Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. 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.
The biggest problem in economics may be that “everyone knows” and at the same time, very few people know. For instance: Almost everyone knows what a dollar is. Yet, almost no one knows what a dollar is.
Isn’t that strange?
Imagine that you have a safe deposit box, a checking account and a savings account, all at your local bank. You go to the bank and you say, “I want to see my safe deposit box and everything in it.”
So they take you to the vault room and show you your box. You can see your box, reach out and touch your box, and you can open your box to see the papers and valuables you keep in it. Your box is a physical reality.
Then you say, “I want to see my checking account and everything in it.” The bank teller might print a piece of paper with your name at the top, and your account number and a number showing how much money you have in your account.
But it’s just a piece of paper, not your checking account. You tear up the paper. Have you torn up your checking account? Of course not.
You say, “No, I don’t want to see a piece of paper; I want to see my actual checking account.” But no matter how hard you insist, the bank will not be able to show you anything more than evidence you have an account. The bank will not be able to show you your checking account because your account does not exist in the physical world. It is just numbers.
Then you say, “At least show me my dollars in my account,” and again the bank teller will print out a piece of paper.
You say, “No, I don’t want to see numbers. I want to see my actual dollars that you have stored in my account.” If you want to make a withdrawal, the bank can give you a check or dollar bills, but checks and dollar bills are not dollars. They merely are evidence that you have a claim on dollars.
Like your checking account, dollars do not exist in the physical world. They are just numbers.
Now this may shock you, because nearly everyone believes a dollar bill is a dollar. But it isn’t. It’s just evidence you own a dollar. A dollar bill is a title to a dollar.
If you own a house, the evidence you own it is a paper called a “title.” But, the paper is not the house. A dollar bill is not a dollar; it is just worth a dollar.
Every day, the US Government Printing Office takes thousands of blank sheets of paper and prints them into sheets and sheets of dollar bills. Are they dollars? No, they are just worthless paper, like the paper your bank gave you.
The printing office sends these worthless dollar bills to banks, to give to people as evidence these people own dollars. But let’s say, on the way to a bank, the truck carrying the dollar bills crashes, and 10 million dollar bills burn up. Has the government lost 10 million dollars? No, because dollar bills are not dollars.
This is important because people often talk about the federal government “printing” money. But though the government prints dollar bills, it cannot print money. No one can print something that does not physically exist.
And this is important, because it helps you see that dollars are nothing more than accounting balances. Dollars can’t be seen, touched, smelled or tasted. They can’t be stored or shipped.
And all this is important, because it shows why the federal government has the unlimited ability to create dollars and never, never, ever can run short of dollars, if it doesn’t wish to. To create dollars, all the government does is mark up numbers in checking accounts.
And it’s really, really important, because it shows why Social Security and Medicare never can run out of dollars, no matter what benefits they pay and what taxes they collect.
I’ll tell you more about that, soon.
Meanwhile, think about this. The United States government is Monetarily Sovereign. “Monetarily” means related to money. And “Sovereign” means having supreme power. The U.S. government has supreme power over its dollars. It can create or destroy its sovereign dollars, whenever it wants, as much as it wants, whenever it wants. The U.S. government never needs to ask anyone for dollars.
Try to visualize what having that power means.
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