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 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.
I’ve spent years answering questions about money, trying to help people understand that money does not exist physically, and that the government has the unlimited ability to create it. So I thought it might be instructive to let you present a few questions to your friends and family, and see how they do.
Some questions may, at first glance, seem trivial. They are not. Fewer than one person in a thousand can answer all these questions. If you answer half, you are doing well.
1. Is a dollar physically real?
2. How big is a dollar, what color is it, and how much does it weigh?
3. I read on the Internet that a dollar bill weighs about one gram. So again, how much does a dollar weigh?
4. A $20 bill also weighs about one gram. So now how much does a dollar weigh?
5. I have a bank safe deposit box. It is real. The size is 24″ x 10″ x 2″. It weighs 1,000 grams and is black. I have a checking account. Is it real? How big is my checking account? What does it weigh? What color is it?
6. If my bank burns down, how many dollars have I lost?
7. Does the federal government have a bank account?
8. How much does the federal government’s bank account weigh?
9. I take a $20 bill to my bank and say, “Please deposit this in my checking account.” Will the teller put that $20 bill into my checking account?
10. Can I look in my checking account and see that dollar bill?
11. The $20 bill I gave to the bank is dirty, so the bank sends it to the U.S. Treasury in exchange for a new one. The Treasury destroys the $20 bill. Is the U.S. now poorer by $20?
12. The Treasury prints a $20 bill to replace the one it destroyed. Is the U.S. now richer by $20?
13. Someone at the Treasury forgets to turn off the press, and it prints one million $20 bills. Is the U.S. now richer by $20 million?
14. I have one blank check left in my checkbook. It weighs about one gram. I make out the check for $1,000, payable to Mr. Smith. Is that check a thousand dollars?
15. Mr. Smith deposits my check in his checking account. Does my bank send his bank my $1,000 payment?
16. I own a $1,000 T-bill. What does the T-bill weigh? What color is it? How big is it?
17. The T-bill is in my T-bill account at the Federal Reserve Bank. I never have seen it, but I know it is there, because the Federal Reserve Bank sent me a notice. Where did the government get the T-bill to put in my account?
18. Next week, my checking account will be marked up by an automatic Social Security payment for $1,300. How did that happen?
19. Who instructed my bank to mark up my account?
20. Why did my bank obey?
21. Every year, the U.S. spends, borrows and taxes trillions of dollars. Where did those dollars originally come from?
22. Who created them?
23. How were they created?
24. How are dollars destroyed
25. You pay your federal taxes using five hundred dollars cash. What does the federal government do with your dollars?
26. How is the federal debt determined?
27. How is the federal deficit determined?
28. If the deficit were zero, could the government sell additional T-securities (i.e. grow the debt)?
29. If federal debt were zero, could the government deficit spend?
30. What is the difference between Monetary Sovereignty and monetary non-sovereignty?
2. A dollar has no physical size, weight or color. It is an accounting notation.
3. Nothing. A dollar bill is not a dollar. It is a title to a dollar.
4. Also, zero
5. A checking account has no physical reality Having no physical reality, it has no size, weight or color. You never can see it, feel it, smell it, taste it or hear it.
6. $0. Dollars, having no physical reality, cannot burn
7. Yes, many.
12. No. Dollar bills are not dollars. They are titles to dollars
14. No. It is a set of instructions to his bank and yours.
15. No. His bank marks up his checking account by $1,000 and instructs my bank to mark down my checking account by $1,000. Nothing is sent, because dollars, not being physical, cannot be sent.
16. No color, no size, no weight. Like dollars, a T-bill does not exist, physically. It is just an accounting notation
17. The government didn’t “get” the T-bill, and it didn’t “put” a T-bill in your account. It just instructed the Federal Reserve Bank to mark up your T-bill account, which it can do endlessly.
18. The government sent instructions to your bank to mark up your account. There is no limit to the government’s ability to send instructions
19. A government computer
20. The law requires banks to obey government instructions
21. Federal deficit spending originally created all dollars. Today, dollars also are created by various types of lending
22. The Treasury, via spending instructions from Congress
23. The checking accounts of federal creditors were credited
24. Federal taxes destroy dollars. Dollars disappear from taxpayers checking accounts. They neither are held nor stored anywhere.
25. Depending on the physical condition of the dollar bills, they may be destroyed or re-used. The actual dollars, being only accounting notations, disappear from the economy and become credits in many federal balance sheets.
26. Federal debt is the total of outstanding T-securities, which regardless of federal spending, Congress may or may not decide to have issued.
27. The federal deficit is the accounting differences between federal taxes and federal spending. It is the method – the only method – by which the federal government creates dollars. If there were no deficits there would be no dollars.
28. Yes. The federal government has the power to mark up any T-bill accounts. This would increase the “debt.” Though T-bills are referred to as “debt,” the federal government does not borrow its own sovereign currency. It has no need to, since it has the unlimited power to mark up checking accounts.
29. Yes. Deficit spending merely is marking up checking accounts, an act that does not affect T-security accounts. Federal deficits and federal debt are not functionally related, though by law, the government is required to mark up T-security accounts the same net amount as it marks up checking accounts when it deficit spends.
30. A Monetarily Sovereign government has the unlimited ability to create it’s sovereign currency. A monetarily non-sovereign government has no sovereign currency.
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