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 motive.
=====================================================================
Before I retired, I spend most of my working life resurrecting small, troubled companies. During that time, I interviewed dozens of such companies, and usually found their major problem to be lack of focus.
In desperation, these companies repeatedly had added products or services to their offerings, always hoping the next product or service — a wider line — would provide the needed profits. They didn’t recognize, however, that each time they added something, they lost something: They lost focus.
With each added product or service, they also added competitors, while spreading their own financial efforts. So rather than becoming stronger, they became weaker. Soon, they had so many competitors, and spread their efforts so thinly, it became impossible for them to survive.
My solution was to identify the one narrow niche each could dominate — the niche that had few, strong competitors and where they could focus all their marketing efforts.
Often there was resistance from management, because they hated to give up on many of their beloved products and services, but in the end, they relented, and their focus is what built their companies.
A failed marketer to attorneys was built into the largest used law book source in the world. A sick software company was built into the largest business simulation seller in the world. That is what focus can accomplish.
Which brings me to MMT. What is their focus?
They defend against false claims about the deficit and about the debt. They defend against false claims about employment; unemployment and full employment. They defend their suggestions about guaranteed employment.
They defend against false claims about inflation, recession and depression. They battle false claims about tax rates, tax loopholes and tax types — FICA, flat taxes, sales taxes. They defend aid to the poor, aid to the states, aid to education. They defend Medicare, Medicaid and Social Security. They talk about the banks and the Fed and Quantitative Easing.
Randy promotes his jobs guarantee. Bill wants the banks supervised. Stephanie lets everyone know inflation is not an imminent problem. Warren lectures on sector analysis.
So what exactly is MMT’s message?
While MMT’s messages are spread ever more thinly, they in turn, face far better-funded competitors — billionaires who have the financial power to outshout MMT at every turn.
Some well-funded competitors talk about the deficit: Heritage Foundation, the Center for Strategic and International Studies and the American Enterprise Institute. Some well funded competitors talk about taxes: The Tea Party. Pete Peterson and the Koch brothers drown MMT’s messages with dollar volume.
MMT tries to fight wars on multiple fronts. But, that is what cost Germany WWII, and had the U.S. been able to focus on Japan, we probably would have won in a year — certainly less than four, long years. The Occupy groups fail because of diverse messaging.
And here is little MMT, like the Alamo, out-manned and out-gunned and attacked on all sides. And to make things even more difficult, the enemy owns the media and the politicians, and MMT’s stories are counter-intuitive.
At long last, MMT must learn it needs to focus its efforts, and that focus should be The Wealth Gap: How big it is, who is causing it and why.
The focus not only should include the facts, but the outrage — not just logic, but the emotion. Consider this amazing video: Viral Video Shows the Extent of U.S. Wealth Inequality
It should start every MMT interview. MMT should express anger not only that this has happened, but why it has happened. MMT should say:
— What is happening. (Inequality rising for many years.)
— Who is responsible? (The upper .1% income group.)
— What is their motive? (The gap is what makes them rich and the bigger the gap, the richer they are.)
— How are they doing it? (By bribing politicians via campaign contributions and promises of lucrative employment later, and by ownership of the media.)
Bottom line, MMT, you need to focus. Many of you teach at UMKC, so getting together is easier. Decide on a plan of attack. Familiarize yourselves with the basic “gap” arguments, then use them every time you write an article or are interviewed.
The gap is the one narrow niche you can dominate. You can make the gap the most important problem in all of economics — far more important than debts and deficits.
Like an advertising or marketing campaign, you should use the same phrases, to imprint these words in the people’s minds. Just as “debt” and “deficit” have been wrongly imprinted, so should “the gap.”
Consistently pound away at the same message: “Cut the gap.”
FOCUS. That is the way the little guy beats the big guy. That is the way MMT can beat Pete Peterson and the Kochs, and save America.
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
Well said, Rodger.
Whenever Stephanie Kelton has an interview, I wish she would say…
“When politicians and the corporate media make any claim about the federal debt and budget deficit, they have one goal, which is to increase the wealth gap between the 1% and the 99%. Whether it is Democrat or Republican, everything they say about the debt and the deficit is lies, designed to scare you into accepting more poverty. That is why we have an ever-widening wealth gap. Americans must reject these lies that sustain mass misery. If Americans don’t, then have only themselves to blame for their suffering and slavery, which grows worse every day.”
Dump the theory. Forget the academic blather.
Focus on POWER and INEQUALITY.
Cut the wealth gap.
Cut the wealth gap.
Focus. Repetition.
Focus. Repetition.
If MMT people are too cowardly to do any of this, then they should at least harp on the madness of making “deficit reduction” more important than job creation.
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And, while Monetary Sovereignty and MMT may be counter-intuitive to most Americans, closing the gap is quite intuitive. We know in our guts that the gap is too big and should be reduced.
That is to our advantage, when arguing about government deficit spending.
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Need I say more?
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One single goal.
EQUALITY:
50% of the people should share 50% of the wealth.
Why MMTers can not join forces and seek ‘equality for all’ is because they can not agree as to the cause of inequality.
Excerpt from :
The Need For Monetary Reform
On September 30, 2009, in Research & Articles, by AMI
“Monetary reform is the critical missing element needed to move humanity back from the brink of economic destruction and nuclear disaster, away from a future dominated by fraud, ugliness and warfare, toward a world of justice and beauty.
The power to create money is an awesome power – at times stronger than the Executive, Legislative and Judicial powers combined. It’s like having a “magic checkbook,” where checks can’t bounce. When controlled privately it can be used to gain riches, but much more importantly it determines the direction of our society by deciding where the money goes…
Thus the money issuing power should never be alienated from democratically elected government and placed ambiguously into private hands as it is in America in the Federal Reserve System today. Indeed, most people would be surprised to learn that the bulk of our money supply is not created by our government, but by private banks when they make loans.”
********Comment by justaluckyfool:
Why I believe “QE 4 The People” could take back the power of money and use that power for the betterment of mankind.
“Taxation on issuance can produce equality and prosperity”.
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The article indicates the author doesn’t understand Monetary Sovereignty, but he does understand the unfairness of the gap. Articles like these show that in bemoaning the gap, you would not be starting from ground zero. Others are talking about it, too. We need to build on that.
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“Obama’s sequester offer slashes non-defense spending by $830 billion over the next ten years. That happens to be the precise amount we’re implicitly giving Wall Street’s biggest banks over the same time period.”
The government continues to create the same amount of money it always has, but the money goes to Wall Street instead of the public.
Tea Party morons call this is a “reduction in government spending.”
It’s the 1930 again. We watch the depression worsen by the day. We know the cause and the cure. We see everything clearly, and in great detail — and yet we cannot stop the public from marching to the slaughterhouse.
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Rodger, this is a very important and USEFUL perspective. Thanks very much for putting it out there.
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I liked this on Upworthy. It puts it into perspectime and explains the wage gap very clear. http://www.upworthy.com/9-out-of-10-americans-are-completely-wrong-about-this-mind-blowing-fact-2?c=ufb1
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Rodger, what is your plan to reduce inequality ?
What degree of inequality should we target ? Is there a particular Gini coefficient we should aim for ?
I partly agree with you that inequality is a big issue and that MMT should have a focused plan to address it.
However, I’d suggest you should come up with a constructive plan rather than criticizing other people for not having a plan.
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Gee, Dan. I put my plan (items #1 through 9) at the end of every post, including this one.
Constructive enough?
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Plan to reduce inequality? I agree with Rodger’s nine steps, but even without them, I think we would have a better world if enough people realized that…
1. The “national debt” has no effect on the government’s ability to create and spend money. It is simply the amount of outstanding T-securities. It is a national asset.
2. The federal government’s deficit is the private sector’s surplus. The federal government’s surplus is the private sector’s deficit.
3. In nations with Monetary Sovereignty, the ONLY purpose for austerity is to increase the wealth gap. In nations without Monetary Sovereignty, austerity is necessary to deal with the loss of Monetary Sovereignty. The ONLY purpose for surrendering Monetary Sovereignty is to increase the wealth gap.
Rodger boils this down even further, correctly noting that we would have a different world if enough people properly understood the terms “deficit” and “national debt.” A very simple change in the public mind would have revolutionary effects.
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It’s a shame that your suggestions are not even being considered, and that the payroll tax was reinstated. It should be noted that none of your suggestions advocate taking from the Rich and giving to the poor, or giving free money to the poor. Even non-liberals should agree with them.
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Rodger,
Thanks for the telling video. I sent it on to many friends,
I agree that the focus of MMT needs to be sharpened, but I don’t see how that can be done by focusing on the gap. As I understand MMT, it deals with how federal funding works and how important things can be done with it. But I don’t see how it can affect the wealth distribution problem, even with its job guarantee provision. I see no reason why new dollars injected into the economy to, for example, rehabilitate the infrastructure, will not rise like cream to the top. I think MMT can help with getting more things done in the real world until real limits come into play, and new dollars foster competition for finite resources. But I don’t see how it can either restrict the natural flow of dollars up to the top, or help redistribute them after they are at the top.
That said, your piece made an important contribution.
Best,
Tip
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The purpose of focusing on the gap is to create an emotional platform that will make the public receptive to MMT’s ideas. Right now, the public thinks MMT’s (and Monetary Sovereignty’s) ideas are nonsense.
The public has to get angry enough to accept something other than “cut the deficit.”
After that, we can institute the “Nine Steps to Prosperity,” listed at the bottom of this post — which will help narrow the gap.
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Forgive me Thornton, but you move me to sarcasm…
“I see no reason why new dollars injected into the economy to, for example, rehabilitate the infrastructure, will not rise like cream to the top.”
Yes! Agreed! We must have more austerity! Always more! We must cut Social Security and Medicare and educational programs and so forth. We must deprive state governments of money, thereby forcing them to impose their own austerity. We must withdraw more money from the money-starved economy, so we can worsen the depression. We must make the public more dependent on the rich, instead of on each other via the government. We must pretend to tax the rich, even though the rich pay zero taxes, and the federal government does not need or use tax revenue anyway. We must remove the mortgage interest deduction. We must increase the FICA tax, even though it does not pay for Social Security or Medicare.
We must have austerity in order to punish the rich, even though austerity punishes only the poor and middle classes, while it increases the power of the rich.
Austerity! More austerity!
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RE:Dan says,”However, I’d suggest you should come up with a constructive plan rather than criticizing other people for not having a plan.
Rodger Malcolm Mitchell says:
March 4, 2013 at 6:42 pm
Gee, Dan. I put my plan (items #1 through 9) at the end of every post, including this one.
Constructive enough?
THE QUESTION BECOMES, HOW DO YOU DO THAT ?
Your answer I believe would be to ‘increase deficit spending’ for surely “a monetary sovereignty can issue all the currency it needs or wants to issue, only restraint being hyperinflation.
So , please tell me how we would avoid HYPERINFLATION by not addressing the $17 trillion “deficit” regardless of the additional $3 or $4 trillion to be spend each year thru plan 1-9 when after 72 years if at 4% (highly unlikely as rate would be much higher in the “Greater Spending Society ) more like 6-8% but using 4% that total would be no longer $17 trillion but $272 trillion and if not paid within an additional 36 years, it would be OVER ONE QUADRILLION DOLLARS.
OMG, that would take a lot of “good faith and credit.”
As for a constructive plan, I hope you would ask, why not
“Lower or even eliminate taxes of income (an inequality) and at the same time increase revenue using another form of taxation (an equal basis),using this increase to benefit “the general welfare”.
YES, Collecting zero federal income taxes while at the same time increasing federal non-deficit spending….What A Helluva Way To Run A Country.
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Every time someone suggests increasing the deficit, a debt hawk screams “Hyperinflation!!!”
Meanwhile, America never has had hyperinflation in its long history, not even during the massive deficit increases of WWII — and despite huge deficits recently, we are nowhere near inflation today, much less hyperinflation.
But if in the distant future we find ourselves experiencing inflation (not even hyper-inflation), we’ll raise interest rates to increase the value of the dollar. And if that doesn’t work, we’ll simply reduce federal spending.
Rather than wringing our hands about something that never has happened, and if anything, is a long way off, how about worrying about something that has been and is happening, today: The increasing gap.
And what is the “other form of taxation” you think would narrow the gap?
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If the US government had a $17 trillion deficit, as you falsely claim, then we would not be suffering from the current depression.
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And the beat goes on, as Congress, bribed by the upper .1%, chips away at social programs benefiting the middle- and lower classes.
But MMT is reluctant to use the “B” word (bribe), because they don’t have absolute proof (they say).
The fact that every Congressperson receives massive political contributions from wealthy people, who are not known for tossing their money away, is not proof enough, I guess.
Tell me, MMT, exactly why do the Pete Petersons and the Kochs of the world, spend billions on politicians? For the good of America?? To be invited to the White House for lunch?
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According to the worms (i.e. MMT academicians) the rich demand austerity for the lower classes because the rich make “innocent mistakes.” The rich are “misguided.”
(Misguided by whom? The worms don’t say.)
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I tried this out on some people last night and it didn’t work. “Occupy Wall Street” has the 1%-99% space. We got lost in space discussing what the gap included, how it got that way, the futility of ordinary folk taking on the huge invested interests, etc. etc. It was a mess and convoluted. You can’t use someone else’s brand.
What made sense to them was the teeter-totter and the closed system of monopoly soveriegn currency: who makes it, who uses it. That was the eye-opener. And it’s foundational. THIS IS WHAT MOSLER AND WRAY AND KELTON FORGET TO REPEAT EVERY TIME THEY ARE ON A SHOW. They need to repeat the issuer and user of the currency bit, over and over and over again. Kelton should travel with a teeter-totter prop. I drew one, and I had their attention.
“Well, what about our borrowing from China?” was the next refrain. I said, “Does China have a factory in Shanghai making dollars?” “No.” “Well then, where are they getting their dollars from that we supposedly borrow? Who is the only one legally allowed to create them?” After a start: “Us. The United States.” “Correct. Let me show you how that works.”
I explained the checking and savings accounts at the Fed that the US govt, and all US Banks, foreign govts and banks can have. Not individuals. I told them that when Walmart or Best Buy buys 100,000 trikes and TVs from China, the money is wired into China’s checking account at the NY Fed. China is then free to go on the open market just like you or me, buy yuan and wire it home, or let it sit in its checking earning nothing, or buy the equivalent of a CD and earn some interest. If it chooses the latter, it moves its money from checking to savings, and buys the government version of a CD called a T-Bill, or some other Treasury security.
When the T-Bill comes due on the 15th of the month and China wants to cash it out and take the interest, the Fed moves the money + interest back to its checking account. The action of moving from savings to checking, not the other way around, is called “paying off the national debt.” I opened up the Treasury.gov’s FAQ site and showed them that explanation, which funnily enough is right above a plea to have people send in money to ‘help pay off the national debt’. Sarcastic little bastards, aren’t they. 😉 because of course, ‘technically’ it’s true.
Eureka. It was making sense. Those two baby understandings (Treasury and Fed) alone made them realize that no one knows what the hell they are talking about in the media or congress, and more importantly, it left them feeling empowered to find out more. So I recommended your site, neweconomicperspectives, mike norman’s, and Kelton’s twitter account. Therefore, I say, focus on what they don’t know foundationally, just as you did with your clients: you made them focus on the niche they didn’t realize was there.
