Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
How soon will we suffer the Tea/Republican/Obama riots in the streets?
An interesting article ran on Washington’s Blog. I’ll quote from parts of it, but I can’t do it justice here. I urge you to go there to read the entire article.
The essence is that austerity combined with a large gap between the wealthy few and the rest of the population, an inevitable result of “cut-deficit” preaching by the Tea/Republicans and President Obama, will lead to riots in the streets, sabotage and other forms of serious civil unrest.
Guest Post: Austerity and Runaway Inequality Lead to Violence And Instability
By Washington’s Blog
A study this month by economists Hans-Joachim Voth and Jacopo Ponticelli shows that – from 1919 to the present – austerity has increased the risk of violence and instability:
From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble cross-country evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability.
Studying instances of austerity and unrest in Europe between 1919 to 2009, Ponticelli and Voth conclude that there is a “clear link between the magnitude of expenditure cutbacks and increases in social unrest. With every additional percentage point of GDP in spending cuts, the risk of unrest increases.”
“Expenditure cuts carry a significant risk of increasing the frequency of riots, anti-government demonstrations, general strikes, political assassinations, and attempts at revolutionary overthrow of the established order. While these are low probability events in normal years, they become much more common as austerity measures are implemented.”
The relation between austerity and riots is so clear that former IMF chief economist and Noble prize winning economist Joseph Stiglitz coined a phrase to describe what happens after the International Monetary Fund demands austerity in return for loans to indebted countries: “The IMF Riot”.
The military must be prepared . . . for a “violent, strategic dislocation inside the United States,” which could be provoked by “unforeseen economic collapse,” “purposeful domestic resistance,” “pervasive public health emergencies” or “loss of functioning political and legal order.” . . . “widespread civil violence,” the document said, “would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.”
As I suggested, read the entire post, the essence of which can be summarized: Civil unrest occurs when:
1. The government cuts spending
2. The gap between rich an poor grows.
As we have said throughout this blog, the drive to reduce the federal deficit is a combination of ignorance about Monetary Sovereignty and madness, supported by zero data, and based on faulty, obsolete assumptions about economics. Congress and the President have not created a deficit reduction committee. They have created a Riot Production and America Destruction Committee.
Sadly, the politicians’ response will be to call out the military, and ruthlessly suppress the population even further, rather than to solve the fundamental problem by federal deficit spending to stimulate the economy, create jobs and lift the lives of the underclasses.
Thus, do all great nations fall at the hands of their leaders. America is no exception.
Rodger Malcolm Mitchell
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