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.
As we, a Monetarily Sovereign nation, suffer the bordering-on-insanity discussions of the federal debt ceiling, and a vote almost is upon us, I thought this might be a good time to reprise a post I wrote last year. From what I can tell, the myths are even more solidly entrenched than they were then.
Updated Tuesday, May 31, 2011:
The U.S. and the world, lurch from boom to bust in seemingly uncontrollable waves. Popular faith holds that recessions and depressions are an unavoidable part of the natural economic cycle. I suspect these “natural” cycles occur because actions (or lack of actions) are based on false beliefs.
Economics has engendered an amazing number of myths, most based on what may seem like logic. But it’s the same logic that says the earth must be flat, else we would fall off. Here is a list of myths, false beliefs and fairy tales. If you disagree with any item on this list, please let me know, and I’ll explain why it’s there.
HOW MANY OF THESE MYTHS DO YOU BELIEVE?
(Do you understand why they are myths?)
• There is no difference between Monetary Sovereignty and monetary non-sovereignty
• Money and debt are two different things.
• A growing economy does not need a growing supply of money.
• Federal surpluses help the economy grow.
• The federal debt is too large.
• The federal debt is the total of federal deficits.
• The federal debt ceiling has a beneficial function.
• The current level of deficits is unsustainable.
• Current federal debt growth is unsustainable
• Federal taxes help pay for federal spending.
• The federal government cannot create money; only the Fed can
• State, county and city governments are financially similar to the federal government.
• Federal borrowing helps pay for federal spending.
• The federal government spends taxpayers’ money.
• Our children and grandchildren will pay for today’s federal deficits.
• A balanced federal budget is more prudent than a federal deficit.
• The federal debt/GDP ratio measures the government’s ability to service its debts.
• The federal debt/GDP ratio measures the health of the economy.
• Each of us is liable for a share of the federal debt.
• Federal earmarks, pork barrel spending and waste hurt the economy.
• The single biggest cause of inflation is excessive federal deficit spending.
• Inflation is too much money chasing too few goods.
• Consumer saving helps the economy grow.
• In fractional reserve banking, banks keep a fraction of deposits and lend the rest.
• The best way to cure inflation is to increase taxes and/or to cut federal spending.
• FICA taxes pay for Medicare and Social Security.
• The government cannot afford to fund Medicare or Social Security.
• The U.S., like the EU nations, can go bankrupt.
• Without increases in taxes or decreased spending, Medicare and Social Security will go bankrupt.
• Without tax increases, the federal government cannot afford to increase support for education, infrastructure improvements, bailouts for states, counties and cities, the military, research and local police.
• Gold is safer and more prudent than “paper” (fiat) money.
• The federal government needs to borrow to pay for deficit spending.
• Federal borrowing reduces the availability of lending funds.
• The two main reasons for the recent economic collapse were low interest rates and lack of federal credit supervision.
• Low interest rates stimulate the economy; high rates slow it.
• Taxing the rich does not hurt the poor.
• Cutting payments to doctors and/or taxing “Cadillac” health insurance plans, is one good way to help pay for improved health care.
• America should try to export more and import less, to achieve a positive balance of payments.
• The U.S. states, counties and cities should be self supporting via local taxes, and not rely on federal assistance.
• Rather than being a net borrower, the federal government should be a net lender.
• Greece, Ireland and the other troubled euro nations need to exercise spending restraint and austerity.
You might wish to ask your Senator or Representative — the people who vote on federal taxing and spending — which myths they believe. My guess: They believe them all.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetary Sovereign, , and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.
Remember that the next time you’re tempted to ask a dopey teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it screwed up my future.”