Of course, I was asked about Fed operations. I said when I can explain them simply, they’ll be the first to know. I said they are so goddam complicated, locked in decades of gold standard rulings and Bretton Woods laws and patches on top of bad policy decisions, it’s way too complicated to understand. But the bottom line is that teeter-totter operating in a monetarily closed system, which our economy is (left our foreign). I told them to remember: if the govt is in deficit, the private sector is in surplus. We (the private sector) just don’t have enough surplus right now to spend; everything is being used to pay down debt. So to prime the pump and aright this economy, the government has to be ‘counter-cyclical’ [the only complicated term I used] and spend more to get us out of this mess. The deficit will take care of itself in time.
I was able to prove what I was saying by showing them that the economy contracted for the first time since 2009 in the 4th quarter of 2012, and the January government figures showed a $3 billion surplus (had them on my iPad Reader), both announced within days of each other. That sold them.
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Hello Mr Mitchell,
Again I hope to make it out to the public.
We complicate our lives to explain how money moves around in the system and completely miss the bigger picture. What does it matter where the money comes from, where it goes, etc, etc..
Can anyone not see that money is simply a token that holds value due to its limited quantity. The goods and services in the economy do not double overnight, but money sure can. So…. double money and prices simply double because the goods and services will remain constant. Is this that difficult to understand? Anyone listening?
Let the free lunch theory go guys and gals, there is NO free lunch. The Fed has been manipulating prices and so has our government. Nature/mood is a b*tch and will not let it go until prices reflect reality whether we like it or not.
The Fed has been pumping credit, the Government has been spending like drunken sailors and 5 years later, we are still talking about how we can manage to get a free lunch tomorrow when we haven’t gotten it in 5 years? It hasn’t happened and it will not happen.
Goods and services, which is where purchasing power comes from, are created by citizens, NOT the government. The government has been clearly taking the citizens purchasing power via the issuance of more currency out of thin air, you think more taking will fix the issue? You CANNOT stimulate the production of more goods and services by stealing from hard working citizens and giving the purchasing power to lazy bums and rich living off the government teat.
Folks, it’s not more theft we need, it’s leaving purchasing power to it’s rightful owners (citizens) that is the solution. I guarantee you that more government spending will destroy what little is left. There is still a tiny bit of time left before the MMT and other free lunch theories are exposed for what they are.
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” So…. double money and prices simply double because the goods and services will remain constant.”
Wrong. You forgot about demand. And the goods and services do not remain constant.
“The Fed has been pumping credit, the Government has been spending like drunken sailors. . . ”
Yet inflation is so low, the Fed has been worried about deflation.
Nice theory (federal spending causes inflation), expressed by many debt hawks, but the facts speak otherwise. See:https://mythfighter.com/2010/04/06/more-thoughts-on-inflation/
“Goods and services, which is where purchasing power comes from, are created by citizens, NOT the government.” This comment really is uninformed. Driven your car lately? The road was created by a government. Flown lately? The controllers are government employees. Eaten lately? Your food was inspected by the government, as was your medicine.
You sound far too young for Medicare and Social Security, both government programs. And if you value your freedom, thank the government for building, maintaining and supplying an army and various police forces.
When your personal intuition is contradicted by historical fact, it’s time to give up on intuition. Science is not intuition. You would do better to study economics rather than babbling endless nonsense.
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Thanks for the response doctor Mitchell,
Perhaps my babbling above is not easy to understand, so let me try again. With regards to me forgetting about demand, have we forgotten about the simply supply and demand curve?
We are again digging into minute details while forgetting the bigger picture. If you have 10 apples and 10 people can afford those apples, increasing the demand to 20 will not change the fact that you only have 10 apples. All that will happen is some of the original 10 will get a smaller part of the apples (half?). You are merely transferring the ownership of the apples from those who earned them to those who did NOT. In the short run it may not mean much, in the long run, you will have less laborers working for the apples and instead waiting for a “free” handout. Eventually, instead of 10 apples you will be left with 9, than 8, than 7, than 6, than 5, than 4…….
Inflation is low? Not sure what figures you are looking at Mr Mitchell, but perhaps you can explain how it is that laborers have not gotten a wage increase in real terms in about 20 years, although real prices have steadily gone up at about 4% a year.
The road was not built by the government, the road was paid for by US tax payers like me and you and built by US citizens like me and you. Same with controllers. A few overpaid government workers organized the projects, again paid for by the tax payers. The US tax payers paid for all those items.
I am too young for medicare and social security and don’t see how taking something that should be affordable to seniors in the first place and making it un-affordable helps anyone. If I was of retirement age, I would be up in arms asking for the government to stop it’s handouts. You worked your entire life to save enough to live through retirement and pay for medical services.
The government first subsidizes medical expenses for just about everyone basically funneling money to the wealthy, prices go higher (let me put my surprise face on), by the time seniors retire their savings are unable to afford them much medical services, the government again hits tax payers pockets by inflating the costs away, the rich benefit some more. Let me simplify, what happens to the price of a cat scan when the number of providers is constant but the funds paying for the service doubles? Simply sir, the prices doubles.
I have zero intuition and all truth to tell. We get all riled up over economic theory, yet miss the most obvious. Goods and services cannot be generated out of thin air, these have to be produced whether we like it or not until Bernanke and Krugman can come up with a machine that can also print them. Who knows, maybe they are on to something… 😉
Again, handing out funds merely takes purchasing power from the hands of those rightful owners (including seniors who worked their whole lives) and hands it over to lazy bums and the wealthy. Doing so for a long term will result in an erosion of productivity as citizens will turn from productive sources to government bums. And this is not an assumption, I know many individuals who have stopped paying their mortgages for months, who have stopped working and are not thinking of going back until they can get a pay check from the government.
Please do not include seniors on the lazy bum column, seniors worked their entire lives and deserve to spend the purchasing power they so rightfully earned (unfortunately, it has been squandered already). Unfortunately, our education system has been so stupefied we can no longer figure out that money are simply tokens and that economic theories are pure garbage.
Sir, being monetary sovereign and having the ability to create tokens does not mean you are wealthier, it simply means you have the ability to increase your denominator. The numerator takes a bit more work to increase. A man’s gain is another man’s loss.
Sad state of affairs really….
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I don’t now whether to laugh or cry, but in any event, bye.
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1.) “Money is simply a token that holds value due to its limited quantity.”
Wrong.
Money has value because society says it does. Such is the nature of fiat currency. All currency, including gold, is fiat currency. Its value is not intrinsic. It only has value because society believes it does. I presume you would lke to “increase the value” of money by having more austerity.
2.) “Double money, and prices simply double because the goods and services will remain constant.”
Wrong.
Services are not limited physical objects. If the US government instituted a WPA-like program, and set million of Americans to work repairing our nation’s infrastructure, then more people would have jobs. This would increase prosperity, but not necessarily prices.
3.) “There is NO free lunch.”
Wrong.
The higher you are in the social food chain, the more you enjoy a lifelong free lunch. Ever heard of government bail-outs? QE? The rentier class? Why can’t average people have some of that lunch?
4.) “The Government has been spending like drunken sailors.”
Wrong.
We are being assaulted by drastically reduced government spending, which has been cut more in the last three years than in any time since 1935. The result (then and now) is a depression. Ever heard of sequestration? Balanced budgets? Austerity?
5.) “Goods and services, which is where purchasing power comes from, are created by citizens, NOT the government.”
Wrong.
Our economy is based on money, not barter. Government creates money. Therefore government is a crucial factor in the production of goods and services.
6.) “I guarantee you that more government spending will destroy what little is left.”
Wrong.
I guarantee you that more government spending is the ONLY way we can prevent the rich from destroying what little we have left.
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Show me the money…
The government has increased our spending 2 fold.. Where is prosperity?
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http://research.stlouisfed.org/fredgraph.png?g=gqX
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