Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
President Obama created a deficit commission headed by Erskine Bowles, chief of staff for President Clinton, and Alan Simpson, former Senator from Wyoming. The two of them wrote a fact-free, guest column for the 5/2/11 Fortune Magazine.
Here is the first paragraph of their article:
Our nation faces the most predictable economic crisis in its history. Spending is rising rapidly, and revenues are failing to keep pace. As a result the federal government is forced to borrow huge sums each year to make up the difference.
Totally, 100% wrong. Since 1971, the end of the gold standard, the U.S. federal government has had the unlimited ability to pay its bills without borrowing, even without taxing. There is zero relationship between federal deficits and the federal government’s ability to spend.
The situation Bowles and Simpson describe is called monetary non-sovereignty. But the U.S. is Monetarily Sovereign, an entirely different economic situation. It’s as though Bowles and Simpson were hired to analyze a football game and came back with recommendations based on tennis rules.
Creating T-securities from thin air, then exchanging them for dollars previously created from thin air(aka “borrowing”), no long is necessary. The fact that the two people heading Obama’s deficit commission don’t understand this fundamental truth of economics, is shocking.
Bowles and Simpson are no more ignorant than the politicians, media writers and old-line economists. What’s shocking is the fact that they head a commission entrusted with analyzing the situation and making recommendations based on their analyses. Instead, they parrot the popular and obsolete wisdom of the day.
Continuing the paragraph:
If not addressed, burgeoning deficits will eventually lead to a fiscal crisis, at which point the world’s financial markets will force decisions upon us.
There’s that word “eventually” again, the word all debt-terrorists use, because they have no facts. “Eventually” is the cousin to “unsustainable” and “ticking time bomb,” previous debt-terrorist favorites. Yes, “eventually” the U.S. will lose the ability to pay its bills, if Congress, on the advice of Bowles and Simpson, refuses to raise the debt ceiling. Meanwhile, according to current law, the U.S. can pay any bill of any size and time — without borrowing.
Later, in another paragraph, Bowles and Simpson say:
Recently Paul Ryan, the Republican chairman of the House Budget Committee, put forward a serious, honest plan for addressing our nations fiscal challenges. But while it makes a constructive contribution to the debate, it fall short of the balanced, comprehensive approach necessary to achieve bipartisan support.
Huh? It’s “serious,” “honest” and “constructive,” but it’s not “balanced” or “comprehensive”? Paul Ryan’s plan is the worst thing that possibly could happen to America, especially to America’s lower paid, 90% majority, the people who depend on Medicare, Social Security and jobs, all of which Ryan’s plan would erode. Bowles and Simpson, rather than actually looking at facts, have given us the typical, wrongheaded gobbledegook we can expect from political appointees who have no idea what they are talking about.
The article ends with:
(The) prospect for bipartisan compromise now offers us the best hope for genuine progress that benefits both sides, and important, benefits the country.
Sure, they want compromise so long as the compromise begins with the diametrically wrong assumption that our Monetarily Sovereign nation somehow has gone back to pre-1971, on the gold standard, to become monetarily non-sovereign.
If you’re wondering how the wealthiest nation in the world could find itself in ongoing financial difficulties, you only need listen to Bowles and Simpson, the two men given the assignment to investigate solutions, but instead came back with exactly what their boss told them.
Bowles and Simpson — may their names live on in disgrace, as classic examples of political hacks who know nothing about the job they were given, so rather than helping, they do damage. (“Doctor, your patient died needlessly. You did a Bowles and Simpson operation.”)
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 teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it ruined my future.”