Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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There is a value to losing. It teaches you what you might have done better. Without losing, there is scant progress. The player who never loses eventually loses – loses his motivation for improvement, loses his competitiveness, loses his desire to learn, loses his morals and his compassion.
Losing teaches you life. Losing teaches you humility — if you let it.
The Republicans lost. This election presumably was one of those “teachable moments.” So, what did the Republicans learn?
Here are a few excerpts from an article in the Washington Post:
Life after defeat for Mitt Romney: Public praise, private questions
by Philip RuckerRomney’s top aides, who only a couple of days ago were openly speculating about who would fill which jobs in a Romney administration, woke up Wednesday to face brutal recriminations.
Some top donors privately unloaded on Romney’s senior staff, describing it as a junior varsity operation that failed to adequately insulate and defend Romney through a summer of relentless attacks from the Obama campaign over his business career and personal wealth.
They learned Romney should have been “insulated and defended” against his history with Bain Capital and his millions in earnings.
Romney told the donors he believed Hurricane Sandy stunted his momentum in the final week of the campaign. . .
They learned not to have a hurricane interrupt a carefully crafted campaign.
Although Romney himself stopped short of placing any blame on New Jersey Gov. Chris Christie, who praised President Obama’s leadership during the storm, several Romney supporters privately pointed fingers at the outspoken governor.
“A lot of people feel like Christie hurt, that we definitely lost four or five points between the storm and Chris Christie giving Obama a chance to be bigger than life,” said one of Romney’s biggest fundraisers, who requested anonymity to speak candidly.
They learned the fault was Chris Christie’s for saying something nice about Obama.
Romney advisers have said they were disappointed with Christie’s keynote address at the Republican National Convention because they believed the speaker focused too much on himself and not enough on the candidate. Republicans close to Christie, however, said the Romney team approved the final draft of the speech.
They learned that Christie’s speech caused Romney’s defeat.
Some of his top donors immediately pointed to the campaign’s early strategic decision to frame the race as a referendum on Obama rather than a choice between two different governing philosophies and leadership styles.
They learned losing was a matter of poor framing.
A second member of Romney’s national finance committee said that while the campaign’s tactics and fundraising organization were executed well, the strategy and message were “total failures.” This fundraiser added that the campaign’s cautious and adversarial relationship with the news media proved detrimental.
“That strategy was we don’t want to define differences, we want it to be a referendum not a choice, but it was always going to be a choice. Elections are a choice. Their fundamental premise was incorrect — and when you’re incorrect on this level, you are shunned by people in the party,” said the fundraiser, who requested anonymity to speak candidly.
They learned not to be adversarial with the media, and that they should have presented defined differences, whatever they may have been.
In sum, the Republicans learned they should have insulated Romney, prevented a hurricane, not let Christie talk and to define differences. Hmmm . . . sounds a bit superficial.
What do I hope the Republicans really learned?
I hope they learned that when you encourage such candidates as Bachmann, Paul, Gingrich, Santorum, Perry and Cain, people will begin to believe you are a party of mean, nutty extremists — and Americans don’t like mean people, nutty people or extreme people — at least not to be President.
I hope they learned that when you give serious attention to birthers and to celebrity grouches like Donald Trump and Clint Eastwood, people will be even more disposed to dislike you and to doubt your sanity.
I hope they learned that a majority of voters believes in the availability of abortion during the first trimester, or in cases of rape or to save a mother’s life. Despite all those massively magnified photos of microscopic fetuses, the majority of people believe there are private personal, social and health issues into which the federal government should not stick its nose. We do value our privacy.
I hope they learned that women are an important voting constituency, who hate when strange men disrespect them or force life decisions on them.
I hope they learned that screaming idiots, of the Glenn Beck and Rush Limbaugh ilk, actually can have a negative effect, particularly on people capable of rational thought.
I hope they learned that a candidate should have his own beliefs, and that the voters do not trust someone who will say anything and repeatedly change positions to please his current audience and the most extreme segments of the party.
I hope they learned we each make our own religious decisions, and do not want the majority forcing their religious beliefs on us.
I hope they learned that Americans do not want religious fundamentalism ala the Taliban, and that our ancestors came here to avoid that dictatorship of church.
I hope they have learned that Americans basically are decent people, who still believe in “Give me your tired, your poor, your huddled masses yearning to breathe free.”
I hope they have learned Americans care about fairness and protecting the underdog, and that we do not want to be ruled by the richest 1%, and we want everyone to have decent food, housing, education and health care.
I hope they learned people want their leaders to care about them and protect them.
Unfortunately, both parties have become so immersed in political strategies and tactics, they have forgotten why they are running for office, and why we should care who wins.
Reminder: The goal is not to defeat this candidate, or to occupy that office. The goal is to serve the people of America. The goal is to make America better. Both parties have forgotten that, or don’t care, but the Republicans lost, so they need to remember and to care more.
I have the feeling that if someone woke Romney in the middle of the night, and asked, “Why do you want to be President?” his first thought would be to say, “Tell me who you are, so I know what to answer.”
Is it too naive for candidates to care about America and the men, women and children living here — to put our nation and our neighbors first, and strategy and tactics last — to reach down and lift the “the homeless and the tempest-tost”?
Is it really too naive?
Rodger Malcolm Mitchell
Monetary Sovereignty
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Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%
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 Imports
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Does Obama, in his executive branch position, have the means to implement even a watered down version of MMT or MS? I’m asking this in all seriousness – could the so called “fiscal cliff” be used to introduce a new and more useful policy? FDR ran against Hoover in ’32 claiming that budget deficits in ’30-’32 were a major economic problem. Upon taking office he and his brain trust realized that deflation, raised taxes/tariffs and lack of liquidity were the real issues (among many others). Obama has to know a great deal more about economics.than I do. Using the next 4 years to placate Boner and McConnell isn’t going accomplish a damned thing and we all know what will happen if austerity is introduced. What can we as citizens do next?
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GOP strategist Karl Rove telling Fox News that President Obama’s campaign succeeded by “suppressing the vote”:
That is what Karl Rove learned.
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Fritz,
You ask a great question.
Obama’s relentless quest for compromise has prevented him from using the full powers of the Presidency. Whether that is clever politics or a character flaw — or both — I won’t say.
I believe nothing can prevent him from using the “platinum coin solution,” which instantly would eliminate the federal debt.
I also believe nothing can prevent him from explaining MMT/MS to the American public. Though the programs are counter-intuitive, they are simple to understand, once one lets go of pre-conceived ideas.
Having the President come on television and say, “Let me explain the realities of the federal budget,” would change the world. People might not believe it immediately (It sounds too much like a free lunch to most people), but it would open up a serious discussion, and force the media to pay attention to MMT/MS.
I feel quite certain that if Obama spent 10 minutes explaining the basics, within a year, everyone at last would understand.
(“Our monetarily sovereign government is different from you and me and the states, counties and cities, and even the euro nations. Here’s why.”)
The sole questions: Does he really want people to understand, and does he have the courage.
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Let’s forget all about money and ask a simple and logical question – Is there such thing as free output?
I mean, would anyone build a bridge for free? Or give their harvest for free? Or cars for free? Or houses for free? Or clothing for free?
Doesn’t all this stuff cost capital to produce? How long before these producers go bankrupt. Is that not what would occur if you spend more than you receive in benefit)…
This is where MMT and MS fail spectacularly.
My opinion??? No, nothing is free Roger. You cannot live in your home if someone didn’t spend capital and labor to build it. You cannot eat if someone doesn’t spend capital to buy groceries and cook it. You would not be able to drive that car if someone didn’t spend capital to build it.
Let’s get something straight, there hasn’t been any economic growth since 2000 because of the deficit fallacy. We’ve been increasing the GDP in terms of debt/deficit, but the output has not grown. We are flat lined. Essentially, we are lying to ourselves with the notion that there is a free lunch. It’s sad anyone can actually believe such a joke. The more the government increases deficits, the lower the output until we hit the wall. A downgrade of US debt is looming from Fitch and this may be just about enough to tip the iceberg.
Obama, the Dems, the GOP have NO way out. They are caught between a rock and a hard place. Let me explain. They can continue to increase deficits all they want (I actually agree with Roger on this), but the market will tolerate it for so long. When the market decides it’s over, it’s over. MMTers and MSers will be no-where to be found or blaming on “not enough” when it happens – because it will. If the government accepts to take it’s pill now and cut deficits or increase taxes, the economy tanks (as Roger rightfully states). What Roger does not state is that, in the end, this is not bad. The economy will restore balance and REAL growth (output) will return after some time. It is not about paper, its about REAL output.
This is good for the average Joe because his earnings will purchase more things. This is good for grandpa because his fixed income will purchase more things. This is not good for those that are on the government dole. It is not good for the rich, not good for unions, healthcare companies , universities who get paid with deficits, etc etc who all get the purchasing power from the regular Joe….
When the government runs deficits, it is deflating the currency (supply and demand says it is) and removing money from the population via a hidden tax. Does the government use the money collected from taxes? Of course it does (I cant believe people let others fool them)..
If the government taxes a dollar from the economy and tomorrow spends a “new” dollar, what is the difference if the government says it is from taxes or from blah? It’s transferring the purchasing power of a dollar from one entity to another. Not sure what MMTers and MSers want to achieve by making up stories of how taxes are not used for funding government spending. Yes they are….
Finally, anytime I hear someone stating that the debt is simply a scorecard. Can you spend a scorecard? Can the government spend when it increases the digits on it’s scorecard? Can anyone remind me what is the definition of fraud and counterfeiting again?
Deflation is a natural course of markets. Profits attracts more supply, which by default drives down costs. This is GOOD for people like you and me. Is there anyone out there that does not like lower prices? I do…
Let’s use whatever time is left wisely!
Danny
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>>“Is there such thing as free output? I mean, would anyone build a bridge for free? Or give their harvest for free? Or cars for free? Or houses for free? Or clothing for free?”
Yours is a common fallacy among people who stubbornly reject the truth of Monetary Sovereignty. They self-righteously bleat, “There’s no free lunch!” In reality the 1% and the big banks enjoy a perpetual free lunch. That is what debt slavery and the rentier class is all about. In any case, the issue here is not about “free.” It’s about exchanges. If the government does not spend enough money into circulation, then average people have no money with which to exchange goods, services, and labor. Average people are forced to take bank loans or starve, a situation you seem to favor, as long as you are personally comfortable.
>>”Doesn’t all this stuff cost capital to produce? How long before these producers go bankrupt. Is that not what would occur if you spend more than you receive in benefit?”
That’s another common fallacy, namely that dollars are somehow limited. It galls you to think that with a decent government, there would be enough money for all. However, that is reality. Sorry.
“>>There hasn’t been any economic growth since 2000 because of the deficit fallacy. We’ve been increasing the GDP in terms of debt/deficit, but the output has not grown. We are flat lined. Essentially, we are lying to ourselves with the notion that there is a free lunch. It’s sad anyone can actually believe such a joke. The more the government increases deficits, the lower the output until we hit the wall. A downgrade of US debt is looming from Fitch and this may be just about enough to tip the iceberg.
First, we can dismiss everything that ultra-corrupt ratings agencies like Fitch say about Treasury bonds, since the Fed pays whatever interest rate it chooses for T-bonds, and can never run out of money to pay that interest. What is the interest rate now, about a quarter of one percent interest? Wow. What a crisis! Second, you totally misunderstand what the “national debt” is. Rodger has explained it so many times that I won’t repeat it. Third, the reason why we have a depression is that government spending (i.e. the deficit) is far too LOW.
>>”Politicians can continue to increase deficits all they want, but the market will tolerate it for so long. When the market decides it’s over, it’s over.”
More nonsense. Since the US government is Monetarily Sovereign, its Treasury bonds are not subject to the whims of the regular “market,” or the bond vigilantes. The Fed CHOOSES what interest rate it wants to pay on T-bonds. What part of “chooses” escapes you?
>>”If the government accepts to take it’s pill now and cut deficits or increase taxes, the economy tanks. In the end, this is not bad. The economy will restore balance and REAL growth (output) will return after some time. It is not about paper, its about REAL output.”
Oh yes, the way to prosperity is through permanent austerity. The way to cure anemia is via leeches. You should run for office. And when you say, “It is not about paper,” you confuse the financial economy with the real economy. The financial economy has plenty of “paper.” The real economy is starved of it. Furthermore, without this “paper,” there is no modern society.
>>”When the government runs deficits, it is deflating the currency (supply and demand says it is) and removing money from the population via a hidden tax. Does the government use the money collected from taxes? Of course it does (I cant believe people let others fool them).
Yet another fallacy. You confused infinite fiat currency with a limited commodity like gold. And no, the U.S. government does NOT use tax revenue. The U.S. government is not like a household.
Please try reading this blog before you criticize it.
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Nice commentary Mark. You’re beginning to make Rodger’s job here too easy. I can’t imagine Rodger would have said anything different and he probably appreciates not having to school morons on here quite so frequently.
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Steve,
Amen to that.
Not too long ago, virtually no one understood Monetary Sovereignty, and I spent my life receiving insults and correcting statements based on ignorance. Lately however, readers like you and Mark do indeed make my job easier.
Getting there.
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>>Yours is a common fallacy among people who stubbornly reject the truth of Monetary Sovereignty. They self-righteously bleat, “There’s no free lunch!” In reality the 1% and the big banks enjoy a perpetual free lunch. That is what debt slavery and the rentier class is all about. In any case, the issue here is not about “free.” It’s about exchanges. If the government does not spend enough money into circulation, then average people have no money with which to exchange goods, services, and labor. Average people are forced to take bank loans or starve, a situation you seem to favor, as long as you are personally comfortable.<>That’s another common fallacy, namely that dollars are somehow limited. It galls you to think that with a decent government, there would be enough money for all. However, that is reality. Sorry.<>First, we can dismiss everything that ultra-corrupt ratings agencies like Fitch say about Treasury bonds, since the Fed pays whatever interest rate it chooses for T-bonds, and can never run out of money to pay that interest. What is the interest rate now, about a quarter of one percent interest? Wow. What a crisis! Second, you totally misunderstand what the “national debt” is. Rodger has explained it so many times that I won’t repeat it. Third, the reason why we have a depression is that government spending (i.e. the deficit) is far too LOW.<>More nonsense. Since the US government is Monetarily Sovereign, its Treasury bonds are not subject to the whims of the regular “market,” or the bond vigilantes. The Fed CHOOSES what interest rate it wants to pay on T-bonds. What part of “chooses” escapes you?<>Oh yes, the way to prosperity is through permanent austerity. The way to cure anemia is via leeches. You should run for office. And when you say, “It is not about paper,” you confuse the financial economy with the real economy. The financial economy has plenty of “paper.” The real economy is starved of it. Furthermore, without this “paper,” there is no modern society.<>Yet another fallacy. You confused infinite fiat currency with a limited commodity like gold. And no, the U.S. government does NOT use tax revenue. The U.S. government is not like a household.<>Please try reading this blog before you criticize it.<<
I have read many posts on this blog and am not criticizing it at all. Everyone reading this blog knows about math and knows that the arguments above are irrefutable.
Please also note that MMT and MS are nothing new. What do you suppose the government has been doing for the last 100 years? Is that not MMT? Is that not MS? Have we not gone from a nation of producers and innovators to a nation of lazy bums and entitled? Has the US not run deficit for years?
Let's stop dreaming of unicorns and let's start facing reality. Time is running out.
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“If the government accepts to take it’s pill now and cut deficits or increase taxes, the economy tanks (as Roger rightfully states). What Roger does not state is that, in the end, this is not bad. The economy will restore balance and REAL growth (output) will return after some time. It is not about paper, its about REAL output.” GDP=Federal Spending + nonfederal Spending – Imports, very good you would have us destroy growth in favor of REAL someting. No Federal Debt = No Money. Does anyone build a bridge for free? In our REAL world one needs dollars to build REAL things. We have one source for these dollars. Return to the bottom of the blog and start over please.
People who own businesses and pay the wages of you and me are not to happy with lower prices.
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Johnny,
This is the equation for GDP. GDP = Consumption + Investment + Government Spending + Net Exports
If you are a real person that eats, than you think in real terms, not in nominal terms. By increasing government spending you are increasing the GDP in terms of debt, not “real” things. The real things just go up in nominal value because the debt is increasing. It’s exactly what I mean, it’s deflating the currency and thereby removing purchasing power from YOU and shifting it to the government.
>>In our REAL world one needs dollars to build REAL things. We have one source for these dollars. Return to the bottom of the blog and start over please.<>People who own businesses and pay the wages of you and me are not to happy with lower prices.<<
You need to back this up with something because it does not make sense… Sir… business don't care if prices drop as long as they can make a margin on their investment. If prices drop in the marketplace, prices for raw materials will drop with them. Capish????
Let's stop playing games with ourselves, the time is running out.
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He’d have to go against his handlers and sponsors. I sort of doubt that will happen. But who knows, maybe he’ll grow a spine and have real compassion on the people he is supposed to serve.
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“I also believe nothing can prevent him from explaining MMT/MS to the American public. Though the programs are counter-intuitive, they are simple to understand, once one lets go of pre-conceived ideas.
Having the President come on television and say, “Let me explain the realities of the federal budget,” would change the world. People might not believe it immediately (It sounds too much like a free lunch to most people), but it would open up a serious discussion, and force the media to pay attention to MMT/MS.”
You have more faith than I do in the general population. If he tried to get on TV and explain this stuff, the majority of the population would probably just get angry and Republicans would use the backlash to torpedo anything he tried to do. There’s already a sizable portion of the population that hates him and won’t even listen to a word he says. You should know how difficult it is to get people to give up firmly held preconceived notions.
I think it will take something a bit more subtle to get people on board with the idea.
“What have the Republicans learned?”
Easy: Nothing.
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unfortunately, i have to agree. i think the MMT-crowd has to do its work behind closed doors with policymakers and/or possible future policymakers via lectures at colleges, like what’s happening right now at Columbia U. (http://www.youtube.com/user/ModMonPubPurpose/videos?sort=dd&flow=list&page=1&view=0 and http://www.modernmoneyandpublicpurpose.com/index.html). i think the american public is just too brainwashed at this point in time to accept the truth about the monetary system.
people can still enjoy prosperity without knowing exactly how it came about.
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Rodger, — Not sure Obama is able of much else than preaching prepped B.S. from a tele-cuer, Aren’t you? If not, what clues you beyond blind hope in
our overtly innumerate Prez to grasp your economic views?
Surely you jest in this article! And, Rodger, closeted liberal that you’ve long been — Romney was your natural ingenue. Your most gifted springboard for unveiling to the American public, Mitchell’s take on ‘Monetary Sovereignty”.
You’re, in effect, celebrating while praying that the least Enonomics – able
Prez since Millard Fillmore buys into what’s easily the most ingeniously counter-intuitive take ever on the U.S.’s economy. Easily!
Rodger, I fear your ‘politics’ have cost you what you so richly deserve. You’re not alone, though. You’re among the brilliant who’ve fallen to venality..
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Fritz: “Could the fiscal cliff be used to introduce a new and more useful policy?”
Yes, but politicians can also use it to give Wall Street everything it wants, including more austerity and the privatization of Social Security. This is my fear.
Fritz: “Does Obama, in his executive branch position, have the means to implement even a watered down version of MMT or MS?”
My view is the same as Rodger’s, who says, “I feel quite certain that if Obama spent 10 minutes explaining the basics, within a year, everyone at last would understand.”
Yes. Imagine the changes if the public understood that…
(1) All federal taxes, including the FICA tax, should be abolished, along with the IRS, since the U.S. government does not need or use tax revenue.
(2) Since the government creates money out of nothing for wars, bailouts, disaster relief, federal agencies, etc, the government could likewise create money out of nothing for job-creation, expanded social programs, single-payer health insurance, a national debt jubilee, etc.
(3) Social Security and Medicare can never “go broke” or become “insolvent.”
(4) The U.S. government does not have a “debt crisis.” The “debt ceiling” charade is a farce.
(5) Deficit spending must be dramatically increased
(6) China does not “own us.”
And so on. Imagine the power that people would feel if they collectively understood the truth.
Since any politician who publicly spoke the truth would be quickly assassinated or run out of office, it’s up to us to spread the word. This requires great patience and stamina, but at least we have Rodger’s blog, plus a few others that explain MMT and MS. I don’t know of any European blog centered on dumping the euro currency.
One other thing…I have compared MMT to a well in the desert. Since politicians want to shut down the well (reduce deficit spending), we are forced to seek water loans (e.g. student loans). If we can’t get loans, we die of thirst. If we do get loans, we die from debt. Now imagine if we opened up the well and used its water productively. We would have no need to fight the banksters, or the private equity firms that destroy companies to strip them of assets. The evil doers would evaporate in the desert.
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You mean that if the water seller wants 20 dollars and you only have 10 bucks and lose your ability to borrow another 10, the water seller will let the water spoil?
No… the water seller will drop the price to whatever you are willing to pay. This is what most miss..
If the government stops subsidizing medicine, health care prices drop to a level where people can afford.
If the government stops subsidizing education, education prices drop to a level people can afford.
If the government stops subsidizing home loans, home prices drop to a level people can afford.
For goodness sake, don’t we see this happening in front of our eyes all the time? Computers? Radios? TVs?
Profits result in higher supply which in turn means lower prices.
More credit chases limited supply of goods and services and drives up costs.
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For goodness sake, don’t we see this happening in front of our eyes all the time? Computers? Radios? TVs?
>>What I see happening is that everybody on all sides of the political spectrum, from Leftist to extreme far Right, EVERYONE (except you) acknowledges that the “fiscal cliff” will severely worsen the U.S. economy. The “fiscal cliff” means reduced federal spending and higher federal taxes, which will reduce the general money supply. Your solution is to let it happen, so that the current depression will be dramatically worsened. For you, austerity is the road to prosperity. The more poverty we have, the more prosperity we will have. For you, 2 minus 2 equals 4.
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Mark,
So who is the one being fiscally responsible? Is it your logic or my logic?
I think we have a personal responsibility issue in our country and people have lost a sense of contribution for the good of the country, not for the good of themselves.
The right wants to spend on the military and just about everything else because it suits their rich friends and buys votes. The left wants to spend on social programs as well as everything else because it benefits their rich friends and buys the votes.
The people can talk all they want, but the government is doing exactly what the people want. Feed me more is what I hear.
Well sir… I am here to remind you that when the belly pops, it will hurt much much much much more.
I laugh when I hear the word austerity. As if the issue here is the lack of something and not the excessive stuffing of our pie holes. As a society, we’ve turned to lazy, self centered, selfish bunch.
Nature has a way of solving these things. Sir… either we chose to see the wall coming or we keep stuffing our pie holes.
One thing is for sure, that wall in front of us sir, that wall is not going to move…
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Actually, what really happens when the money supply deflates is that businesses lay off workers, people cannot afford to purchase the goods and services offered by businesses.
Prices are “sticky” they do not go down. Employees and business owners are both in debt and must pay the principal and interest on their debt regardless of whether or not the economy has enough money. Therefore, they will no lower the prices of their products or labor below that necessary to pay their debt and still have enough to live on. And this is why we have recessions and depressions when the money supply is reduced, rather than seeing lower prices.
Given a choice between inflation and deflation, I’ll take inflation because it harms fewer people and may help me pay off my debts.
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Zarepheth,
Yes, you are right, business will lay off workers. At this stage, that is what will happen because of the excessive debt levels taken on. Prices are sticky as you say because the government continues to meddle in the market, not because people just don’t want to lower their price.
During the housing collapse margin calls were placed on the banks by the MARKET, and had it not been for the government, the banks would have collapsed and so would have home prices. Who would home sellers, going bankrupt, sell their homes if others cant get loans. Prices would have dropped to levels others could afford and not a penny less. But this was not allowed to happened, the government backstopped the banks, it backstop GM, it backstop home owners and screwed the ones that never signed a mortgage paper.
In terms of deflation versus inflation, deflation is the normal course of the economy whether you want to believe it or not. The more profit, the more supply, the lower the prices, the more people like me and you can buy. Our money increases in value with deflation.
I cant believe anyone would pick inflation when we’ve been having inflation for the last 100 years and we have nothing but debt slaves. Amazing….
Anyway, the market will be talking to us soon enough…
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Mark, for today’s laugh yourself silly segment just view Jeff Macke’s “You Explain It” video over on Yahoo! Finance on the collapse of the Social Security system by of course, you guessed it, 2033!. Macke’s always an idiot, but his shit from today is priceless!
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Rodger, I’ve kept my cool on this, but I am really becoming annoyed at the UMKC crowd’s rather smug insistence that federal taxes are necessary to maintain the authority of the fiat dollar, and to maintain demand for the dollar (i.e. control inflation). I side with you in saying that local taxes and federal interest rates can do the same thing. What peeves me is people like L. Randal Wray who pretend that MMT-ers unanimously agree with him on this, and echo his mantra that “taxes drive money.”
In this they are as rigid as the people who oppose MMT altogether. Just as average people say, “Okay, the federal government creates money out of nothing, but MMT is still wrong,” so does the UMKC crowd say, “Okay, local taxes can do the same thing, but we still need federal taxes.”
I want all federal taxes abolished. I say they are not necessary. If we cannot abolish them, then I insist that federal taxes should only be a LAST RESORT if other measures prove inadequate.
At the same time, I favor higher taxes at the local level. If states, counties, and municipalities lack tax revenue, then they must sell bonds, which puts their denizens at the mercy of Wall Street and bond vigilantes, and inevitably leads to austerity.
Instead of paying 18% of my income in federal taxes, plus another 7% in state taxes, I would rather have zero federal taxes and, say 11% local taxes. That is a net gain of 14% of my income that I get to keep, while I avoid austerity at the local level. In any case, if I don’t like local taxes in one place, I have the option of moving to some other place. Not so with federal taxes.
Apologies Rodger. It’s just that the more the UMKC group becomes inflexible on this matter, the more strongly I oppose them on it (although I have never left any reader comment on any MMT blog).
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I’d be worried about unintended consequences if all federal taxes were somehow abolished. The government may not need tax dollars to spend, but even if they did, that still wouldn’t be the only purpose of taxes. They can be used as a tool to encourage or discourage certain actions, economically or otherwise.
I’ve gotten to the point where I don’t think the UMKC group has it right either. I think they’ve been drinking a little too much of their own koolaid.
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Bropelini: “I’d be worried about unintended consequences if all federal taxes were somehow abolished. The government may not need tax dollars to spend, but even if they did, that still wouldn’t be the only purpose of taxes. They can be used as a tool to encourage or discourage certain actions, economically or otherwise.”
Yes, I took that into account. It seems to be that if the U.S. government wanted to encourage or discourage actions, it could do so by granting or withholding funds. (Actually it already does that.) Also, we could let all the tax laws stay in place, but lower all federal taxes to zero. That way the Congress could raise them here and there on a temporary basis.
People are so used to paying unnecessary federal taxes that they consider it insane to not pay them. That includes the UMKC crowd. The rich don’t pay taxes anyway.
In any case, even if we want to let the federal government keep taxing us for whatever reason, I say that federal taxes should be the LAST resport, after all other measures fail.
The UMKC group will not even consider this viewpoint. Many of their views are flat wrong. I just read three lengthy articles by L. Randal Wray in which he thinks that inadequate tax collection was one cause for the hyper-inflation of Zimbabwe’e national currency. This despite the fact that Zimbabwe does not have a national currency. Instead, Zimbabwe uses dollars, pounds, euros, South African Rands, and Botswana Pulas.
Oh well. That’s why I read Rodger’s blog far more than any of the others.
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i havent read anything that randy has written that said federal taxes have to be used to make the dollar desireable, i think you are making stuff up(havent heard anyone from umkc,warren mosler, mike norman, or anyone else in the mmt crowd for that matter)
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It’s one of the foundations of MMT.
Go to Warren Mosler’s website, and in bold headline letters, you’ll read the words, “MMT: Taxes function to regulate aggregate demand”
By the way, although I agree that taxes do function that way (by reducing money supply), I disagree that they are necessary for that purpose.
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I believe that we have to have some sort of “sink” to pull money out of the economy just as we need a “source” to add money to the economy. Whether that sink is in the form of taxes or something else, it should encourage people to accept the government’s issuance and spending of the currency.
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By the way, if federal taxes are always necessary, then why do Andorra, Bahamas, Brunei, Monaco, Qatar, UAE, British Virgin Islands, and Saudi Arabia collect no federal income taxes? Why do half of the world’s countries have no payroll tax? Why don’t Bahamas and Monaco even have a corporate tax? Just a thought.
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Rodger, I sometimes wonder if MMT is all it’s cracked up to be. Even if everyone accepted MMT as true, I wonder if we would still have the same problems.
For example, there are some people who accept the truth of MMT, but still call themselves “fiscal conservatives” who oppose “undeserved entitlements.”
How do these MMT “fiscal conservatives” define “undeserved entitlements”? The same way that regular right-wing elitists do…
If I am a right-wing elitist, or an MMT “fiscal conservative,” then for me, “big government” and “undeserved entitlements” means government spending that benefits someone else in addition to me.
This is the essence of whining about “big government.” If government spending benefits me, then it is “right, good, and just.” If it benefits someone else as well, then it is “bad.” It is “big government.”
Show me someone who works for a military contractor, and totally depends on government spending, and I’ll show you someone who opposes social programs such as food stamps, on which other people depend. Their hypocrisy is nauseating.
And so Rodger, I submit that mass selfishness, stupidity, and hypocrisy are the real reasons why most people reject MMT. It galls them to think the government can easily create enough money for everyone to be prosperous. You yourself have noted that the drive to widen the gap between oneself and others is not limited to the 1%. You have noted that many right-wing people in the middle class (what remains of it anyway) seek to widen the gap between themselves and the lower class. Such ambient selfishness is a serious impediment to MMT. For many people, “It is not enough that I succeed; others must fail.”
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The nation goes through philosophical phases.
Some decades, we are in a compassionate phase, where charity is admired and the poor are not sneered at for being poor.
Some decades are the “I’ve got mine” phase, where people claim that if you help the poor, you encourage sloth.
The right wing, Tea Party mentality has brought this decade directly into the selfish, “I’ve got mine” phase That too will pass.
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what does anything you said have to do with mmt? nothing, thats what
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Mark, I work for a military contractor and am dependent upon the government purchasing my employer’s products and services. Even so, I support social programs and so do many of my coworkers. We may be employed by a large corporation that benefits at the public trough, but that doesn’t mean we have it in for everyone else. It just means we want to be responsible in paying our own bills – at least until the system changes to where we no longer have to support our employer’s vampiric agenda.
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I’m no economic genius by far but this seem ridiculous. To keep government growing and make more money seems to be a stale mate and that would keep things the same or seperate the rich and the poor even more and raising taxes on top of all of that would reduce everyones cash flow. If you pay your bills and cut spending to less then you make till you bills are paid then reduce taxes then you will become wealthy. If you keep making money and raising inflation people can not prosper to a better way of life. There would have to be some kinda of balance or everyone would become rich and then the economy would die so there is a need for some separation but this seems to be a road to socialism were the government is rich and the people are the poor???
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To demonstrate what “having learned nothing” looks like, here is an excerpt from a Charles Krauthammer article in the Washington post.
See, it was not because Republicans angered Hispanics, blacks, women, Jews, young people, the poor, the middle class and people who have compassion for the underdog. No, it was because Obama somehow hypnotized the voters with his “darker arts.”
Got it.
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check out colbert, thhttp://bobcesca.com/blog-archives/2012/11/soul-searching.htmle the gop are in a hole and are digging faster and faster, good riddence to bad rubbish
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what have they learned? well, apparently, they’re already starting to come around on immigration: http://news.yahoo.com/blogs/ticket/sean-hannity-john-boehner-gop-tackle-immigration-reform-142212570–election.html
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