–Why Pakistan and Afghanistan, but not Mexico?

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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This is not my area of expertise, but you may find it thought-provoking.

First the setup question: Why have U.S. soldiers been in Afghanistan and Pakistan? Presumably, the answer is to fight the Taliban and al Qaeda, who over the years, have killed many Americans and who represent a serious, ongoing threat to the American way of life. That seems like a reasonable use of an army, even when the action occurs in a putative ally.

Now the real question: Which has caused more American deaths and hardship, and been a bigger threat to the American way of life: The Talaban/alQaeda combination or the drug cartels of Mexico? The question came to mind when I saw a Washington Post article which said:

Today’s competitive crime mafias in Mexico are no longer satisfied with bazookas, rocket-propelled grenades or land mines. The Mexican military has discovered that gangsters south of Texas are building armored assault vehicles, with gun turrets, inch-thick armor plates, firing ports and bulletproof glass.
[ . . . ]
Last year authorities found an elaborate tunnel stretching more than 2,200 feet, complete with train tracks and ventilation, that was used to move marijuana between a house in the Mexican city of Tijuana and a warehouse in Otay Mesa, Calif.

On the high seas, maritime forces have intercepted dozens of “narco-submarines” hauling multi-ton loads of cocaine north. The semi-submersibles travel very low in the water to avoid detection.

With growing frequency, U.S. guards have spotted ultralight aircraft barnstorming over the border fences to drop 200-pound loads of pot in fields for waiting pickup trucks that flash their high beams or create a makeshift drop zone out of light sticks. According to U.S. officials, there have been more than 300 ultralight incursions into the United States in the past 18 months.

I say the Mexican drug cartels have caused far more damage to America, and are far more likely to continue doing damage well into the future. If true, why do we devote so much military effort to Afghanistan and Pakistan, all of whom are far across the ocean, while devoting virtually no military effort to Mexico, right on our border.

As in Afghanistan and Pakistan, the Mexican government has shown very little inclination or ability to rid itself of America’s enemies, the drug cartels. Isn’t there even more reason to make the same deal with Mexico as we have with Afghanistan, and send in our bombers, our Predators and our troops?

According to the Journal of American Medical Association, in 2000, 17,000 deaths occurred as a result of illegal drug abuse. But death is only a small part of the story. Consider individual lives ruined, entire families ruined, entire neighborhoods ruined. The damage done by the Pakistan and Afghanistan wars, while horrendous, pales in comparison to the damage done by illegal drugs from Mexico.

What is different about the Mexican “disease” that makes it immune from a “vaccination” by the U.S.army? Mexico, is within easy range of our army, and stabilizing Mexico not only would reduce illegal drugs, but illegal immigration. Further, Mexico could become a much stronger trade partner, if its people and businesses were not subjugated by crime lords.

The current situation makes internal reform almost impossible. The government, the army and the drug cartels all work together. There is no institution with the power to stop them. Mexico will continue to decline until it is one vast illegal drug factory. There is no countervailing effort. Talk about WMDs, what is worse than illegal, habit-forming drugs?

So my question is: Why Afghanistan and Pakistan, but not Mexico? Don’t we have our priorities confused?

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

–How the poor get screwed. Why deficit reduction increases the gap between rich and poor.

Every politician claims to love the poor, the downtrodden, the unemployed. Yet, the same politicians vote to cut the deficit, hurting those poor he/she loves so much. Sadly, the poor buy into it.

Both parties claim that reducing the federal deficit will reduce unemployment and benefit the working class and the poor. Exactly how a reduction in net federal dollars flowing into the economy will stimulate employment and benefit the working class, never is explained, because there is no explanation. It is a bogus argument.

To reduce the deficit requires taxes to be increased or federal spending to be reduced. The Democrats want to reduce the deficit by increasing taxes on the “wealthy.” The Tea/Republicans want to cut the deficit through federal spending reductions. Functionally, there is no difference between a tax increase and a spending reduction; both reduce the amount of money being added to the economy.

