Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Readers of this blog know dollars do not exist in a material form. You cannot see, touch or hold a dollar. It strictly is an accounting function — a number on a balance sheet — which the federal government has the unlimited ability to change.
This seems alien to the average person, who works his or whole life to obtain these ethereal numbers. But when dollars are viewed properly, it becomes easier to see why the federal debt is of so little import. It is under the total control of the federal government, which can change the debt simply by changing numbers in its balance sheets.
Treasury’s Thrift Savings Plan maneuver aims to keep government under debt cap
By Eric Yoder, Published: January 17
The federal government resorted to a favorite accounting maneuver Tuesday to stay under its debt limit, suspending the issuance of securities in a retirement savings program for federal and postal employees.
The Treasury Department announced the maneuver involving the Thrift Savings Plan’s government securities fund to keep the government below the $15.2 trillion debt ceiling, pending approval of a higher limit.
The fund, commonly called the G fund, consists of special-issue securities available only through the TSP. It operates much like a mutual fund for employees saving through the 401(k)-style program.
By not issuing new securities for the fund, the Treasury in effect frees up money on investment in the fund to stay below the debt limit. However, the G fund money remains on account with the Treasury, and investors “are guaranteed interest when Treasury securities are issued to the fund, and they are guaranteed interest when securities are not issued to the fund,” TSP spokesman Tom Trabucco said.
A statement from TSP Executive Director Greg T. Long posted at http://www.tsp.gov said the guarantee “has effectively protected G fund investors many times over the past 25 years. That protection, which was established by the Thrift Savings Plan Investment Act of 1987, will again work to ensure that G fund investors are completely unaffected by the limitation on securities issued by the U.S. Treasury. G fund account balances will continue to accrue earnings and be updated each business day, and loans and withdrawals will be unaffected.”
Trabucco said that the 1987 legislation “was enacted to protect investors in just this situation and keep them insulated from the politics of the debt limit.”
The Treasury has resorted to similar maneuvers about a dozen times during the TSP’s two-decade existence with no effect on investors, he said. The most recent occurrence was last spring and summer, when Congress and the White House deadlocked over raising the debt ceiling. An agreement was reached in August.
Imagine you own a business. You look at your balance sheet and find your liabilities exceed your assets. You have a negative net worth and can’t pay your bills. What do you do? If you’re our Monetarily Sovereign, federal government, you have the power to change the numbers and voila! You now have a positive net worth, and can pay all your bills.
This is why the federal government (unlike state and local governments and unlike the euro nations) never can run short of dollars, never needs to tax, never needs to borrow and never can be “broke” as so many uninformed politicians like to claim.
It’s the federal Balance Sheet Boogie. Don’t you wish you could do it?
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports