–U.S. Congress and the President find a way to allow boats to sail as far as they wish without falling over the edge of the world. Boats to be built out of thinner, flimsier wood.

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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U.S. Congress and the President have found a solution, allowing boats to sail as far as they wish, without falling over the edge of the world. Boats will be built out of thinner, flimsier wood, causing them to sink before they get to the edge.

Washington Post: Congressional negotiators reach tentative deal on payroll tax, unemployment benefits
By Paul Kane and David Nakamura, Published: February 14

Congressional negotiators reached a tentative deal Tuesday to extend a payroll tax holiday, unemployment benefits and Medicare payment rates for doctors, while finding more than $50 billion in cuts to reduce the effect on the federal deficit.

While President Obama and congressional leaders publicly jousted over the negotiations, senior Democrats and Republicans worked behind the scenes toward a compromise that would extend the tax and unemployment benefits through the year. A deal also would mean that doctors would not see a drop in rates paid by Medicare, according to senior aides in both parties.

Despite evidence lacking either for an edge to the world, or for the desirability of reducing deficits, Congress and the President are proud of their work.

Citizens cheer.

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

–Who are the people who vote Republican these days? Why do they hate so much?

I, who used to vote mostly Republican, because I believed the conservatives had a better handle on business and economics, now find myself disagreeing with the conservative movement on almost every major issue:

Treatment of gays: I favor allowing gays to marry (who does it hurt?) and do not feel being gay is an “abomination” or whatever other insults the pious right throws at it. Love is better than hate.

Treatment of immigrants: I favor making U.S. citizenship much easier. I would do a background check for criminality, then let them in. It costs us far more trying to keep them out. (Hello, Arizona) We all are immigrants, and it was much easier back then. Current laws are exclusionary for no reason.

Birth control: I favor abortion rights in the first trimester, and yes, let’s do stem cell research rather than protecting microscopic cells doomed to die, anyway. Or, we can let girls have babies they can’t care for, thereby guaranteeing yet another generation of poverty and crime.

Religion in public venues: Any step toward theocracy, even a tiny step, is a move toward disaster. If you want to pray, close your eyes and pray. God will hear you. Don’t force me to listen to you.

Attitudes about aid to the poor. Recent sneering about “food stamp President” is symptomatic of distaste for people less fortunate. No, the poor are not lazy bums. They are you, but for the grace of God.

Gun control: No more BS. Guns account for most of the murders in America. The 2nd Amendment begins, “A well regulated Militia, being necessary to the security of a free State . . .” I see the guns and the killing, but where is the well regulated Militia to control those guns? The pious right resists any sort of regulation.

Payroll tax cut: FICA should be eliminated, forever. It has no purpose in a Monetarily Sovereign nation. Although most taxes are bad, this may be single worst tax of all. Why is the pious right so resistant to cutting it?

Unemployment insurance: Extend it. What’s the alternative? Let the people starve? Either give them money or give them jobs, but don’t let them die – or riot.

Social Security, Medicare, Medicaid: Why do we talk about limiting them? They are the crown jewels of a modern society. Our Monetarily Sovereign government can afford to pay for these services and the people can’t. I favor free Medicare for every U.S. resident (not just citizen) and untaxed Social Security.

The wealth gap: Cut social services and don’t tax the wealthy? Really? Well, I do agree with not taxing the wealthy – or the un-wealthy, for that matter — but we should expand social services.

Campaign contribution limits: That right wing Supreme Court is simply nuts about the rich. Simply nuts.

Preemptive war: Previous wars belonged to the Democrats, but more recently the Republicans have taken over. George Bush was a lying fool, who cost thousands of Americans their lives and limbs, all in the name of right wing “patriotism” (and to show his father something). What is there about the right that they keep waving the flag?

The environment: We need it; our kids need it. I favor strict pollution controls along with federal aid to affected industries and more federal support for energy research.

I was a conservative, but if all of the above makes me a liberal, so be it. Come to think of it, every great social initiative was passed by liberals. The conservatives have, of late, become the party of hate. Who are these people who vote Republican these days? Why are they so filled with venom?

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

#MONETARY SOVEREIGNTY

–The EU’s solution for Greece — translated.

In case you want to know what the EU and Greek leaders really mean, here are translations:

Greek Parliament Passes Austerity Plan After Riots Rage
John Kolesidis/Reuters

ATHENS — After violent protests left dozens of buildings aflame in Athens, the Greek Parliament voted early on Monday to approve a package of harsh austerity measures demanded by the country’s foreign lenders in exchange for new loans to keep Greece from defaulting on its debt.

Though it came after days of intense debate and the resignation of several ministers in protest, in the end the vote on the austerity measures was not close: 199 in favor and 74 opposed, with 27 abstentions or blank ballots. The Parliament also gave the government the authority to sign a new loan agreement with the foreign lenders and approve a broader arrangement to reduce the amount Greece must repay to its bondholders.