Traditionally, the Republicans have favored cutting taxes, an act that benefits economic growth. Democrats traditionally have wanted to spend more, which also benefits economic growth. Unfortunately, the Tea Party, a perverted outgrowth of President Reagan’s memorable statement, “. . . government is the problem,” has taken over the Republican Party, who now will do and say anything to get into power.

This has dragged in the Democrats, who will do and say anything to stay in power, so both parties now are preaching an anti growth line, being led by a group of economic know-nothings. Extreme views often gain favor during difficult times, when people are desperate for a solution, and in this case, the extreme views are supported by the wealthy. Note how such luminaries as Bill Gates and Warren Buffet have made statements actually supporting a tax increase! Why do rich people want their taxes raised? Not out of generosity. Read on.

Because a growing economy requires a growing supply of money, a tax increase and/or a spending reduction reduce economic growth. And no matter how it’s done, deficit reduction hurts the lower incomes most. Consider a tax increase on the wealthiest. What does it accomplish? It reduces the amount of money in the economy. A Monetarily Sovereign nation does not spend tax money. It has no need to. The spending itself creates money. So what happens to tax money? It leaves the economy and is destroyed. It simply ceases to exist.

History shows that every depression and most recessions not only have been caused by reductions in the money supply, but even by reductions in money supply growth. See: SUMMARY. Who suffers most during recessions and depressions – the wealthiest or the poorest? Right, the poorest.

Although tax increases will force the wealthiest to pay more taxes, that will not affect their life styles. They’ll find more tax “loopholes.” They’ll get by on two cars rather than three (Dealerships may fire some working salespeople), and the remodeling of the 2nd home may be delayed a year (Some tradespeople will lose their jobs). But life will go on for the wealthy. Not so for the less wealthy who, during a recession, may become unemployed, lose their housing, spend less and cancel plans for children’s college.

According to the IRS, the bottom 50 percent of Americans earned less than $32,879 and paid only 2.9% percent of the nation’s income taxes, down from 3 percent a year earlier. So to reduce the so-called “deficit,” shall we increase taxes on these folks?

Where the lowest paid really get hit is with FICA. In 2010, income taxes totaled $935 billion, and FICA totaled $875 billion – pretty close. But while all income is subject to income tax, only salaries below $100K are subject to FICA – an enormous saving for the wealthy. And, not only does FICA steal 7.65% from every salaried worker, but it steals another 7.65% from his/her boss. Think of it as 15.3% that could have gone to the salaried employee, but instead goes to the government, where it is destroyed. FICA, not income tax, is the big tax burden on working people.

In short, all taxes and tax increases hurt everyone in the economy — they are recessionary — but they hurt the poor more than the wealthy, so by comparison, the wealthy become wealthier. Tax increases make the wealth gap grow.

Now consider a federal spending reduction. Medicare and Social Security are the biggest targets, and who relies most on these federal programs – the 1% of Americans defined as “rich, who earned an adjusted gross income of $410,096 or more and accounted for 22.8% of all wages, while paying 40.4% of total reported income taxes? Or are the 99% defined as “not rich” more likely to need Social Security and Medicare?

Right. If Medicare and Social Security are cut, the rich will hardly notice. Warren Buffet probably doesn’t even know whether he receives Medicare and Social Security benefits. Financially, it is meaningless to him. Cutting social programs hurts the poor more than the rich, increasing the gap between rich and poor.

Or, we could cut military spending. This would cut profits and jobs from all those industries that sell to the U.S. military, and it would cut the number of salaried service people. Cutting military programs hurts the poor more than the rich, increasing the gap between rich and poor.

No matter where you look in the federal budget, spending cuts would hurt the bottom 99% far more than the top 1%.

In summary, federal tax increases and federal spending cuts (i.e. deficit reduction) cause recessions, and all three hurt the middle class and poor far more than they hurt the rich. Deficit reduction will increase the gap between the rich and the poor.

And the wealthy have brainwashed the non-wealthy into thinking this is a good thing.

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

MONETARY SOVEREIGNTY

Erskine Bowles and Alan Simpson reveal why the nation is in trouble: Them.

President Obama created a deficit commission headed by Erskine Bowles, chief of staff for President Clinton, and Alan Simpson, former Senator from Wyoming. The two of them wrote a fact-free, guest column for the 5/2/11 Fortune Magazine.

