–Why Polish people are smarter than their government, the EU and the IMF — and the American people

Mitchell’s laws:
●The more 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 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.
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Why the Polish people are smarter than the Polish government, the European Union (EU) and the International Monetary Fund (IMF):

Poland was smart enough to retain the single, most valuable asset any nation can have: its Monetary Sovereignty. Rather than adopting the euro, over which it would have no control, Poland retained the złoty, over which it has total control.

It can create them at will, pay any bill of any size, and change their value whenever needed. Poland is sovereign over the złoty, just as the U.S. is sovereign over the dollar. By contrast, the euro nations use an “alien” currency, over which they have no control, which is the fundamental reason why they are in financial trouble.

Global Property Guide
Feb 27, 2012
Poland, the Exceptional East European?

With Europe in meltdown, is Poland an exception? Europe’s sixth-largest economy has strong domestic demand, and has not yet adopted the euro: so it was able to devalue the zloty to maintain competitiveness. Poland’s economy grew by 3.8% in 2011, and is expected to grow by 2.5% in 2012 and 2.5% in 2013 (OECD forecast November 2011).

While most of Europe is struggling to avoid a double-dip recession, the Polish economy is growing. Its depreciated currency makes its products attractive to buyers.

Workers are moving back to Poland, according to recent OCDE data. Unemployment was 9.6% in 2011, and is expected to rise to 9.9% in 2012, but this is lower than in many European countries. Migration dynamics are a fundamental demand driver for urban housing markets, particularly for urban areas such as Warsaw, Krakow and Wroctaw characterized by significant in-migration rates.

Poland’s relatively strong economic position is highlighted by Bloomberg, which calculates that Polish government bonds provide a better risk-adjusted return than German Bunds and US Treasuries.

Attention: Polish government: Your “relatively strong economic position” comes from your being MONETARILY SOVEREIGN. You can control your money supply. So, if it isn’t broken, don’t fix it.

Wikipedia

Conditions of Poland’s accession to the European Union oblige the country to eventually adopt the euro, though not at any specific date and only after Poland meets the necessary stability criteria. Serious discussions of joining the Eurozone have ensued.

However, article 227 of the Constitution of the Republic of Poland will need to be amended first, so it seems unlikely that Poland will adopt the Euro before 2019. Public opinion research by CBOS from March 2011 shows that 60% of Poles are against changing their currency. Only 32% of Poles want to adopt the Euro, compared to 41% in April 2010

Let’s see now: Our monetarily non-sovereign euro neighbors are in the toilet. We Poles are Monetarily Sovereign over our currency, the złoty, and are in a “relatively strong economic position.” So what shall we do? Shall we give up the złoty, surrender our Monetary Sovereignty and join the euro nations by adopting their alien currency? Hmmm. . .

Thousands of Poles protest pro-market reforms
By VANESSA GERA
Associated Press / September 29, 2012

WARSAW, Poland (AP) — Thousands of Poles blew horns, prayed and waved flags in downtown Warsaw on Saturday to show their anger over a new law which will gradually raise the retirement age to 67 for all Poles from 60 for women and 65 for men.

Dubbed ‘‘Wake Up, Poland,’’ the protest is an expression of the deep anxieties gripping many Poles as the government tries to lower state debt by embracing pro-market reforms that are weakening the social safety net.

Police had no estimate yet for the number of protesters, but private broadcaster TVN24 said tens of thousands turned out.

Quick summary: A Monetarily Sovereign nation has the unlimited ability to pay its bills. Nevertheless, it thinks its deficit is unsustainable, so it decides to take money from its citizens (who need money) and give it to the government (which doesn’t need money, because it creates money.) The government gradually raises the retirement age to lower state debt, and it weakens the social safety net.

Sound familiar?

Apparently, the Polish government (like the U.S. government) doesn’t realize it is Monetarily Sovereign, so it acts like a nation already stuck with the euro.

The Polish people probably don’t understand Monetary Sovereignty either, but they know enough not to want the euro and the cuts in social services that monetarily non-sovereign (i.e. euro) nations are forced into. This says the Polish people are smarter than the Polish government, the EU and the IMF — and the U.S. government, for that matter.

It seems they also are smarter than the American people, who continue to buy into the absolute nonsense (promulgated by the upper 1% income group) that the U.S. federal deficit and debt are too high, when in fact, they are too low.

If Poland resists the siren song of the failed euro, the failed EU and the failed IMF, and begins to use its Monetary Sovereignty, rather than act like a euro nation, it soon will be the strongest nation in Europe. But that’s a big “IF.”

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
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’s 99%

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 Imports

#MONETARY SOVEREIGNTY

IMF, ECB and Greece, oh my! How the innocent are led to slaughter by the incompetent.

Exclusive: IMF, EU clash over Greece’s bailout prospects
By Dina Kyriakidou and Lesley Wroughton
ATHENS/WASHINGTON | Wed Sep 26, 2012 9:59am EDT

(Reuters) – Greece’s international lenders are at loggerheads over how to solve Athens’ debt crisis, threatening more trouble for the euro as the IMF demands European governments write off some of the Greek debt they hold.

“The problem is not between the IMF and Athens, it’s between the IMF and the EU,” one Greek official said. Already facing an electoral backlash over bailouts and austerity, EU leaders do not relish IMF proposals that they swallow tens of billions of euros of losses on their holdings of Greek government bonds.

Greece remains deeply in debt. Being monetarily non-sovereign (they have no sovereign currency), Greece has no source of incoming funds, with which to pay their debts. So my question is: Why would anyone have lent them money, and why would these lenders have expected to be paid?

They remind me of the U.S. banks that gave mortgages to people with insufficient income to pay the mortgage – with one difference. The U.S. banks didn’t care. They immediately sold the mortgages to Fannie Mae et al who bundled the mortgages into securities rated AAA (by the crooked bond rating agencies), and sold them to the crooked big banks, who in turn sold them to unsuspecting investors, who believed the AAA rating. Lenders to Greece weren’t that clever.

The Fund, brought in for its expertise, global financial firepower and reputation for imposing fiscal discipline, is for its part keen to protect the hard-earned credibility it put on the line by joining in a bailout package that set Greece a target of cutting its deficit to under 120 percent of GDP by 2020.

If there is an agency in the world, that has less economic expertise than the IMF, I’ve yet to hear about it. This is a group that thinks the treatment for anemia is to apply leeches. They insist debtor nations stop creating the money needed to pay their debts, and instead borrow more money, to go deeper into debt.

I can’t imagine who gave the IMF “credibility,” but this organization has been a disaster, with no redeeming characteristics. Loans to monetarily non-sovereign, indebted governments only exacerbate their debt situation, and Monetarily Sovereign nations don’t need loans. So what good is the IMF?

German Finance Minister Wolfgang Schaeuble, whose own creditor government has been concerned at slippage in Greece’s efforts to cut spending and raise taxes, gave a rare public hint of IMF concerns last week: “You should ask around about what the mood is like in the IMF,” he told reporters in Berlin, “In having to deal constantly with these European problems and the repeated failure of the Europeans to meet agreed targets.”

Translation: “Oh woe is us! We told the naughty euro nations to raise taxes and cut spending, thereby guaranteeing their further economic disaster. But, they have failed to meet those targets. Our life is difficult.”

Germany has overplayed its hand. It had hoped that by being a creditor to other monetary non-sovereign euro nations, it could dominate them — Germany’s World War II goal. Deutschland uber alles.

But these nations refuse to be dominated, and now are on the verge of sticking Germany with a ton of bad debt.

A restructuring – essentially requiring the ECB and European governments to take losses on nearly 200 billion euros in Greek debt they hold – could ease Greece’s burden.

Yes, that will “ease” the burden by transferring the burden from Greece to Germany.

Private investors took such a “haircut” this year, but with reforms being held up and a recession much deeper than expected, Greece seems likely to have to suffer more pain itself, or inflict more on its creditors, if it is to put its finances on a sustainable footing and resume market borrowing.

Translation: “Sustainable footing” means to borrow when there is insufficient income with which to pay back, screw the creditors (politely called a “haircut”), then borrow more. This has been the IMF/ECB “plan” for years.

Out of the Greece’s 204 billion-euro official debt, 20 billion is owed to the IMF, which would be repaid in full in the event of an official-sector restructuring. The ECB has so far refused to face any losses on the bonds it has purchased over past years to prop up Greek debt, estimated at about 50 billion.

The IMF and ECB first must be paid in full. Then the other creditors can fight over the scraps. The irony: The ECB is the only entity that can create euros, so is least in need of being paid back.

“It is now clear to the IMF that Greece will need more time or more money or both,” a troika official told Reuters.

Greece has asked for an extra two years to meet interim targets and European leaders appear to agree. Stournaras, the finance minister, told Reuters on Tuesday that such an extension would cost an additional 13-15 billion euros, which could be covered without further pain for European taxpayers.

What about Greek taxpayers? This is an example of IMF economic brilliance. They now have discovered that a monetarily non-sovereign nation, with no source of income, needs more money. Who’da thunk it? So Greece will be allowed more time to meet its target of further impoverishing its citizenry.

Soon, the citizenry will rise up, and the sounds of the Guillotine will be heard in Greek-land.

Such a gap could be covered through the issuance of more short-term debt, by seeking lower interest rates from the ongoing bailout loans or a rollover of debt held by the
ECB.

More IMF brilliance: Provide more short term debt to a debtor that cannot pay its debts. Or ask lenders, who already are on the hook for Greece’s bad debts, to lower interest rates on those bad debts.

A senior Greek government official told Reuters, however, that the IMF preferred to see Europeans take losses on some of their previous loans to Athens, blocking any agreement: “The IMF wants an official-sector restructuring but we can’t do that,” the official said. “No one else wants it.”

Translation: “You euro nations take the losses. We at the IMF won’t, despite the fact that we helped create the problem. Then, after you take losses on existing loans, give Greece more loans.”

Disputes within the rescue mission, however, also reflect deeper concerns about Greece’s ability to slash its debt-to-GDP ratio from a current level around 160 percent and to recover the confidence of private investors willing to buy its bonds.

The statement is senseless. They want to lower the debt/GDP ratio, so they can sell more debt, which would increase the debt/GDP ratio? Huh?

In any event, the debt/GDP ratio is completely meaningless. It doesn’t predict solvency or prosperity. It doesn’t predict anything. But being useless explains why the IMF and the crooked rating agencies love it.

“Lots of … bankers in the chorus seem to indicate they would be quite happy for Greece to leave the euro.”

Amen to that. Within two years of leaving the euro, Greece will be well on its way to prosperity – if its leaders understand Monetary Sovereignty – while those nations, still burdened with the euro, sink ever deeper into despair.

You are watching a euro train wreck — in agonizingly slow motion. As always, the only long-term solutions are:
1. Greece and all other euro nations, re-adopt their own sovereign currencies
or
2. The euro nations form a fiscal federation, in which the EU provide euros as needed.

Meanwhile, the innocent citizens suffer. It’s a foretaste of what debt hawks are doing to the U.S.

Rodger Malcolm Mitchell
Monetary Sovereignty

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#MONETARY SOVEREIGNTY

–Wanted for the Most Powerful Job on Earth: Competence and Courage. No Cowards Need Apply

Many of you have faced this political problem: Do you agree with the boss when you know the boss is dead wrong? Do you not merely agree, but speak earnestly in favor of the boss’s wrong ideas, knowing those ideas will lead to economic disaster?

And if you do the political thing, and agree and fight for the boss’s wrong ideas, and the disaster occurs, who is to blame? And what does that make you?

Washington Post
Romney’s tongue-tied eloquence
By Fareed Zakaria, Published: September 26, 2012

Peggy Noonan eloquently voiced what many conservatives believe when she said that Romney’s campaign has been a “rolling calamity.” And yet, shouldn’t it puzzle us that Romney is so “incompetent” (also from Noonan), given his deserved reputation for, well, competence?

He founded one of this country’s most successful financial firms, turned around the flailing Salt Lake City Olympics and was a successful governor. How did he get so clumsy so fast?

In fact, the problem is not Romney but the new Republican Party. Given the direction in which it has moved and the pressures from its most extreme — yet most powerful — elements, any nominee would face the same challenge: Can you be a serious candidate for the general election while not outraging the Republican base?

Why won’t Romney, an intelligent man, fluent in economics, explain his economic policy? Because any sensible answer would cause a firestorm in his party. It is obvious that, with a deficit at 8 percent of gross domestic product, any solution to our budgetary problems has to involve both spending cuts and tax increases.

Here, Mr. Zakaria flies wildly off track. Spending cuts and tax increases are absolutely, positively guaranteed to lead to recessions and depressions. It’s a mathematical certainty, as expressed in the formula readers of this blog know so well:

GDP = Federal Spending + Non-federal Spending – Net Imports.

But there is something more fundamental at work. Apparently, Romney knows his Republican base is wrong, and he knows that decisions agreeing with that base will adversely affect America. So, what should he do? Agree with the base, hoping to be elected, knowing he will destroy our economy? Or disagree with the base, not get elected, and possibly save America?

Our soldiers make an even more extreme form of that decision: Bravely stand and fight and possibly die saving your platoon, or like a coward, run away to save yourself, assuring that the rest of your platoon will die?

Is the personal glory of the Presidency worth hurting America?

Ronald Reagan agreed to tax increases when the deficit hit 4 percent of GDP; George H.W. Bush did so when the deficit was 3 percent of GDP. But today’s Republican Party is organized around the proposition that, no matter the circumstances, there must never be a tax increase of any kind.

The Simpson-Bowles proposal calls for $1 of tax increases for every $3 of spending cuts. But every Republican presidential candidate — including Romney — pledged during the primaries that he or she would not accept $10 of spending cuts if that meant a dollar of tax increases.

Just a reminder that taxes reduce the “Non-federal Spending” part of the above equation, and thereby reduce GDP growth. So the no-tax-increases pledge is a good idea. The bad part of the idea is that cuts in Federal Spending reduce GDP growth. Simple mathematics dictates that tax increases economically are identical with spending decreases — both reduce GDP growth.

So Romney could present a serious economic plan with numbers that make sense — and then face a revolt within his own party. His solution: to be utterly vague about how he would deal with the deficit. Were he to get specific, he would be committing ideological blasphemy. So instead he talks about freedom and capitalism.

Said another way: Romney could tell the truth, save America, and possibly doom his own ambition to become President. Or he can, as he has, agreed with the Republican base, enhancing his personal ambition, but dooming America’s future.

He has chosen his route. What does that say about him?

Romney’s own inclinations are obvious. In 2002, he refused to take Grover Norquist’s “no tax” pledge. But by 2006, the ground had shifted and he raced to become the first presidential candidate to commit to it.

One of numerous Romney flip-flops, trying to “agree with the boss” to the detriment of America.

The same pattern has emerged on immigration. On ABC’s “This Week” last Sunday, Republican strategist Nicolle Wallace urged Romney to reach out to Hispanics by reminding them of Obama’s poor record on immigration reform. Except that the Republican Party is now strongly opposed to a path to citizenship for illegal immigrants.

Romney has curried favor within the party by opposing the Dream Act, supporting Arizona’s harsh law under which police check people’s immigration status at will and proposing “self-deportation” as a way to get rid of undocumented immigrants. As with the deficit, he has a plan — but it’s secret.

Romney has tried to run a campaign while not running afoul of his party’s strictures. As a result, he has twisted himself into a pretzel, speaking vacuously, avoiding specifics and refusing to provide any serious plans for the most important issues of the day.

Here is a man who even disavowed his own signature political achievement — “Romneycare” — just to curry favor with the Republican political base.

