–The CTJ shows why the taxpayer myth is the heart of our problem

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.

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The Citizens for Tax Justice, published an article titled, Ten (of Many) Reasons Why We Need Corporate Tax Reform, in which they list ten large coporations that paid no, or almost no, federal taxes 2008-2012.

The article dated April 12th, 2013, by Jason Sattler, related this shocking story:

You may not believe this, but once upon a time even big corporations paid taxes.

Citizens for Tax Justice (CTJ) has a new study of Fortune 500 companies that illuminates how the nation’s largest corporations are able to corrupt our broken tax system to pay nothing — sometimes literally less than nothing — in taxes.

Facebook, for instance, used one simple tax break — writing off executive stock options — to pay no taxes in 2012 and offset its future taxes.

The article lists other companies such as Fed Ex, Pepco, Ryder, Apache and Interpublic, all of which paid zero income taxes in the past five years. Less, than zero, really, because they all have tax credits going forward, so probably will continue to pay zero taxes.

Shocking. But, that’s not the myth. That’s probably real. Here’s the myth:

CTJ cites U.S. senator Carl Levin (D-MI), who estimates that this tax break costs taxpayers between $12 billion and $61 billion a year.

Like every other senator, every representative, the President, the Chairman of the Fed, the Secretary of the Treasury and the Counsel of Economic Advisers, Senator Levin claims that federal tax breaks cost us taxpayers money.

And that Big Lie, that taxpayer myth, is at the heart of the austerity poison we are being force-fed.

You, Mr., Mrs. and Ms. Taxpayer do not pay for federal spending, and tax breaks for your neighbor or General Electric do not cost you one penny. In actual fact, these tax breaks put dollars into your pocket.

Here is how the experts fool you: Your city, county and state governments are what’s called,“monetarily non-sovereign.” They don’t use their own sovereign currency. They use the U.S. dollar.

They can’t arbitrarily create dollars. In fact, they can and often do, run short of dollars. So they need to collect dollars from you, to pay their bills. The collected dollars are called “taxes,” and if your neighbor doesn’t pay taxes, you’ll have to pay more, to make up the difference.

By contrast, the U.S. government is what’s called “Monetarily Sovereign.” It not only uses its own currency, but it arbitrarily creates all the dollars it wants, whenever it wants. The U.S. never can run short of dollars.

That’s why the U.S. government never needs to ask anyone for dollars. It doesn’t need to borrow (though it borrows) and it doesn’t need to tax (though it taxes). Why?

You’ll repeatedly hear and read several platitudes relative to the taxpayer myth. They explain why it persists in the face of overwhelming evidence to the contrary. Here are a few, with their counter comment:

1. Taxpayers pay for federal spending. (Nope. Taxepayers pay for state and local spending, but the federal government creates the dollars it spends. That is the difference between Monetary Sovereignty and monetary non-sovereignty.)

2. We just can’t keep printing money forever.
(Why not?)

3. Everyone says the federal debt and deficit are “unsustainable,” so it must be true.
(“Unsustainable” would mean we’d run out of dollars, which we cannot.)

4. Being in “debt” is bad for me, so it must be bad for the government.
(Debt is no problem for a government that has the unlimited ability to create dollars. But “taxes” are bad for you who doesn’t have this ability.)

5. We have to live within our means.
(We do live within our means. Our “means” is the government’s unlimited ability to create the dollars to pay its debts.)

6. Our grandchildren will have to pay the federal debt.
(Our grandchildren don’t owe the debt, although they do own most of it. Being creditors, not debtors, they receive interest payments on the debt.)

7. I am the government; if the government is in debt, I am in debt.
(You are not the government. You pay taxes; the government collects taxes. You can run short of dollars; the government cannot.)

8. If we print too much money we’ll have inflation, like the Weimar Republic
(The Weimar Republic was forced into hyperinflation by post-WWI reparations, which had to be paid in gold or product — nothing like the U.S. situation. U.S. inflation has not been caused by federal spending, but rather by oil prices. Because the U.S. government is sovereign over the dollar, it can set the value of the dollar at any level it wishes.)

The CTJ continues with its taxpayer myth:

Corporate Tax Reform Should Repeal Tax Loopholes and Restore Overall Corporate Tax Revenues to a More Reasonable Level

The tax breaks that have allowed these companies to be so successful in their tax avoidance are, by and large, perfectly legal, and often have been on the books for decades.

Actually, the tax “breaks” have helped these companies to be successful. Successful companies hire people, pay salaries and are more competitive with foreign companies. Successful companies buy goods and services, helping other companies. Why, in heaven’s name, would we want business to be less successful?

As Congress focuses on strategies for revamping the U.S. corporate income tax, a sensible starting point should be to critically assess the costs of each of these tax breaks, and to take steps to ensure that profitable corporations pay their fair share of the U.S. taxes.

“Assess costs” to whom? Not to you; not to me. If GE doesn’t pay taxes, it doesn’t take one dollar out of our pockets. In fact, GE’s spending on goods, services and payroll puts dollars into our pockets.

The next step is as, if not more, important. The revenues raised from eliminating corporate tax subsidies should not be given right back to corporations in the form of tax-rate reductions, as corporate lobbyists and their allies inside the Washington Beltway preposterously argue.

Apparently, the Citizens for Tax Justice consider business to be the enemy of the economy, so money should be taken from business and given to the govnerment. Talk about “preposterous”!

Instead, as the vast majority of Americans understand, these desperately needed revenues should be used to address our nation’s fiscal problems and to make critically needed public investments in our nation’s future.

In one sentence, the taxpayer myth is repeated five times — perhaps a new world’s record:

“. . . vast majority of Americans understand . . . ” is a version of “everyone says” (#3)

“. . . desperately needed revenues. . . ” is part of “live within our means” (#5)

” . . . should be used . . .” is part of “taxepayers pay for federal spending” (#1)

” . . . our nation’s fiscal problems . . .” probably is part of “Weimar Republic” (#8)

and ” . . . critically needed public investments . . . also is part of “taxepayers pay for federal spending” (#1)

In short, the Citizens for Tax Justice is clueless about the difference between Monetary Sovereignty and monetary non-sovereignty. What they say about taxes applies only to state, county and city taxes (and to euro-nation taxes), but not to federal taxes.

How could a group that claims to “fulfill its mission primarily by producing research on tax issues and analyses of legislative proposals” get it so wrong?

Maybe you should ask them:
Phone: (202)299-1066
Email to CTJ: ctj@ctj.org

Annie Singer, Communications Director
Phone: (202) 299-1066 ext. 27
Email to Anne: anne@ctj.org

Citizens for Tax Justice
1616 P Street NW
Suite 200
Washington, DC 20036
Fax: (202) 299-1065
====================================================================================================================================================
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

24 thoughts on “–The CTJ shows why the taxpayer myth is the heart of our problem

  1. All you say is accurate mr mitchell, but very deceiving.

    As you say, cities, counties, states cannot issue currency but the US government can. But the federal government does not issue currency and it should not. But the fed gov does borrow via the issuance of bonds, which in some way is equivalent to issuing currency.

    Sir, you seem to think there is a difference in collecting taxes versus issuing currency, it is the same. Either issuing currency results in increased prices or it doesnt.

    The more money you introduce into the economy, the more those dollars will chase the same goods and services. Goods and services do not increase in quantity as fast as you can increase the money supply.

    Sir, do you know the role of interest in the economy? Let’s just say you can:dream of a world where everyone is well off. Can our production support it? You may want to promote production and punish laziness.

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  2. Great article: Really great, it is exact and therefore should be endored or proven incorrect or at least then improved. Surely the elimination of FICA and federal income taxes would be a betterment for all citizens.
    IF IN FACT THESE 8 STATEMENTS ARE MYTHS….
    1. Taxpayers pay for federal spending.
    2. We just can’t keep printing money forever.
    3. Everyone says the federal debt and deficit are “unsustainable,” so it must be true.
    4. Being in “debt” is bad for me, so it must be bad for the government.
    5. We have to live within our means.
    6. Our grandchildren will have to pay the federal debt.
    7. I am the government; if the government is in debt, I am in debt.
    8. If we print too much money we’ll have inflation, like the Weimar Republic
    “Why would you not want prosperity for yourselves and your children ?
    Roger perhaps you got it right but getting a majority of the people to act on it does seem to be a problem, perhaps because you do not show a way “to control the quality and quantity of the sovereign currency if the myths were to be destroyed?
    How do you answer the questions:
    Does the issuer of the sovereign currency own the goods and services of the sovereignty, or is the “money” merely a transferable receipt of the wealth of the sovereign social group that is being safeguarded by the sovereignty?

    As per Frederick Soddy, “The Role of Money”, one can totally agree with your 8 points being ‘myths’. But there must be a “taxation” an expropriation of the currency (that is owned by the entire group) so that the governing group can use it and being a democratic capitalism return it back to the people. As ” in order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…”
    As Obama said (take his words with a grain of salt), as stated on ” 60 minutes” (12/11/11)” President Obama said,”You can’t raise revenues by lowering taxes unless you get the money from somewhere else.” ?
    GOOGLE “JUSTALUCKYFOOL, QE 4 The PEOPLE-“CBWFTP instead of working for the PFPB”

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  3. I have found the following analogy useful when for responding to the “balanced budget” types on the various internet discussions.

    If every member in your household can gather food, then every member can afford to run a “balanced food budget” where the amount of food they gather is equal to the amount of food that they eat.

    If only one member in your household can gather food (FOOD SOVEREIGN), under penalty of law, and we demand that this member run a “balanced food budget” where the amount of food that one member gathers is only equal to the amount of food that one member eats, would you think that a good idea?

    Duh – Of course it is a STUPID idea because if that member does not run a food “deficit” then there is no “surplus” for anybody else to eat!

    Now do you understand why your “balanced money budget” idea for the U.S. (MONETARY SOVEREIGN) is stupid?

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  4. I have found the following question useful when responding to the “government debt” types on the various internet discussions.

    Assets = Liabilities + Equity

    The accounting equation after a non-monetary sovereign issues a $50K face value note and sells it for $49K:

    Asset = Sale Cash = $49K
    Liabilities = Note Payable At Maturity = $50K
    Equity = Loss = ($1K)

    The accounting equation after a monetary sovereign issues a $50K face value note and sells it for $49K:

    Asset = Sale Cash = $49K
    Asset = Unmatured Note Converts To Cash At Maturity = $50K
    Liabilities = Note Payable At Maturity = $50K
    Equity = Gain = $49K

    So please do tell how do both of these note issues represent being in “debt”?

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  5. Myth 1: The federal government runs on taxes.
    Myth 2: The federal government runs on borrowed money.

    Both are false.
    Both contradict each other.
    Both are defended by the public and politicians alike.

    Politicians defend both because the rich pay them to do so, in order to widen the wealth gap. When politicians claim that they want to “raise taxes on corporations” (which they don’t, and shouldn’t) this justifies an increase in taxes and austerity on average people. “We will cut Social Security, and increase corporate taxes. Everyone must pay his share.” That’s why groups like “Citizens for Tax Justice” in Washington are financed by the rich, and quoted by politicians. They are propaganda mills who are paid to maintain the lies. CTJ clowns absolutely reject the truth of Monetary Sovereignty.

    The average person clings to both falsehoods because he is a spiteful, self-righteous fool who doesn’t want prosperity for himself. He wants punishment for the rich. He defends the lies, because they justify his envy, plus his desire to widen the gap between himself and those he considers inferior. They justify the smugness that keeps him enslaved. “The government is in debt! The government spends too much! Cut food stamps to the parasites!” (“But don’t touch my Social Security.”)

    He is angered to read that, “Sen. Carl Levin (D-MI) estimates that corporate tax breaks costs taxpayers between $12 billion and $61 billion a year.” Yeah! Get ‘em Carl! And if you want to impose austerity on us, that’s okay, as long as you denounce them corporate tax breaks! Everyone must pay his share.” (“But don’t touch my Social Security.”)

    Looked at another way, most people fear the facts. “Huh? You’re saying the federal government doesn’t need to tax us at all? Ridiculous! Of COURSE the government must tax us. Or maybe the government runs on borrowed money. Whatever. All I know is that you’re wrong!”

    And so they righteously march to the slaughterhouse of austerity.

    Marching alongside them are MMT morons who defend federal taxes, and who claim that politicians are simply “misguided.” They imagine themselves living above us mortals. They “get it”; we don’t. They are as smug as the other retards.

    Spite. Selfishness. Self-righteousness. They are a delicious but deadly drug that most of the public is addicted to. The two above falsehoods justify the addiction. “Cut their food stamps, but don’t touch my Social Security, which I PAID FOR! My money is in the trust fund!” (Many MMT morons believe this too.)

    To point out his error is to undermine his self-righteousness, which is intolerable. Wrath is delicious. Some people who hate Israel note that the USA supports Israel with billions of “tax dollars.” If you tell them the U.S. government creates that money out of nothing, you dilute their delicious wrath. Hence they reject the truth, and cling to the falsehood that taxes fund the U.S. government. Again, spite maintains myths. It relies on falsehoods. The more people cling to myths, the more they cling to their own slavery.

    There have been visitors to this blog who want to attack the rich. When their errors are exposed, they vanish. For them, smug ignorance is bliss, even though it means slavery. Like most other people, they are not happy unless they are miserable.

    ++++++++++++++++++++++++++++++++++++++++

    Unrelated:

    Lest anyone think that Russia Today (“RT”) gives the truth, while the Western corporate media tell lies, here’s a brief RT article that overflows with garbage. It claims that Obama wants to radically increase federal spending, and that federal deficits are “skyrocketing.” It laments that Obama will not balance the budget. It sympathetically quotes Republicans who claim that the U.S. government has a “debt crisis.”

    Who wrote this trash? RT doesn’t say.

    http://rt.com/usa/obama-deficit-trillion-year-783/

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  6. “The US money system is designed in a way that the government must obtain inside bank money from the private sector before it can spend. This is paramount in understanding the flow of funds through the economy. The government does not merely decide how money is spent and print it at will. It must be able to procure funding in the form of tax payments or bond sales because our monetary system is designed in such a manner that banks create almost all of the money and the government determines itself as a user of bank money. In Ms all money is state money so the state would never borrow back its own IOU. But this is clearly not the way our system is designed or the state would spend without procuring funds in the first place. The MS position is only relevant if private banks are part of the government issuing money on behalf of public purpose, but they are clearly private profit driven entities who issue money for private purpose.”

    To believe the government today creates all money without constraint is an alternate reality or extreme view where the government is given the express ability to self fund and essentially dominate the money system. To be specific, the government’s money creation abilities are dispersed away from the government to the private banking system into private hands because the system was designed in such a manner so as to disperse money creation powers out of the hands of government and into the hands of the private sector. Your positions imply that the mechanisms are already in place for government to self fund. In reality this isn’t the case. Sweeping changes would have to occur within the present system. These changes do not already exist, but would have to be put into place. Until they are you are making perscriptions for policy and not making an accurate description of our monetary system. MR

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    1. 1. The government doesn’t create “all” money. It creates some money.
      2. The government creates dollars by instructing banks to mark up checking accounts. These instructions are in the form of checks and wires. The government has the unlimited ability to send instructions, which is why the U.S. government never can run short of dollars.
      3. Government “borrowing” is an obsolete remnant of monetary non-sovereign days, and is based on an obsolete law.
      4. Many comments are more appropriate to a monetarily non-sovereign government than to a Monetarily Sovereign government. Those who do not understand the differences, do not understand economics. Sadly, that does not prevent them from pontificating on economics.

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      1. The federal government can create money, but it does not. Every single dollar spent, and we can prove this, is either collected via taxes or borrowed. Let me know if you want the links, i can supply them.

        The banks create the majority of the currency by lending money times over. The debt acts as money, pushing up prices.

        The federal government doesnt mark up any accounts, not one. Can they do it? Sure they can, but unless they are doing it in a vaccum, they have not made it public.

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      2. And you are right, the US can never run out of dollars if it choses to. What will happen if they chose to create money ad-hoc? Investors drive the economy, not the government. Investors will request higher rate off return for their investments driving interest rates up the wazoo. You want to crash the economy? Just print…

        Demand is not driven by dollars in your pocket, it’s driven by purchasing power. Purchasing power comes from production and savings. MMTers have it exactly backwards, it’s not more government spending we need, we need government spending to collapse. We need the gov to be slashed in half.

        We need higher rates of interest. We need banks to be responsible. We need homeowners to be responsible. We need to reward work and punish leeches, while helping the real needy and our seniors. We need to allow incapable businesses to fail and capable to prosper. Finally, we need to let the free market work.

        Purchasing power and savings come from production.

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    2. Rodger says, “Many comments are more appropriate to a monetarily non-sovereign government than to a Monetarily Sovereign government.

      Yes. Most people do not understand the difference between he who has a printing press for money, and he who does not.

      EXAMPLE 1: “The government must obtain inside bank money from the private sector before it can spend.”

      That is only true for governments that do not have MS (e.g. state, county, and municipal governments). It is not true for the US federal government, which creates its own money out of nothing, simply by crediting bank accounts. The federal government levees taxes and sells T-securities by choice, not by necessity. It could operate just fine with zero taxes, and no T-securities. It does NOT get its money from private banks. By contgrast, the euro-zone nations DO INDEED get all their money from private parties (i.e. banks and the buyers of bonds) since euro-zone politicians surrendered their nations’ Monetary Sovereignty. In the euro-zone, Troika bankers have absolute power. They create money out of nothing on their computer keyboards (just like the US government) and they use that power to enslave 333 million people.

      EXAMPLE 2: “The government must be able to procure funding in the form of tax payments or bond sales because banks create almost all of the money, and the government determines itself as a user of bank money.”

      Again, that is only true for governments that do not have MS, like the euro-zone governments. As for “creating almost all of the money,” the US government plans to spend about $3.8 trillion in FY 2013, which is over a quarter of the US GDP. That money will be created out of nothing. It will not come from bank loans, although the government will sell T-securities by choice. In FY 2013 the government expects to take back $2.9 trillion in taxes, leaving a deficit of $901 billion. By virtue of obsolete laws dating from the gold standard days, the Treasury must sell $901 billion in T-securities. Again, this is all by choice, not by necessity.

      The other 74% of the US GDP for FY 2013 will consist of bank loans, plus the circulation of money that already exists.

      EXAMPLE 3: “In MS all money is state money so the state would never borrow back its own IOU.”

      No. In MS, there are three ways that money comes into existence: government spending, bank lending, and foreign sales. (The latter do not apply to the USA, since the USA has a net trade deficit). As for “borrowing back its own IOU,” this statement is nonsensical.

      In the USA the private sector (i.e. banks, plus the shadow banking system) do create most of the money. Far too much. But they do not create it all.

      And remember, the “national debt” is simply the amount of T-securities that have been purchased. It is money on deposit at the Fed, and has no effect whatever on the government’s ability to spend, whether the national debt is zero, or a quadrillion.

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    3. Gov doesn’t create $ without restraint. 1)It has a budget and 2) it must remain aware of inflation and resource availability.

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    4. Charles, that sounds to me like you are quoting Joe Bongiovanni. (Joebhed) A good guy, but he doesn’t understand what he is saying, or he wouldn’t say it. True, the MMTers could make their explanations more intuitive and simpler. But they really have dotted all the is and crossed all the ts. The gubmint makes a show of doing things as if it were financially constrained. But all the smoke and mirrors is just that. It doesn’t constrain the government at all in practice. The banks need the government’s money, which the government really does create all the time. But the government doesn’t need the banks’ money.

      Part of the problem is that many MMT fans take some academic MMT statements (like you can’t compare household & government budgets) as core theory – rather than rules of thumb, metaphors, slogans – which can and are violated at crucial places in arguments And they take core theory / theorems, ironclad, axiomatic stuff which is never violated (the government destroys money when it taxes, creates it when it spends, similarly for banks) as metaphors/slogans/rules of thumb.

      And the MMT academics could make it clearer. (I daresay if they did, it would be clearer even to themselves.) Part of the bad effect of the colossal abuse and misuse of mathematics in economics is an unfortunate reaction – those who actually do reason carefully, mathematically, rigorously – the heterodox, the Institutionalists or post Keynesians, the MMT / MS ers, – do not present their arguments as mathematically and above all as well organized as even the average man in the street does on matters of general interest. But in general using words rather than symbols is a good indication of mathematical content and rigorous reasoning in economics, sad to say. While the mainstream apes the form of mathematics, but for 99.9% of it, no mathematical, no rigorous content, content which even the kindest critics have to say frequently verges on nonsense.

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  7. Just watched Steven Horrowitz from FFF on youtube. This acclaimed economist gives his libertarian reasons for abolishing central banks. Just like Charles Fasola, he believes the monetary system legally requires Government to borrow money from private banks via bonds for public purposes, or raise the revenue through taxes. In his opinion, private banks competing for deposits in a free market.would provide for a more stable monetary base. as well as limit government size and power.,Of course he also feels the need for so called sound money, backed by an exchangeable commodity. He reiterates the history of state chartered banks ,from the birth of our nation, through their battle with national banks , and ultimately the regional federal reserve we enjoy today. Stressing the failure of these institutions to provide economic stability .

    I believe all of these opinions forget to recognize the vast difference between historical perspectives and current -political-economic conditions. Especially Global trade and interconnection resulting from America’s imperialistic success story. We represent the worlds greatest economy, fourth most populous, wealthiest, and importantly the only military superpower. The U.S owes no other sovereign country debt in anything other than dollars. These conditions were considerably different before world war two. Most of the world was on a gold standard as well. Society evolves, hopefully for the better, so why wouldn’t economies and monetary systems. Cherry picking policies one might like from the past and attempting to administer them currently to fix misunderstood non problems, like federal deficits, would cause far more harm . There are many complex ed variables relating to efficient economies today. Balancing federal budgets, currently serve no particular public purpose, other than fraudulent or misguided political popularity.

    In today,s modern global economy, we should understand the role of central banks as score keepers of assets and liabilities. They neither have or don’t have money. Keystrokes on spread sheets mark citizens accounts up or down at the fed., as well as foreign central banks who hold dollars or treasuries. Bonds are used to establish interest rates in administration of monetary policies, though the governments fiscal measures are far better tools for managing economic trends and promoting greater living standards. Taxes extinguish excessive currency created from stimulus programs as a lever against inflationary propensities,and are used to persuade those engaged in business to pursue socially beneficial enterprises, as well as deterrents against harmful engagements that might be legal but publicly malignant .

    Whether or not this accounting measure was foreseen when the fed was enacted is irrelevant . The power and capability of the Fed today is obvious. Seems to me this is a major development for the well being of our society, as long as our government remains of,by, and for ,the people. Unfortunately, this ability for government to procure dollars, without economic constraints to fund goods and services, irrespective of tax revenue or debt, can stink of socialism. Redistribution of wealth comes to mind. This is an anathema to classical capitalism. Obviously this is why myths associated with government funding perpetuate. The idea that a modern government isnt restrained in its spending ,like a citizen or business, is difficult to comprehend, since we have all been taught otherwise. This relatively fresh and new idea , when taken to its logical conclusion, can conjure ridiculous assumptions , that if literally interpreted , imagine no-one working and everybody getting as much as they want. The welfare state the fiscally conservative socially repressive right wingers abhor. Though i believe a small negative with respect to how excessive disparity of wealth manipulates a free democracy. The free market only goes so far, an informed population can use their political voice to hedge the excesses, unfairness , and environmental costs super successful for profit enterprises historically cause. .