Here is the first paragraph of their article:

Our nation faces the most predictable economic crisis in its history. Spending is rising rapidly, and revenues are failing to keep pace. As a result the federal government is forced to borrow huge sums each year to make up the difference.

Totally, 100% wrong. Since 1971, the end of the gold standard, the U.S. federal government has had the unlimited ability to pay its bills without borrowing, even without taxing. There is zero relationship between federal deficits and the federal government’s ability to spend.

The situation Bowles and Simpson describe is called monetary non-sovereignty. But the U.S. is Monetarily Sovereign, an entirely different economic situation. It’s as though Bowles and Simpson were hired to analyze a football game and came back with recommendations based on tennis rules.

Creating T-securities from thin air, then exchanging them for dollars previously created from thin air(aka “borrowing”), no long is necessary. The fact that the two people heading Obama’s deficit commission don’t understand this fundamental truth of economics, is shocking.

Bowles and Simpson are no more ignorant than the politicians, media writers and old-line economists. What’s shocking is the fact that they head a commission entrusted with analyzing the situation and making recommendations based on their analyses. Instead, they parrot the popular and obsolete wisdom of the day.

Continuing the paragraph:

If not addressed, burgeoning deficits will eventually lead to a fiscal crisis, at which point the world’s financial markets will force decisions upon us.

There’s that word “eventually” again, the word all debt-terrorists use, because they have no facts. “Eventually” is the cousin to “unsustainable” and “ticking time bomb,” previous debt-terrorist favorites. Yes, “eventually” the U.S. will lose the ability to pay its bills, if Congress, on the advice of Bowles and Simpson, refuses to raise the debt ceiling. Meanwhile, according to current law, the U.S. can pay any bill of any size and time — without borrowing.

Later, in another paragraph, Bowles and Simpson say:

Recently Paul Ryan, the Republican chairman of the House Budget Committee, put forward a serious, honest plan for addressing our nations fiscal challenges. But while it makes a constructive contribution to the debate, it fall short of the balanced, comprehensive approach necessary to achieve bipartisan support.

Huh? It’s “serious,” “honest” and “constructive,” but it’s not “balanced” or “comprehensive”? Paul Ryan’s plan is the worst thing that possibly could happen to America, especially to America’s lower paid, 90% majority, the people who depend on Medicare, Social Security and jobs, all of which Ryan’s plan would erode. Bowles and Simpson, rather than actually looking at facts, have given us the typical, wrongheaded gobbledegook we can expect from political appointees who have no idea what they are talking about.

The article ends with:

(The) prospect for bipartisan compromise now offers us the best hope for genuine progress that benefits both sides, and important, benefits the country.

Sure, they want compromise so long as the compromise begins with the diametrically wrong assumption that our Monetarily Sovereign nation somehow has gone back to pre-1971, on the gold standard, to become monetarily non-sovereign.

If you’re wondering how the wealthiest nation in the world could find itself in ongoing financial difficulties, you only need listen to Bowles and Simpson, the two men given the assignment to investigate solutions, but instead came back with exactly what their boss told them.

Bowles and Simpson — may their names live on in disgrace, as classic examples of political hacks who know nothing about the job they were given, so rather than helping, they do damage. (“Doctor, your patient died needlessly. You did a Bowles and Simpson operation.”)

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

MONETARY SOVEREIGNTY

–Republicans continue to be their own worst enemy, by Harold Meyerson

The Washington Post published an article by Harold Meyerson, (Opinion Writer, June 2, 2011) titled, Republicans continue to be their own worst enemy. The article began with the well-deserved criticism of Paul Rand:

If you think it is Wisconsin Rep. Paul Ryan’s gutting of Medicare that is pulling the Republicans down, you need to think bigger. The House Budget Committee chairman’s proposal to convert Medicare into a private insurance-voucher plan is indeed a political calamity for the GOP, as the results of last week’s congressional special election in Upstate New York showed. But it’s far from the only disaster that the party has visited upon itself.

Mr. Meyerson then goes on to give what he considers to be additional examples of Republican self-immolation:

In Florida, only 29 percent of voters told the Quinnipiac pollsters last week that they approved of Gov. Rick Scott’s five-month tenure in office, during which Scott has endeavored to slash business taxes — already among the nation’s lowest — while also reducing spending on schools and cutting care for the developmentally disabled.
[ . . .]
Things are looking just as bad for the GOP’s new crop of Midwestern governors. In Wisconsin, Scott Walker, whose proposal to curtail collective bargaining for public employees triggered a nationally watched eruption of protest . . .

(Re.) Ohio Gov. John Kasich: . . . approval rating was a bargain-basement 33 percent, while his disapproval rating had risen to 56 percent. Voters . . . asked if they intended to support the referendum likely to appear on this November’s ballot that would repeal the Kasich-backed law sharply limiting collective bargaining rights for public employees. Ohioans said, by a 55 to 35 percent margin, that they’d vote to repeal it.
[ . . .]
In Michigan, Gov. Rick Snyder had a 33 percent approval rating, against a 60 percent disapproval rating, in a May survey that also found that 71 percent of Michigan voters thought poorly of his budget cuts to public schools, and more than 60 percent opposed his proposed tax reductions on business. A May survey of New Jersey voters by Fairleigh Dickinson University pollsters found that Gov. Chris Christie’s favorables had slumped to 40 percent, while his unfavorables had risen to 60 percent.

Meyerson compares them with Democratic governors Jerry Brown (California) and Andrew Cuomo (New York), who have favorable ratings.

In contrast to their GOP counterparts, neither Cuomo nor Brown has proposed stripping public employees of meaningful union representation, though both have sought and obtained cutbacks to public programs. The Los Angeles Times/USC Dornsife poll also shows that Californians support Brown’s plan to retain higher tax rates rather than further decimate public schools.

Meyerson concludes:

But the Republican governors — like Ryan and his fellow Republicans in Congress — have pursued a more radical course that sharply disadvantages most Americans. . . . Republicans did not run last year on a platform of ending collective bargaining, slashing school budgets and gutting Medicare — in essence, favoring society’s most powerful at the expense of everyone else — yet that’s precisely what they’ve done since gaining power.That’s not merely bad policy; it’s bad faith — and bad news for Republicans’ electoral prospects.

It also is extraordinarily ignorant (though I don’t know whether Meyerson truly understands why), because it is unnecessary. At the federal level, a Monetarily Sovereign government does not need to cut Medicare and Social Security. The federal government has the unlimited ability to pay for these vital services. While the Tea (formerly Republican) Party rightly says that increasing taxes on the wealthy is a bad idea for the economy, cutting Medicare and Social Security are orders of magnitude worse ideas.

Not only will Medicare and Social Security cuts harm the lower and middle classes, their children and their grandchildren, but these cuts will harm the entire economy by removing money from the economy. And this whole controversy exists because the Tea/Republicans do not understand the differences between Monetary Sovereignty and monetary non-sovereignty.

By contrast with the federal government, the states, being monetarily non-sovereign, do not have the unlimited ability to support state and local programs. They are forced to cut services or increase taxes or be more efficient. In reality, there is a low limit to how far efficiency can take you, so it comes down to services vs taxes, and people want their services.

Of course, the long-term solution to the states’ (and counties’ and cities’) problems is federal support. But again, this requires an understanding of Monetary Sovereignty, a knowledge of which not one national politician has demonstrated. (Visualize 550+ people running our economy, and not one of them has even a basic understanding of economics.)

So the Tea/Republicans, who rode to power on a wave of knee-jerk discontent, now will face an electorate who have had a chance to think about realities. Carrying anti-government placards and screaming anti-government slogans will not overcome the reality that the people like their Medicare and Social Security, and if anything these programs should be expanded – and don’t you dare touch them. Here is one case, where the people are much smarter than the politicians – or is that always the case?

Of course, this all gets back to my own favorite slogan, “Those who don’t understand the differences between Monetary Sovereignty and monetary non-sovereignty, don’t understand economics” (and they should stop writing about, or voting on, economic issues).

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

MONETARY SOVEREIGNTY

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