–Eurozone discovers formula for economic growth while raising taxes, reducing spending and paying off loans.

Mitchell’s laws:
●The more federal 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.
●The penalty for ignorance is slavery.
==========================================================================================================================================

Here is the European formula for economic growth:

1. First, destroy a nation’s ability to create money. One method is to take away the nation’s sovereign currency, and force it to use an alien currency, the euro.

2. If the nation runs a trade deficit (mathematically necessary for half the world), its euro supply declines, and it finds itself less and less able to pay its bills. So it is forced to borrow euros.

3. The EU sets requirements for borrowing: Increase taxes and reduce spending (aka “austerity”) Both requirements draw euros out of the private sector, which depresses the nation’s economy, further. The nation must borrow more and more.

4. As loans are repaid – with interest – euros flow out faster and faster. The nation now is in an economic “death spiral,” from which there is no escape.

But wait. Along comes the EU and the other euro nations, to save the day. Here are some excerpts from Bloomberg News:

Bloomberg News
German Lawmakers Set to Approve Greek Aid Plan This Week
By Patrick Donahue on November 27,

German lawmakers are set to approve Greece’s new aid package by the end of this week after euro-area finance ministers reached an overnight agreement to ease terms on emergency bailout aid for the country.

Lawmakers expressed relief that a Greek debt write- off wasn’t part of the agreement in Brussels.

Translation: Greece will continue to go deeper into debt.

The euro ministers gave Greece more breathing room to scale back its debt amid economic collapse, declaring after three years of false starts that Europe has found the formula for nursing the debt-stricken country back to health.

Translation: Greece has “breathing room,” but has no way to obtain euros to pay its debt – plus interest — except to borrow more and more.

“We believe that these measures are appropriate for the solution of the problems that have emerged in Greece,” Gerda Hasselfeldt, the Bundestag caucus leader for the CSU, told reporters. “I also can’t say whether this is the last step. We have to keep an eye on this.”

Translation: They will watch as Greece descends in an ever faster “death spiral.”

The agreement “offers a change so that Greece can return to the markets and sustainable growth and competitiveness after long and difficult developments,” Finance Minister Wolfgang Schaeuble said today.

Part of the welcome for the agreement, stemmed from the rejection of forgiving any of Greece’s publicly held debt, an option the government in Berlin has ruled out.

Translation: Greece has no way to grow its economy, except by obtaining euros. It has no way to obtain euros except by more borrowing. No one will forgive Greece’s debts, so Greece will sink deeper and deeper into debt, the economic “death spiral.”

And that is the EU formula for Greek economic growth.
===============================================================================================================================================================================================================

Here is how the U.S. Congress applies the European successful formula for national growth:

1. First, cut the deficit to destroy the government’s ability to create dollars.

2. As the U.S. runs a trade deficit, its dollar supply declines, and it finds itself less and less able to pay its bills.

3. Congress demands increased taxes and reduced spending (aka “austerity”). Both requirements draw dollars out of the private sector, which depresses the nation’s economy, further.

4. America now is in an economic “death spiral,” from which there is no escape.

And that’s it. That is the European model for economic success. We’re fortunate our Congress is copying it.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

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

–The FICA disgrace

Fifteen years ago, FREE MONEY suggested the elimination of FICA. Three years ago I posted (with input from Warren Mosler and Randall Wray) “Ten Reasons to Eliminate FICA.”

FICA is the most damaging tax in American history. It punishes the middle and lower income classes (the “99%”), while leaving upper income classes (the “1%”) virtually untouched. It punishes salaried people while leaving all other types of income unscathed.

For many in the middle and lower income classes, FICA is the largest tax they pay – larger even than those income taxes that are much in discussion today. No tax does more than FICA to widen the gap between the richest and the rest.

So it should come no surprise that the Democrats and the Republicans seem to favor increasing FICA, since both parties receive so much funding from the upper 1%.

Here are a few excerpts from an article in the HuffPost:

Obama Administration Not Sticking Up For Payroll Tax Cut
Posted: 11/26/2012

WASHINGTON — For the past two years, U.S. workers have enjoyed a 2 percentage-point increase in take-home pay thanks to a payroll tax reduction trumpeted by lawmakers as an effective lift for a sagging economy. Come Dec. 31, that cut will expire — and policymakers don’t seem too upset about it.

The White House has gone almost completely quiet on one of its favorite stimulus policies. In a report released Monday morning, the administration warned that middle-class families will pay thousands more in taxes next year unless Republicans relented on income tax breaks for the rich. But the report didn’t mention the soon-to-expire payroll tax cut.

