Mitchell’s laws:
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The more federal budgets are cut and taxes increased, the weaker an economy becomes. .
●Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.
●The single most important problem in economics is the gap between rich and poor.
●Austerity is the government’s method for widening the gap between rich and poor.
●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.
●Everything in economics devolves to motive, and the motive is the Gap.
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Perhaps no words more accurately and succinctly illustrate the confusion about economics than “Monetary Sovereignty.” It is not a theory or a hypothesis or a philosophy. In its essence it merely is a description of the way federal financing actually works.
A Monetarily Sovereign government has the exclusive and unlimited power to create its sovereign currency. Monetary Sovereignty is the foundation of economics. The United States is Monetarily Sovereign. It has the exclusively unlimited power to create the dollar. China, Canada, Australia, the UK and Japan are Monetarily Sovereign. They have the exclusively unlimited power to create their sovereign currencies.
The U.S. government created the dollar from thin air, by creating from thin air, all the laws and rules that made the dollar possible. Being sovereign over the dollar, the U.S. can do anything it wishes with the dollar. It can make the dollar equal to three euros, two pumpkins or one partridge in a pear tree. The federal government’s power over the dollar is unlimited.
Illinois, Cook County and Chicago are monetarily NON-sovereign. The dollar is not their sovereign currency, and they do not have the unlimited power to create dollars. France, Germany and Italy are monetarily non-sovereign. They do not have the exclusively unlimited power to create their currency, the euro.
You, your business and I also are monetarily non-sovereign. Even Bill Gates and Warren Buffet do not have the unlimited power to create dollars. They are monetarily non-sovereign.
Because our Monetarily Sovereign nation has the unlimited power to create its sovereign currency, the dollar, it never needs to ask anyone for dollars. It doesn’t need to tax or borrow, and it never can be forced into bankruptcy. It can pay any bill of any size at any time.
In fact, the federal government creates money by paying its bills. The U.S. has created many trillions of dollars, simply by pressing computer keys, and will continue to do so. It does not “owe” anyone for creating these dollars. The government cannot live beyond its means; it has no means to live beyond.
By contrast, if the debts of France, Germany et al, exceed their ability to obtain euros they, as monetarily non-sovereign nations, could be forced into bankruptcy. They did not create the euro, nor do they have the unlimited ability to pay bills.
Everything you believe about your personal finances — debts, deficits, spending, affordability, saving and budgeting — are inappropriate to U.S. federal finances. For this reason, your personal intuition about U.S. financing likely is wrong.
Because no Monetarily Sovereign nation can be forced into bankruptcy, none of that nation’s agencies can be forced into bankruptcy. The U.S Supreme Court, the Department of Defense, Congress, Social Security, Medicare and any of the other 1,300 federal agencies cannot go bankrupt unless the federal government wishes it.
(All the talk about Social Security or Medicare going bankrupt is misguided. Even if FICA were eliminated, Social Security and Medicare would not need to go bankrupt, unless Congress wished it. They could pay benefits, forever.)
The unlimited ability to create money is an uncontested fact for Monetarily Sovereign nations, although at any given time,economic growth, inflation, deflation, recession, depression and social factors may influence a nation’s decision to create money.
A Monetarily Sovereign nation even can choose to declare bankruptcy, for various reasons, but this would be an arbitrary matter of choice, not a forced necessity. An example would be Congress’s failure to raise the debt ceiling. This could force the U.S. into bankruptcy.
Debt hawks do not (or do not wish to) understand the implications of Monetary Sovereignty. You never will see that term on such debt hawk web sites as The Committee for a Responsible Federal Budget” or the Concord Coalition.
If you go to those sites you will see federal debt described in the same terms as personal debt – as an unsustainable obligation. While debt can be unsustainable for you, me, businesses, states, cities, counties and the monetarily non-sovereign EU nations, no debt is unsustainable for the U.S. government.
Debt hawks suffer from Anthropomorphic economics disease — the false belief that federal finances are like yours and mine.
The U.S. was not always completely Monetarily Sovereign. Prior to 1971, the U.S was on a gold standard. It had a sovereign currency, but did not have the unlimited ability to create that currency, since every dollar needed to be backed by a fixed amount of gold. No gold; no dollars.
Similarly, the EU nations are on a euro standard. Their ability to create euros is limited by law. Our states, counties and cities are on a dollar standard. Their ability to create or obtain money by borrowing or taxing is limited by local law, by voters and by lenders.
The financial problems of Portugal, Ireland, Italy, Greece and Spain (The PIIGS), are due not to deficits and debt. They are due to these nations having surrendered the single most valuable asset any nation can own — their Monetary Sovereignty — thus preventing them from servicing their debt by creating money.
Some debt hawks say that a Debt/GDP ratio exceeding 100% puts a nation on the brink of bankruptcy. Yet today, Japan has a Debt/GDP ratio above 200%, and this Monetarily Sovereign nation has absolutely no difficulty servicing its debt.
The debt hawks, as usual, having learned nothing from this, continue to wail about the meaningless Debt/GDP ratio, which because it is a classic apples/oranges comparison, is devoid of significance (the numerator is a 200-year measure of cumulative T-securities outstanding; the denominator is a one-year measure of productivity. The two are unrelated).
So-called federal “debt” is the nothing more than the total of dollars deposited in T-securities accounts at the Federal Reserve Bank. These accounts essentially are savings accounts.
To “pay off” the federal debt, the Federal Reserve Bank merely debits these T-securities accounts and credits holders’ checking accounts, the same way your personal bank transfers dollars from your savings account to your checking account. No new dollars needed.
Thus, all federal debt easily could be eliminated tomorrow.
That would require pressing a few computer keys. This would be a simple asset exchange, with no new money created and no inflation consequences.
Because a Monetarily Sovereign nation has the unlimited ability to create its sovereign currency, that nation needs neither to tax nor to borrow. Why would it?
Further, that nation does not use tax money or borrowed money to pay for spending. Federal income has no relationship to federal spending and so, taxes and borrowing are unnecessary.
When the states, counties, cities, you and I spend, we transfer dollars from our checking accounts to some other checking accounts. When the federal government spends, it creates dollars.
To pay its bills, the government sends instructions (not dollars) to creditors’ banks, instructing the banks to increase the dollar amount in creditors’ checking accounts. These instructions are in the form of checks or wires.
At the moment the bank obeys those instructions, dollars are created, and the money supply is increased. This is how the federal government creates dollars — not by “printing,” but by sending instructions.
If U.S. federal taxes and borrowing fell to $0, or rose to $100 trillion, neither event would reduce by even one penny, the federal government’s ability to create the money to pay any size bills.
Although Monetarily Sovereign nations need neither to tax nor to borrow, they may choose to do so for reasons unrelated to financial need. The spending by Monetarily Sovereign nations is constrained only by inflation.
However, since 1971, the end of the gold standard and the beginning of Monetary Sovereignty, there has been no relationship between federal deficit spending and inflation. More about this at Inflation and at SUMMARY.
At some level, deficit spending could cause inflation. For instance, if the government were to give every American $1 trillion, I am confident we would have inflation. But we are nowhere near that point.
Because taxes do not pay for federal spending, FICA does not pay for Social Security benefits. FICA could (and should) be reduced to zero, and benefits could be tripled, and this would not affect by even one penny the federal government’s ability to pay Social Security benefits.
Recently, the federal government made a profit on its purchase and sale of corporate stock (GM et al). All such profits came out of the economy, and therefore were recessive — harmful to the economy and useless for the federal government.
By reducing the money supply, federal profits = losses for the economy. Federal surpluses = economic deficits.
The federal government has “saved” money by firing, or reducing the pay of, federal employees. Those so-called “savings” would be money not sent into the economy, and therefore, are recessive. The federal government, having the unlimited ability to create dollars, does not need to “save” dollars.
Politicians and the press do not yet seem to understand Monetary Sovereignty. However, no one intelligently can discuss national deficits and debt without acknowledging the implications of Monetarily Sovereignty. The concept is the basis for all modern economics. Monetary Sovereignty is to economics as arithmetic is to mathematics.
The next time you go to any economics blog or web site, see if the contributors understand Monetarily Sovereignty and use it in their discussions. If they do, it might be a good site. If they don’t, the site is worthless.
All debt hawk objections revolve around just two questions:
1. How much money can the federal government create? Answer: Infinite
2. How much money should the federal government create? Answer: Up to the threat of uncontrollable inflation.
Despite an astounding 3,500% increase in debt since 1971, we are not anywhere near the point where deficits cause uncontrollable inflation (which is controlled via interest rates). As of this writing, we are fighting deflation.
In short, most of our economic problems are caused by the politicians, the media and the public not recognizinging the implications of Monetary Sovereignty. By crippling the federal government’s ability to grow the U.S. economy, the Tea/Republicans have injured more Americans than Al Qaeda.
I suggest you next read the data at Summary, for detailed answers to your questions.
Question of the day: How does a tax increase or spending decrease reduce unemployment or grow the economy?
Answer: When the federal government taxes, dollars are removed from the economy. When the federal government spends, dollars are added to the economy.
A federal deficit is a surplus for the economy.
Therefore, both a tax increase and a spending decrease reduce money growth in the economy. Because GDP = Federal Spending + Non-federal Spending + Net Exports, a reduction in money growth reduces economic growth.
