–Why don’t the facts penetrate? Why don’t we get it? Why don’t we want to get it?

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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Those who understand Monetary Sovereignty continually wonder why the facts don’t seem to penetrate. The concept is so simple and straightforward, yet not one person in a thousand is willing to examine those facts, much less understand them or agree with their implications. Why?

I can remember an incident from the time I was five years old, and memory being what it is, I probably remember it wrong. The memory is of a family picnic. My uncle had built a bonfire, and my parents, uncles and aunts threw branches and leaves into it, which made the fire flare up in a big roar.

We kids loved it, but were not allowed to throw things into the fire, because it was considered dangerous. I recall whining about this, so after a time, my father said, “O.K., you can throw sand into the fire.” Thrilled, I picked up a handful of sand and threw it in, but the fire didn’t grow. So I threw another handful and another, but instead of flaring up, the fire grew smaller.

Finally, much to my dismay, the fire went out, and all the fun went out with it. I thought I was building the fire, but I was putting it out. And on the drive home, when I realized what I had done, I felt so sad. I fundamentally misunderstood the difference between wood and sand. That’s what I remember. That feeling of sadness and betrayal and ignorance.

And now I look at the American people, exactly 99% of whom are “99%ers,” demanding that federal spending be reduced, and taxes be increased – that Social Security be cut to save it, and Medicare and Medicaid and the military – in effect, throwing sand on the economic fire, and I empathize in advance, the sad, betrayed feeling they will have, and the feeling of ignorance.

So a fundamental misunderstanding about the nature of things may be part of it.

“Forgive them father, for they know not what they do.” I forgive them, but will they forgive themselves, when or if the realization sets in?

Then there are those of you who are parents; you know the drill. Something happens when your child becomes a teen: Based on your experience, you tell your teenage child to do something or not to do something, and what is the reaction? Anger at your interference? Disgust at your foolishness?

No matter that you have clear facts on your side. The teen brain doesn’t want to hear facts; he (or she) wants to hear what his contemporaries say. He wants to follow in the herd. He doesn’t want to think; he wants to feel. There is safety in the group.

And now I look at the American people. The facts of Monetary Sovereignty are irrefutable, but the people don’t want to hear facts. Their reaction to those facts is anger at this interference in their preconceived notions, disgust at the foolishness of those trying to explain the facts. The people not only want to follow the herd, they want to follow in the middle of the herd. They don’t want to think; they want to feel – safe.

Perhaps the teen brain has an evolutionary benefit, allowing humans to ignore facts in favor of group adhesion. And all of us retain vestiges of this teen-brain, even into our dotage. Our teen brain cheers passionately for our favorite sports team, when our logical brain tells us that team’s success will have zero practical benefit for us.

So teen brain may be part of it.

And then there is the “too-good-to-be-true” syndrome. Bad experience has taught us cynicism is wiser than optimism. The hard way seems more noble than the easy way. Politicians boast about their humble beginnings, as though climbing the ladder from the very bottom is superior to climbing it from the middle. And working for something is superior to having it given to you. And “if it seems to good to be true, it probably is.”

Monetary Sovereignty seems too good to be true. The federal government can pay any debt. In fact, it creates more money simply by paying its debts. Taxes are unnecessary. Borrowing is unnecessary. Bankruptcy is impossible. And all the while, inflation can be prevented. We can have Medicare for everyone. Education for everyone. A much richer Social Security. An end to poverty. We can have it all.

This cannot be. Our world is turned upside down. All we have been taught and all we believe is wrong. This is too good to be true; it cannot be true. It is Pollyanna.

So cynicism may be part of it.

In answer to the question, why don’t the facts penetrate — why don’t we get it — part may be that fundamental misunderstanding about the difference between people’s finances and the federal government’s finances. Part may be the teen brain. And part may be cynicism.

Put them all together and they spell “austerity,” for us, for our children and for our grandchildren. This will be our legacy. This is how we will be remembered.

Or maybe there’s something else. Searching. Searching.