Translation: “The marginal tax rate, on those rich people who pay very little of the marginal rate anyway, cannot be allowed to rise. But, taxing the 99% is O.K. Those people are not big contributors to our campaigns.”

At the daily briefing later on Monday, Alan Krueger, chairman of President Barack Obama’s Council of Economic Advisers (CEA), said that the payroll tax cut clearly gave a boost to middle-class families and to the economy in general over the past year. But he stopped notably short of supporting its extension.

Translation: Cutting FICA helps the economy, so let’s increase FICA.

“There are many tax provisions that are expiring at the end of the year and the president has said that the payroll tax cut, among others, should be on the table,” Krueger said.

Translation: President Obama, the self-proclaimed protector of the 99%, does not mind increasing taxes on the “little” people who voted for him.

Congressional leaders are similarly difficult to read, though many signs hint at the demise of the payroll tax cut. House Minority Leader Nancy Pelosi (D-Calif.) said in September the tax cut should be allowed to expire.

Translation: Thank you to all you middle and lower income people who voted Democratic. Gotcha!

Many lawmakers and outside stakeholders have expressed concern that diverting tax money from Social Security — which the payroll tax helps fund — would weaken the program, which provides an average monthly benefit of $1,237 to some 40 million seniors. The Social Security Administration’s actuaries say the trust fund will run out of money in 2033, at which point incoming tax revenue could support just 75 percent of benefits.

Translation: We successfully have brainwashed you people into believing FICA pays for your Social Security. That is one of the great successes of the *BIG LIE.

AARP, the lobby group for senior citizens, said in a statement Monday that it is glad the White House left the cut out of its tax report. The organization has previously said the payroll tax should return to normal.

“We’re pleased the White House doesn’t mention the payroll tax holiday since extending it would undermine Social Security’s separate dedicated funding source,” AARP executive Joyce Rogers said in an email. “We also remain committed to keeping Social Security and Medicare benefit cuts out of any ‘fiscal cliff’ negotiations.”

Translation: You thought AARP was on the side of the retired and elderly. No, AARP is an insurance agency masquerading as your benefactor. AARP always has promulgated the *BIG LIE that FICA pays for Social Security and Medicare.

Sen. Bernie Sanders (I-Vt.), a self-described socialist who has been a vocal advocate of social insurance programs, said Monday that he is “strongly opposed” to keeping the tax holiday, since doing so could damage Social Security’s solvency.

“The middle class deserves tax relief, but not at the expense of Social Security,” Sanders said. “The president and members of his administration have been very clear that the payroll tax reduction was temporary and would not be extended. I expect them to keep that commitment.”

Translation: And, of course, we in Congress like FICA because our rich contributors like FICA. What’s good for the rich is good for the country – oh, except maybe for those middle and lower income groups. But you can’t help everyone.

Bottom line: FICA is 100% bad for the economy. Before the U.S. became Monetarily Sovereign in 1971, FICA did fund Social Security. Today, FICA no longer pays for Social Security. FICA does not pay for Medicare. FICA does not pay for anything. You might as well shove your money into a garbage bag and burn it.

All FICA does is take money from the pockets of middle and lower income class consumers and from businesses (which take it from employees). More than a trillion dollars was paid for FICA this year. That’s a trillion dollars removed from the economy, lost forever. Think of what this economy could do with an extra $1 trillion.

If FICA were $0, that would not reduce by even one cent, the federal government’s ability to pay all Social Security benefits and to provide free Medicare to every man, woman and child in America. The collection of FICA is the 2nd biggest tax disgrace in America.

The biggest? Obama and the Democrats – the great supporters of the 99% – justify FICA by telling you the *BIG LIE.

[*The BIG LIE is a statement that U.S. federal taxes pay for U.S. spending. In a Monetarily Sovereign government, taxes pay for nothing.]

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

#MONETARY SOVEREIGNTY

–Why you don’t want Congress or your friends to fly your plane

To make a plane stall and crash, you either increase its load (by pointing the nose up), or you decrease its power (by easing off the throttle). So, if you already are stalling, which is better: To increase the load or to decrease the power?

Dumb question, right? Either approach would send your plane into a death spiral.

That’s the debate Congress currently is having about our economy. Should they increase our tax load or decrease our federal spending power? Dumb debate, right? Either approach (aka “austerity”) will send us into an economic death spiral.

It widely is understood that increasing your taxes depresses the economy, by taking spending money out of your pocket. It also widely is understood that cuts in federal spending depress the economy, also by taking spending money out of your pocket.

So Congress, it its wisdom, is telling you that a some combination of tax increases and spending cuts magically will grow the economy. Huh?

Excuse me, Congress, but combining two wrongs does not make a right. It just makes a “worse.”