Money is the lifeblood of an economy. Cutting the federal deficit to cure a recession is like applying leeches to cure anemia.
[For more on this subject, see: Free Lunch]
Rodger Malcolm Mitchell
Monetary Sovereignty
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Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)
10. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
—–
10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt
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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports
THE RECESSION CLOCK
Vertical gray bars mark recessions.
As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.
#MONETARYSOVEREIGNTY
This entire blog is devoted to asking the very same questions. The U.S. became Monetarily Sovereign on August 15, 1971, yet the government acts as though that never happened.
Why?
Rodger,
If the 99% understood MMT and knew they could be paid any amount of $$$ by the federal government without any restraints or consequences on the amount (yes, a $trillion would be inflationary)as you explain (even if it was just $10,000 to each citizen)- what would you think they would do then? Why would they go to work for $10.00 per hour if they knew the government could give them $10,000 without any need for someone else paying for it…ie taxes. I believe your MMT falls apart there. There are severe social consequences to MMT and to the seeming eutopia it paints.
After reading your speech for Obama explaining MS and MMTand my $5000 check etc.. I decided to stay at home on my couch with the TV and my Iphone, and forget about picking up all of Malcolm’s garbage – and if I don’t get more money next time (cause I ain’t going to school – even if I get paid for it), I will make sure the other 99% who feel the same way – and there are a lot of us who know about this now thanks to ole Malcolm – vote someone in office that will do it – or we will burn the house down. So Rodg, pick up your own garbage, and don’t forget to pay for my cable. Good luck, DA.
Apparently, you are a charitable and compassionate person, who knows that helping poor and middle class people encourages sloth.
It’s not sloth that’s the main issue, its dependence. Once people get on gov’t dependence getting out becomes increasingly difficult. The result is generational poverty. The result of Monetary Sovereignty is a monetary collapse. This is already happening and has been happening since the Fed started printing up fiat currency in the early 1900s. The value of the dollar has declined by over 98% in just the last 100 years. Bankruptcy for a Monetary Sovereign nation doesn’t mean it can’t print more money, it means that the paper money they print becomes completely worthless. Countries are moving off the dollar as the reserve currency at an accelerated pace. Here’s an excerpt from an article.
So while Bernanke is teaching students it’s too much of a problem to mine and ship gold to the U.S. to fill our void, the Chinese are buying up the mines — in Africa.
China is mining gold, buying gold, buying gold mines and encouraging its citizens to buy gold. They are even minting gold coins in various sizes to make it easier for citizens to accumulate. Maybe we need to take another look at Zhaoxue’s statement. “…for the acceleration of renminbi internationalization…” And right now the renminbi is fiat like all other currencies, right?
Reports in the past have told us it would be years before the dollars’ place, as the world reserve currency would end. At one time economists speculated if the dollar were ever replaced, it would be by the euro. Not anymore. Following the world wide financial collapse in 2008, and the stresses by such countries as Greece, the euro continues to teeter. The world watches for the impact of more Euro zone bailouts; it’s not looking good. All eyes right now are on Spain, as a not “if” but “when” bailout.
And then there is the fiscal cliff Ron Paul has warned about in the U.S. Failure by our nation’s leaders to reign in spending on domestic social issues, tighten tax loop-holes that encourage off-shore banking and investments by the rich (Hello Romney), an out of control military industrial complex pushing U.S. imperialism all over the world, and of course the Bush era tax cuts that are getting ready to expire and the now loss of the petrodollar. Add to that, the never ending Federal Reserve’s QEs. How much more can the fiat paper dollar withstand, even if stacked a billion thick?
Many people just don’t realize how aggressive the competition against the greenback has become in just the last two years by the red renminbi of China. The remnimbi is positioning itself to be viewed as a real global reserve currency alternative. China is not one to make public most of their financial plans, but let’s look at some of the stories that have made it into the mainstream media:
Russia and China in 2010 decided to do away with debt exchanges using the U.S. dollar and instead trade directly in ruble and renminbi.
In December 2011, Japan and China announced they would be promoting trades directly with each other and sidestepping the dollar. Last year’s trades were about $340 billion. At the same time China announced a direct $11 billion currency swap with Thailand.
In January 2012, Wen Jiabao, the Chinese Premier, signed a $5.5 billion currency swap with the United Arab Emirates.
Then at the end of January there is an article from Forbes answering the question “Why is China buying so much gold?” Forbes simple answer; a substitute against capital flight. What? The Chinese Premier, Wen Jiabao is the one flying all over the world setting up all these currency swaps.
In late March 2012, according to Zeebiz, “The five major emerging economies of BRICS — Brazil, Russia, India, China and South Africa — are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade at the fourth summit of their leaders…” And, “The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28% over the last few years, but at $230 billion, remains much below the potential of the five economic power houses.”
In March 2012, we learned Dubai-based Emirates NBD the largest bank is selling dim sum bonds, debt securities issued in the Chinese yuan.
Again in March 2012, China and Australia sign a $30+ billion swap agreement. According to the Reserve Bank of Australia, “The main purposes of the swap agreement are to support trade and investment between Australia and China, particularly in local-currency terms, and to strengthen bilateral financial cooperation. The agreement reflects the increasing opportunities available to settle trade between the two countries in Chinese renminbi and to make RMB-denominated investments.”
In April, we learn in a report from Forbes, that China will be avoiding U.S. financial sanctions against Iran by making oil purchases not only bartering goods, but also using gold.
In late June 2012, China and Chile agreed to strengthen their ties in a strategic partnership and double their trade in three years. The leaders of the two nations, Jiabao and Pinera, also announced the completion of negotiations on investment-related supplementary deals to a bilateral free trade agreement.
Also in late June of 2012, China and Brazil agreed to a $30 billion currency swap.
So while Monetary Sovereign, Keynesians such as yourself are fiddling, the US dollar continues to burn. MS is a pipe dream. A great theory that inevitably breaks down when implemented in practice.
Free handouts from government certainly encourage continued dependency on that same governmental handout. Why is poverty the same now or worse with the greatest increase in government handouts in the history of the United States? You don’t even understand your own theory taken to its end – why would people work if they know the government can give them money anytime without the need to pay it back per your own theory. You are living in an unrealistic utopian theoretical mindset. So, go pick up your own garbage. The handout doesn’t necessarily encourage sloth – I just don’t want to pick up your garbage for $15.00 per hour because I can get the “money” for free by voting in the right “leader” since I fully understand what your MMT is all about. We 99%rs aren’t that stupid.
Finally off the gold standard, but still the world watches for some reason, and now it so eveident that foul play is all that’s left with the “QE” programs even I almost want to expatriate and leave this mess behind, but will not desert this once proud country, the best example ever offered to mankind, as imperfect as it always has been IMO.
Deficits ? a sovereign country doesn’t have them ! if taxes and fees do not cover expenses of the government, the money is just printed….BUT, as I would have it overseen by the states with their powers of nullification/10th to make sure the overprint is valid and desireable, as in a disaster or properly declared war to save the country.
If not, the politicos are voted out, or worse impeached, investigated, etc. for corruption by public and private entites FOIA to resolve such problem in debauching the currency.
National debt ? reflects the above, and as I would have it, to be usued mainly for public benefit programs, including infrastructure replacement and SMALL retirement accounts like social security NOT large “investments” as now and esp. not foreign types and other influence peddling schemes AWA MIC back door schemes to impoverish the very soldiers that supposedly “protect and defend:” the dwindling Constitutional rights we once enjoyed (mostly). There simply would be no “lender of last resort” as now, with the private fed banks adjudicated and mostly out of business, with international, extraditive, retroacitve legislation to bring these “people” to justice for the last 100 years of malfeasance and usury, adjudicated one case at a time for veracity, validity villification, etc. with those found gullty suffering jail time and forfiture regardless of immunities, implied, granted or treatied, and we DO have the ISAF at our disposal to go get them don’t we ?, even if Patreaus isn’t there any more…was it that he couldn’t take all the corruption or did his deals go bad for him ?…that ME “woman” he has hung around with (no, not the West Pointer), really makes me nervous, as she is a true Mata Hari, and seems to get a lot of “traction/action” in white-Washingtown. these days.
Insofar as ‘prosperity for all:”, nothing beat the work ethic IMO. The results are plain to see with western civilization having no equal, mostly based on protestantism’s programs to allow people to read the Bible (and write), such that skilled labor could be transferred easily to the learned, etc. a great lession to the world, esp. the Islamic hard-liners who abuse womanhood so badly.
The state of the world worries me to a point where I am making modest preps for jan. 1, but hoping for better than I surmise as I hope youall do…more on my small blog…. http://usssaratoga2.blogspot.com/
“If not, the politicos are voted out…”
‘There’s the rub…’
So who can find the 51% ? We have the greatest form of government,
we need only to “cast our secret ballot.
We need only to vote for those who will :
TAKE AWAY FROM THE PRIVATE FOR PROFIT BANKS THE RIGHT TO RAISE TAXES (REVENUE) ON OUR OWN CURRENCY AND GIVE IT BACK TO THE PEOPLE.
