Tag: PIIGS

–Christine Lagarde is the world’s best choice for managing director of the International Monetary Fund. Oh, really?

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Thank heaven for the Chicago Tribune editors. I always can depend on them to demonstrate uncanny ignorance of economics, which gives me the repeated opportunity to pontificate.

Here is an excerpt from their 7/2/11 editorial titled, “Fresh air at the IMF.

When Christine Lagarde begins her job as managing director of the International Monetary Fund on Tuesday, she will step into one of the most powerful finance jobs in the world at a time of instability both inside and outside the global lender. She will also be a rare commodity at the top of the IMF, a woman.

The IMF needs, more than anything, strong leadership right now. Greece’s debt crisis threatens the worldwide economic recovery. Emerging market leaders from China to Russia to Brazil are demanding a bigger say in the IMF, which is traditionally run by a European. And the IMF’s internal working are in flux following the departure of director Dominique Strauss-Kahn . . .

Some critics assert that Lagarde’s lack of economic training — she is a corporate lawyer, not an economist — leaves her unqualified to run an institution heralded as a temple to global economics. But those who know her say that argument is weak. Lagarde, most recently the French finance minister, brings substantial credentials to her new post. (She) is known as a shrewd negotiator, effective manager, superb communicator and a no-nonsense consensus builder.

She has ample qualifications . . .

Perfect. A group of editors, who continually demonstrates a lack of economics knowledge, agrees with the IMF that a corporate lawyer has “ample qualifications” to run an economics-centered organization. Why do they agree? As I said, they themselves lack economics knowledge so they feel such knowledge is unnecessary.

Question to Tribune editors: Would you like your next surgery to be conducted by someone with no medical training? Or when you owned the Chicago Cubs, did you hire ballplayers who didn’t know how to play baseball? (Wait a minute. On second thought, that is exactly what you did. Now I’m beginning to understand your editorial positions).

Then again, perhaps the Tribune is right. Perhaps someone with no economics knowledge will do better than a gang of old-line economists, who still live in the gold-standard days, and have zero understanding about the differences between Monetary Sovereignty and monetary non-sovereignty. Surely the IMF, by repeatedly lending money to monetarily non-sovereign, overextended nations(!), then telling these nations to cut spending and increase taxes (the most direct route to recession), has demonstrated that knowledge of economics is not a qualification for managing director. So for these astute fellows (all men), Ms. Lagarde may be the most logical choice.

The blind lead the blind.

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


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No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetary Sovereign, , and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.

Remember that the next time you’re tempted to ask a teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it ruined my future.”

MONETARY SOVEREIGNTY

–Japan, Ireland, Greece: Facts vs. Mainstream Economists

The debt hawks are to economics as the creationists are to biology.

The mainstream economists never change, but my hope is if I continue to demonstrate the inconsistencies of mainstream economics, eventually the word will get to the politicians, the media and the public. Here is a quick sampling of 10/26/10 AP articles:

“TOKYO — Japan’s Cabinet approved an extra budget to help finance $63 billion of stimulus spending aimed at spurring the country’s lackluster economy as it battles deflation and a strong yen.”

The CIA’s World Factbook 2010 shows Japan’s Debt/GDP at 189%. According to mainstream economics (aka debt-hawk economics), that Debt/GDP ratio should force a terrible inflation on Japan, and its debt should be “unsustainable.” But Japan is battling deflation, and seems to have so little difficulty “sustaining” its debt. And it will spend an additional $63 billion. See the disconnect?

The same source lists the Debt/GDP ratio for the U.S. as 53% (More recent data from the Treasury shows this to be 66%), far lower than Japan’s. Yet, the debt hawks claim – without any supporting data — the U.S. federal debt must be reduced by raising taxes and/or reduced spending, either or both of which will injure the economy.

But wait, there’s more. According to mainstream economics, all that borrowing should have forced Japan’s interest rates up, which should be bad for economic growth. But Japan’s benchmark interest rate is 0%, as low as it has been in 5 years. The reason: Japan’s benchmark interest rate is not market-derived; it is set by the Japanese government, just as the U.S. Fed Funds rate is set by the Fed.

“DUBLIN — Ireland’s government said it must slash euro15 billion ($20.8 billion) from its annual budgets in a four-year plan designed to bring Europe’s highest deficit back within EU limits.”

The EU demands that its nations have a Deficit/GDP ratio below 3%. However, as Ireland reduces stimulus spending, GDP also will fall. So, Ireland must chase a moving target, in which reductions in the numerator cause reductions in the denominator. Visualize a dog chasing its tail, and you have the EU mainstream economics version of Ireland.

“ATHENS, Greece — Greece’s central bank governor says the government must not relent in its planned deficit-cutting efforts but warns against further tax increases, which would deepen the recession.”

Just so we understand, tax increases will “deepen the recession” (by removing money from the economy), but deficit cuts, which also will remove money from the economy, are O.K.???

And this is what the science of economics has become.

There are two and only two solutions for Greece and Ireland. Either,
1. Return to Monetary Sovereignty by re-adopting your sovereign currency
or
2. Have the EU create a true United States of Europe whereby the EU would supply euros to its member nations as needed.

There are no other solutions. Oh yes, and stop demanding that your member nations commit economic suicide.

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

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”