How can federal spending increase the nation’s money supply?

The U.S. federal government created the very first U.S. laws from thin air, and some of those laws created the very first U.S. dollars, also from thin air.

Ever since then, the government has continued to create laws, and some of those laws allow the government to continue creating more dollars.

Thus, the U.S. government has given itself the power to create an infinite supply of U.S. laws and an infinite supply of U.S. dollars. The power is called “Monetary Sovereignty.”

You do not have this power. Nor does your city, county, state, or business. You all are monetarily non-sovereign.

While the federal government can’t unintentionally run short of dollars, you can, as can even the wealthiest people or businesses on earth.

So would you or anyone elect to send your precious dollars to the federal government?

Water Bottle Pouring Water To Ocean Canvas Print | Canvas Prints-somchaij
Sending dollars to a Monetarily Sovereign government is even more futile than pouring a bottle of water into the ocean.

Of course, you wouldn’t, because you are too wise to throw your money away.

The only reason why you would send money to the federal government is to obey laws requiring you to do so.

Otherwise, you would be a fool to send dollars to an entity that has infinite dollars.

Sadly, thousands, perhaps millions, of well-meaning Americans do just that.

Recently, reader “Mark” mentioned this government website:

Gift Contributions to Reduce Debt Held by the Public
The Bureau of the Fiscal Service may accept gifts donated to the United States Government to reduce debt held by the public. Acting for the Secretary of the Treasury, Fiscal Service may accept a gift of:

Money, only on the condition that it be used to reduce debt held by the public.

An outstanding government obligation, only on the condition that the obligation be cashed and the proceeds used to reduce debt held by the public.

Other intangible personal property only on the condition that the property is sold and the proceeds used to reduce the public debt.

Gifts to reduce debt held by the public may be inter vivos (from a living person) gifts or testamentary bequests (in a person’s will).

The fiscal year to date information includes total gifts received for the months of October through September. Monthly data is not available for the years 1996 and 1997.

Read about how to make a contribution to reduce the debt.

Gift Contributions*
2021 $1,268,950.35   2020 $1,615,198.54    2019 $4,991,215.70    2018 $775,654.63

2017 $2,611,428.24   2016 $2,718,154.76    2015 $3,864,661.38    2014 $5,103,452.84

2013 $1,763,754.56   2012 $7,749,618.27    2011 $3,277,369.23    2010 $2,840,466.75

2009 3,063,057.05    2008 2,189,358.89     2007 2,624,862.42      2006 1,646,209.41

2005 1,455,541.65    2004 664,911.25       2003 1,277,423.40      2002 744,675.06

2001 1,645,082.28    2000 1,868,891.93     1999 1,457,510.59      1998 1,535,541.02

*Gifts to Reduce Debt Held by the Public have been reported in the footnotes of the Monthly Statement of the Public Debt since February 1988. Visit the MSPD to view historical information on the debt including fiscal year to date tables through and including 1987.

If a private citizen had written the above pack of lies to solicit money, a sheriff would be banging on his door. But who will arrest Timothy (Tim) E. Gribben, commissioner of the U.S. Department of the Treasury’s Bureau of the Fiscal Service (Fiscal Service)?

If you go to his department’s website, you will see lies that would shame even Donald Trump. For instance:

. . . gifts donated to the United States Government to reduce debt held by the public.

What a con job. First, there is no reason to reduce the debt held by the public. This so-called “debt” is nothing more than deposits into T-security accounts held by the Federal Reserve Bank.

There is no reason to reduce these deposits, and the federal government has the unlimited ability to increase or constrain them.

Further, the government pays off the deposits every day upon maturity, simply by returning the money in the accounts. This is no burden whatsoever on the government or on taxpayers, as no tax dollars are used.

Second, the dollars you send to the federal government are destroyed upon receipt. The dollars you send come from the M1 money supply measure, but when they are received they immediately become part of no money supply measure.

Because the government has the infinite ability to create infinite dollars, there is no point in trying to measure or add to the government’s money supply. It is worse than hoping to raise an ocean level by pouring a bottle of water into the ocean because even an ocean isn’t infinte.

Infinity plus any number, still is infinity, which is why voluntarily sending dollars to the federal government is infinitely foolish.

∞ + 1 = ∞

“We are guided by our commitment to integrity, collaboration, accountability, learning, and excellence in our dealings with each other and with those we support and serve.”

Oh, puleeze. When someone brags about his integrity, collaboration, accountability, learning, and excellence, you can be sure he has none of those virtues, especially when:

“We . . . conducted 472 auctions to fund critical government operations and activities.”

His auctions do nothing to fund government operations and activities. Like federal tax dollars, auction dollars are destroyed upon receipt. The transition from being part of the M1 money supply to being part of no money supply effectively destroys dollars.

“We collected over $4.91 trillion in federal revenue of which 99.6% was settled electronically.”

Whether settled electronically or with an abacus, it was $4.91 trillion dollars removed from the U.S. private sector (aka “the economy”) or from some other nation’s private sector — and destroyed.

. . . processed nearly  202.2 million transactions valued at over $3.56 trillion in tax revenue.

He destroyed $3.56 trillion that formerly was in the economy.

“We collected $5.04 billion in delinquent debt.”

And gave that $5.04 billion to an entity that already has an unlimited supply of dollars.

Treasury Offset Program collected $271.76 million of delinquent child support collections and $294.8 million of State Unemployment Insurance. The Centralized Receivables Service processed 805,980 cases and collected over $79.1 million.

All of the above-mentioned dollars were taken from the private sector, and destroyed.

“We finance government operations by offering Treasury securities through reliable, accurate, flexible, and electronic systems.”

No, you do not “finance government operations by offering Treasury securities.” The government finances its own operations by creating dollars, ad hoc.

In summary, take pity on the well-meaning but ignorant folks who voluntarily pour their precious dollars into an infinite, unmeasurable ocean.

But take even more pity on those of us who are forced, by law, to do the same, unnecessary thing: Paying FICA.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

……………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Student loans: Another screwing of the middle classes

Let’s be clear. Every time the government pays a creditor, it creates new dollars, ad hoc.
In fact, paying creditors is the method by which the government creates dollars.

Thus, the U.S. federal government cannot unintentionally run short of its own sovereign currency.

Let’s be clearer. The U.S. federal government has absolute control over the value of the U.S. dollar (aka “inflation.”) Not only does the government control interest rates (which affect the value of the dollar) but the government arbitrarily can and has changed the value of the dollar many times.

Coinage Act of 1792
Coinage Act  of 1834
Coinage Act of 1853
Coinage Act of 1857
The Mint Act of 1873
Coinage Act of 1965
Nixon “Shock” of 1971

With the unlimited ability to create dollars, and the unlimited ability to control inflation, the federal government has no need to ask anyone for U.S. dollars.

It already has infinite dollars.Facepalm - Wikipedia

In fact, all U.S. tax dollars sent to the federal government are destroyed upon receipt.

These dollars, formerly part of the M1 money-supply measure, cease to exist in any money-supply measure after arriving at the U.S. Treasury.

Thus, federal taxes are not collected to provide the federal government with spending money.

The sole purpose and effect of federal taxation is to control the economy by rewarding what the government wants to encourage and by penalizing what the government wishes to discourage.

Thus, the government never should lend dollars, because lending requires repayment of dollars, which the federal government doesn’t use.

The government should give dollars when it believes dollars are needed. Giving, rather than lending, adds growth dollars to the economy.

One goal of the federal government should be to ease the ability of middle- and lower-income students, to attend college if they wish to.

Unfortunately, to achieve that goal, the government provides colleges students with dollars, via lending.

The above facts are what make the following article so infuriating.

Predatory student loans
Servicing company required to cancel $1.7B in debts for 66,000 borrowers
By Stacy Cowley The New York Times

Navient, once one of the country’s largest student loan servicing companies, reached a $1.85 billion deal with 39 states to settle claims that it had made predatory student loans that saddled millions of borrowers with billions of dollars in debt that they were highly unlikely to repay.

The deal, announced Thursday, requires Navient to cancel $1.7 billion in private student loan debts for nearly 66,000 borrowers and pay $95 million in restitution.

The private loans were crucial to Navient’s ability to make a large volume of lucrative federal loans, prosecutors said.

“Navient repeatedly and deliberately put profits ahead of its borrowers,” said Josh Shapiro, the attorney general of Pennsylvania, one of several states that had sued Navient.

Most of those who took out the private loans attended for-profit schools, often ones with low graduation rates and poor job-placement records.

The private loans Navient made were — in the company’s own words, according to legal filings — a “baited hook” that the lender used to reel in more federally guaranteed loans.

At some schools, it anticipated that more than 90% of the loans would default.

Rather than helping lower- and middle-income students succeed, and narrow the Gap between the rich and the rest, student loans do exactly the opposite.

Student loans doom students to lifetimes of debt and low credit ratings.

Imagine lending money when you know 90% of the borrowers would be forced into default. It is yet another clever scam by the rich (who control the U.S. government), to widen that Gap, while not-so-incidentally, putting dollars in their own pockets.

Navient, which did not admit any fault in the settlement, said it did not act illegally.

“The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court,” said Mark Heleen, Navient’s chief legal officer.

Oh sure. All innocent companies settle lawsuits for $1.7 billion + $95 million.

Several state attorneys general also filed state lawsuits claiming that Sallie Mae — Navient’s predecessor company, from which it split off in 2014 — made private, subprime loans to borrowers it knew were likely to default.

Under Education Department rules, no more than 90% of a school’s tuition payments can come from federal funding. The private loans were intended, according to court filings, to fill that gap and lure in students, who would then take out the lucrative federal loans that the schools — and Navient — relied on.

The settlement calls for payments of around $260 per person to be distributed to 350,000 federal loan borrowers.

That $260 is a pittance compared to what the students owe or have paid.

To maintain America’s competitiveness in the world, a college education has become more necessary for America’s young people. To increase America’s wealth and to decrease poverty, the Gap between the rich and the rest should be narrowed.

If the government truly wished to encourage America’s competitiveness, and to narrow the Gap, rather than merely feeding the rich, it would fund free education for all.

Consider that the states, counties, and cities, none of which have unlimited dollars, already fund free K-12, and you can see what a scam the federal student loan system is.

The federal government should adopt Step 4, Free education for everyone, and Step  5, Salary for attending school  of the Ten Steps to Prosperity (below).

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

……………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

The Federal Government Has Infinite $. So why this?

The U.S. federal government is Monetarily Sovereign. That means it has the infinite ability to create its own sovereign currency, the U.S. dollar.

In the 1790’s the government created from thin air, a group of laws that in turn, created from thin air, an arbitrary number of U.S. dollars, and gave them an arbitrary value.

Subsequently, it has created trillions of U.S. dollars (arbitrarily), and often has changed their value.

In short, the U.S. government can do whatever it wishes with the U.S. dollar and never unwillingly can run short of them. U.S. dollars.

Further, the U.S. government has absolute control over the value of a dollar, thus having absolute control over inflation.

So why this:

Our COVID test prices vs. the world’s


Why not free tests?

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

……………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

EMERGENCY! THE FEDERAL GOVERNMENT IS RUNNING OUT OF DOLLARS! (Nah)

EMERGENCY! THE FEDERAL GOVERNMENT IS RUNNING SHORT OF DOLLARS!

Who wants you to believe that nonsense? The rich, of course. They want to widen the income/wealth/power Gap between them and you — and REASON is happy to oblige.

Let’s begin with the headlines:

REASON: ECONOMICS
Inflation Means Interest Rates Could Rise. Higher Interest Rates Will Make the National Debt More Expensive.
The Fed may soon get serious about hitting the monetary brakes to slow the economy.
BRUCE YANDLE | FROM THE FEBRUARY 2022 ISSUE of REASON

They say the so-called “national debt” will be “more expensive.”

The definition of “more expensive” is: An entity having infinite dollars (the U.S. governement) will pump more stimulus dollars into the private sector (aka “the economy’), thus not only helping the private sector grow, but also accomplishing many important economic tasks.

That’s what REASON means by “more expensive.”

10-Year US Treasury Note - Guide, Examples, Importance of 10-Yr Notes
The U.S. government can’t run short of these, 
One1 REAL ONE Dollar UNCIRCULATED United States Gem Mint image 1
or these,
United States Treasury Check For Either A Federal Tax Refund Or Social Security Payment Isolated On White Stock Photo, Picture And Royalty Free Image. Image 137893207.
or these.

The Treasury bond, the dollar bill and the Treasury check all are titles to dollars. Just as a car title is not a car, and a house title is not a house, the above three titles are not dollars. They merely represent dollars, which have no physical existence.

The so-called “national debt” refers to the total of dollars deposited from non-federal sources into T-security (T-bills, T-notes, T-bonds) accounts.

They are not debts of the federal government, which neither needs, uses, nor even touches the dollar in those accounts, except to return them upon maturity. Unlike real debts, the “national debt” is not a financial burden on the federal government or on taxpayers.

The sole purposes of the “national debt” are to provide a safe parking place for unused dollars (thus helping to stabilize the dollar), and to help the Federal Reserve control interest rates (by setting a base rate).

Recent comments from Federal Reserve Chair Jerome Powell hinted that the Fed may soon get serious about hitting the monetary brakes to slow the economy.

Until recently, inflation was described as transitory. But at some point, that story has to change.

For REASON, economic growth is bad, so the economy must be “slowed.” Actually, for REASON, government and all government spending are bad, and there is no acceptable level of either.

Price levels likely will rise into 2022. The all-item consumer price index (CPI) was up more than 5 percent on a year-over-year basis for July, August, and September. The increase for October was 6.2 percent—the largest jump since 1990.

The Fed considers 2 percent inflation to be its goal. Obviously, there is a large gap between that and what we are seeing.

The inflation rate is reflected in interest rates that borrowers must pay, especially for longer-term debt. Lenders hope to be paid back with at least as much purchasing power.

If they believe inflation will tick away at 4 percent, interest rates will tend to rise. Higher interest rates mean higher interest costs on all forms of public and private debt.

As a result, mortgage rates will rise, all forms of construction will suffer, and businesses will postpone making large investments in plants and equipment.

REASON, which wants the economy to “hit the brakes,” suddenly becomes conserned about construction, and businesses investing in plants and equipment, thus criticizing both sides of the same stimulus question.

Now consider the public debt—especially the federal debt, which ballooned as a result of large budget deficits in recent years. (In 2020, the federal government raised $3.4 trillion in revenue and spent $6.6 trillion.)

Translation: The federal government pumped $3.2 trillion net growth dollars into the economy, and you should be shocked.

The interest cost of the national debt was $253 billion in 2008, equivalent to $325 billion in 2021 dollars; it remained around that level through 2015.

Even though the debt doubled in those years, sharply falling interest rates and low inflation helped contain costs.

But that was yesterday. With today’s higher inflation and rising interest rates (perhaps with more to come), the Congressional Budget Office (CBO) estimates that the interest cost of public debt is $413 billion in 2021, stated in current dollars.

Obviously, any dollar spent on interest cannot be spent on government benefits or services.

REASON, demonstrates its ignorance about federal financing, by implying that if the government spends dollars on interest it doesn’t have enough dollars to spend on benefits or services (which REASON hates, anyway).

Of course, if REASON had evan an ounce of knowledge about federal financing, they would admit that the federal government has infinite dollars to spend, so interest payments do not in any way preclude other spending.

Looking ahead, the CBO expects more of the same. For 2026, it projects that the interest rate on 10-year Treasury bonds, currently 1.5 percent, will be 2.6 percent, and that the interest cost of the federal debt will rise to $524 billion.

For 2030, the projections are 2.8 percent and $829 billion, respectively, all stated in current dollars for the noted years.

In other words, the federal government will pump $524 billionand $829 billion interest into the economy in 2030.

Now we are talking about real money. To put $829 billion into perspective, in 2020 the United States spent $714 billion on the military, $769 billion on Medicare, and $914 billion on all nondefense discretionary spending, all stated in 2020 dollars.

Back-of-the-envelope calculations strongly suggest that some spending categories will have to give.

The above-mentioned “back-of-the-envelope calculations neglect to mention that the federal deficit spending is not constrained by lack of dollars. It is infinite.

Finally, we come to the heart of the issue.

The United States is experiencing an inflationary surge caused fundamentally by the injection into the economy of trillions of dollars—stimulus and other spending—without an accompanying rise in production of goods and services that might be purchased with the new dollars. It’s rising demand plus troubled supply.

All inflations are scarcity-based. None are spending-based. Increased deficit spending to cure shortages would end the inflation.

The government has been spending massively for many years, without the long-feared inflat

These forces will be with us until the stimulus dollars work their way through the economy and the federal government stops printing more money.

When the federal government stops “printing” (technically the wrong term) money we will have a recession, just as we always do when money creation stops.

Reductions in federal debt growth lead to inflation
Reductions in federal “debt” growth (blue line) cause receissions (gray vertical bars) which are cured by increases in federal “debt” growth.

As the process continues, our government—the source of inflation in the first place—will face hard choices when paying for past and future deficits and rising debt. 

The federal government pays for all its spending, promptly. Yet, the so-called federal debt is composed of T-securities that are as much as 30 years old. They pay for nothing.

All federal obligations are paid for immediately. The government faces no “hard choices” when paying its debts. It has the infinite ability to create dollars.

The federal government cannot unintentionally run short of dollars.

The so-called “debt is about $25 trillion. The U.S. government does not owe anyone or any thing $25 trillion.

The government could pay off the $25 trillion of T-securities today simply by returning the $25 trillion dollars already deposited into T-security accounts. No burden on the government. No tax dollars involved. No taxpayers burdened.

BRUCE YANDLE is a distinguished adjunct fellow with the Mercatus Center at George Mason University, dean emeritus of the Clemson College of Business and Behavioral Sciences, and a former executive director of the Federal Trade Commission.

This does not speak kindly of the Mercatus Center and GME or of the FTC, who seem to be devoid of information about federal financing.