Amend the Fed, “QE 4 the people”, “QE4 WAR”
51% ? We don’t have enough of that type apparrently ! Banking has been shown to be totally abused in private hands and should be federalized as my blog alludes to IMO, with the states using their powers of nullification/10th to keep the feds in line with printing new money in US dollars that has NO DEBT incurred as with the frn. Also, the bank of north dakota has as it’s legally binding mission statement that all profits must be plowed back into the state as valid loans or direct tax refunds to the people ! These two ideas would do much to break the chains that are now threatening to drag us over the cliff like Pol-Pott-ism….And as you say, go after the QE types, regardless of circumstances,..and much more on my blog…you got more ?
You state that the US is monetarily sovereign and doesn’t have to borrow money. Well, our privately owned central bank, the Federal Reserve, issues our money, and does so by loaning it to us… with interest.
If the USA is monetarily sovereign, then why does the natonal debt keep growing as we “borrow” money from the lender of last resort, the fed ?
Rodger,
You also stated, “Because a Monetarily Sovereign nation has the unlimited ability to create its sovereign currency, that nation needs neither to tax nor to borrow. Why would it? Further, that nation does not use tax money or borrowed money to pay for spending. Federal income has no relationship to federal spending and so, taxes and borrowing are unnecessary.” If this is the case, why do we have an IRS or income tax system on the federal level?
Scorpious
You just asked the central question of this blog: “Why do our politicians ignore the reality of Monetary Sovereignty.” You’ll find that question answered dozens of times in the articles linked on the left.
If our politicians understood Monetary Sovereignty, I wouldn’t write this blog.
“If our politicians understood Monetary Sovereignty, I wouldn’t write this blog.” Maybe the word “politicians” will give you a clue.
Okay… so how do you educate the politician since you’ll never be able to remove them?!
It seems as though this is the best kept secret between our government and its citizens…only because neither is educated on the subject!
You STILL need to run for office instead of waste your time here IMO; wish I had it to do over again knowing what I do now.
Me too.
Scorpious,
Austerity is a method for widening the gap between rich and poor.
The politicians cannot be educated, because it’s in their own best interests not to know. They receive money from the wealthy, and will not vote against the wealthy.
The only hope is to educate the public, who then will vote in their own best interests. Admittedly, it is a distant hope.
The USA is not a Monetarily Sovereign nation until Treasury makes the money and The private corporation Federal Reserve does not.
The US uses the dollar and is sovereign over the dollar. Greece uses the euro, but is not sovereign over the euro.
Do you understand the difference?
Good luck convicting Roger of that fact.
John and Curt,
All domestic banks, not just the FRB, create dollars by lending, but that doesn’t make the U.S. monetarily non-sovereign.
Congress and the President create dollars by setting budgets for federal agencies, which write checks that are CLEARED by banks, including the FRB. Congress and the President can set budgets at any level they choose, endlessly, and no federal checks ever will bounce, which is what makes the U.S. Monetarily Sovereign.
If the government chose, it could set a budget of $900 trillion, and when federal agencies spent that $900 trillion, $900 trillion would be created.
(Greece, Illinois and Chicago, being monetarily non-sovereign, cannot write checks endlessly)
The instant a federal check or wire is deposited into any bank (including your local bank), dollars are created. The clearing process is merely an accounting function, not a dollar-creation function.
Contrast what the federal government can do with what the states, counties, cities and euro nations can do, and you will understand the difference between Monetary Sovereignty and monetary non-sovereignty.
Or better yet, read the above post.
Nope, Wrong again Roger. The US Treasury has No Money. All US currency is controlled by the FRB. The FRB creates currency that the Treasury and Banks use. Banks need to the money to lead and invest. Treasury uses the money to pay bills and invest. Matter of fact most the TARP issued bail-outs was pure investments. Out of the 1407 TARP loans, there are less than 200 community banks who still owe Treasury money. Once everyone understands the evil the Federal Reserve Bank Act of 1913, then you’ll start to understand the US and in some sense the world economic position. BTW, we don’t really have a financial issue, but a credit issue. More on that some other day.
Try explaining this one Roger -> http://dealbook.nytimes.com/2012/09/09/treasury-to-sell-18-billion-worth-of-additional-a-i-g-shares/
Hi. I don’t know why but it was hard to understand what Mitchell was saying, and now that I do it seems perfectly clear. USA is sovereign by law but does not use its powers correctly.
One question arise though; is not government borrowing limited by the interest it will have to pay? The interest will accumulate so that in a short while most of the budget will be interest. The interest goes to private pockets. And I also hope we agree that it is immoral to charge interest on money created by the banks? No risk, no interest.
USA =Monetary Sovereigm
Yes,agreed. Even I believe RMM would agree!
Federal Reserve may be a “privately held corporation” for direction purposes, but it must turn all it’s profits over to the US Treasury thereby making it very, very different than what would be “a for-profit private bank or financial institution.
When the Fed creates currency it is merely an operational arm of the Mon. Sovty -no conflict.
However where we have a problem (i call “major Flaw”) is when
“private for-profit banks and financial institutions create loans (money)
for their own gain. The Mon. Sovty do have a conditional unlimited issuance problem that could destroy its Sovereignty and that is “hyperinflation and moral hazard”. (here is where there may be some disagreement)
For private for-profit banks to be able to “issue currency” for their own
profit, what is to stop them from making bets, loans, and whatever in $100’s of trillions, even $1,000’s of trillions causing hyperinflation
or collaspe if “credit” the potential money they created is not made whole.
Justaluckyfool would ask, “Is a Monetary Sovereignty, really a monetary sovereignty if it allows by law a private for-profit financial institution
to issue, “print” “make electoric entry” its currency.?”
We go back to Frederick Soddy (becoming my fave) 1926,1933 “The Role of Money”
There are two kinds of loans:
Genuine (made by the sovereignty)
and Counterfeit ( made by for- profit banks)
Inflation has settled into the Fed’s goal of 2% – 3%. The Fed actually fears a below-2% rate more than an above 3% rate, because a too-low inflation rate could lead to deflation, which they feel would be an economic disaster.
RMM, as you ask ,”Where is the inflation”
Your chart shows it and the Fed is happy to have it at 2%-#5 range.
Everyone else is talking “fear of hyperinflatio” which of course
you chart proves “ain’t happening.
Anton,
The U.S., being Monetarily Sovereign, has the unlimited ability to pay interest. It merely instructs the bond-holders’ banks to credit their checking accounts. It can do this forever.
Yes, A Mon.Sov. has the unlimited ABILITY to issue its own currency.
BUT with self imposed restraints so as not to destroy “the good faith and credit of the sovereign nation” when such issuance would no longer be acceptable for redemtion for the goods and services of that nation (hyperinflation).
Yes, A Mon. Sov. has the unlimited ability to pay interest.
(BUT with self imposed restraints….) JUST a simple question.
WHY ? Why pay interest on your own creation? Isn’t that backwards ? Plain stupid?
Why pay the 1% an increasing portion of all the goods and services
of the sovereign nation, for doing something not wanted, not needed, and at the same time taking away our real wealth to us for their own self interest and not redistributed “for the general welfare”?
Actually, the simple explanation is that you CAN’T create money to pay interest. Why? The money paid as interest will be UNPRODUCTIVE, meaning it will cause immediate inflation. Thus, every economy MUST be under a system of law, and there has to be a law REGULATING the money supply. The regulation would be based on a periodic issue/taxation in appropriate amount to keep unemployment low (<1%) and inflation non existent.
The federal government creates dollars to pay interest every day. So where is the inflation?
Where is the inflation? Everywhere. And since most of the money created today goes to nonproductive activity like speculation, hoarding and war you have both high unemployment and inflation. Remember the simple mechanics of economy; if you have unemployment, you have to little money in circulation. Ben Bernanke would not agree about that of course.
Too much money -> Inflation
Too little money -> Unemployment
If you have both the problem is that the money is not available to the people.
Looking at our trade deficit it seems we export our monetary inflation and import goods made with cheap labor.
Domestically we suffer from health care and education inflation. These services cant be imported.
There is trmendous price ibflation
Hi roger, this is the rest of my comment.i inadvertantlyhit post while fixing a typo.
There is tremendous price inflation in US Treasury bonds caused by exported dollars coming back as investment in our debt instruments.
Please respond to this (link below) reality as the US loses its reserve curreny and no one wants US dollars any more. Debasement of the dollar will come much faster with your money presses going full speed. It may take a while – but it will happen. Interest rates will have to increase and oil prices along with it – but it won’t be due to higher oil prices – the debasement will come first.
http://www.zerohedge.com/contributed/2012-11-28/welcome-currency-war-part-5-dollar-gets-serious-competition
The article to which you referred ended with this conclusion:
“That selling pressure will, other things being equal, lower the dollar’s relative value, which is another way of saying that the US might not be able to borrow infinite amounts of money going forward, forcing us to either cut annual deficits far faster than is currently planned or pay a higher interest rate on future borrowings, which would increase future deficits.”
Completely, 100% wrong. The U.S. is Monetarily Sovereign. It has the unlimited ability to create the dollar, its sovereign currency. That’s what “sovereign” means.
Thus the U.S. does not need to obtain dollars from anyone — not from you, not from me, not from China. It does not rely on taxes or borrowing. If both taxes and borrowing fell to $0, this would not affect by even 1 cent, the federal government’s ability to run deficits.
Further, interest on T-securities is not determined by the market, but rather by the Fed.
The author of the article is clueless about Monetary Sovereignty, and really should not be writing about economics.
