Mitchell’s laws:
●The more federal 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.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motivation.
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Recently, I saw an excellent movie, “A Royal Affair.” The producer describes it this way:
The true story of an ordinary man who wins the queen’s heart and starts a revolution. Centering on the intriguing love triangle between the ever more insane Danish King Christian VII, the royal physician who is a man of enlightenment and idealism Struensee and the young but strong Queen Caroline Mathilda.
A Royal Affair is the gripping tale of brave idealists who risk everything in their pursuit of freedom for their people.”
The movie also is about a menagerie of butt kissing, boot licking sycophants, whose sole mission in life is to agree with whomever has most power currently, so as to gain power for themselves, despite horrible damage to their nation and its people — in short, exactly like the U.S. Congress.
Recently, I’ve been in touch with Warren Mosler and Stephanie Kelton, two of the more influential people in Modern Monetary Theory. They are interviewed repeatedly, though sadly, I don’t see as much positive result as one might hope.
Here is the text of my 2/15/13 note to Stephanie:
Hi Stephanie,
You may be our best hope. I just wrote to Warren, and gave him my usual doubts that Obama, Bernanke, the Counsel of Economic Advisors et al don’t understand economics. Warren’s response was, “they are afraid the deficit will bring down ‘the whole house of cards’ like greece“
I then said, All of them are afraid? The thousands of political leaders in America and around the world, and their economists, all are ignorant of the economic facts? I have trouble believing that you and I and a few dozen professors (mostly from UMKC) and a handful of others are the only knowledgeable people on earth.
His response was, “yes, bunch of sheep. some might not be, but they are ‘team players’ who follow their leader and don’t think at all.”
So there it is. All those politicians and PhD economists are “ignorant, sheep or team players.”
My belief: It’s more than ignorance and “sheepness.” Has to be. The 1% are paying politicians to create austerity and widen the gap, and the sooner we all accept that, the sooner we’ll be able to do what’s necessary to turn things around.
In short, I believe it’s not ignorance but rather bribery. Warren agrees it’s not ignorance, but he thinks it’s “sheep following their leader,” something like King Christian VII’s kiss-ups.
Stephanie, then wrote me today:
I can tell you that I had lunch with a WH aide last month. He told me that everyone in Congress is a total wimp. no one — not a single one — wants to make a decision or think for themselves. He was quite adamant. Everyone wants to be told what to do. Both sides of the aisle.
The D’s divide into two camps: those who view their mission as supporting the President 100% — cheerleaders for Obama — and those who are concerned only with attacking the R’s. On the other side of the aisle are those who care only about attacking and undermining Obama and those who care only about brand loyalty and the Rep. base.
It is only about “winning” as defined by these narrow missions. No one cares about policy — only politics. He is very well connected and totally disgusted.
So when you ask whether it is possible that no one understands the economic facts, I wonder if that is even the right question. They seem to have ZERO interest in economic facts or economic policy itself. They are minions on a mission.
I believe Stephanie, her White House contact and Warren all are correct. The sheep know the truth, but they follow the leader. Their motive is the same as the King’s followers, i.e. no one ever got fired (or beheaded)for laughing at the King’s jokes.
All of which begs the question, “What is are motives of the leaders?” I can think of two:
1. The leaders suck up to the voters who are absolutely, positively certain the federal deficit is too high, and demand that something be done about it.
and
2. The leaders are being bribed by the upper .1% income group to widen the income gap by legislating against the best interests of the 99.9%.
Why do the voters believe the Big Lie that the deficit is to large? Partly its a feedback mechanism. People tend to listen to and believe ideas they already believe. That’s why anti-black, anti-brown, anti-poor, anti-immigrant and anti-gay bigots and gun nuts are more likely to watch Fox “News” and less likely to watch MSNBC — more likely to believe what Republicans say and less likely to believe Democrats.
Of equal importance is the fact that most media are owned by the upper .1%, who want austerity, because austerity injures the middle class and widens the gap between the very rich and the rest.
So, if the media continually (for more than 40 years) pound away at the Big Lie, that the deficit must be reduced, the voters believe it, and the politicians reinforce what the voters already believe, especially when the .1% pay them to do so.
Where does that leave us if we wish to save America, especially the middle and lower income groups? Trying to educate the politicians and their lackeys is useless. They already know the truth, but are motivated not to admit it.
Trying to educate the voters also is useless, because they will not listen. They want to hear what they already believe.
Which brings us back to my suggestion made several weeks ago. We first must shock the public with a scandal — the scandal that the politicians are being bribed by the rich to screw the poor.
We must make the voters angry enough for them to open their minds to a different idea.
Once we get them angry enough so they are shouting out their windows, “I’m mad as hell and I’m not going to take it any more,” then we come to them and say, “If you’re that angry, here’s the solution.” And we explain the simplicity of Monetary Sovereignty.
Scandal first; educate after.
By the way, I believe Stephanie agrees with this, and if I’m right and she does, and if she will have the courage to say so, again and again, and if UMKC and the rest of MMT support her, she may become the most important economist in America.
Let us pray.
Rodger Malcolm Mitchell
Monetary Sovereignty
====================================================================================================================================================
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 
I’m not sure what scandal would get their attention, but getting the voters’ attention is the key. The notion that politicians and their donors share the same political objectives is not a scandal. Anyone can argue that the contribution is made because of the politician’s beliefs, not vice verse. Even if not, they are far too careful to allow any proof to exist. Corruption is rampant, but even that is not “news”, especially when the vast majority of the mainstream media is of the same political persuasion as the corrupt party in power.
If someone with credibility could say “Obama and Boehner both know that cutting spending and raising taxes are bad for us, not good for us, but they are doing it anyway”, and say it over and over, with a large megaphone, then maybe something could happen.
The public’s minds have been changed before: on race, gay rights, and women’s rights, to name the biggest reversals in my lifetime. Those took a generational change, a passing of the reins of power, from the start of the movement to the time when significant results were achieved. And it usually also takes a charismatic leader, often more than one, who espouses the cause as his primary focus. It also requires that the “problem” be obvious and persistent. Recessions and even the Great Depression aren’t persistent enough, because we somehow always stumble our way back to growth without knowing why.
Economists as a group are not known for their charisma. That’s a big obstacle to overcome. Stephanie could be the one. Warren has his charms, too, in a different sort of way. He could be cast as the “voice of reason” to accompany the more moralistic Progressive approach. But the charismatic leader, in this case, probably has to be a political leader. Someone elected to something. Or at least someone who has the ear of the MSM, like Krugman does. Maybe get Stephanie on This Week, and get Warren a column in the Washington Post.
Or maybe the one we need is now a student at UMKC, and we just have to wait 30 years until (s)he gets into the US Senate.
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Why not just a simple story be told. One that almost all would agree that is true.
How “we the people” are being taxed without representation.
As a matter of fact, the private for profit banks are prodding us to pay up the taxes we owe them, almost $16 trillion-the national debt. Paying interest on our own money is taxation. Period. Under the present system there is two ways money comes into circulation. One-by direct printing of colorful paper or fancy tokens. Two-by selling of Treasury bonds or notes. Number one has very little cost and no future payment required to anyone. Number two has a cost attached to it that could even exceed its own value, that is a ‘tax’ attached called compound interest.
We must stop this stupid practice ! Why are ‘we the people’ paying interest (tax) on our own money? And, OMG, to the 1%.
What if…that $16 trillion were used to increase SS and Medicare payments….or OMG, to eliminate federal income taxes, or FICA ???
Justaluckyfool must ask your question, “Why do you not want prosperity for yourselves and your children?”
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justaluckyfool says: “Under the present system there is two ways money comes into circulation. One-by direct printing of colorful paper or fancy tokens. Two-by selling of Treasury bonds or notes.”
Wow. It sounds like you agree with Ellen Brown and her cultists. They think ALL money in the US economy (except for coins) exists as bank loans. They offer no proof to support this claim, yet they will not budge from their dogma. Ellen Brown once offered a quote from a 1930s Fed official, but it was irrelevant, since it was from the gold standard days. Ms. Brown favors publicly owned banks, as do I, but she has no clue about Monetary Sovereignty, and she refuses to learn. (I know this, because I’ve tried to help her.)
As Rodger has often noted, there are two ways that money enters into the U.S. economy.
1. Bank loans
2. Government spending.
(Foreign trade only adds money if a nation has a trade surplus. The USA has a trade deficit.)
Government spending is money created out of nothing. It is not lent by banks, nor by China, nor by any other party (despite Ellen Brown’s stubborn delusion).
For fiscal year 2013 the US government will create $3.8 trillion out of nothing, and will spend it. Because of federal laws dating from the gold standard days (before 15 Aug 1971) the Treasury is required to sell T-securities each fiscal year in an amount that equals the total federal deficit. For FY 2013 the deficit will be $901 billion. Therefore from 1 Oct 2012 to 30 Sept 2013 the Treasury must create $901 billion worth of T-securities out of nothing, and sell them to banks (including the Fed) plus other investors.
The Treasury will create the other $2.9 trillion out of nothing, and spend it into the economy, irrespective of the T-security process. For example, over $700 billion will be sent out to Social Security recipients via direct deposit. The Treasury will use a computer to credit the bank accounts of Social Security recipients. Where will the Treasury get the money to credit the bank accounts? From nowhere.
If I type $1,000,000 onto my keyboard, and I credit it to your bank account, then I have created a million dollars out of nothing. The government does the same thing, equal to $10.4 billion per day. ($3.8 trillion / 365 days.) Bank loan money and government spending money are both created out of nothing, on computer keyboards. (Fractional reserve lending no longer exists, again contrary to the Ellen Brown cult.)
T-securities are a form of dollars, which the Fed or the Treasury could convert into regular dollars any time the Fed or the Treasury wished. The “national debt” is the total amount of T-securities outstanding. It is money deposited into the Fed. It is no problem at all for the US economy. Average people do not owe this money.
Back in the gold standard days, federal government spending was constrained by the amount of gold the government could obtain, and by the amount of T-securities the government could sell. That is, the US government had to borrow. Since 15 Aug 1971, however, the US government has not needed to borrow, since the government has created its own money. US government spending has been constrained by nothing except the will of the rich and their puppet politicians.
What Ellen Brown and her groupies want is for the U.S. government to issue Civil War style “greenbacks.” That is, they want the government to issue money directly, without any connection to the Fed. They want Treasury notes instead of Federal Reserve notes.
They make several errors, which they fanatically cling to. First, they refuse to acknowledge that the US government already issues debt-free money. For FY 2013, the government will issue $2.9 trillion directly, plus another $901 billion through the Open Market process. (The Treasury will sell $901 billion worth of T-securities to banks, to China, and to other investors, and then use the sales proceeds to spend into the economy. This is by choice, not by necessity.)
I would like to see federal spending totally cut off from the Open Market process. The Fed could still sell securities as CDs, but it would be a separate process from federal spending. (Of course, if that happened, then the rich and their puppet politicians could not lie that the US government is “broke” and has a “debt crisis.”)
Second, the Ellen Brown cultists refuse to acknowledge that all money is digital. Dollar bills are not money. They are currency notes. True money only exists in the computerized ledgers of banks. Some of those digital values are money the banks lend to us. Some of it is money we lend to banks (e.g. money we deposit into our accounts).
For the cultists, ALL money except for coins is lent by banks. Even the US Bureau of Printing and Engraving is a bank. (In reality it is not a bank, but a government agency. It is part of the Treasury.)
HERE IS THE PROBLEM…
The $3.8 trillion the US government will create out of nothing for FY 2013 is only 25.3% of the US GDP. The other three-quarters of the GDP will come from bank lending, and from the circulation of money that already exists. Bank lending creates a credit cycle, which manifests as the business cycle. When the business cycle is down, and banks will not lend, we have a recession. Today, banks have lent over $1 trillion in student loans, but there are not jobs for students to pay back those loans. So the recession remains. If banks will not lend, then there are only two ways that any economy can get out of a recession.
1. Increase its trade surplus. This won’t happen with the USA, since we have a trade deficit.
2. Increase government spending. This is opposed by the rich, along with their sycophants and hangers-on, including politicians, media figures, and most economics processors. Reduced government spending during a recession causes an increase in general poverty, which widens the wealth gap between the rich and the rest. This is what austerity mania is all about: increasing the poverty of the public.
Since the Ellen Brown cultists falsely believe that all money comes from bank loans, they give a free pass to the rich and their sycophants.
Worse, they support austerity, since they think austerity will somehow reign in the banks. Yow!
The cultists refuse to listen to the facts. They are as smug as the deficit hawks.
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MarkRobertson, Thank you for your reply:
“As Rodger has often noted, there are two ways that money enters into the U.S. economy.
1. Bank loans
2. Government spending.”
We are both incorrect. Combined we may be correct in that there are THREE ways that currency is issued .
1.Bank loans
2.Government spending ( by colorful printing or tokens or Treasury bills and notes)
As for “Since the Ellen Brown cultists falsely believe that all money comes from bank loans, they give a free pass to the rich and their sycophants. ”
This is not an honest statement, for surely you could not prove not only what any Ellen Brown cultist believe as a group let alone whatever what ever group you belong to.
If you had bother to read any of my comments you would have known that “Justaluckyfool” is just a fool that belongs to no specific group because as a lucky fool is one that believes” NO ONE CAN GET IT RIGHT ALL THE TIME”. “Unintended consequences are innovations by mankind and can not be 100% predictable regardless of what fools attempt to predict if by chance that one fool is correct then he is just-a- lucky- fool, albeit still a fool”.
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Correction: Two ways and means of currency issuance.
If agreed then, Isn’t the bank method really ‘legalized counterfeit’ as per Frederick Soddy, “It was recognized in Athens and Sparta ten centuries before the birth of Christ that one of the most vital prerogatives of the State was the sole right to issue money. How curious that the unique quality of this prerogative is only now
being re-discovered. The” money-power ” which has been able to overshadow ostensibly responsible government, is not the power of the merely ultra-
rich, but is nothing more nor less than a new technique designed to create and destroy money by adding and withdrawing figures in bank ledgers, without the slightest concern for the interests of the community or the real role that money ought
to perform therein. ”
As with all economist (and stock Gurus) they are sometimes ‘Luckyfools’.
We must take back the SOLE RIGHT TO ISSUE MONEY !
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Debt is built on violence and force. Most people still think virtual money is a relatively new concept. It actually was the first form of credit- contrary to the popular Adam Smith myth that barter was the launching point for economics. http://theanarchistlibrary.org/library/David_Graeber__Debt__The_First_Five_Thousand_Years.html
JLF is right to point out the problem of usury and the magic of compound interest. Soddy called it a ‘perpetual motion scheme’. What happens when an unstoppable force (perpetual growth built on future promises) rams head on into an immovable object (a planet with finite resources and ecological carryin capacities unable to meet those promises)? So far as I can tell, this is not given much consideration by MMT or MS.
“Usury both generates today’s endemic scarcity and drives the world-devouring engine of perpetual growth. To explain how, I will begin with a parable created by the extraordinary economic visionary Bernard Lietaer entitled “The Eleventh Round,” from his book The Future of Money.”
http://sacred-economics.com/sacred-economics-chapter-6-the-economics-of-usury/
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The aide’s take on politics sounds very believable, because it’s the same sort of mentality that I see on the internet every day — “my party is great and your party sucks.” Never mind the facts and issues.
Not sure that I share your focus on understanding why the pols are motivated to do the things they do.
Yes, they are bribed by the rich and brainwashed by the media. The near death of labor unions has given the rich a near monopoly on bribing pols. The end of the Fairness Doctrine was the end of any “real” TV news.
Yes, they want to follow a leader. That’s human nature. Nothing new there. What’s new is that there is no leadership. We need an FDR and instead we got Obama. Ugh.
Let’s face it, Milt Friedman won the messaging battle back in the 80’s. Even though his policies sucked, his messaging was superb and millions became converts to “Chicago School” economics. The left has never recovered from that, it’s never come up with an equally effective message.
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“Not sure that I share your focus on understanding why the pols are motivated to do the things they do.”
Economics theories operate in a dream world when they do not account for all the ramifications of human greed. Examples include the Austrian school, plus neo-classical economics – that is, the economics taught in most universities. Most economics professors deal in hypothetical abstractions, which they pretend are the real world. They imagine that “the market” is a divine entity, free of rigging, monopolies, and plutocratic control.
If you do not fully understand human greed as a motivation, then you cannot understand austerity, or Monetary Sovereignty, or economics. You will insist that austerity is “misguided,” or some kind of “error.” (Or you will insist that austerity is right, good, and necessary.)
The fact is that we have austerity because the 1% want it, their servants push it, and the public has been brainwashed into praising it. Many MMT people refuse to candidly admit this.
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“Government spending is money created out of nothing.”, Mark.
Does that statement mean that you are a ‘Soddy cultist’?
Quote Frederick Soddy, (The Role of Money”,
Money is the NOTHING you get for SOMETHING in order to get ANYTHING”
Then perhaps, just perhaps you would believe that ‘banks create counterfeit money’ and they do it by ‘Fictitious lending’ (lending money the create ‘out of thin air’ and create real profits by charging compound interest.
Would you believe that if banks have residential and commercial loans on their books for an average of $10 trillion at an average of 6% for an average of 72 years they would create an income (profit) of more than THREE QUADRILLION DOLLARS?
Just how dumb does one have to be to be an American citizen ?
Just how dumb does one have to be to be an economist?
Just…….to realize what the most powerful weapon for inequality is?
One needs only to read “The Tale of The Impish Interest and his brother Compound”. Hudson: .economics-of-compound-rates-of-interest-a-four-thousand-year-overview-part-ii/
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JALF… I thank you for your comments. I believe a few of those who comment or write mini-books in this comment section could benefit from a healthy dose of Mr. Hudson’s writings.
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Oh, it very well may be a bit worse than we think. The Federal Reserve is acting like it understands a good chunk of MMT. MMT for the 1% and budget cuts for the middle class (soon too be poor) and the already poor. It’s a two pronged assault to widen the income/power gap.
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MMT is not a desire. It is not a “good thing.” MMT is a value-neutral theory based on facts, like the theory of aerodynamics. Some MMT students have personal desires, such as their hypothetical jobs guarantee, but this is separate from the core of MMT proper. Other students have personal notions such as “taxes drive money.” There is room for wishes and interpretations in all fact-based theories.
MMT explains reality. I would like to see the public understand this reality.
And yes, the Fed understands MMT. In 2002 Bernanke admitted that Milton Friedman was correct: dropping money from helicopters would stimulate the economy. Greenspan also admitted the facts of MMT. He told them to Paul Ryan, who ignores the facts, since Ryan is a spineless sycophant for the 1%.
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Rodger, I think there is another option–work with intermediaries. For example, the American Society of Civil Engineers recently issued a study of the magnitude and costs of upgrading our infrastructure. Civil engineers are among the most fact-based, rational, real world professionals in the country. They are among the most likely to understand the basics of MS/MMT if a simple explanation were written for them in their terms.
I have tried to get Stephanie to see that she/you need an action oriented explanation that will make sense to the likes of civil engineers. It should show the difference between physical actions that they know have direct, measurable effects and mythical limits to dollars. Those guys and gals (more than 140,000 strong) could carry the issue all around the country, to the Feds, S/Ls governments, and to thousands of contractors. Carrying the message would be in their direct interest, and they have networks to do it.
Best,
Tip Parker
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i’m not quite following you, rodger. shock the masses with a scandal…that the politicians are being bribed by the rich to screw the poor?
silly me… all this time i thought that was something you see in the news nearly everyday of the year… so, at least for me, the shock has kinda worn off…
i still say that the thing that warren, stefanie and randall did at columbia univ. was a good thing and what the MMT’ers are doing at UMKC is good.
change is simply not gonna happen quickly and it cannot happen from the bottom-up–it can only happen from the top-down. as i’ve said on other posts, there’s a demographic shift in the process of happening. it’s like a wave that will reach its crest in about 10-15 years from now. MMT’ers have got to get ahead of that wave and direct it in the right direction.
you guys need to speak at colleges, in economics, law and poli sci depts. you need to educate a class of people who might potentially get involved in politics and run for office or might become bureaucrats or business people in the next decade. these people are gonna be the decisionmakers in the future, so you gotta plant seeds in them NOW.
though i’m appreciative of the fact that you write this blog everyday–it was thru you that i discovered MMT–i honestly think that you and all the others out there need to turn your focus towards college students. you need to look towards developing relationships with colleges, so you guys can go there and lecture regularly and try to counter the BS they’re learning. it’s a waste of time trying to “fire up” the masses, cuz we are powerless to change anything–holding up signs and yelling slogans and getting the crap beaten out of you by the police doesn’t change a thing. you need to fire up those people who might want to run for office, especially congress, since it is they who actually control the economy, via the budget and the legal structure.
anyhow, that’s just my 2 cents…
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Yuu Kim writes, “Silly me… all this time i thought that was something you see in the news nearly everyday of the year… so, at least for me, the shock has kinda worn off…”
Yes, everyone knows that politicians work for the 1%. This is self-evident. No one denies it — UNLESS the words “federal deficit” and “national debt” are mentioned, in which case all awareness of corruption vanishes, and the public demands to be crushed by genocide (i.e. austerity).
I would like to see this amnesia end. Whenever media morons claim that the masses must submit to famine and genocide because the US government has a “debt crisis,” I would like average people to think, “Debt crisis? This is more lies, designed to boost the power of the One Percent.”
Average people are already angry, but their anger is self-defeating. It is controlled by the 1%. Average people demand that the rich pay taxes (which will never happen) yet they also favor austerity. They insist on marching to the slaughterhouse. Their anger is a type of whining; a mere venting of anxiety and frustration. They deny that austerity is genocide. They do not have focused wrath. They do not shout, “LIES!” when they hear the words “deficit crisis.” They do not demand that they be allowed to participate in power, which means having a say in the creation of money. Instead, they are babies crying for Mommy (the rich) to take care of them (give them jobs).
I want average people to understand that they would have the power if they would snap out of their trance. There is enough money for all.
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Educate the politicians. Educate the masses. Educate the civil engineers. Educate the college students. All good ideas. But they ignore the fact that politicians, the media and the colleges all are beholden to the .1%, whose primary financial goal is to widen the gap.
So unless the masses, the civil engineers and the college students understand who the enemy is, and what the motives are, they will tilt at windmills.
The college professors are not stupid. They see the same numbers we do. Yet, they receive grants, speaking engagements, honors and tenure, all thanks to the 1%. That’s why, even knowing what they know, they are afraid to speak out. So they teach their students the .1% mantra. An occasional speech at the assembly hall will not undo daily misinformation to students.
The politicians too, know the facts. But for the same reasons, they too are afraid to speak out.
The media are owned by the .1%.
The masses do not understand the facts, and have no desire to learn economic theory. They rely on the media and the politicians to tell them what to think.
So, where shall we begin? The people who know the facts are afraid to speak out. The people who don’t know the facts are subject to daily misinformation.
My belief is that re-education cannot begin with the facts, but must begin with emotion. The masses must become outraged enough to be willing to learn the facts.
Groups like “Occupy” had the emotion, but they too, didn’t understand the facts. And they seemingly took pride in having no organization and no knowledge. So they were a mob, hated by the people they wanted to save, and failed and always will fail. I wrote to them frequently, telling them this would happen. They refused to listen. Google “Occupy” you’ll see: “NYC Protest for World Revolution.” World revolution? Gimme a break.
If the more notable MMT speakers would stress the emotional evidence — that austerity, everywhere in the world, is a scheme by the 1% to depress the 99% and widen the income gap — the 99% could be mobilized, not for “world revolution,” but for anti-austerity.”
No great movement ever was accomplished without the public first getting angry.
But MMT, the vast majority of whom are college professors, display their own fears, too. It’s not a good career move to preach blasphemy.
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Perhaps the “shock treatment” we need should be based upon something we’ve already done, and the greatest president who did it. Namely, to produce, again, debt-free TRULY sovereign money (not this borrowed money in the form of Federal Reserve Notes (yes, it is)). That would be United States Notes. If anyone has a problem with that they can take it up with Lincoln, or even with SCOTUS, who reaffirmed the right of the Congress to “coin Money” as it say in Art. 1, Sec. 8 of the constitution, in an 8-1 decision (how many times has THAT happened?!) in Julliard v. Greenman. They can even challenge the fact that the US Note was our country’s longest lasting form of currency and that 2 bills subsequent to its final phasing out in 1996, attempted to resurrect it (HR1452 – LaHood), and (HR2990 – Kucinich).
Perhaps what we need is not logic and teaching, but precedent and allies, some dead and some living.
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Or, simply stop issuing Treasury securities. No T-securities = no debt.
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Sounds good, but since we need to issue securities in order to “rent” our money now, how else would we get a credit to the gov’t account without issuing Treasuries first? Sure, if we do what Lincoln did and just issue money which Treasury didn’t even include on its own debt report (at least not later on, once they started issuing such reports), then we don’t need to do that.
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Since 1971, when the government became Monetarily Sovereign, it gave itself the unlimited ability to create dollars simply by spending, i.e. by marking up creditors’ bank accounts.
Someone once said, “A government that can create T-bills from thin air can create dollar bills from thin air.
The federal government, being Monetarily Sovereign is absolutely sovereign over the dollar. it does not need to ask anyone for dollars — not you, not me, not China.
Dollars are nothing more than accounting credits, which the federal government (unlike state and local governments and euro nations) has the unlimited ability to create. It is SOVEREIGN over its sovereign currency. It can do anything it wants, including credit its own accounts.
If tomorrow, the federal government (via Congressional authority) were to say, “One dollar equals one sock puppet,” then one dollar would equal one sock puppet.
So if you’re worried about the government running short of dollars in some account, all the government needs to do is declare that that account now contains more dollars. That is what “sovereign” means.
Imagine playing Monopoly and bank runs short of Monopoly dollars. So the players agree tear up some blank paper, write $1 on each piece, and allow the bank to use those as dollars. Where did the additional dollars come from? They were created from thin air.
Thus, FICA does not pay for Social Security or Medicare. The government can declare those accounts as flush or as broke as it wishes.
Sadly, the euro nations do not have a sovereign currency, so they are dying financially.
It is important to recognize the fundamental difference between Monetary Sovereignty and monetary non-sovereignty.
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Absolutely correct and true !
“Rodger Malcolm Mitchell says:
February 25, 2013 at 12:07 pm
Since 1971, when the government became Monetarily Sovereign, it gave itself the unlimited ability to create dollars simply by spending, i.e. by marking up creditors’ bank accounts. ”
It can-But the issuer is constrained if it wishes to “control the quality and quantity ” of its value. It must be accountable to moral hazard, and/or inflation.
Wouldn’t this point be agreed upon ?
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The Fed controls inflation by increasing interest rates, when necessary. In that way, it has controlled inflation close to its target rate of 2% – 3%.
Since the U.S. became Monetary Sovereign in 1971, there has been no relationship between federal deficit spending and inflation. See: https://mythfighter.com/2010/04/06/more-thoughts-on-inflation/
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Thank you for the reply, Having read it, may I rephrase the question.
my e See: https://mythfighter.com/2010/04/06/more-thoughts-on-inflation/
It can-But the issuer is constrained if it wishes to “control the quality and quantity ” of its value. Must It be accountable to moral hazard,i.e., such as increasing the exchange value of the currency to excessive or hyper inflated denominations.
Perhaps it could also be stated that any increase in the real money supply (vertical) would be inflationary meaning ‘increase’ but should it have an equal increase in its redemption value that would really equal a zero net change. If agreed then, “If deficits don’t cause inflation (read excessive denomination of sovereign currency for exchange of goods and services) what does? Perhaps, an excessive demand for the use of bad money to get a limited amount of goods and services ?
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In answer to your question, see: https://mythfighter.com/2010/04/06/more-thoughts-on-inflation/
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Roger, “Aye ,there’s the rub” If I read your reply correctly: The US Dollar has No value. That makes your position diametrically opposed to “the US Dollar is backed by the goods and services of the entire social community, the sovereignty known as the United States of America. That sovereignty that ‘by good faith and credit shall pay (‘redeem’) all debts ,foreign and domestic.’ The sovereignty that issues its receipts of its sovereign wealth of the entire community either by bank credit or colorful paper or token (The vertical money supply in existence.
So tell me why people wish to save US Dollars ? If you cannot demand future
exchange then maybe , just maybe gold or any non consumable good or service is “good value” to use as a medium of exchange.
OR whatever one can get for something that can be exchanged for anything.
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