The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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When the Fed profits, you lose.

1/10/11: WASHINGTON (Reuters) – The Federal Reserve is turning over a record $78.4 billion to the U.S. Treasury Department after its swollen securities portfolios generated big profits in 2010, the central bank said on Monday.
The remittance to the Treasury for 2010 is $31 billion more than a year earlier.
“The increase was due primarily to increased interest income earned on securities holdings during 2010,” the Fed said in a reference to portfolios that have been fattened by buying aimed at stimulating a slow-paced recovery.

That’s $78.4 billion taken from the economy and lost forever. Last year $47 billion was lost. True, much of this money was interest on T-securities, which was paid by the government, so the money merely recirculated. But had that money been paid to private holders, rather than to the Fed, it would have stimulated the economy.

The Fed turns over profits to the Treasury annually and has never posted a loss.

In short, every year the Fed removes money from the economy, an annual anti-stimulus action. While many people will cheer the Fed’s “profits,” this money is identical with a tax on the private sector.

No, these so-called profits do not reduce your taxes. No, these so-called profits do not increase the federal government’s ability to pay its bills. No, these so called profits do not have a positive effect on our economy. They are a dead loss to the money supply — exactly the opposite of the stimulus spending. They are the worst financial news of the day.

When it comes to federal financing, “profit” is bad and “deficit” is good. That has been true since 1971, when we became Monetarily Sovereign. One day, the government and the mainstream economists will get it.

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

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