The debt hawks are to economics as the creationists are to biology. Those, who do not understand Monetary Sovereignty, do not understand economics. If you understand the following, simple statement, you are ahead of most economists, politicians and media writers in America: Our government, being Monetarily Sovereign, has the unlimited ability to create the dollars to pay its bills.

John Mauldin is an author who repeatedly will remind his readers his book has been on the New York Times best seller list for weeks, along with several other books of fiction. He spends so much time with self-promotion, he may not have the energy for learning. He writes about economics, yet seems not to understand Monetary Sovereignty, the basis for all modern economics.

Here is what he said in a recent article titled, “The Plight of the Working Class”

. . . the only way you can show a positive GDP for the last decade is with government spending. . . . Without government spending, “real” GDP would be at levels it was over ten years ago. And it is real growth that drives wages and creates jobs.

Correct. He makes it sound like some sort of crime, but the need for federal spending increases is a fundamental tenet of Monetary Sovereignty, as is demonstrated in these charts: “Is federal money better than other money?”

My book calls for a large increase in funded infrastructure spending through a fuels tax. . .

How is it possible to be a famous economics writer, yet repeatedly confuse monetarily non-sovereign governments with Monetarily Sovereign governments? It’s like a musician confusing a piano with an oboe. A Monetarily Sovereign government (i.e. the U.S.) does not spend tax money. If federal taxes were zero, this would not reduce by even one penny, the federal government’s ability to spend. By contrast, monetarily non-sovereign governments, example: Illinois, do spend tax money. Mr. Mauldin still doesn’t get it, despite many reminders.

Yes, we have to make cuts to government programs. A 33% growth in federal discretionary spending (not including stimulus money) the last three years alone is not reasonable, given the size of the deficit.

Double talk. What does “reasonable” mean? And why is money creation unreasonable? And specifically, what is wrong with the deficit? A growing economy requires a growing money supply. The misnamed “deficit” is the federal government’s method for adding money to the economy. So what is the problem? He never says anything supported by facts.

The last recession was not caused by too little government.

More double talk. There is a massive difference between too little government and too little federal spending. The last recession was precipitated by several factors, one of which was too little federal government spending. Every depression and most recessions follow decreased federal spending growth. See: What causes GDP growth?

I am worried about the survival of the country economically. Another crisis caused by the bond market driving up interest rates . . .

The market does not determine interest rates; the Fed does. It controls the Fed Funds rate, which translates to all other interest rates. So this best selling author doesn’t understand bond markets, either. By the way, what are the rates these days? Too high?

. . ., because they become concerned about the size of the debt and deficits, will seriously reduce the choices we have – with none of them being good. Ask Ireland or Greece how it feels.”

Can you imagine? He does not seem to realize Ireland and Greece are monetarily non-sovereign, while the U.S. is Monetarily Sovereign! He is making a patently false comparison, something like saying since water and gasoline both are liquids, it doesn’t matter which liquid you pour on a fire.

. . . my friend Barry Ritholtz . . .

Two prolific economics authors, neither of whom displays even the vaguest concept of Monetary Sovereignty, are friends. Wouldn’t you know it.

As I have written many times, cutting government spending will mean lower GDP numbers in the short term, but survival in the longer term.

As is typical with debt hawks, there never is any data or even a mechanism for the stated claims. These people think it is sufficient to say, in effect, “Debt is big; therefore debt is bad,” without such details as:

–What kind of debt? Personal or government?
–What kind of government? Monetarily Sovereign or monetarily non-sovereign?
–Specifically, how will a reduction in federal money creation raise GDP in the short or long terms?
–Why would the federal government be unable to “survive” federal spending?

In short, I view Mr. Mauldin as a prominent fraud, who makes his money by quoting popular wisdom, and by supporting his views with no facts. He just goes along with the intuitive “debt is bad” mantra, and by doing so, hurts America.

But he is a best selling author, which says much about the reading habits of the American public.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth.