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. Economic austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Here is how our Monetarily Sovereign government, which has the unlimited ability to create dollars simply by touching a computer key, plans to remove dollars from our economy. As the economy suffers the death of a thousand cuts, everyone cheers.
The Federal Eye, Posted 10/19/2011
Georgetown landmark to be sold by federal government
By Ed O’Keefe and Jonathan O’Connell
A government-owned landmark with a choice Georgetown address is expected to be put up for sale in the next year as part of the Obama administration’s plans to sell excess federal property across the country.
The facility, a largely abandoned art deco-style heating plant owned by the General Services Administration, is situated on a two-acre site amid townhouses and the Four Seasons Hotel at the corner of 29th and K Streets NW. On Thursday, it will be added to a list of 12,000 properties the federal government says it no longer needs, as part of a review ordered by President Obama to save at least $3 billion in government building costs.
Jeffrey Zients, deputy director of the Office of Management and Budget, said the administration will save more than $3.5 billion in building costs by the end of fiscal 2012. The federal government owns 1.2 million properties costing taxpayers more than $20 billion to operate and maintain, Zients said. In addition to the 12,000 excess properties, he said another 50,000 are considered underused.
More accurately, the federal government plans to stop sending $20 billion into the economy annually. This has the same effect as a $20 billion tax increase.
Built in the 1940s, the GSA plant once burned coal and natural gas, but has sat dormant and racked up $3.5 million in maintenance costs in the last decade, Zients said.
. . . Dollars that have been going to maintenance personnel.
Some agencies, including the departments of Homeland Security and Justice, are studying how best to consolidate workers. At Justice, dozens of career attorneys this week threatened to quit if the department goes through with plans to close four regional offices located in southern and midwestern cities.
. . . Thereby exacerbating unemployment.
Even though the White House is set to meet its goal, officials are pushing Congress to pass a bill that would establish a civilian buildings commission to review other sites for closure or consolidation. If the legislation passes, the panel would issue recommendations to Congress for an up or down vote and generate at least $15 billion in savings over there years, Zients said.
That’s $15 billion fewer dollars entering the economy. Removing dollars from the economy is anti-stimulative. Remember: Federal Deficit Spending – Net Imports = Net Private Savings, so reduced federal spending = reduced private savings.
Yes, it could be said the private sector may lose dollars, but it will gain wealth, a nebulous entity that cannot be measured or accurately defined. People use “wealth” to mean all sorts of things. Are educated children part of America’s “wealth”? Is happiness “wealth”? What about a newly written song or poem? Do they contribute to our “wealth”? The Grand Canyon, which has minimal intrinsic value, but immeasurable value in terms of beauty and symbolism – is that “wealth” and if so, how much? No one knows how much wealth there is in America, whether it has grown or declined, and whether one kind of wealth is more economically stimulative than another. “Wealth” is an uncertain word, meaning different things to different people, and so is not a scientifically meaningful term.
But, we do know for certain:
1. Our Monetarily Sovereign government, upon receiving dollars for sales or for taxes, has no use for these dollars. It can create unlimited dollars, ad hoc, by spending. Dollars sent to the U.S. government, simply disappear on arrival. (This is not the case with dollars sent to state and local governments, which are monetarily non-sovereign.)
2. Federal asset sales to the private sector reduce the domestic supply of dollars.
3. Dollar supply reductions lead to recessions.
All of the above relates to The Biggest Economic Question of the Day: “How does a tax increase or spending decrease reduce unemployment or grow the economy?”
The far better alternative would be for the government to give (not sell) unneeded property to the private sector, and not remove dollars from the economy.
I award the Obama administration one dunce cap for believing the federal government needs dollars more than does the private sector.
(If you are one of those who has received a dunce cap from me, don’t bother sending it back. I create dunce caps ad hoc, by awarding them, so I have no use for yours. I now am running a dunce cap deficit of 45 caps. What is my limit?)
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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings
12 thoughts on “–Economy continues to suffer the death of a thousand cuts — and everyone cheers.”
you are the dunce hat master, Rodger … no limit to your creativity on dunce hats, so create them as needed and put em where they belong! tis a shame we can’t MAKE EM WEAR EM!
Yes, I am dunce cap sovereign.
Are you concerned that consumer price inflation has risen to 4?
Not really. It’s been there before — caused by oil prices, which will be headed back down. The Fed can control inflation at this level.
Bernanke is supposedly an inflation hawk, yet he keeps interest rates low. I guess Ivy League degrees don’t mean jack if you were taught the wrong thing.
you’ll never run out of dunce caps since you are The Free Dunce Cap Soevereign King of The Unlimited Universe 😉 LOLL
Exactly — just as the U.S. federal government is The Free Dollar Sovereign King of The Unlimited Universe
Bernanke keeps interest rates low because he believes low rates help stimulate the economy. He is wrong. I discuss this at: https://rodgermmitchell.wordpress.com/2009/09/09/low-interest-rates-do-not-help-the-economy/
If inflation does go much above target, I believe he will raise rates, which is the correct thing to do.
Rodger Malcolm Mitchell
Warren Mosler in 2009: “I would make the current zero interest rate policy permanent. This minimizes cost pressures on output, including investment, and thereby helps to stabilize prices.”
Wow. Paul Volcker he is not.
It’s one of the few areas where Monetary Sovereignty differs from MMT
When you say “1. Our Monetarily Sovereign government, upon receiving dollars for sales or for taxes, has no use for these dollars. It can create unlimited dollars, ad hoc, by spending.”
How do you mean “no use for these dollars”? Can I reformulate the statement to be: “The government, choosing to spend, will either collect money via taxes or sales and spend it (leaving the total amount of money constant) or can just print money and spend it (increasing the total amount of money).” So if the government wants to increase the total amount of money, it has no use for taxes since they would not increase the supply of money? Or is it more like no use for Treasuries (or whatever was “sales”) since they have to be paid back and we would prefer to just print the money for them instead? Or is the tax collection itself useless, whereby the end result in purchasing power would be the same if the government taxed and spent versus just printed and spent?
I say this because when you say “no use”, I would see this difference between tax+spend vs print+spend to be an important “knob” that the government turns. If you want to increase the money supply faster, go for more of the printing, if you want to keep spending up but want to keep money supply growth low, go for the tax+spend solution. A 100% print or 100% tax solution would seem to limit your options for monetary policy the same way as a 0%-forever interest rate.
The government does not use tax dollars for spending. Yes, spending – taxes = deficits, and the greater the deficit the faster the money supply grows.