●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Until the 99% understand the need for federal deficits, the 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
When someone can’t understand a simple concept, it’s because they don’t wish to understand.
Though Monetary Sovereignty can be complex, its fundamental concept is simple: A Monetarily Sovereign government has the unlimited ability to create its sovereign currency. That is why a Monetarily Sovereign government never needs to ask anyone else for that currency. It never can run short of money.
Think of owning a dollar-creation machine. Your machine allows you to create endless dollars. Would you ever need to ask anyone to give or lend you dollars? The U.S. is Monetarily Sovereign. It can create endless dollars. It never needs to ask anyone for dollars.
Could anything be simpler?
Yet, there are educated people who claim not to understand that simple concept. Congress and the President fret over the federal debt. Surely, anyone with even modest intelligence, can understand that a nation with the unlimited ability to create dollars, doesn’t need to borrow dollars. I am certain Congress and the President know this.
Yet the Speaker of the House, John Boehner, famously lied, “America is broke.” A nation owning a dollar-creation machine is “broke”???
Both political parties feign concern about the “unsustainability” of the debt, though no one seems to know what “unsustainable” means. The hundreds of editors of all major newspapers pretend we are in a debt crisis, though no one seems to know what that crisis is. The Federal Reserve publishes articles indicating none of their executives understands that the U.S. owns the money-creation machine.
Meanwhile, adherents to Modern Monetary Theory (MMT) and Monetary Sovereignty (MS), write books, articles and blog posts, trying to simplify the concept enough for all these college-educated people. It’s a fools mission.
We cannot force someone to “understand” something they do not want to understand. So the real question becomes, “Why do these people pretend ignorance, when even the least intelligent among them, understands perfectly?” The answer is money and power.
The politicians and the media are paid not to understand. Their jobs depend on their not understanding.
Money is comparative. Owning $1 million might make you the richest man in the room. Everyone in the room would admire your “wealth.” You not only would have their admiration to stroke your ego, but you would have the power to encourage or even force people in that room to do things, say things or even believe things.
Or, owning $1 million might make you the poorest man in the room. No one in the room would admire your wealth. Your power would be negligible.
Your power and admiration would be based on something called the “gap.” Whether a wealth gap or an income gap, the size of the gap, rather than the absolute value of your dollar holdings, is the key to your power.
The gap can be widened either by increasing the dollar holdings of the rich, and/or by decreasing the dollar holdings of the not-rich. Either approach will accomplish the same end.
Reducing the federal debt demands that federal spending be decreased and/or taxes be increased. The vast majority of federal spending benefits the not-rich more than the rich: Social Security, Medicare, Medicaid, aid to education, food stamps, disability care – all have far more meaning for the middle and lower classes. So cuts in federal spending, which reduce the federal deficit, widen the gap.
Many taxes also hurt the less affluent: FICA, income taxes on Social Security benefits, tolls, sales taxes, all reduce the deficit and widen the gap.
Clearly, telling the populace that federal deficits and debt should be reduced, is in the best interest of the wealthiest among us, and it is to the detriment of those less wealthy. Is it any wonder then, that the politicians who owe their jobs to rich donors, and the media, which are controlled by rich owners, repeatedly decry the federal debt?
What can be done? Trying to educate the politicians and the media is hopeless. They already know. But, in essence, they have put their hands over their ears, and are yelling, “I CAN’T HEAR YOU..”
I believe we must educate the public, directly.
We have been blessed with a medium the rich can’t control: The Internet. You users of Facebook and Twitter should direct your friends and followers to appropriate postings about Monetary Sovereignty. You need to build an ever-branching tree of fact. When enough people understand the basic truth, the politicians and the media will jump on the train.
It’s our only hope.
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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports
9 thoughts on “–How you can help close the gap. (No, writing to politicians and newspapers won’t do it.)”
In support of Rodger’s point, I often quote Keynes and Milton Friedman. They both made the point that stimulus can come from simply printing money and spending it.
Keynes made the point, for example, in a letter to Roosevelt. See 2nd half of 5th para here:
And Friedman advocated a monetary system in which there was no government borrowing at all. Under this system, government would just create money and spend it as necessary (or do the opposite: raise taxes and “unprint” money if the economy was overheating). See paragraph starting “Under the proposal..” (p.250) here:
Click to access friedman.pdf
Federal spending actually does benefit the rich, since it increases the income that the poor can pay, allowing them to raise the rents in the slums they own, and making the most productive members of society less likely to be competition for their slumlord status.
Yes, deficit spending provides dollars to the rich. But, the key point is that federal deficit spending reduces the gap by helping the poor more than it helps the rich. It’s the gap that the rich covet.
Also, increased federal debt allows banks to find more reserves to make more loans at higher interest rates. The solution is LVT + positive money.
Except that as I understand it, a bank could have an infinite amount of reserves and yet could not make even a single penny of more loans if they didn’t acquire more capital. So reserves are irrelevant…
Right. “Fractional reserve lending” is a fiction. It should be called “fractional capital lending.” A bank with zero reserves always can obtain reserves from the Fed, from other banks, or from the private sector.
Years ago, I owned a company that lent millions of dollars to our bank after 5:00PM and received the money back (plus interest) the next morning. This was called “overnights” and the purpose was to give the bank its needed reserves.
“When someone can’t understand a simple concept, it’s because they don’t wish to understand.”
Yes, this applies to all topics. For example, many people believe that global climate change is a myth. They believe every lie they’ve been told about Nazi Germany, or Libya, Syria, and Iran. Facts and logic are irrelevant. People believe what they want to believe. And what they want to believe is mainly dictated by the 1% and their accomplices.
“Why do these people pretend ignorance, when even the least intelligent among them understands perfectly? The answer is money and power.”
Yes, any field of human inquiry that involves money and power will be distorted. Whether it is the hard sciences or social sciences, if money and power is at stake, it will be filled with fads, lies, illogic, censorship, misdirection, and disinformation. In the days of Galileo Galilei (1564-1642) the Catholic Church based its political power on claiming that Copernicus and Galileo were wrong in saying the earth orbited the sun. Today the Catholic Church does not base its power on astronomy. Therefore astronomy is now an actual science, proceeding in an orderly fashion with no controversy. Not so with climatology, which affects corporate power and profits. Not so with economics. When money and power are at stake, logic becomes their servant.
Money and power are tied to the herd instinct, or “groupthink.” In any social group, regardless of size, the members of the group tend to think what the group’s leaders tell them to think. This happens because average people want to keep their rank in the pecking order. They may occupy a low rank, but they fear they will fall to an even lower rank if they question the lies that form the ranking system. Hence they will likely flame you if you try explaining Monetary Sovereignty to them, or if you try explaining that the euro currency project is all about power for the 1% and their agents (e.g. politicians, euro-crats, academicians, and media pundits). Most people simply can’t face reality. They prefer to chatter like monkeys. If you doubt this, try speaking the truth at the corporate media web sites. You will likely be flamed, ignored, or deleted.
When the 1% and their servants issue lies, the lies form a vital part of the average person’s self-image and world view. For example, the 1% have programmed the masses to falsely think that personal finances are the same as national finances. If you debunk this lie, then the average person regards it as an attack on his psyche. He interprets it as an insult. How dare you subvert his beliefs and his self-image? Thus, the average person’s slavery and stupidity stem not from ignorance, but from selfishness. He defends his pathetic world-view, and therefore remains a slave. He believes whatever makes him most comfortable in his dungeon, never trying to escape from his dungeon.
“We cannot force someone to understand something they do not want to understand.”
Exactly. We cannot educate those who refuse to be educated. We can only provide the truth for those who wish to educate themselves.
It’s unfortunate, but that’s reality.
Rodger, this is unrelated, but I am continually amazed by how creative people are in thinking up ways to deceive themselves. I just read an article in The Nation about how some people are calling for a “Robin Hood” tax on financial speculators. James Tobin started advocating this in 1972, shortly after the USA went off the gold standard.
But why have such a tax? I want federal taxes eliminated altogether. The rich pay no taxes anyway, and corporations pay less than zero taxes. Moreover, the federal government does not run on tax revenue. The federal government runs on borrowed money. (Which I would also like to see ended.)
You say that federal taxes (unlike state and local taxes) are destroyed upon receipt. Wow. So, the government imprisons us if we don’t pay taxes, and when we do pay taxes, they burn the money (i.e. delete it on their keyboard).
Given this, what use is there for a “Robin Hood” tax, except possibly to put a slight damper on rampant financial speculation? Certainly the federal government will not use that revenue.
In any case, a “Robin Hood” tax could never pass. It’s not the money. It’s the principle. Private bankers and speculators run the show. A “Robin Hood” tax, no matter how tiny, would mean the government is back in control, which would be unacceptable.
>>>BY THE WAY, how do you know that federal income tax revenues are destroyed upon receipt. I do not doubt or dispute you. Can you think of any place where I might read more about that? I find it staggering.
You are correct. There is no need for a “Robin Hood” tax. (There also is no need for federal borrowing. A government that has a “money-creation” machine doesn’t need to ask anyone for dollars.)
Professor Randy Wray often has written about the fact that tax dollars are destroyed. I don’t have the link, however.
The federal government has no “storage” place for dollars. There actually are two ways that dollars are created and two ways they are destroyed:
1. The government creates dollars by spending and destroys dollars by taxing.
2. Banks create dollars by lending and destroy dollars when loans mature.