Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Paul Krugman wrote an article, the beginning of which I’ll quote:
Barack Herbert Hoover Obama
From today’s radio address:
“Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.”
Yep, the false government-family equivalence, the myth of expansionary austerity, and the confidence fairy, all in just two sentences.
In one, succinct line, Krugman has summarized the destructive fantasy foisted on America by the Tea/Republican Party, and swallowed by the Democrats, the media, the bloggers and the public. Let’s parse Obama’s comments:
“Government has to start living within its means, just like families do.“
I can’t imagine how a President could express more utter economic foolishness than this. First, there is no comparison between federal finances and family finances. The federal government is unique. It is Monetarily Sovereign, meaning it has the unlimited ability to pay any bills of any size, any time.
If the government owed you $100 trillion (!), the government would pay your bill by instructing your bank to credit your checking account $100 trillion. This would require the press of a computer button. No money would move from the government to your bank. Instead, your bank simply would change the numbers in your account to reflect that additional $100 trillion. Bill paid. Period. This is how the federal governments pays all its debts, and is the reason the entire debt ceiling argument, as well as the debt ceiling itself, is an exercise in ignorance.
Families, on the other hand, are monetarily non-sovereign. You do not have the power to instruct a bank to mark up someone’s account. The best you can do is give someone a check, which is a set of instructions to your bank, to mark down your account, while your bank instructs your creditor’s bank to mark up his account. But your bank won’t do it unless you have sufficient balance in your account.
The same limitation exists for other monetarily non-sovereign entities such as businesses, states, counties and cities. The federal government, being Monetarily Sovereign, faces no such limitation.
The fact that the President of the United States, with all his advisers, either doesn’t know the differences between Monetary Sovereignty and monetary non-sovereignty — or is too contemptuous of the voting public to explain the differences — is an indictment of the man. He now is trapped by his own misstatements. His lies have begot bigger lies, while the truth would have set him free.
Then, there is,
“We have to cut the spending we can’t afford so we can put the economy on sounder footing . . .”
Since there is no spending the federal government can’t afford, what the hell is he talking about? And, would someone please tell me the mechanism by which reduced federal spending puts the economy on a “sounder footing.” To my thinking, a sounder footing would mean more jobs, more growth, more prosperity. How does reduced money growth accomplish that?
So, how does less federal money help business? How do increased taxes help business? How does cutting Medicare, Social Security and Medicaid benefits — all dollars paid to consumers — help the economy?
Finally, we have:
“. . .and give our businesses the confidence they need to grow and create jobs.”
The notion that confidence grows business and creates jobs — what a ridiculous myth. Business growth creates confidence and not the other way around. America was loaded with confidence, just before the Great Depression. America also was loaded with confidence just before the most recent recession. America always is loaded with confidence when business is good and people are working.
The idea that in some strange way, cutting federal money creation will create confidence which will stimulate business — despite a lack of money — is beyond ignorant. It is downright stupid. And the fact that our President mouths these obscene platitudes is beyond frightening. It is disgusting.
I’ll end this by admitting that I voted for Obama. Call it the Palin effect. Call it my liberal bias. Call it home cooking (I’m a Chicagoan.) So for me, this guy has been disappointment squared. He oversaw the “universal” (almost) health care program, by letting other Democrats fight for it. He reportedly made a brave decision regarding bin Laden. But, he either has been clueless or gutless when it comes to the economy.
I can understand the public not understanding Monetary Sovereignty; the media deny it exists. I can understand the media not understanding Monetary Sovereignty; the old-line economists deny it exists. I can understand the old-line economists not understanding Monetary Sovereignty; they have been giving the same classroom lectures since the gold standard days (when we were not Monetarily Sovereign), and one can’t teach egotistical old professors new ideas.
But, it angers me that the President of the United States, the leader of the free world, the most powerful man on earth, does not or will not understand the simple truths that: The federal government has no “means” to live within; the federal government is not in any way like families or like any other American institution; the federal government can “afford” anything simply by crediting bank accounts; reduced federal spending reduces the economy’s money supply which reduces growth; and confidence does not grow an economy, money does.
Or is this all just a traitorous politician’s “say-anything-and-do-anything” for personal power, and to hell with the American people? Whichever it is, Mr. Obama, you are a major disappointment, a leader from the rear, whose reelection will be salvaged only by the likes of Michelle Bachmann et al.
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.”