So when the rest of the world stops buying our debt and loaning us money – the Fed could have to monetize our debt 100% – as it can do because we are monetarily sovereign. And you don’t believe that will be inflationary and debase the dollar? Yea, I know, inflation is only due to high energy prices. Even now as a small business owner, I am seeing prices across the board, electricity. water, supplies, all going up. Yet, you say we are in deflation. That is a load of crap. That is the big secret the Fed doesn’t want out. One thing I do know, the Fed will continue to monetize our debt till the cows come home to try to keep interest rates low, regardless of what inflation does. It has no choice.
Wait Rodger. You agreed earlier on in this thread that MS only works as long as other countries take our paper money but said that we will all be long gone before that ever happens. Now you have proof that countries are in fact moving away from the US dollar as the World Reserve Currency. As the Fed continues to churn out pieces of paper (or hits keystrokes) making them more and more worthless, what happens when other countries no longer want to take them?
The problem is Rodger that you don’t understand your own theory when taken to its logical conclusion both domestically and internationally. As was pointed out earlier, domestically speaking, as soon as the politicians & people fully embrace Monetary Sovereignty the people will ALWAYS vote for the candidate promising more free stuff. Internationally, countries will stop taking the dollar because it will be worthless. Why should they produce and give away their products in exchange for pieces of paper that are printed at will?
Monetary Sovereignty is an academic Pipe Dream, printing money is the last resort of a failed gov’t, and nations fail because of loose fiscal policy.
“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”
― Thomas Sowell
1.The U.S. government no longer needs to sell T-securities. It creates dollars by crediting bank accounts.
2. For the past 5 years, inflation has averaged 2% — exactly where the Fed wants it to be.
3. I said we are fighting deflation. In 2009 we were in a deflation.
If you want the facts, see: http://research.stlouisfed.org/fredgraph.png?g=df0
You can make charts say anything you want – you are not living in the real world. I guess you need to tell the government they don’t need to sell T bills anymore – maybe they just don’t know what you know. Also, at the same time tell them to credit every one with a bank account a million dollars and lets just reset the whole monetary system – I am sure that will cure everything.
Why read this blog if you already know everything and have zero desire to learn?
I understand the concept of MS and that the US can not technically go bankrupt. But you haven’t explained the ramication of flooding the monetary system with unlimited dollars (ie… deficits that don’t matter anymore) and to what degree this will damage the US dollar’s reserve currency status. To say it will do nothing is disengenuous at best and a lie at worst. MS breaks down when foreign entities no longer want to want to hold our dollars and it is no longer the reserve currency.
Max,
Economics works for a nation so long as that nation’s money is accepted — either by other nations or by its own people. So?
Monetary Sovereignty simply is a description of how things actually work,. not how they should work. As for evaluating it, I say it is better than monetary non-sovereignty.
But, there may be better systems out there. Bitcoins are an example of a different sort of money, currently evolving, that ultimately could (or could not) prove superior to U.S. Monetary Sovereignty.
You are correct that when people understand that the federal government can buy anything, they may begin to demand more. Initially, this will result in a better life for all Americans.
Over time, it also could lead to inflation, which the government always has the power to cure, by raising interest rates and or by refusing to spend more, as it already (and unnecessarily) is doing.
Rodger Malcolm Mitchell
“You are correct that when people understand that the federal government can buy anything, they may begin to demand more. Initially, this will result in a better life for all Americans.”
All bubbles are great initially, however they seem not to end very well. Just ask everyone who lost their house to foreclosure how much better their life was when they were using their house as an ATM and buying stuff they couldn’t really afford. All bubbles collapse and MS is the king of all bubbles.
Also, I don’t think you understand the role interest rates really play. Interest rates is the price of money and what’s a price but a signal to the market of how much demand there is for that product. By artificially manipulating the interest rate, the Fed/gov’t is sending a signal to the market that says people have a lot of savings so money is cheap and therefore you should borrow and invest when the reality is that people don’t have savings and borrowing and investing when there’s no future demand will result in an even worse condition, ie. malinvestment (this is a very simplistic explanation of the business cycle).
In addition, the Fed can not indefinitely stave off inflation with interest rates, in fact all they can do is delay the inevitable. How much lower than 0% do you want to go?
Max, today is setting a record for truly ignorant comments.
You said, “the Fed can not indefinitely stave off inflation with interest rates, in fact all they can do is delay the inevitable. How much lower than 0% do you want to go?”
Yikes! The government raises interest rates to fight inflation.
Do you actually read before you write?
@Rodger – “today is setting a record for truly ignorant comments.” Well maybe that’s because you’re commenting more than usual. My point was that the Fed is keeping interest rates artificially low which is sending the wrong signals to the market, similar to what they did during the housing bubble (and every other bubble the gov’t has created). And thanks for ignoring the entire point of my comment which was an attempt to educate you on what interest rates really are for.
What’s truly ignorant is you defending a theory that you don’t even understand the consequences of, despite all the evidence staring you in the face. The world is moving away from the dollar as the reserve currency. Gold, which has been accepted as currency since the beginning of human history and despite the fact that it’s been shunned for the last 40 years, is now being widely accumulated by other countries because they have lost faith in the US dollar and the politicians who manage it. In addition, other currencies such as the Canadian and Australian dollar are officially being recognized as reserve currencies (that’s a fact), and countries are doing currency swaps in their own currency to get away from the US dollar. The value of the dollar is plummeting and the Fed is pumping 40 billion into the economy a month with QE4ever. The idea that we can print paper money forever and engage in loose monetary policy with no ill effects is exactly what has destroyed previous civilizations, the US is not immune.
Maybe you should go back to middle school and take the econ class where you learn that “there’s no such thing as a free lunch” because that’s exactly what you’re pedaling.
John, your article is a perfect example of why I write this blog.
The Treasury never should lend; it only should give. In lending, and making a profit on its loans, the Treasury acts as though it were the treasury of a monetarily non-sovereign nation.
This blog contains almost 800 posts decrying the federal government’s ridiculous concerns about its deficits, its debt and its money supply. This is a first cousin to the silly debt ceiling.
RMM,
“The Treasury never should lend; it only should give. In lending, and making a profit on its loans, the Treasury acts as though it were the treasury of a monetarily non-sovereign nation.”
********* One hellofva statement.
“the Treasury acts as though it were the treasury of a monetarily non-sovereign nation”…where did you get that ?
When the US Treasury adjust accounts on the positive side for unlimited amounts isn’t that a “loan on future goods and services to be redeemed by the good faith and credit of the American people”?
Or are we just “giving” those “electronic clicks”(scores) away ?
Perhaps you would clarify?
Monetary Sovereignty is the greatest theory ever created. Marred only by the fact that it requires honest politicians and honest bankers to do the right thing for the country and not themselves.
At least one reader claims the U.S. government is not Monetarily Sovereign, because it doesn’t create dollars, and instead the Federal Reserve Bank, a supposedly “private” institution does.
His confusion arises because dollar creation is part of a process that includes clearing by the FRB. The reader confuses clearing with creating.
Here is the process:
1. Congress and the President create budgets for each federal agency.
2. Using their budgets, the federal agencies pay their bills by sending Treasury checks to their creditors, or by sending wires to creditors’ banks. These checks and wires are federal instructions to the banks, to increase the balance in the creditors’ checking accounts.
3. The banks clear the checks and wires through the Federal Reserve Bank, which in turn, clears through the Treasury.
That’s the process. So at what point, and by whom, are dollars created?
The answer: Dollars are created when the Treasury checks are deposited in creditors’ checking accounts. Everything after that merely is a clearing function, over which the FRB exerts no control. Their role in this is simple accounting.
could you use this step by step process to explain the opposite condition of how money is Destroyed when we pay taxes, i.e., neutralized?
Thanx
1. You send your check (instructions) to the IRS
2. The IRS instructs your bank to reduce the number in your checking account and makes a note in its own books that you have paid.
That’s it.
The money in your checking account has ceased to exist. The entries in the books of the federal government are not part of the money supply.
OK So this is one of those Econ 101 moments where were taught the money we pay in taxes goes on to the US treasury to help pay the nation’s bills, and MS & MMT say NOT, money is neutralized, +1-1=0 and poof– ceases to exist..However, this is not the case with state/local taxes collected??
Correct tetrahedron720,
State/local governments are monetarily non-sovereign, just like you and me (and the euro nations). The Monetarily Sovereign U.S. government creates its sovereign currency.
You and I do not have a sovereign currency. We use the federal government’s currency.
You have just put your finger on the fundamental difference between Monetary Sovereignty and monetary non-sovereignty, which makes you one of the few people who understands what this site is all about.
Even the President and Congress don’t admit to understanding it, (though in reality, they do).
The US Treasury does Not create money, the Federal Reserve does. Roger seems to either lack this basic understanding, or refuses to admit it. Case in point, the 2008 TARP bailout money/funds/computer click was provided 100% by the Fed. I should know since I worked in the TARP office almost 4 years. I also built the system, in 2011 that captured all 1407 bailout financial institutions. Before I created the system, all data was kept on spreadsheets, pdf, word, and paper. All current TARP funds and repayments are processed by a single bank, Not the Treasury.
Galt,
The Federal Reserve is only 99 years old. The U.S. government is 236 years old. Do you see the problem with your contention that the Federal Reserve, not the Treasury, creates dollars?