Consider FICA. The U. S. federal government, being Monetarily Sovereign, does not use FICA to pay for Social Security and Medicare. Even if FICA were $0, the government could fund Social Security and Medicare, forever. The U.S. simply never can run short of its own sovereign money.

All FICA does is take spending money from your pockets, thereby depressing the economy. FICA is the single, most economically harmful tax in American history, as it punishes the lower and middle classes. So predictably, Congress wishes to increase FICA and other tax collections as a “solution” to the recession.

And consider Social Security. It adds spending money to your pockets, thereby stimulating the economy. So predictably, Congress repeatedly cuts SS by increasing the qualifying age and by taxing benefits.

In short, to cure the recession, Congress wishes to implement a combination of the two acts that will worsen the recession – tax increases and spending cuts – and thereby send us into an economic death spiral.

Why?

Its what the super rich tell them to do. As Romney’s tax returns demonstrated, the super rich are hardly touched by tax increases. The man paid so little taxes, he had to phony up his returns to show increased tax payments. The life style of the super rich hardly is touched by recessions and depressions.

But the middle and lower classes suffer from tax increases and spending cuts and recessions. So tax increases and spending cuts help increase the gap between the super rich and the rest. And Congress, bought and paid for by the super rich, does exactly as asked: Increase that gap.

The super rich, using Congress as its stooges, has convinced the populace that the federal deficit is “unsustainable” and that the U.S. must “live within its means.” This is 100% nonsense — an absolute lie – for the U.S. can “sustain” any amount of deficit, and does not have a “means” to live within.

But ask your friends if the deficit should be reduced and they will say, “Yes,” because they have been brainwashed by the super rich into believing federal finances are like their own, kitchen table, personal finances.

You never want to be in a plane piloted by Congress or by your friends. If the plane ever gets into a stall, they either will increase the load or cut the power – or a combination of the two — sending you into a death spiral.

Which is where we are headed, now.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

#MONETARY SOVEREIGNTY

–The arithmetic of austerity. It’s not a “fiscal cliff.” It’s a “death spiral”

“Austerity” is a reduction in the federal deficit, which is accomplished via reduced federal spending and/or increased federal tax collections.

According to debt hawks, the “ideal” condition is a balanced federal budget, where spending equals taxes. Under this “ideal,” balanced condition, a nation with a trade deficit (as the U.S. has), will send more dollars overseas than return to our economy. Under a balanced federal budget, the total dollars in the U.S. will decline by the amount of the trade deficit.

Recently, the U.S. trade deficit has averaged about $45 billion per month. So our federal deficit must be at least $45 billion per month for the economy to break even, not counting the effects of inflation.

A common measure of economic growth, Gross Domestic Product, equals Federal Spending + Non-federal Spending, less the Trade Deficit. Austerity requires federal spending to decline and/or non-federal spending to decline, with the later being negatively affected by tax increases.

Austerity always causes GDP to be less than what it would have been, had there not been austerity.

The question then, is what effect does GDP have on austerity? As shown, for GDP to decline, federal spending and/or non-federal spending must decline.

Reduced GDP causes non-federal spending to decline, which causes lower tax collections. If nothing else changes, these reduced tax collections will increase the federal deficit, which will demand further austerity.

To maintain a balanced budget, federal spending also would have to be reduced, but since federal spending is part of GDP, the reduction in federal spending would reduce GDP.

Thus, we have an “austerity death spiral” to depression. Reductions in deficits beget reductions in GDP, which beget more deficits, which can be reduced only by reducing GDP further – a never-ending downward helix, or in the vernacular, an austerity death spiral.

Aside from reversing the trade deficit into a trade surplus, the only way to end the austerity death spiral is to increase the deficit, via federal spending increases and/or reduced taxes.

Republicans want to maintain “low” taxes and to decrease federal spending. Democrats want to increase some taxes and to decrease some spending. Either approach will lead to an economic death spiral.

Can we avoid the austerity death spiral simply by running a trade surplus? Yes, but the world’s balance of trade always is zero. So, if we run a trade surplus, other nation(s) must run a trade deficit. We would avoid depression by impoverishing other nations, which would cause them to have recessions and depressions.

In today’s world economy, where no nation is an “island,” causing foreign recessions and depressions comes back to hurt our own economy, as witness the negative economic effects the euro nations’ own austerity-induced death spirals have had on us.

Straightforward arithmetic shows that deficit reductions (aka “austerity”) reduce GDP, which in turn begins an economic “death spiral” to depression.

Keep this in mind as the politicians in Washington, at the urging of the wealthy class, debate the best way to cause our economic austerity death spiral.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

#MONETARY SOVEREIGNTY

Share this:

Share this:

Share this:

Share this: