – and leave the budget highly vulnerable to increases in interest rates.

Only if there is a foolish debt ceiling, which Ms. Macguineas favors. Remove the debt ceiling and nothing gets squeezed out.

This inequity is exacerbated by the fact that the bulk of our government spending goes to consumption — much of it for the elderly — rather than investments, which would at least have the potential to boost longer-term growth.

And there you have the fundamental Tea Party, right wing mantra: Cut Social Security; cut Medicare; cut welfare, cut aid to the poor, cut all those benefits for “consumption,” i.e. payments to needy people.

To gain further understanding of what economic ignorance can produce, I recommend you read the full text of her paper, which you can find at http://www.riponsociety.org/forum114mm.htm

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

==========================================================================================================================================
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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

Washington Post: By Editorial, Published: November 16

NO MATTER ONE’S views about Occupy Wall Street and its imitative protests across the country, it’s hard to quarrel with the principles that propelled New York Mayor Michael R. Bloomberg (I) to clear Lower Manhattan’s Zuccotti Park. From the start, Mr. Bloomberg expressed a commitment to the First Amendment rights of protesters, but he also stressed the importance of guaranteeing public health and safety. When those two goals clashed, the mayor was right to take action.

In an early-morning raid Tuesday, New York police swooped down on the park, clearing it of protesters, as well as the tents, generators and other encampment paraphernalia that had occupied it for two months. To be sure, there were incidents, such as the banishment and arrest of reporters trying to cover the event, that should have been avoided. But police largely acted with restraint, and the well-planned operation was without the violence that has accompanied similar actions in other cities. More important, contrary to the claims of critics who likened it to crackdowns in despotic countries, the effort was not undertaken to end the protest or to squelch its message about the concentration of economic and political power. Demonstrators were allowed back in the park but without tents and other gear needed for an indefinite stay.

Utter bullsh*t. The billionaire mayor of a city that stores all its garbage on the curb in front of its stores, suddenly becomes oh-so-concerned about the public health and safety in one teeny, little park, that he sends in half the NY police force (at 1:00 in the morning, mind you), not only to clear the park, but to destroy all the possessions of the protesters. Yes, that billionaire mayor is committed to First Amendment rights. Sure, he is.

And then there was “the arrest and banishment of reporters” by that billionaire mayor who is committed to First Amendment rights. Why banish reporters if you’re proud of what you’re doing? Anyone who believes what the bought-and-paid-for editor of the above article says, is a damn fool.

The #OWS protests are against the gap between rich and poor. Is that bad? What is the establishment response? To lift the poor? No way. The response is to squelch the protests. The response is to sic the cops on them and to clear the parks with bullhorns, batons, beatings and tear gas. The response is to destroy all the protesters belongings. Hey, “Let ‘em eat cake,” right Mr. billionaire mayor?

I’ve not heard one politician propose a plan to help improve the lives of the middle class and the poor. All I hear from the politicians is how we need to cut Medicare, cut Social Security, cut unemployment payments, cut federal employment, cut the military – cut, cut, cut – cut all the things that help support the middle class and the poor —- and of course, get rid of those noisy, unkempt protesters.

And support the banks and arrest protesters, but please don’t arrest anyone for bank fraud.

You damn fools.

The newspapers print, and the TV talking heads rant, unimaginably ignorant editorials about how federal debt should be reduced, without bothering to answer the key question: How will tax increases and/or spending decreases help reduce unemployment, lift the lives of the poor and middle classes, and grow the economy. THEY WON’T.

Not one politician, media prostitute or cowardly economist has any understanding of a fundamental equation in economics: Gross Domestic Product = Federal spending + private consumption + investment + net exports –– a formula demonstrating that reductions in federal spending must reduce GDP.

You damn fools.

So Congress and the President created a “super committee” to reduce the federal deficit (i.e. to increase the gap), and none of them has any understanding of another fundamental equation in economics: Federal Deficits – Net Imports = Net Private Savings, which tells us that reducing deficits must reduce savings.

You damn fools

Congress and the President should have created a “super committee” to determine how to lift the lives of the middle class and the poor. It isn’t all that hard. Here’s where to begin:

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

Begin to institute #1-#9 today, in the order shown, and if/when excessive inflation starts to occur, institute the first inflation-fighting program the Fed always uses: Raise interest rates. If that doesn’t do enough, begin to cut deficit spending.

“Oh, no,” the rich and the media and the economists say. “That could increase the deficit (meaning, increase the money supply). And as everyone knows, the deficit is bad. And anyway, we’re much more afraid of a distant and controllable inflation that could reduce the value of our millions, than we are of today’s unemployment that steals the life savings of the poor and middle class. Those poor folks can muddle along, but what about us 1%?”

The problem is, no one knows exactly why the deficit is bad. But so long as “everyone says so,” it must be true. The wealthy always are right, especially for the brainless 99% who march obediently to the drum, right over the cliff.

You damn fools.

So you think the French revolution was an anomaly? And the Arab spring couldn’t happen here? And the Bolshevik revolution was just a bunch of crazy commies? And the Xinhai Revolution, what the heck was that? This is America. Our people are passive. They’ll do what their leaders tell them to do, because they have been trained to respect “law and order” (the 1%’s euphemism for “clamp down on those scruffy protesters”).

You damn fools.

I predicted this months ago, and the response is no surprise. The establishment always sides with the rich, and the lessons of past injustices are forgotten. And now I have a message for all of you in the 99%, who criticize the #OWS for camping in parks, and disrupting traffic, and making an inconvenient mess: Wake up. These young people are fighting the battle you should have fought years ago.

While you sit in front of the TV you still are paying off, in your “underwater” house near foreclosure, eating a Big Mac because it’s the best you can afford, and shaking your head at the rowdiness you see on the tube: Time to smell the roses. Those politicians you elected don’t care about you. They don’t care about your kids or grandkids.

They care only about your vote, so they give you a bunch of snake oil about federal deficits and federal debt, to distract you from the real problem which is: You are being screwed, day in and day out. And you fall for it. Ask everyone you meet about the federal deficit, and they’ll parrot like little robots: “The deficit is bad; the deficit is bad.”

The rich own the media and the economists, and now they expect you to fall in line and repeat after them: “Cut my health care; increase my taxes; cut my retirement fund; make me work longer hours; fire government workers; cheat me; beat me.”

And you’ll do it. Yes you will. How do I know? Because you’ve been doing it for years. And now you’re criticizing #OWS – the people who are putting everything on the line for you and your family — because the rich told you to, and you always, always do what you’re told.

You damn fools.

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

==========================================================================================================================================
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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY