–How the politicians convince you to take money from your pocket and flush it

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.
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As I’ve been harping on, the debt-hawk effort to reduce the federal deficit has absolutely nothing to do with fiscal prudence, living within our means, not indebting our children, or any other fiscal platitude. It is part of a program designed to increase the gap between the rich and the not-so-rich. Period.

In that vein, here is a survey I received from my Senator, Mark Kirk:

Should Congress cut contributions to the Social Security Trust Fund (replacing these losses with downgraded Treasury debt) in effort to stimulate the economy?
Yes_____
No _____
Do not know _____

He accompanies this survey with a letter that reads, in part:

Social Security is not a welfare program. It is a retirement security program funded by contributions from each American worker to support senior citizens who met their Social Security obligations when they were asked to contribute to the system.

Congress is considering both Democratic and Republican proposals to cut contributions to the Social Security Trust Fund (also called the “payroll tax”) to stimulate the economy. The government would attempt to recoup these new losses to the Social Security Trust Fund by borrowing more, using downgraded U.S. government bonds. Democratic Senator Joe Manchin (D-WV) and I agree that we should protect Social Security’s Trust Fund . . .

So far, 83.97% of the respondents answered, “No,” meaning they do not want the FICA tax to be reduced. They want more money taken from their pockets and added to a mythical Trust Fund. You can’t fool all the people, all the time, but apparently you can fool 83.97% of them.

First, there is no trust fund. It is an accounting fiction, debited and credited at will, by the federal government.

Second, FICA doesn’t pay for Social Security any more than you can identify which of your tax dollars pay for any other federal spending. The government spends by crediting bank accounts, without regard to taxes, then debiting the general fund. Payroll taxes are not held separate from income taxes. (Truth be told, no taxes are “held.” They all are destroyed upon receipt. But that’s another story.)

Third, the government, being Monetarily Sovereign, doesn’t need to borrow dollars it has the unlimited ability to create.

Fourth, S&P’s downgrading of U.S. debt is yet another fraudulent act by the company that rated worthless mortgage securities, “AAA.”

Fifth, downgrading U.S. debt has no adverse effect on the U.S. economy. It doesn’t affect interest rates (the Fed controls rates), and even if it increased rates, the effect would be positive. High rates are stimulative, because they add federal dollars to the economy.)

Sixth, the question itself is a dishonest, two-part exercise in obfuscation. Most two-part questions are dishonest. Consider: “Should you send your child to school, thereby intentionally exposing him to the risks of deadly, communicable diseases, serious accidents, rampant crime, relentless bullying and bad teaching?” Yes or no?

Is this an honest question about school attendance? Is the statement that SS Trust Fund losses must be replaced with “downgraded Treasury debt” honest? Of course not.

All of this is part of the attempt to have you willingly flush your money down the toilet, increase the gap, and not blame the Republicans for increasing SS taxes. It is a scam far greater than anything Bernie Madoff ever dreamed of.

Think of the trillions that have been taken from working people under the guise of “insurance.” Even the name “FICA” — Federal Insurance Contributions Act — is a lie. It’s not insurance.

FICA, and indeed the entire tax system, is nothing more than a financial version of the Stockholm Syndrome.

In psychology, Stockholm Syndrome is an apparently paradoxical psychological phenomenon in which hostages express empathy and have positive feelings towards their captors, sometimes to the point of defending them. These feelings are generally considered irrational in light of the danger or risk endured by the victims, who essentially mistake a lack of abuse from their captors for an act of kindness. (Wikipedia)

Do you defend politicians, who vote to tax you a bit less, mistaking the reduced tax abuse for kindness? Do you accept your tax abuse, because you believe the government’s fables about the need for austerity?

If so, welcome to tax mythology, where you, the voter, are a puppet, and the richest 1% pull your strings.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com


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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
b>Gross Domestic Product = Federal Spending + Private Investment + Private Consumption + Net exports

#MONETARY SOVEREIGNTY

11 thoughts on “–How the politicians convince you to take money from your pocket and flush it

  1. “Downgraded” AA debt pays a higher interest rate than AAA debt, thereby enriching the “Trust Fund” more, and helping it to become more solvent. I vote “Yes”.

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  2. RMM,

    Can you direct me to one of your posts (or elsewhere) that explains how banking works?

    Specifically, I’ve read a lot about banks not being “reserve constrained” and how “loans create deposits” etc.. but I can’t find anywhere that explains the whole process.

    Also, if banks do not loan out our deposits… what exactly does a bank do with all of the money I deposit? Is a percentage kept as Reserves while the rest used to purchase Treasuries? If I put $100 into my bank… what does the bank do with that money?

    thanks

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  3. Except for the fact that markets don’t set rates, the Fed does. Regardless of the “rating” the Fed can defend its target rate.

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  4. J Kra,

    PDW,

    It’s a wonderful question, but the full answer is way too complex to answer completely in one space. The answer is spread throughout this blog.

    The short answer is: The banks do lend your deposits, but are not constrained by your deposits. Being constrained by capital, not by reserves, they also lend what they borrow from the Fed and other banks.

    That simple answer, though true, troubles me, because it characterizes money as having physical properties — as something you can hold and save and lend, like a bag of marbles. It isn’t.

    Think of it this way: When you “deposit” money in the bank, all that happens is you give the bank legal instructions to mark up your account. You actually haven’t deposited anything, in the true sense of the word.

    When your bank “lends” you money, it merely marks up your account and marks down the bank’s account showing how much it legally is entitled to lend. Nothing actually moves from place to place.

    All bank lending, borrowing and spending is based on instructions to mark up and mark down accounts, and these instructions have their basis in the law. Change the law, and banks could “lend” more or less. Change the law, and I could “lend” you a trillion dollars.

    I know this sounds like confusing word-play, but if you try to visualize lending and spending as merely following legal instructions to mark up and mark down accounts, I think you will come to a more realistic understanding of money than most people have.

    Sorry to make the seemingly simple, complex.

    Rodger Malcolm Mitchell

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  5. FICA, and indeed the entire tax system, is nothing more than a financial version of the Stockholm Syndrome.

    In psychology, Stockholm Syndrome is an apparently paradoxical psychological phenomenon in which hostages express empathy and have positive feelings towards their captors, sometimes to the point of defending them. These feelings are generally considered irrational in light of the danger or risk endured by the victims, who essentially mistake a lack of abuse from their captors for an act of kindness. (Wikipedia)

    Do you defend politicians, who vote to tax you a bit less, mistaking the reduced tax abuse for kindness? Do you accept your tax abuse, because you believe the government’s fables about the need for austerity?

    If so, welcome to tax mythology, where you, the voter, are a puppet, and the richest 1% pull your strings.
    THANK YOU,Rodger M Mitchell for one really great quote.
    As I have asked for Challenge ,and endorse them, I will now change “The All Inclusive Solution.The Federal Reserve Bank of America.” too eliminate the Income Stream of Income Taxes.It will now state that income taxes will be ZERO (0%
    and FICA will be ZERO ($0).
    BUT IT WILL STILL SATISFY THE ANSWER TO THE OBAMA QUESTION,” “On 60 minutes (12/11/11) ,President Obama said,”You can’t raise revenues by lowering taxes unless you get the money from somewhere else.”
    AMERICA SHOW HIM THE WAY!

    All Inclusive Solution.The Federal Reserve Bank of America.

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  6. RMM,

    Thanks for the response regarding how banking works. I’ll be spending a lot more time trying to understand it. If you know of any links that can help me I’d appreciate them.

    From this post, you said:

    “Fifth, downgrading U.S. debt has no adverse effect on the U.S. economy. It doesn’t affect interest rates (the Fed controls rates), and even if it increased rates, the effect would be positive. High rates are stimulative, because they add federal dollars to the economy.)”

    Is this not a contradiction of your fundamental position? In many other posts you’ve claimed that raising interest rates is your preferred method of fighting inflation. If that doesn’t work, then you’d defer to the MMT position of cutting government spending and/or raising taxes.

    How do you square this circle? (that “high rates are stimulative” and also your preferred method of fighting inflation by raising interest rates?) Maybe I’m missing something.

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  7. If other people haven’t seen it, here’s FDR on the Social Security taxes.

    “I guess you’re right on the economics. They [Social Security taxes] are politics all the way through. We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics.”

    Luther Gulick Memorandum re: Famous FDR Quote

    Whose explanation sounds more like FDR’s: Senator Kirk, or Rodger?

    It’s a completely different political / financial situation now though after the bad guys have worked hard for decades to destroy SS by gross overtaxation – using the political defense mechanism as a tool to destroy it – of course by saying they’re saving it.

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  8. How the public has been brainwashed by the media and the politicians and the old-line economists.

    Washington Post Poll watcher: Most support keeping payroll tax cut By Scott Clement

    Fully 58 percent of Americans say Congress should vote to extend the temporary payroll tax deduction passed last year according to an Associated Press-GfK poll released Thursday, while fewer than four in 10 — 35 percent — say Congress should allow the payroll tax deduction to expire. Democrats and independents support extending the payroll tax deduction, while Republicans split evenly. Conservatives back the extension by a 54 to 42 percent margin.

    At least 1/3 of Americans want the government to take more money out of their pockets, unnecessarily.

    Of course, the congressional battle over the tax is about whether and how to pay for such an extension. As far as general positions go, by about 2 to 1 the public says the lawmakers should focus on cutting government spending rather than increasing taxes in trying to balance the deficit, though wide majorities believe both will ultimately be necessary.

    At least 2/3 of Americans believe federal spending, which is necessary for economic growth, should be cut.

    Rodger Malcolm Mitchell

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  9. RMM,

    If money growth doesn’t “directly” lead to inflation, could it indirectly?

    For example, it seems OPEC operates a de facto monopoly. Do you think many of your proposals to bring up the poor, which would put more money into the pockets of the masses, would “signal” to OPEC that they have room to push the price of oil higher? And in doing, since oil is the #1 natural resource-input, then increaseing the money supply would indirectly cause inflation?

    (I’m specifically referring to “normal” times, not necessarily right now where deflation is probably a more significant concern than inflation)

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  10. J Kra,

    Sufficient money growth could lead to inflation. I feel confident that if the federal government spent $100 trillion this year, we would have inflation.

    The real question is: What is the greatest danger facing America, inflation or recession/depression? Debt hawks act as though inflation were the greater danger, and even cite hyper-inflation (which we never have had) as a real danger.

    The real danger? Insufficient money growth has led to six recessions since 1971, all of which were cured with renewed money growth.

    Does it make sense to ignore the real and imminent danger, while fussing over a rare and distant danger?

    Rodger Malcolm Mitchell

    Like

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