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

–The New York Times, a model of consistency. Has spread the same economic ignorance for 40 years.

I haven’t bothered to read the New York Times in months, only because they print exactly the same economic tripe as my hometown paper, the Chicago Tribune. So what would be the purpose? But on the lottery-scale chance things had changed, I decided to give them another peek. After all, they are one of the world’s great newspapers, aren’t they?

Here is what I found.

The Gridlock Where Debts Meet Politics
By David Leonhardt, November 5, 2011, NY Times

WASHINGTON — With Greece struggling to form a government that can force harsh austerity measures onto a weary public, Europe is in usual form, taking a couple of steps toward solving its fiscal crisis and then a couple of steps backward. Washington, meanwhile, is hoping that the latest deficit-reduction committee in Congress can succeed where others have failed.

Of course, if the deficit-reduction committee “succeeds” in cutting the deficit, America will have a fiscal crisis identical with that of Europe’s, perhaps worse.

This cycle of bureaucracy and gridlock has been repeating itself for months now. It is tempting to blame feckless politicians on both sides of the Atlantic, and that would not be entirely wrong.

But the frailty of politicians is not the full story. The fact is that most of the industrialized world — Europe, the United States, Japan, too — is in a difficult economic bind. There are no simple solutions that would quickly win the approval of citizens if only politicians were willing to try them.

The author, David Leonhardt, clearly does not understand the differences between Monetarily Sovereign nations (United States, Japan, some of Europe) and monetarily non-sovereign nations (the euro countries). So he just lumps them together as though they had similar problems.

And no simple solutions? Really? How about these:

1. Monetarily sovereign nations increase deficit spending
2. Euro nations either leave the euro, or the EU give (not lend) euros to its member nations, as needed.

That simple enough for you, Mr. Leonhardt?

Most voters in these places have yet to come to grips with the notion that they have promised themselves benefits that, at current tax rates, they cannot afford. Their economies have been growing too slowly, for too long, to pay for the coming bulge of retirees.

True for monetarily non-sovereign nations; completely untrue for Monetarily Sovereign nations, which do not use taxes to pay for benefits. Nor do economies pay for retirees, if Mr. Leonhard is referring to programs like Social Security.

“The U.S. and Europe have to make hard choices because of two things: slower growth and aging populations,” said Barry Eichengreen, an economist at the University of California, Berkeley. “Europe’s choices are even harder than America’s, because the prospects for growth are more dubious.”

The problems of Europe’s monetarily non-sovereign nations are completely different from the problems of Europe’s Monetarily Sovereign nations. Mr. Leonhardt doesn’t understand that. Talking about “Europe’s choices” simply makes no sense.

Europe still has not set aside enough money to cover its debts, with Italy now presenting the most immediate problems, many economists say. In the United States, a special Congressional deficit committee appears to be making little progress, and some members of Congress have even begun talking about undoing the automatic Pentagon cuts set to take place if the committee deadlocks.

Same problem. He writes about economics, but has no clue about the differences between MS and monetary non-sovereignty. So, he has no clue about economics. The UK doesn’t need to “set aside” money, though Spain does. If Mr. Leonhardt were a sportswriter, he might say, “The problem with the Chicago Bears and the Chicago Cubs is they don’t get on base enough.”

On the most basic level, affluent countries are facing sharply increasing claims on their resources even as those resources are growing less quickly than they once were. The increasing claims come from the aging of the population, while the slowing growth of available resources comes from a slowdown of economic expansion over the last generation.

Pure gobbledegook. What “resources and what “claims” is he talking about?

“These are very difficult moral issues,” said Benjamin an, an economic historian at Harvard. “We are really talking about the level at which we support the elderly retired population.”

If there is a university that combines more hubris with less knowledge of economics than Harvard, I’d like to know what . . . oh, wait . . . The University of Chicago is right up there. Anyway, does the government of the greatest nation on earth – a nation with the unlimited ability to pay any bill of any size, really have a “difficult”moral issue, in deciding whether to support its elderly? This is a difficult issue?

