The debt hawks are to economics as the creationists are to biology. Those, who do not understand Monetary Sovereignty, do not understand economics. If you understand the following, simple statement, you are ahead of most economists, politicians and media writers in America: Our government, being Monetarily Sovereign, has the unlimited ability to create the dollars to pay its bills.
I often have said I don’t mind or criticize ignorance. Even the most brilliant of us is ignorant about many things. What I do mind is people who are supposed to be knowledgeable, refusing to learn, and instead of learning, continuing to spout false and harmful ideas in the face of facts. In that vein, some articles are so incredible, one doesn’t know whether to laugh or cry. This is one of them:
Washington Post, Joel Achenbach, Published: May 15, 2011
With the United States poised to slam into its debt limit Monday, conservative economists are eyeballing all that gold in Fort Knox. There’s about 147 million ounces of gold parked in the legendary vault. Gold is selling at nearly $1,500 an ounce. That’s many billions of dollars in bullion.
“It’s just sort of sitting there,” said Ron Utt, a senior fellow at the Heritage Foundation. “Given the high price it is now, and the tremendous debt problem we now have, by all means, sell at the peak.”
Uh, excuse me Mr. Utt and your Heritage Foundation fellows, but the federal debt merely is the total of outstanding T-securities, which the U.S. easily could (and should) eliminate by exchanging them for dollars. It would be a simple asset swap, which the U.S. does every day at the touch of a computer key. The creditor’s T-securities account would be debited and his checking account credited.
Oh, but wait, all is not lost. Perhaps the Obama administration has a better idea:
“But that’s cockamamie,” declares the Obama administration.
Ah, now we’re getting somewhere.
Mary J. Miller, Treasury’s assistant secretary for financial markets, said the U.S. should sell assets in an orderly, “well-telegraphed” manner, not in a “fire sale” atmosphere with a debt limit deadline accelerating the process. “It would be bad for the taxpayers. It would be bad for the markets,” Miller said.
Oh, no. She’s as ignorant of economics as is Utt. She doesn’t want to sell gold; she wants to sell other assets. Uh, excuse me Ms. Miller, but not only does the U.S. not need to sell any assets, but the federal debt does not affect, or even involve, the U.S. taxpayer. Servicing the debt does not use tax money.
O.K., maybe she’s an exceptionally ignorant example. There probably are more informed people in the White House:
Another senior administration official, not authorized to speak for attribution, described the situation more bluntly: “Selling off the gold is just one level of crazy away from selling Mount Rushmore.”
Excellent. Maybe the anonymous “senior administration official” actually knows something, although being part of the Obama administration, I can understand why he/she chose to remain anonymous.
The United States may have run up a huge debt, but it is not a poor country by any stretch of the imagination. The federal government owns roughly 650 million acres of land, close to a third of the nation’s total land mass. Plus a million buildings. Plus electrical utilities like the Tennessee Valley Authority. And an interstate highway system.
OMG, as the kids say. Now the author of this article begins to demonstrate his ignorance. Excuse me, Mr. Achenbach, but federal assets have nothing to do with servicing T-securities. If the government didn’t own a single building, a single acre or a single electrical utility, that would not affect the government’s ability to service its T-securities by even a single penny. Isn’t there anyone in government or the media who understands Monetary Sovereignty? Anyone?
Economists of a conservative or libertarian bent have long argued that the federal government needs to get out of certain businesses, unload unneeded assets, and privatize such functions as passenger rail service and air traffic control. No one advocates selling Yellowstone, but why, some economists ask, should the federal government be in the electricity business?
Economist Kevin Hassett of the American Enterprise Institute said the federal government should consider the sale of interstate highways. Motorists would have to pay tolls to the private owners, he said, but the roads would likely be in better shape. Federal, state and local governments could raise hundreds of billions of dollars through highway privatization, he said.
“Many of the world’s roads were originally built as toll roads, so it would hardly be revolutionary to return to that model,” Hassett said. “If it can work for the River Styx, why not the Beltway?”
Yet another economist who does not know what he’s talking about. The City of Chicago privatized its parking meters and a toll road. The result: Costs to users tripled and service is lousy. And wouldn’t that be just peachy for the national highway system to be converted to toll roads? Drivers would love that.
And why does a Monetarily Sovereign nation need to collect tolls, anyway? Ah Kevin, please enjoy your return to the River Styx.
The Heritage Foundation on Tuesday released a plan for balancing the budget that did not include tax increases, but did include a proposal to sell $260 billion in federal assets over 15 years. The plan does not specify the assets. It refers to “partial sales of federal properties, real estate, mineral rights, the electromagnetic spectrum, and energy-generation facilities.”
“We’re not going to say we’re going to sell off the Smithsonian and the Capitol. We would not propose that anyway. There’s no specific building that we would point to,” said Alison Fraser, head of the Economic Policy Studies department at Heritage.
The Heritage group chose not to mention the Fort Knox gold when it included asset sales in the budget plan. Fraser said the group didn’t want to be “sidetracked” into a debate with the hardy band of folks who think the country should return to the gold standard. “We just opted not to go there,” she said.
That would be something to remember: One group ignorant of economics, debating with another group, equally ignorant of economics. Lord have mercy.
But some economists want to liberate the bullion.
“Why not?” asks Chris Edwards, director of tax policy studies at the libertarian Cato Institute. “I think it shows that the government is getting serious about reforming itself.”
Another “genius” joins the conversation. Excuse me, Mr. Edwards, but what the heck are you talking about?
Oh, well, I could go on and on quoting ignorant remarks from this article, but they all essentially are based on the same idiocy, which is: The federal debt, composed of T-bills created from thin air, somehow is a difficult burden to a government that also creates dollars from thin air.
So tell me, should I laugh or cry? This controversy deserves at least 3 dunce caps for major ignorance. Note that though I am running a dunce cap deficit, I will have no difficulty creating as many as I wish. I am dunce cap sovereign, just as the U.S. government is dollar sovereign. It can create as many as it wishes:
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 dopey teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it screwed up my future.”