Ironically, Romney already “ran afoul of his party’s strictures” — at least somewhat. The Republican base really wanted a nutcase like Michele Bachmann or Newt Gingrich. The base was cool on Romney. But, even after winning the nomination, he caved to the pressure, and went along with what this “intelligent man, fluent in economics” (according to Zakaria) knew was wrong. His personal ambition exceeded his patriotism. Romney first; America second.

To be awarded with the Presidency of the United States, and all that position’s powers and honors, you should at least display the courage of our fighting men and women — people who die for what they believe, and are not rewarded with the powers and honors of the Presidency. You will be expected to make difficult and correct decisions, each of which will have massive effect, not just on your platoon, but on the entire United States — indeed, the entire world.

What kind of leader will you be if you lack the competence and courage to stand up for what you believe is right, and against what you believe is wrong? Why would you accept the rewards of a leadership that requires you to send your people over a cliff?

For the sake of personal ambition, Romney has sold his soul to the devil. After the election, what will he see when he looks in the mirror?

Wanted for President of the United States: Competence and Courage. No Cowards Need Apply.

Rodger Malcolm Mitchell
Monetary Sovereignty

P.S. Please: Spare me the “Obama is just as bad” comments. He isn’t.

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#MONETARY SOVEREIGNTY

–No need to visit Spain. Spain is coming to visit you.

In “Travel to Spain to see a culture of dependency” we discussed how the starving Spanish feed themselves and their children with rotting food dug from dumpsters. Because of deficit reduction, aka “austerity,” the unemployment rate in Spain ranges from “relatively low” in Girona (14%) to 25% for the country as a whole. About 22% of Spanish households exist in poverty.

Now let’s talk America:

New York Times
Soaring Poverty Casts Spotlight on ‘Lost Decade’
By Sabrina Tavernise
Published: September 13, 2011

WASHINGTON — Another 2.6 million people slipped into poverty in the United States last year, the Census Bureau reported Tuesday, and the number of Americans living below the official poverty line, 46.2 million people, was the highest number in the 52 years the bureau has been publishing figures on it.

And in new signs of distress among the middle class, median household incomes fell last year to levels last seen in 1996.

Economists pointed to a telling statistic: It was the first time since the Great Depression that median household income, adjusted for inflation, had not risen over such a long period, said Lawrence Katz, an economics professor at Harvard.

As we continually mention (even at the bottom of each post), here is how Gross Domestic Product, the prime measure of economic growth, is calculated:

GDP = Federal Spending + Non-federal Spending – Net Imports

So, by definition, economic growth requires federal and non-federal spending growth. That is why deficit reduction, which involves spending decreases and tax increases, always must reduce economic growth and lead to recessions and depressions. It’s a mathematical necessity.

People who deny the adverse effect of deficit reduction, also would deny that taking one apple from a dozen, leaves only eleven apples.

The bureau’s findings were worse than many economists expected, and brought into sharp relief the toll the past decade had taken on Americans at the middle and lower parts of the income ladder. It is also fresh evidence that the disappointing economic recovery has done nothing for the country’s poorest citizens.

Readers of this blog know deficit reduction hurts the middle and lower classes much more than the upper classes, thereby increasing the gap between the so-called “1%” and the “99%.” This is not accidental. It is by design.

The 1% are perfectly happy to see their own fortunes decline so long as the gap increases. That is the goal of the 1%, and the bought-and-paid-for politicians and media are happy to further that goal, by spreading the lie that deficits are “too big” and “unsustainable” and “the federal government must live within its means.”

Of course, the exact opposite is true: Federal deficits are too small. They easily are sustainable. And being Monetarily Sovereign, the federal government has the power to create any amount of “means” it wishes.

The report said the percentage of Americans living below the poverty line last year, 15.1 percent, was the highest level since 1993. (The poverty line in 2010 for a family of four was $22,314.)

The past decade was also marked by a growing gap between the very top and very bottom of the income ladder. Median household income for the bottom tenth of the income spectrum fell by 12 percent from a peak in 1999, while the top 90th percentile dropped by just 1.5 percent.