In the United States, the debates center on whether to let government grow as the population ages and whether the affluent, who have done very well in recent decades, should pay more taxes. In Europe, the issues revolve around whether to shrink government, which is bigger than it is here, and whether well-off northern countries like Germany should support poorer countries, like Greece and Italy, which also suffer from fiscal irresponsibility.

Yup. Sadly, those are the debates, only because the economists and the media put their hands over their ears and scream, “I can’t hear you. I can’t hear you.” whenever anyone mentions Monetary Sovereignty.

Everywhere, though, the debate is about much more than just partisan advantage or the next election. It is a philosophical debate.

Yah, right. It’s a philosophical debate – about who will win the next election.

Polls, however, suggest that there is little political advantage in explaining the reality of future budget math. “Everybody thinks, ‘My taxes are going to fund somebody else’s social programs,’ ” Mr. Eichengreen said, “making people even more resistant to solutions.”

In other words, the pols think the voters are too stupid to understand the facts, so why even bother? Just keep feeding them bullsh*t, and hope to win next November. Who cares about reality or the future of America.

An article in the current issue of The National Interest, named this problem the “no-growth trap.”

In the short term, this trap takes the form of resistance to emergency measures, like Germany’s distaste at bailing out more profligate countries, which may increase deficits. “The central paradox of financial crises,” Timothy F. Geithner, the Treasury secretary, said before leaving for the Group of 20 meetings in Europe last week, “is that what feels just and fair is the opposite of what’s required for a just and fair outcome.”

No, the central paradox is those people who have been given the power to solve the problem don’t understand Monetary Sovereignty, so they have no solutions.

Longer term, the trap is created by resistance to the higher taxes and reduced benefits necessary to return countries to financial stability. The resistance is understandable, given how weak income growth has been in the past decade, but it is not sustainable.

The voters are smarter than their leaders. The voters know higher taxes and reduced benefits will not “return countries to financial stability,” unless one considers a depression and the death of a nation to be financial stability.

In the months since I last visited the New York Times, nothing has changed – still printing the abject ignorance about our economy – still mouthing the same, old, popular economic wisdom that went obsolete on August 15, 1971.

It’s been more than 40 years. Isn’t that enough time for the vaunted New York Times to catch up?

One dunce cap for Mr. Leonhardt

(This brings us to a 1065 cap deficit. I doubt a cap tax will bring me to cap stability.)

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

MONETARY SOVEREIGNTY

–The Big Lie triumphs. Darkness settles over America. The end of the American dream.

. . . in the big lie there is always a certain force of credibility; because the broad masses of a nation are always more easily corrupted in the deeper strata of their emotional nature than consciously or voluntarily; and thus in the primitive simplicity of their minds they more readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods.

It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously.

Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation . . .

—Adolf Hitler , Mein Kampf, vol. I, ch. X

Once we believed that in America, hard work and a good plan would allow even the poorest among us to climb the economic ladder. We believed “rags-to-riches” was a natural outgrowth of the American experience. We believed in the American dream.

Now, the rich have used The Big Lie to convince the poor to vote against their own best interests. The so-called “99%” have been sold the idea that a mean, hardscrabble life is a noble life, that pain leads to pleasure and that austerity is the road to prosperity. The wealthy“1%” of America don’t believe these things for themselves, of course. They are exempt from The Big Lie, and the poor don’t object.

The American dream always has been a cooperative enterprise between Americans and the American government, each relying on the other. It begins with the belief that anything is possible, if you truly strive. It continues with the belief you can make a better life for yourself, and an even better life for your children, and they will make a better life for their children.

By necessity, the American dream includes a beneficial government that unlike those heavy-handed European monarchies of yore, encourages and assists entrepreneurial growth by providing financial and social support – a government that looks out for the little guy, a government that “has your back.”

That beneficial government first does what a government is formed to do: It creates money. And it assures that even the poorest among us have access, not only to dollars, but to the benefits dollars can buy – access to education, food, housing, health care, transportation, communication, protection and the law.

On August 15, 1971, the U.S. acquired the most valuable asset any nation can have– more valuable than its land or its minerals or its water or its crops – and that asset is Monetary Sovereignty, the unlimited ability to control its money supply. No longer would our government’s hands be tied by tax collections. Federal spending only would be limited by inflation, and inflation could be controlled with interest rates. The stage was set for the “99%” to receive the government support the American dream requires.

No longer would our government’s hands be tied by tax collections. Federal spending would be limited only by inflation, and inflation could be controlled with interest rates. The stage was set for the “99%” to receive the government support the American dream requires.

But though the underlying facts changed in 1971, the teaching of our leaders never did. Americans were told The Big Lie: That despite Monetary Sovereignty, federal finances continue to be like personal finances – limited by income – and that federal income pays for federal spending, and without income there can be no spending.

It was as though Monetary Sovereignty never happened.

Even today, the vast majority of economists, and virtually all politicians, media and columnists deny the implications of what happened in 1971. So, we remain blinded to the most important event in U.S. economic history.

Visualize any medical doctor denying the germ theory of disease or any physicist denying the existence of atoms, or any geographer denying the world is round, and you have a parallel with professional economists denying Monetary Sovereignty, so central is this basic truth of economics.

While there always have been worries about federal deficits and debt, and these worries earlier had a basis in fact, the federal government was not greatly hindered. Massive federal deficit spending cured the Great Depression at a time when the U.S. was monetarily non-sovereign. Now, ironically, when there should be no worries at all about deficits and debt, a group called the Tea Party has risen to focus on these meaningless numbers, and by spreading The Big Lie, has turned the entire nation into debt watchers.

Now, ironically, when there should be no worries at all about deficits and debt, a group called the Tea Party has risen to focus on these meaningless numbers, and by spreading The Big Lie, has turned the entire nation into debt watchers.

And this focus has impacted the poor more than the rich, contributing to the increased financial gap between them, destroying the American dream. The people have been taught federal deficits are “unsustainable,” a “ticking time bomb.”

They have been taught federal deficit spending will cause inflation “eventually,” though there is no historical relationship between federal deficits and inflation.

They wrongly have been taught our children and grandchildren will pay for today’s federal debt, a debt they neither own nor ever will pay.

The people have been taught that sacrifice now will protect our children and grandchildren, though in fact, sacrifice now actually will punish those children and grandchildren.

Cut Social Security? Cut Medicare? Cut support for education? Cut FDA oversight of food and drugs? Cut oversight of banks and other financial institutions? Cut support for medical and physical research? Cut support for education? Don’t extend unemployment benefits? Cut support for climate change prevention?

Every single cut punishes the children and grandchildren of the “99%.”

All of these facts should be obvious to even the most casual observer. Yet they disappear in the face of the Big Lie, which is that a Monetarily Sovereign nation somehow can run short of the money it has the unlimited ability to create, and that it must borrow and tax in order to obtain its money, and that like you and me, it can have difficulty paying its debts with its own money, and that federal benefits, particularly benefits to the “99%”, must be reduced.

The Big Lie comes from the “1%” influence on the economists, the media and the politicians, all of whom are financed by the wealthy. It is the “1%’s” method for protecting, and indeed, expanding the Gap between rich and poor.

That is the motivation, and we have seen the effect, but what is the cure?

Clearly, rational facts do not overcome The Big Lie. Instead, I believe there must be an event or series of events, so horrifying that a desperate public will ignore The Big Lie and seek refuge in a bigger truth.

Today, we are in the early stages of such an event – a terrible recession – and political action to reduce the federal deficit will exacerbate this recession until it turns into a full-blown depression, and the resultant riots and chaos perhaps will be sufficient to turn even the most brainwashed toward the fundamental truths of Monetary Sovereignty.

The wealthy will fight with every resource at their command. They will intimidate the economists and the media and the politicians. They will deny the facts. They will claim patriotism and moral high ground. They will shame and deceive.