The new austerity measures include, among others, a 22 percent cut in the benchmark minimum wage and 150,000 government layoffs by 2015 — a bitter prospect in a country ravaged by five years of recession and with unemployment at 21 percent and rising.

TRANSLATION: Greece’s leaders sold out their own citizens, and doomed them to abject poverty, just to protect banks, foreign lenders and other members of the 1%.

But the chaos on the streets of Athens, where more than 80,000 people turned out to protest on Sunday, and in other cities across Greece reflected a growing dread — certainly among Greeks, but also among economists and perhaps even European officials — that the sharp belt-tightening and the bailout money it brings will still not be enough to keep the country from going over a precipice.

TRANSLATION: Greece is monetarily non-sovereign. So renegotiating loans and cutting deficits will do zero, zip, zilch to prevent bankruptcy. It only will make people suffer until Greece’s leaders finally admit that returning to the Monetary Sovereignty of the drachma is the only sensible course. But who cares?

Angry protesters in the capital threw rocks at the police, who fired back with tear gas. After nightfall, demonstrators threw Molotov cocktails, setting fire to more than 40 buildings, including a historic theater in downtown Athens, the worst damage in the city since May 2010, when three people were killed when protesters firebombed a bank. There were clashes in Salonika in the north, Patra in the west, Volos in central Greece, and on the islands of Crete and Corfu.

TRANSLATION: You always can rely on the police and military to hammer their friends and neighbors. Soon the police will fire bullets, but don’t worry. No one will be prosecuted. And as the intro at the top of this post says, “Austerity = poverty and leads to civil disorder.” Anyway, why are those people so angry at having their lives ruined?

Greece’s limping economy yields large trade and budget deficits, and none but the European Central Bank, the European Commission and the International Monetary Fund — known collectively as the troika — are willing to lend the nation the money it needs to stay afloat.

TRANSLATION: Greece is hopelessly in debt, so lending them more money would be stupid, non-productive and damaging. That’s why lending is being considered.

The troika is demanding more concessions to placate Germany and other northern European countries, where the bailout of Greece is a hard sell to voters.

TRANSLATION: Greece is down and just about out, so now is the time to kick them. Germany hasn’t changed much from WWII.

In the debate on Sunday night before the vote, Mr. Papademos appealed to lawmakers to do their “patriotic duty” and pass the measures, saying they would be saving Greece from bankruptcy in March, when a bond issue comes due that Greece cannot repay without foreign help.

Mr. Papademos acknowledged on Sunday that the program “calls for sacrifices from a broad range of citizens who have already made sacrifices.” But the alternative, he said, “a disastrous default,” would be worse.

TRANSLATION: “”Patriotic duty” = saving the banks from loss. Bank losses would be “disastrous,” while citizen losses are “patriotic.”

When they meet again on Wednesday, they are expected to sign off on the measures and raise the stakes. A major topic of discussion is expected to be establishing an escrow account that would hold new money lent to Greece, and using it first to pay creditors, before the Greek government can tap it for any other purpose.

The idea, backed by Germany and the Netherlands, may make further loans to Greece more palatable to German voters, but many Greeks see it as a fundamental loss of sovereignty and feel that they are being pushed into poverty to appease banks.

TRANSLATION: See above translations.

Anti-German sentiment is also on the rise in Greece, where memories of the Nazi occupation during World War II are still vivid. “This is worse than the ’40s,” said Stella Papafagou, 82. “This time the government is following the Germans’ orders. I would prefer to die with dignity than with my head bent down.”

TRANSLATION: Where Hitler failed, Merkel will succeed. Papademos is the Greek version of Neville Chamberlain.

If Greece dug itself into a hole by borrowing beyond its means, as many argue, there is also a growing sense that the troika’s austerity regimen of spending cuts and tax increases is burying Greece alive in that hole. “The reason Greece is in this position is because of the strategy the troika imposed upon it,” said Mr. Tilford, of the Center for European Reform.

TRANSLATION: Well, duhhh. Raised taxes and reduced spending (aka “austerity”) always screws an economy. Too bad our own Tea/Republicans don’t understand that.

“They’ve all sold out in there, they should be punished,” said Makis Barbarossos, 37, an insurance salesman, as he waved a cigarette toward Parliament on Sunday. “We should put them in small, unheated apartments with 300-euro pensions and see, can they live like that? Can they live how they’re asking us to live?”

TRANSLATION: That punishment would be far too mild for the incredible horrors the Greek and EU leaders continue to visit on the Greek people. Sadly, the poor will continue to suffer; the rich will continue to prosper; and nothing good will be allowed to happen.

The solution: See: What would happen if Greece were to return to the drachma? Meanwhile, I award the people of Greece one guillotine, to use as you feel appropriate.

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

#MONETARY SOVEREIGNTY

What do money supply, interest rates and religion have in common? A lesson on confusing the public.

The 2008 explosion of the real estate bubble cost America vast amounts of money, which loss caused the “great recession.” Scientific logic and historical precedent show that recovery from the current recession demands increased deficit growth.

But based on all the non-factual, faith-based beliefs being preached, these are not scientific times. Now comes Michael Sivy, who tells us money growth is dangerous.

First, a bit about Mr. Sivy:
Michael Sivy is a Chartered Financial Analyst and a former securities analyst for an independent stock research firm. He was an investment columnist at Money for more than 23 years as well as a guest columnist for TIME’s international edition. Sivy has appeared as a stock-market commentator on television, including the networks ABC, CBS, NBC, Fox, CNBC, CNN and MSNBC. In addition, he has been heard on NPR’s All Things Considered, PRI’s Marketplace and on the CBS Radio network. He is the author of Michael Sivy’s Rules of Investing: How to Pick Stocks Like a Pro. Born in Manhattan, Sivy holds B.A. and M.A. degrees in classics from Columbia University, and studied theology at Oxford University and Yale Divinity School.

Time Magazine: Are We Already Planting the Seeds of the Next Financial Crisis?

Central banks are trying to revive weak economies by injecting large amounts of money. That policy helps in the short run, but easy money can also create the conditions for future booms and busts.
By Michael Sivy, February 13, 2012

The wreckage of the housing bubble and the banking crisis haven’t yet been cleared away completely, but already there are hints of renewed speculation – warning signs of a problem that often arises when central banks try to bolster weak economies.

Expanding the amount of money in circulation is, of course, beneficial in the short run because it stimulates business activity and takes some of the pressure off overextended borrowers and banks.

Federal deficit spending also is beneficial in the medium run and the long run. Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports. It’s not clear how expanding the money supply “takes pressure off overextended borrowers.” Perhaps it’s just a matter of faith.

But easy money also encourages risk-taking and temporarily pushes the prices of safe investments up to unsustainable levels, thereby creating the potential for future financial crises.

Note the subtle shift from “Expanding the amount of money in circulation” to “easy money.” The former simply has to do with the quantity of money; the later relates to interest rates — two different circumstances. Mr. Sivy seems not to be concerned with the difference.

This problem last occurred – with catastrophic results – in the years following the 2000 technology stock crash, when Federal Reserve Chairman Alan Greenspan repeatedly stoked the money supply. That did help revive the U.S. economy, but it also fueled a bubble in home prices that contributed greatly to the 2008 banking crisis.

Increased money supply caused the bubble in home prices? Huh? I wonder why the increased money supply of the 1980’s didn’t cause a real estate crash. Innocent me, I thought the 2008 crash was caused by bad lending practices against insufficient collateral.

Is current Fed Chairman Ben Bernanke . . . risking future bubbles because he is trying to compensate for a past one? . . . Bernanke has bluntly announced that he will hold down interest rates close to zero until 2014. That may be intended as a confidence-building measure, but it will also make speculators feel more secure. Consider these signs of a growing appetite for risk:

Aggressive investments are becoming more popular. Low interest rates are making investors take greater risks in the search for yield. Sales of junk bonds picked up in January, and February looks strong as well, with billion-dollar-plus offerings by casino owner Caesars Entertainment and hospital operator HCA.

O.K., so he is talking about interest rates and not about money supply. Hard to keep track. Anyway, he is correct that low interest rates do nothing positive for the economy. They make borrowing more attractive, but lending less attractive, and more importantly, cause the federal government to pump less interest money into the economy. Historically, low interest rates have corresponded with slower GDP growth.

Safe investments have enjoyed big price gains recently.

Whoa! First it was “Aggressive investments are becoming more popular.” Now it’s “safe investments enjoying big price gains.” So, what he’s saying is, prices of all investments are rising. What a revelation: Prices rise coming out of a recession. Who’d a thunk?

Anyway, the article continued, again confusing money supply with interest rates, correctly denouncing the Fed’s low-rate policy, and incorrectly denouncing increases in the money supply.

Terminology has been the undoing of economics. “Debt” and “deficit” continue to confuse the politicians, the media, the public and even the old-line economists, for these words mean something substantially different when applied to the Monetarily Sovereign U.S. government vs. monetarily non-sovereign entities.

“Easy money” is another example, in that the term combines low interest rates with increased money supply, either of which may occur without the other. The federal government can lower rates without increasing the money supply, simply by spending less. Or it can increase the money supply without lowering rates, by spending more.

Mr. Sivy, like so many in the media, is confused, and this confusion confuses the public. He is right about interest rates, wrong about money supply, and seemingly doesn’t understand the difference. His criticism of Bernanke is as though he is saying, “God has created too much water because people drown in it.”

Bottom line: Money growth is stimulative, low interest rates are anti-stimulative, and Mr. Sivy’s divinity studies may be perfect for today’s faith-based, proof-lacking economics, where the economists and the media are the high priests, and their prestige trumps data.

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

#MONETARY SOVEREIGNTY

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