The rich are overjoyed. Their income fell 1.5%, but the gap increased. Exactly what they wanted.

This year is not likely to be any better, economists said. Stimulus money has largely ended, and state and local governments have made deep cuts to staff and to budgets for social programs, both likely to move economically fragile families closer to poverty.

Why has stimulus money ended? That’s right: The lie that deficits must be reduced.

Minorities were hit hardest. Blacks experienced the highest poverty rate, at 27 percent, up from 25 percent in 2009, and Hispanics rose to 26 percent from 25 percent. For whites, 9.9 percent lived in poverty, up from 9.4 percent in 2009. Asians were unchanged at 12.1 percent.

Most blacks probably will vote for Obama, but for the wrong reason: Not because he’s less likely to cut federal spending, but because he’s black (or ½ black). Most Hispanics also will vote for Obama, also for the wrong reason: Because he’s more sympathetic to immigrants.

But poor or middle class or unemployed whites – who will they vote for? Unaccountably, they make up a large part of the Romney vote. And he is the man who tells them they live in a “culture of dependency,” as his excuse for wanting to cut federal deficits.

In truth, both candidates have said they want to reduce the deficit, though Obama is less likely to do so. With both candidates in the pocket of the rich, voting choices are limited, to say the least. So the electorate needs to learn up then speak up. Occupy Wall Street had the chance, but though they speak up, they have not learned up, so their words are meaningless.

Last year, about 48 million people ages 18 to 64 did not work even one week out of the year, up from 45 million in 2009, said Trudi Renwick, a Census official.

“Once you’ve been out of work for a long time, it’s a very difficult road to get back,” Lawrence Katz said.

More “culture of dependency” members, too lazy to look for work, according to the “religious” right.

“We’re risking a new underclass,” said Timothy Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin, Madison. “Young, less-educated adults, mainly men, can’t support their children and form stable families because they are jobless,” he added.

With cuts to unemployment compensation, food stamps, Medicaid, Medicare and for older people, Social Security, how will these people find food, clothing and shelter? The same way people in Spain do: Digging through dumpsters and flopping in abandoned buildings.

When enough men can’t support their wives and children, society is just one step away from riot and insurrection. America is not immune.

The report also said the number of uninsured Americans increased by 900,000 to 49.9 million. Those covered by employer-based insurance continued to decline in 2010, to about 55 percent, while those with government-provided coverage continued to increase, up slightly to 31 percent. Employer-based coverage was down from 65 percent in 2000, the report said.

All of the above could be prevented and cured by steady increases in federal deficit spending, which the government can and should do. But when I tell this to one of those most affected by deficit reduction — middle and lower income, white Americans — they often get angry and spit out, “What about inflation?” then illogically mention the pre-WWII Germany and Zimbabwe hyperinflations.

I only can shake my head in wonderment. The German and Zimbabwe hyperinflations were not caused by government spending, but rather were the cause of government spending. And as for the U.S., our inflation rate has remained close to the Fed’s intentional target of 2% – 3% – and when it has risen above that, the cause was not related to federal spending, but rather to oil prices.

These poor people are more worried about an inflation that rarely happens, and easily is controlled by the Fed, than they are about something that is upon us and is killing us at this very moment. They act like a drowning man refusing to be pulled from the water, because the air is cold and he doesn’t want to catch a chill.

In summary:

1. Reductions in deficits have led to nearly every depression and recession in American history.
2. Increases in deficits have cured every recession and depression.
3. Deficits have not caused inflations, which in any event, easily are cured by interest rate control.
4. Mathematically, GDP growth requires federal deficit growth
5. Deficit reduction increases the gap between the rich and the rest of us, which is exactly what the rich want.

Aside from that, deficit reduction is a wonderful idea – especially if you’re rich – and live in Spain. But even if you’re not rich, but still would like to visit Spain, don’t worry.

Look out your door. Spain is coming to visit you — in a ship named “Deficit Reduction.”

Rodger Malcolm Mitchell
Monetary Sovereignty

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#MONETARY SOVEREIGNTY

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