Anyway, you’re confusing an accounting function with “create.” Who would you say “created” my book, the guy who turned on the printing press or me? The Federal Reserve merely keeps the books; it’s not a creative function.
What you were doing was an accounting function — unless your contention is that you decided on TARP and you directed TARP payments.
Congress creates dollars by providing budgets and instructions to federal agencies to create dollars by sending Treasury instructions to creditors’ banks to create dollars by raising the numbers in checking accounts.
Dollar creation is a process, initiated by Congress, with many functions involved, but the dollar creation and spending credit goes to Congress.
You were just a little functionary doing your little functionary duty, then coming home and bragging, “Look how much money I created, today.”
the Federal Reserve Act of 1913 changed how the US creates money. Do your history. The TARP office didn’t create money. Congress authorized us to allow others others issue it. We acted as a middle office and regulator. We kept no books, per say. The Fed gave us our money/credit or whatever you want to spin the term. A little history of TARP amy drive some of this home. When Congress authorized the TARP funds. the early TARP people didn’t know how to issue the money. One approach was to have the Mint print paper money and have it flown by helicopter to NY and have it issued the banks.
I got to this point in reading all the comments and I had to stop…it is obvious most people do not understand what you are trying to tell them and I couldnt help feeling that wouldnt it put everything to rest if there was factual evidence of this process….and then I got to this comment. This comment sums it up nicely but is there a way to prove that this is exactly what happens? Isnt there some sort of legislation existing that explains this? That way no one can argue the point.
http://www.federalreserve.gov/faqs/about_14986.htm
I get it. Even though the Federal Reserve can create dollars, they do so with permission…much like a licensing agreement.
The US retains exclusive rights over the dollar.
By golly i think i have it! Do I?
Curt,
Dollars are easy to create. You create dollars when you borrow. If you take out a mortgage, your bank creates X thousand dollars, which it puts into your checking account, from which you pay the owner of the real estates.
You also create dollars when you lend. If you make a formal loan to your brother, you deposit dollars into his checking account. But you are not poorer. You still have the dollars in the form of a loan document. This is what differentiates a loan from a gift.
A gift creates no dollars. A loan does. That is why a paper dollar bill actually is not in itself a dollar, but rather a loan document. It shows that the government owes you one dollar.
So what IS a dollar? It is an accounting notation, with no physical substance. You never have seen, touched, smelled or tasted a dollar. It is like a game score. It exists only as an measure, not as a physical reality.
We deal with such measures all the time. You never have seen an inch, a mile or a light year. You never have seen a ton or an acre. You never have seen “twenty.” A dollar is a similar measure.
The difference between privately created dollars and federally created dollars is the private dollars are limited by the borrowers finite ability to service loans. The federal government has an infinite ability of service its dollar loans. In that sense, the federal government is like a scoreboard, that can display any size score.
Great first all this talk that now ones understanding how money works and then the saying that bernanke cant print as much money as he wants and that america can never be broken.
You sir dont understand how money works, money is just paper it should note how much are goods and services are worth.
yes Bernake can print as much money as he can, and yes maybe the money wont hit the market increasing inflation but the question is what can he buy with it at the end?? No one will give money to the goverment bills or what ever because everyone sees america has 100% debt and its increasing year for year.
Everyone is moving away from the dollar, america isnt even the biggest importer anymore more as it got replaced by the EU. No one wants to trade with america especially exporting to this country because they realized that they consume much more than produce and it gets backed up by us dollar. Thats why america tries now all of the sudden to export a lot in the last time, they realized they need to prove them self that their reserve currency deserves its name and thats why they need to go to war with iran and hold all the military presence there despite their debt to have the power in oil. America is on the brink of collapsing much worse than europe maybe not this year or next but soon in the near future.
http://www.rferl.org/content/China_Others_Urge_Move_Away_From_Dollar_As_Reserve_Currency/1516046.html
even your shitty free europe which backed by us goverment fed dollars reports it.
Aren’t Federal Income Tax revenues applied directly to the defecit?
Not sure what you mean by “applied.” The federal deficit is just a statistic. It is the arithmetic difference between taxes collected and spending.
This does not mean the government uses or needs taxes for spending. Even if taxes fell to $0, the government could continue spending — even triple spending.
If the Bears ran for 200 yards and the Packers ran for only 150 yards, the Packers had a 50 yard running deficit. But that does not mean the Bears “applied” Packer yards to anything. It’s just an arithmetic difference.
The Income Tax Revenue will offset an equivalent amount of deficit. This is important to politicians and seems to be very important to voters.
The fact that something is completely wrong, but still is important to politicians and voters, is the reason I write this blog.
So the treasury creates the money digitally, and also materially as well by means of the Mint’s real printing press. And the Fed keeps the books on the money supply but is not responsible FOR the money supply other than accounting. The good news is that we-the-people aren’t going to be forced some day to pay back the national debt because we didn’t sign off on it, but congress did. How am I doing so far?
And, the states and localities keep coming after me jacking up my taxes on property and gasoline. And California is going bust. I could be wrong, but the soveriegn cat is going to be out of the bag pretty soon when the federal government will be forced to keystroke billions to bailout more than the banksters. They’re going to have to save California et al as there is not enough revenue otherwise and austerity will only kill us even faster.
WE NEED TO TAKE AWAY FROM THE PRIVATE FOR PROFIT BANKS THE RIGHT TO RAISE TAXES (REVENUE) ON OUR OWN CURRENCY AND GIVE THAT RIGHT BACK TO THE PEOPLE.
What if that one issue were used as the basis for being elected ?
You are saying that private banks have the right to tax us? That’s news to me ! have you studied the bank of north dakota yet ?
“lucky”
if we take away the banks power to “tax” us, what will they derive income from? They will have to be nationalized, no?
Thanx
Thank you for the question as that is how improvement can be made.
justaluckyfool.
“No to nationalization of banks for they are an important sector for a capitalistic society. They would only lose that income that they are now getting from “taxation”. They may continue to earn profits from banking, yes banking what they are supposed to do. Charge a fee for services. Make investments and charge a fee and maybe even charge a percentage of winnings as a bonus. BUT they most obtain permission from their shareholders not only how to distribute any gains, but also how to destribute losses as they must be on a 100% margin basis.
Thank you again. Please continue to challenge.
Sopwith,
Understand the difference between “can” and “should.” The federal government can create infinite dollars. That does not mean the federal government should create infinite dollars.
If the federal government:
1. Eliminated FICA (Click here)
2. Provided Medicare — parts A, B & D — for everyone
3. Sent every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Provided long-term nursing care for everyone
5. Provided free education (including post-grad) for everyone
6. Paid a salary for attending school (Click here)
7. Eliminated corporate taxes
8. Increased the standard income tax deduction annually
9. Increased federal spending on the myriad initiatives that benefit America’s 99%
. . . then you and I and all Americans would lead far better lives than we do, today. Do you oppose this?
At some point, increased federal deficit spending would cause inflation. The government would fight this by doing as it always successfully has done: Increase interest rates. However, if that didn’t work, as a last resort the government might have to cut deficit spending.
Until that happens, your life would be greatly improved from what it is now.
What is there about this that you don’t like — or do you enjoy the miserable economy the current beliefs have given you?
Please put an annual dollar figure on your points above. Fica and Medicaid ABD will be in the trillions alone. And, since all of us are also not contibuting to these programs – but will be paid out by the government anyway – this will inject even more money into the economy. Please count that as far as how much money will end up in the “system”. Do you have inflation yet?Remember, the hyperinflation of the Weimar Republic happened pretty quickly – although for different reasons. Trying to “gradually” control hyperinflation once it happens is a fallacy. But the worse part of your whole scenario is getting something for nothing and raising generations of sloths that will EXPECT and REQUIRE more and more. Something you don’t think will happen? Do you not know human nature? Maybe you don’t. Or maybe you don’t care because you may not be living to see it when the crap hits the fan. But as you see it,until that happens, I guess life will be improved. I am sure that is what any fledgling socialistic and communistic state thought initially. To much is given, much is expected. And, the government will expect much.
Hyper Inflation also occurred in Germany when they started printing up money to pay workers on strike. They printed up so much money that it became completely worthless, children were folding it and using it for paper planes, while adults were burning it for heat. That was sometime in the 30s? Hmm, I wonder what happened next???
When you say something that never happens are you talking about every failed country with a loose monetary policy?
All, you cannot print your way to prosperity. You must honor the work ethic first that built western civilization and justify your existance in it IMO. The Weimar republic example is not what we have with the QE crowd. They are printing for themselves only and have expatriated to world-wide “undisclosed locations” like Bush and Cheney, etal. and could give a rat’s butt about any of us period, like Blankface who is testifying before congress now, trying to say that the likes of the EARNED part of social security is the way to cut a deficit, etc. HOGWASH. Extradition of these malfeasant animals is what we should be doing like Iceland did, but we do not have national public referendum…yell at your congressmen like I do…schedule appointments to vent your grievances, etc. ; even if they refuse you, or grant a meeting, but are totally insulting at it, you have made the point which may be a NDAA head’s up but so what…are you going to live in relative ease forever and give up your country for your young as you see now happening ? I will fight in every legal way possible to keep my son from having to bear the brunt of such diatribe as Blankfein is delivering, even if he’s just an errand boy for the super-rich….much more on my small blog… http://usssaratoga2.blogspot.com/
Sop,
1. Eliminate FICA — $1 trillion
(Wait one year to see if this causes inflation)
2. Medicare for everyone. Estimate: $250 billion
(Wait one year to see if this causes inflation)
3. $5,000 to everyone: $1.5 trillion
(Wait one year to see if this causes inflation)
(Continue 4-9, pausing one year between each, to evaluate inflation.)
Neither you, nor I, nor anyone on earth knows how much federal deficit spending would cause inflation. But you and the other debt hawks don’t want to do anything for fear whatever you do might at some unknown point possibly cause an inflation we can’t deal with.
You prefer to struggle along with unemployment, inadequate health care, poverty, poor schools, bankrupt cities and states, and repeated recessions (7 in just the past 40 years) rather than “risk” a hyperinflation — something the U.S. never has had.
As for the Weimar Republic, you’re right, it happened for different reasons — completely different reasons — which is why it never has happened to America.
Say, you forgot to mention Zimbabwe, the other debt hawk favorite. Fearing something that never happens rather than something that always happens. And if you give people health care and an education, they’ll turn into sloths? That’s called “debt hawk logic.”
Lord, I’ll love to talk with you when you can’t find a job and you’re sick and can’t afford a good doctor and hospital and expensive medicine. I want to hear you whine, “Help me, help me” — like a sloth.
Medicare for everyone $250 billion? – way too low! – healthcare expenditures are 1/6th of a $16 trillion GDP. That comes to around $2.7 trillion expenditure in my calculator. And remember, for SS amd MC these are just payments OUT from the government – how about the money that stays in the system because the government isn’t taking and “destroying” it from taxes as you like you say. Way too low of estimates with money floating around – try again with the numbers.
In your rush to disagree, you forgot that the government already pays to cover Medicare benefits for the most expensive users — those over 65 plus the disabled. Healthy people under 65 spend only a minuscule fraction of total medical costs.
Anyway, this has been your final comment. You are incapable of learning, and my patience is limited.
and … you didn’t respond to the fact of human nature wanting more and more from the government. And to the : “too much is given – much is expected”. That is the real dilemma anyway isn’t it? You can’t put that in to some calculation. Again – who will want to pick up your granddaughters garbage after you are dead and gone? Oh and what about your statement – the government can slow it down or take the give outs back – that will cause true riots.
This is heartbreaking, but typical. Your argument is that if the government gives people anything, these people will just want more and more. So don’t give them anything.
So, was Medicaid a mistake? By providing health care to people who can’t afford it, have we caused them to want more and more, when they really should just get out there and work, and not expect any handouts?
And undoubtedly food stamps just makes people lazy? Let ’em starve. And aid to the disabled just makes the greedy? And aid to education — forget it. Let them work for their knowledge.
And those ever-present garbage collectors (Why do debt fools continually mention garbage pickup?), yes they all will quit work unless you make them starve. Got to keep the riff raff down. Right?
You must have been raised by a very selfish, mean-spirited family, so today, you all give nothing to charity, because those needy people will just want more and more. Right?
I guess you voted for Romney.
Sopwith; I’m afraid that’s what they will do…I mean WS that owns America now, as Blankfein testifies or pontificates or whatever, so that once most people are on welfare, they’ll pull the plug and as that 19th century industrialist said infamously, “they’ll just send in the lower class goons to kill off the other lower class goons for us” or words to that effect…population reduction the hard way for us; too easy for them as usual. You DO know about Ludlow ? and the Battle of Blair mountain ?
Roger most of what you say on this blog has been spot on.
One of the themes that seems to pop out every now and then is the insatiability of human “nature.” Oh Dear, if the cat gets out of the bag about MS/MMT’s infinite fundability then everyone will want everything for nothing!
If there is any group of ordinary people that could be making $100/hr it’s the New York City sanitation workers. All they have to do is wait for a hot summer day and go on strike. They would have the politicians by the short hairs, right? But they don’t.They only ask for a decent wage for the very importance of what they do, and what they do is extremely important! Perhaps more important than what a highly paid bureaucrat receives.
This is the fallacy of scarcity, distrust and fear. We think if everyone has too muchpower = access to the vault = they will hold the country hostage. We are still thinking in ignorant, old fashioned terms, survival of the fittest, not enough to go around, panic, live for now, to hell with tomorrow.
It is a fact that we tend to nurture that which nurtures us. Or to put it another way, you don’t bite the hand that feeds you; you don’t shoot yourself in the foot, unless you’re on WALL STREET or somewhere else in the big money world..
It isn’t the working man/woman that can’t be trusted, it’s the Wall Street-get rich quick types that are the problem. These are the ones who Panic, who drive up the price of gasoline. These are the sociopathic, antisocial socialites blinded by numbers, who cannot see beyond the present moment. They do what they do whether we like it or not because they can, because it’s legal, because behind the scenes they are pulling the strings! (Pay no attention to that man over there behind the curtain!)
No, it’s not the average person we cannot trust. Ultimately, it’s a heavily skewed legal/financial system that is doing our undoing. Exactly what would be the result of MS/MMT as policy is hard to say, but I think we can trust the average person to do the right thing. If there is ever to be a system of economic democracy, it will begin with the reality of Modern money functioning and mechanics.
There’s no fallacy of scarcity, it’s the first basic lesson of economics. If you can’t get past the first lesson then you shouldn’t be talking about economics. What would happen if the New York trash workers were to go on strike during a 100 degree day is that the people would be pissed. They wouldn’t just hand over $100/hr they would demand that the trash workers get back to work or all get fired. The reason the trash workers don’t get paid $100 per hour is not because they’re not asking for it, its because the value they bring to the job isn’t worth $100/hr and their skill set isn’t “scarce”. In other words they know they won’t get $100/hr and if they asked for it they’d all get fired. What they offer is manual labor and if they demand rates above market price they will get replaced with someone who can do the exact same job. In other words the reason Michael Jordon made 50 million per year is because there were very few people who could do what Jordon did, the reason the cashier at McDonald’s makes $7.25/hr is because there are millions of people who can do exactly what they do. That’s the basic lesson of scarcity in action.
In addition, if you think people won’t demand more “free stuff” from the gov’t you haven’t been paying attention over the last 100 years. Do some research on Wickard vs Filburn and then correlate that with the exponential growth of gov’t since then. Finally, this entire election was about “free stuff”. Free contraception, free entitlements, free Obama phone, free health care, free “fill in the blank”. And this isn’t limited to one party. Entitlements have unfunded liabilities in the 220 Trillion range and both Obama & Romney were arguing about who was going to spend more on Medicaid. People will always vote for the politician who offers them more “free stuff”.
Perhaps I should have said relative scarcity of “funding”. And yes it is the first lesson of basic econ because no economist has yet developed an abundance “funding” model to deal with our situation locally or globally. MMT offers the beginning “seed” of abundance modeling. But so far, generally, scarcity wins by default. However, abundance is reality in the real world of technology and mass-production. Go shopping at Wal-Mart sometime.
As for those sanitation workers, we really don’t know what would happen in my hypothetical example. For sure people would be mad at the stench surrounding them, but the workers would get a substantial raise before it’s all over, because before you could hire and retrain new people to learn the job and deal with the pushback and sabotage from the union workers, let alone find new workers who would be willing to jump into that fray, the rotting food/rats aren’t going on strike and will continue to gag the homeowners. Time is on the side of the strikers. Besides, all they want is a decent wage. Clearly I exagerrated with my eg. of $100/hr. But what you get isn’t always what your worth; sometimes it’s what you can get from the pressure you exert.
Also you state: ” entitlements approaching 220 Trillion range and both Obama & Romney were arguing about who was going to spend more on Medicaid. People will always vote for the politician who offers them more “free stuff.”
Sounds to me like the average Joe is catching on to the corporate welfare/bailouts/loopholes/favoritism that’s been going on for decades. ‘Hey why not me too’ says poor Joe?
It also sounds like economists had better find a financial abundance model. The scarcity model of Econ 101 is going into the museum of obsolete practices, because it’s not at all equal to the task of Joe’s needs wants and desires. Joe watches TV and has the internet. Joe isn’t stupid or intimidated or as respectful of authority anymore as our grandfathers once were. Equality isn’t a pipedream. It’s a demand that will require an unprecedented political-economic breakthrough commensurate with the capacity of world-around, mass-production technology, that has yet to be fully tested.
Granted it’s been a little while since I shopped at Walmart (I prefer Target) but last I checked Walmart doesn’t give away things for free. Every product they have has a price on it and that price is based on supply and demand. If Walmart was to price flat screen TVs at free or $1, I would bet my house that they would run out (scarcity) in a matter of minutes. I would also bet my house that no one would make flat screen TVs anymore because they’d lose money at that price.. You seem to forget that people work for this thing called money. And money is nothing more than a placeholder for goods. If you give people stuff for free what’s the point of working for it.
BTW, I’m 100% against corporate welfare/bailouts/loopholes etc, but that’s a failure of gov’t not corporations. Corporations can’t force a consumer to buy their stuff, only the gov’t can (indirectly through taxation and redistribution (see the Volt)). As such, corporations lobby/bribe the politicians who then legislate theft of citizens money. If gov’t didn’t have the power to steal then corporations would have to survive on the merits of their product or service not on how much money they can spend on lobbyists.
Equality of OPPORTUNITY isn’t a pipe dream, equality of RESULTS is – unless you want everyone to be equally poor, which is the inevitable result of monetary sovereignty when taken to its logical conclusion.
“…yet progressives always believe that printing money will solve the problem.”
What then do you and Ayn Rand say about a solution to all the horrible problems we have encountered? The private sector left unchecked will only give us Upton Sinclair’s Jungle. Neither sector is without blame. State and local government is starved for tax revenue; business is starved for profit. The people pay and pay for both.
Nevertheless, the bottom line is government DOES help people. (What are you thinking?)
We know your complaint.
What is YOUR solution?
So guys,
if you received free health care, free education and didn’t have to pay federal taxes, you’d stop working?
And how do the “Nine Steps to Prosperity” listed in the post lead to a “logical conclusion” of poverty?
Yes! Just to prove that there is No Free Lunch. Someone always pays. The perfect way to crush liberalism is to Stop producing. Make the liberals try to make things on their own. HINT: They Can’t!
But that’s what you seem to fail to understand Rodger, it doesn’t stop at “free” education & “free” healthcare. Once the people get that they’re going to vote for the politician who gives them “free” food (food stamps), “free” housing (section 8 subsidized housing), “free” cell phones, “free” transportation vouchers, “free” internet, “free” cable TV, “free” clothes, “free” toys, “free” everything. THERE IS NO SUCH THING AS FREE!!!
So your theory is, “Don’t give people health care or education, because that will make them want other free things, and we will be helpless to refuse them, because we gave them healthcare and education.”
Sort of like, “Don’t give them military and homeland protection, roads, bridges, dams and all the other myriad services provided by the government, because now we are helpless to refuse them.” Right?
But wait. You don’t still believe federal taxes pay for federal spending, do you? No, that wouldn’t be possible. Or would it?
By the way, if “there’s no such thing as free” (in all caps so I can read it), what’s your concern?
What I’m saying is that you don’t understand the long-term consequences of your theory. Giving people “free stuff” is great in the short run but is unsustainable. Just like robbing a bank or being a drug dealer is great in the short run; it’s the long term consequences that suck. You keep arguing that printing up lots of fiat money will make people happy immediately. I don’t dispute that but the result will be a monetary collapse and we’ll all pay the price later. And what I’m saying isn’t a theory, it’s reality that has come to fruition countless times over the course of human kind (remember Nero fiddling while Rome was burning). As I’ve said before, printing money is the last resort of a failed gov’t who’s run out of all other ideas, with the result almost always leading to the collapse of a nation. We’re already seeing the signs of it now, with other countries moving away from the US dollar as the reserve currency and private investors moving into hard currency.
My concern is that this nation is heading towards a monetary collapse where the dollar becomes worth nothing (not hard to imagine since the dollar has already lost 98% of its value in just the last century). My concern is that for the first time in America my children’s generation will be worse off than mine (which again isn’t theory but actually the current consensus), because of loose fiscal policy.
And as far as giving people free stuff, I’m fine with private organizations doing it but I’m completely against the gov’t doing it, because the gov’t has proven that they are a colossal failure. As Friedman said, “Almost all government programs are started with good intentions, but when you look at what they actually achieve, there is a general rule. Almost every such program has results that are the opposite of the intentions of the well-meaning people who originally backed it.” or if you prefer Mises, “Gov’t interventions create unintended consequences that lead to calls for further intervention, and so on into a destructive spiral of more and more gov’t control”.”
The bottom line is that the gov’t doesn’t help people. They create programs that are meant to help people but since the gov’t has no comprehension of the Law of Unintended Consequences nor the foresight to look past the next election cycle, the result is always the opposite of the intentions. In other words, instead of lifting people out of poverty, gov’t poverty programs breed dependence and keep people in poverty. Instead of making housing more affordable, gov’t housing subsidies raise the cost of housing. Instead of making higher education more affordable, gov’t subsidizing education has skyrocketed the cost of higher education. Instead of making health care more affordable and higher quality, gov’t health care programs make health care more expensive and less efficient. We have 1/2 a century of results to gauge the failure of gov’t programs, yet progressives always believe that printing money will solve the problem.
No problem. When you are 65, don’t accept Medicare or Social Security and for now, don’t drive on any federal highways. Don’t want you to suffer the “long-term consequences.”
RMM,
I’m sick of it. These people who come on here like chicken little saying the world is going to collapse if free stuff is handed out to people. They don’t understand human nature. People like/want to work and would do so in any case. If nobody works the food won’t get on any tables of all households everywhere. We have to work or society will collapse for sure whether or not we live in a utopia. This is in evidence whenever there is an emergency and people come to the rescue of strangers and asking for nothing in return. Yes, government creates problems and so does industry. We all create problems. We all solve problems too and as a matter of fact we all solve more problems than we create. If the naysayers don’t think MS/MMT will work then they can put their solution on the table and watch how fast it gets picked apart. There are no perfect solutions.
All we want is a practical idea that will float. But for now it seems the politicians keep wanting to cut and slash our way out of the debt-jungle. As we all know by now, the biggest problem in economics is the inability to comprehend the difference between limited nonsovereign budgets and limited-only-by-inflation, sovereign monetary plenitude, i.e., as long as demand is = or < supply we have no problem.
So far there is no way to test capacity short of all out world war III. And I don't think the powers that be want (us) to know the truth as to just how much capacity there really is. Heaven forbid if it got out that all that machinery and automation could never be exhausted and everyone could have a good life without the wealthiest having to take a hit in the least.
Not Mentioned by either side so far: The Govt. ought to be for,by and with the people (masses). Beyond politics and law making- Govt has a role to play in creating new revenue/wealth for the people(Nation). Govt. has unlimited powers/tools to raise the standard of living- Natural resurces, coop ownerships, cottage industries, innovation, taxes. The Capitalist corporate led system has failed to bridge the gap between the rich and the poor. It is time for a new system.
You need to understand that the Government doesn’t have the understanding how to grow anything except their talk, staffs, and their own budget. I worked as a federal employee and before that as military careerist. Interesting, the military is very conscience about using tax payers money, but it just the opposition in the federal space. The military may buy a few $600 toilet seats, but on the federal side, they will buy millions and never use them. If you think capitalism has failed, then ask yourself who made those toilet seats, your car, your clothes, your bank, your vacation spot(s), etc. It wasn’t any government, not do they have the understanding, yet alone, the capacity to make the examples I just mentioned. If you want a clearer understanding how capitalism really works (and well I will add), look at this short clip -> http://www.youtube.com/user/IPencilMovie?feature=watch
yea, and it is called Communism
That sure has worked everywhere hasn’t it? – and don’t tell me about China – you would be an itinerant farmer in China with no hope of elevating your place in society… or maybe you would be one of the elite communist bosses?
Actually sopwith, China is a great example of what Capitalism can do. China is far from a Capitalist society but the introduction of Capitalism over the last three decades has lifted more Chinese people out of poverty than at any time in the 5000+ year history of China. Just loosening the economic reigns a little bit has resulted in a massive decrease in poverty and an increase in quality of life for the Chinese people. China has a long way to go but just a little bit of Capitalism has done more for the people of China than anything else the gov’t has done throughout China’s storied history.
Hey Max – I totally agree with you about China- a litlle capitalism can work well where it is allowed to work unfettered – and where they allow it – it works better than it does in the US in many instances. The problem is: they allow it to work where they want it at the desires of the huge ruling elite. The descrepancy between the city benefactors and the rural working class is so lage that most in the US can’t fathom. China is still communist – and the ruling elite has a firm control on who benefits from that control.
Capitalism has lifted more people out of poverty and increased the quality of life for more people across the entire world in the last 200 years than every other economic system combined over the last 5000+ years. Capitalism has allowed the poor in America to live better than 90% of the rest of the world. What’s happened to Capitalism over the last century is that it has been infected with “progressivism (aka socialism)”. When socialism infects Capitalism the result is the massive expansion of gov’t, the destruction of personal liberty and Crony Capitalism. Capitalism hasn’t failed, it’s been destroyed by all the well intentioned “do-gooders” working through the unaccountable gov’t that have failed.
The author is WRONG.
US Government do not have the power to print Dollar, only the Federal Reserve ( which is a private organization) has.
US Government borrows money from the Federal Reserve and pays interests.
These are internal debts of US government in addition to the Treasury bonds it sells to the public and foreign countries ( External Debt).
Similarly the UK Government borrows from the Bank of England, who prints the money. Germany or Greece borrow money from the European Central Bank; Japan Government borrows money from the Bank of Japan.
The independent central banks are there to control the politicians from printing money whatever they want.
Only the Soviet Gornment had the right to print as much Roubles as it wanted ; however, it had the restriction imposed upon itself by a balanced budget every year. As there was no tax on anything or on anyone, the USSR Government could spend only what it could earn from exports and what it could produce. As a result, it had no foreign or domestic debt.
Other Government do not have that freedom today; they are restricted by the independent Central Banks.
Prove me wrong, I am ready to learn new things which I do not know.
National debt is really national “saving” by foreign/domestic pur”chasers” of the debt looking for a safe haven. We-the-people did not sign off on any loan. That’s crazy! We don’t owe. The owing is between the treasury and the bond holders, that’s all.
Sovereign USA doesn’t “borrow” IN THE USUAL SENSE. Currency is legally and digitally invented into existence to the extent of the deficit shortfall. China, et al purchases our debt as safe haven, we (treasury) owe them only the interest and principle upon maturity if they don’t roll it over. As a sovereign entity we can easily meet the cashout or interest.
AND the deficit is not a deficit; it is supplementary investment injected into the private economy as dictated by the U.S. budget and by emergency measures authorized by Congress. That spending becomes net wealth and stimulus to the private economy without negative offset.
FEDERAL Taxes are not spent; they are what reduces the surplus-i.e., poof!, neutralized–money from thin air and back to thin air. Your bank’s reserves are debited, and simultaneously your account is debited. +1-1 = 0. Excess reserves are soaked up by the FED to maintain their target rate. The “spending” is keystrokes from the Fed to the Treasury; and what the Fed or treasury can’t sell as T-notes, the Fed buys up, expanding it balance sheet. The Fed has no printing press, only a keyboard press.
Therefore, national “debt” keeps growing because taxes are totally insufficient and always will be as automation takes over employment more and more. What is growing is bondholder savings that are safe. When they mature they will always be paid off due to USA’s monetary sovereignty.
Debt and deficit affect local-state government, firms-households. They borrow and spend as they USE the currency, not issue it. Only a sovereign can issue or else you go to the slammer.
Hello Rodger. What limits how many nations and or states can be monetarily sovereign? Obviously individuals can’t be monetary sovereigns. But can towns? States? Obviously some countries are. But why don’t all countries pick up the idea since it seems to allow so the country so much more flexibility. Many thanks for the excellent info.
Lyndo
Good question.
Chicago could be Monetarily Sovereign. So could Illinois. Only laws prevent such freedom, and the theory is that a unified national monetary system is stronger than a system containing myriad forms of money.
Europe was doing better with the myriad forms of money than it now is doing with the euro.
Constitution gives the money power to the Federal Government. The Federal Reserve Act on 1913 transferred that power to the Federal Reserve. The Federal Reserve owns the US monetary system.
Still promulgating the myth about the Federal Reserve being a private organization, that creates money at its whim, and is not in the control of the federal government? It gets so boring. Maybe you should turn your attention to area 51 if you enjoy myths.
I’m pretty sure that the Federal Reserve remits its profits to the Treasury. However, I do not think this is the case for private banks. The are able to privatize the profits made off the creation of a public good (money). Which to mean seems very unfair. It would be like giving private individuals the power to tax others.
Lyndon,
You think its unfair for a lender to charge interest? Would you lend money without charging interest?
No it is not unfair for a lender to charge interest so long as he has not ‘created’ those US dollars. If he has ‘created’ those US dollars (as is the case in modern banking), then he should not be able to charge interest.
What I am saying is that there is HUGE DISTINCTION between a man working productively and saving up money, and then lending it out at interest, and another man (having somehow?? gained the privilege) creating money out of thin air at no effort at all, and then lending it out at interest. It seems the ambiguity in the word ‘interest’ has clothed naked villainy in seeming legitimacy.
The method banks use to create money, is lending.
Exactly. And this is to be distinguished between the lending which
does not involve the creation of money. For example: that which takes place on LendingClub.
I wasn’t familiar with LendingClub, so I looked them up. Here’s what a Wikipedia article said:
Here’s what LendingClub says about itself on its own website:
Are you saying that peer2peer lending is not full reserve? Or are you saying that full reserve lending still involves money creation?
Peer2peer lending does create money, since the debt document is a form of money.
But in the case of LendingClub: “All loans are made by WebBank,a Utah-chartered Industrial Bank, Member FDIC.” So it really isn’t even Peer2peer lending.
Rodger, many thanks for the responses. I appreciate your expertise. I see now (upon closer examination) that lending club is not really peer2peer lending. Seems like kind of a fraudulent business model to be promoting themselves as peer2peer when in fact they are not… (Thanks for pointing that out).
But your comment: “Peer2peer lending does create money, since the debt document is a form of money.” mystifies me. Can you explain this? Or point me to some information that would explain it? In my mind peer2peer means (in simple terms): I have saved $1000 dollars, someone else needs $1000, so I lend it to them directly based on the (perhaps written) agreement that they will pay it back plus interest at a later date. Where is the money creation in this process? I’m not seeing where a net new sum of money has come into existence. All I’m seeing is that my -$1000 dollars has become someone else’s +$1000, with the whole thing summing to zero. Am I missing something obvious?
Thanks,
Lyndon
I’m going to let you think this one out for yourself.
Think of all the financial differences between giving someone money and lending someone money.
Such a tease! I see differences but I don’t see wherein money is created… Unless we are considering the loan agreement money…?
Let me try to highlight the distinction I am trying to make in a different way in order to illustrate my confusion. Since money represents demand for ‘real things,’ let me substitute in the real things.
In order for me to lend a dude 3 cows I must first have the cows in my possession. So, in order to lend I must first produce. I must exert effort and raise the cows by the sweat of my brow. When I lend, I go without the cows for a year and he consumes them while doing the necessary productive work (raising cows) to pay me back
But the lending action itself has not created any new cows. The cows were already in my possession. Now they are gone. They are in some one else’s possession. There are not now 6 cows because of my lending. All that has happened is a substitution.
However, with banks it is as though they simply create cows out of thin air by magic. When a bank lends cows, it does not first have to possess them the cows first.
So the difference is, I have earned my cows. The bank has not earned its cows. Therefore I deserve interest payments. The bank does not.
The loan agreement is money. The lender can use it in exactly the same way he uses any other form of money. All money is a form of debt
Money has no physical existence. So all money is “created out of thin air.”
A bank earns the money it lends, by providing services. You may not respect that line of work, but it is the same “sweat” you mentioned. The bank is not just given the money as a charitable act.
It then lends the money and deserves compensation for lending it. If you lent your cows, wouldn’t you expect some compensation?
There is zero difference between earning money by digging ditches, raising cows or providing bank services. What do you do to earn money. Is it in some way “better” than what a bank does? Is it as good as raising cows?
“The loan agreement is money. ”
Please tell me where I can take the unpaid loans I have that the people can no longer afford to pay; where do I get “the good faith and credit” of the Monetary Sovereignty to redeem them for “goods and services”.
Oh wait a minute, isn’t that QE 3 ? The Fed buying MBS’s, using our cash to purchase their buddies “toxic bets”.
“QE” disease is eating us alive, and you don’t see any AGs or judges lining up to prosecute do you ?
The whole MMT enterprise (indeed its raison d’etre) is to draw a distinction between users and creators of the currency. Mosler, Kelton et al. repeatedly warn against treating the government (currency issuer) the same as the household (currency user). They state in no uncertain terms that the distinction is that the issue is not subject to the same constraints as the user. The difference being that the users (households) cannot create money – they must save before they spend where as the issuer can create money and therefore does not need to save before spending. Are you denying this distinction?
that is the big one of course, but as I would have it…a bit different…
– adjudicate each case of fed printing for 100 years for validity of invested funds, not from thin air or illegal funds,
and prosecute accordingly with jail time and forfeiture like Iceland, etc.
– Do NOT pay of the national debt as it comes due, but follow the above…NOT Kucinich’s HR6550/2990/NEEDS
– Us National bank issues money without debt for it’s bills when there is not enough tax and fee revenue under strict scrutiny by all branches of gov., and the states with their powers of nullification
– Private and public banks would compete for validity, with private enterprise being given first preference if they held to federal and state statutes for the sake of the American private enterprise system
– these banks would apply for loan money to the federal central bank for the no-debt money
– They would pay back the principal as it came due and paid so it could be used by the federal gov. for it’s bills
– that way taxes could be reduced, and the system benefits at both ends ! ……..thoughts ?
I cannot create money, I am not a monetary sovereign. I can only use money that has already been created. How can you equate my lending to a neighbor to the banks lending. They are two different things. The banks are utilizing the monetary sovereign privileges (which they somehow co-opted) from the government to turn massive private profits, and putting the rest of us in the poorhouse.
Why are you equivocating all forms of lending? Clearly there is the kind of lending money issuers do and the kind of lending I do when I loan my buddy a hundred dollars and ask him to buy me a 6 pack of beer for my troubles…
I worked with the Fed while at Treasury and CFPB over 10 years. From direct experience I know what I am talking about. Do you have my experience?
I’m so impressed with the thousands of flunkies who work at the Fed, and have no clue about Monetary Sovereignty. Did your boss understand it? Did his boss? How far down the chain were you?
I was reading another blog where the author was a proponent of Monetary Sovereignty and one of his recommendations was in times of depression/recession the gov’t should repeal counterfeiting laws and let everyone with a printer print themselves a couple grand. Said you could download a program from the gov’t that lets you print a set amount of money (he’s recommendation was $3,000 per person).
What’s your thought on that Rodger?
If the government set a specific limit on how much each person could print, I’d have no problem with the concept. While there would be significant problems with the physical execution, the idea of each person being given say, $3,000, is excellent.
If the Fed rakes all its profit back to the Treasury, why did it charge the latter interest in the first place?
For the same reason that a Monetarily Sovereign government — a government having the unlimited power to create its own sovereign currency, the dollar — takes dollars from the economy in the form of taxes. Obsolete laws. The U.S. has only been Monetar…