And they might win, and if they do, we have seen the end of the American dream.

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

MONETARY SOVEREIGNTY

–Why postage is really, really ignorant

Amazing, isn’t it, how many areas of our lives are touched by the ignorance of Monetary Sovereignty.

Washington Post
Senators unveil bipartisan Postal Service rescue plan
Andrew Harrer/BLOOMBERG

A bipartisan Senate bill introduced Wednesday would give the U.S. Postal Service about $7 billion to pay for employee buyouts and other debt, allow a renegotiation of postal worker health-care benefits and require two years of studies before ending Saturday mail deliveries.

The plan, a modified version of proposals previously introduced by Sens. Thomas R. Carper (D-Del.) and Susan Collins -(R-Maine), will be considered by a Senate committee Wednesday.

The bill refunds about $7 billion that auditors agree the Postal Service has overpaid into federal worker retirement accounts. The money would be used in part to offer buyouts of up to $25,000 to as many as 100,000 eligible postal workers, with the rest of the funds put toward other debt.

Refunding the money “is not a bailout,” Sen. Joseph I. Lieberman (I-Conn.) said. “It’s the result of a legal analysis that everybody agrees with, that this was in fact an overpayment by the Postal Service” into the Federal Employee Retirement System.

House Republicans disagree. They consider any attempt to refund the Postal Service with money from federal retirement or health-care accounts would be a taxpayer-funded bailout.

The Senate bill also would scrap a 10-year payment schedule that requires the Postal Service to pay about $5.5 billion annually to prefund future worker retirements. The bill would spread out those payments over 40 years, significantly reducing the annual obligations that postal officials say cause much of the agency’s cash shortfalls. The Postal Service also would be allowed to renegotiate a new health-care plan with its major worker unions to help cut costs.

Short-term spending legislation passed last month by Congress gave USPS until Nov. 18 to make its annual prefunding payments. Aides said Wednesday that they did not know whether the Postal Service would get another extension or be forced to make the payment this month.

If the bill passes, plans to end Saturday mail deliveries would have to wait at least two more years until USPS and postal regulators further study the potential effects on customers and industries that rely on six-day mail deliveries.

The Postal Service also would have to scrap the delivery of mail to some doorside mailboxes in favor of sidewalk, curbside or centralized neighborhood boxes. The bill also would force the USPS to further study the effects of closing post offices and mail processing facilities — a move that postal officials said could save billions of dollars in operating costs.

“Without taking controversial steps like these, the Postal Service simply isn’t going to make it,” Lieberman said. “That would be terrible.”

Terrible, indeed. The post office provides one of our government’s most important services. How in the name of idiocy, was it decided that this particular federal agency must run a balanced budget? Why?

Shall we now demand that the U.S. Supreme Court run a balanced budget? Shall Congress and the White House run balanced budgets? Must the military, the FAA, the CIA, the FBI, FEMA and the other 1300 federal agencies each run balanced budgets?

The federal government very simply, should make the post office a free service, paid for by federal deficit spending. Here’s a little secret for you. Those dollars you spend on postage stamps do absolutely nothing to help the federal government spend. They do not pay for post office expenses. And as we have seen, the federal government can give the postal service dollars at will.

The only thing accomplished by postage costs is to reduce the use of the postal service. Is this a worthwhile goal? Is reducing the number of postal workers (thereby increasing national unemployment) a worthwhile goal? Is cutting Saturday deliveries a benefit to America?

Postage is a tax on mail users. All taxes are anti-stimulative in that they remove dollars from the economy. As always, those who do not understand Monetary Sovereignty do not understand economics.

I award 1 dunce cap to whomever first decided the post office must run a balanced budget, and to the politicians who continue this harmful charade. This will be my 1066th dunce cap awarded. Not running short, yet. Still sustainable. Still “prudent.” Still living within my means. And the value of each dunce cap has not gone down.

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

MONETARY SOVEREIGNTY

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