    We are a country of law, and the laws on the books clearly detail the role, and power of the fed. to monetize its imaginary debt. Why people want to hobble themselves through austerity is beyond me, it is sort of like a religious fanatic self-flagellating. We must press the media to confront politicians and address these realities. Forgetting about what should or shouldnt be policy, how about stressing what is. Reiterate the laws relating to what the fed describes as it’s mandate and legal prerogative. Demand that economic books update modern monetary realities. How the hell can the media miss the obvious contradictions that arise when Presidents declare the congress broke,? We do live in a political economy, but why cause ourselves unnecessary hardship and pain. Just as every student learns about supply demand relationships, so should they understand that government deficits provide for non-governmental sector savings, Federal government surpluses set the seed for recessions, though cyclical economic up trends might provide surplus tax revenue to coffers,which the government doesnt need; continuing to run a surplus is not a measure of good policy, but a misaligned agenda, the removal of this money base eats up the savings and eventually smothers the economy, by reducing sales resulting in unemployment and further reduction in wages that result in a negative feed loop, unless federal stimulus dollars flow, and or taxes abate

    Entitlements, and they,re not really entitlements since the regressive payroll taxes support this skin in the game commitment, are essential for a growing flourishing economy. Fear mongering to reduce these progressive benefits is disgusting and unbecoming a society pledged to freedom and equality. Social safety nets are vital to a fair , open, and honest country.For whatever reason you get sick , or retire broke, many times the result of just bad luck, don,t pretend freedom is available without funds, No money, no life, this country can afford to fund unlucky citizens, even if they are lazy or stupid. Remember, satiated people dont revolt into civil unrest, plus the money they spend on essentials contributes to our economy. When people are desperate they do horrible things, gun violence as a result of economic crime comes to mind, as well as unavailable mental health programs Plus it is just as costly to house these unfortunate people in institutions, relying on charitable contributions isn’t as efficient., and market solutions without government oversight is an invitation to failure.

    Congressman Ryan staring at Obama’s proposed budget with a sullen expression is nauseating. Either he is a liar, or an idiot. An interview between him and a knowledgeable journalist is imperative. How the hell do you go about that? I am sure all questions are vetted before he ever considers answering questions from an interviewer he doesn’t know. Greenspan already schooled him on revenue constraints regarding the fed. , suppose he didn’t do his homework and is just dense, or he could care less, his constituents want austerity to increase their relative wealth and power, while others work harder, longer, and for less. Funny, I thought progress through modern technology was supposed to achieve the opposite.

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    1. Thanks for your comments Larry. A couple of observations if I may…

      “Steven Horrowitz like Charles Fasola believes the monetary system legally requires Government to borrow money from private banks via bonds for public purposes, or raise the revenue through taxes.”

      >>Federal law dating from the gold standard days requires the Treasury to sell T-securities in an aggregate amount equal to the federal deficit for a given fiscal year. (I am researching the laws involved.) Hence the government is required to “borrow” in the form of selling T-securities, just as banks borrow the deposits of clients. However the government does not borrow in the sense of needing proceeds from the sale of T-securities. It “borrows” by choice, not necessity. Horrowitz and Fasola’s error is to believe it is by necessity.

      “In Horrowitz’ opinion, private banks competing for deposits in a free market would provide for a more stable monetary base, as well as limit government size and power.”

      >>There has never been a genuinely “free market.” Moreover, lack of regulation causes crime, instability, monopolies, and a widening wealth gap. The more this becomes obvious, the more people like Horrowitz call for more deregulation. Mostlibertarian lunatics and neo-liberal nitwits cling to their “free market” fantasies. If deregulation causes crime, fraud, and the theft of trillions, then the solution is more deregulation. If the surrender of monetary sovereignty to private bankers causes devastation, the solution is to give more power to the private bankers. If austerity causes a depression, the solution is more austerity. If leeches worsen the anemia, the solution is more leeches. Horrowitz does this because he wants to be a toady for the rich.

      “Of course Horrowitz also feels the need for so called sound money, backed by an exchangeable commodity.”

      >> Horrowitz champions the delusion that “sound money” exists apart from any system. In reality there is no “sound money”; there are only sound and unsound monetary systems. A sound monetary system requires a stable society and government. (Horrowitz is an enemy of government.) The dollar is a unit of account in the U.S. monetary system. The US system interlocks with other systems. Also, there is no such thing as money “backed” by an exchangeable commodity. All monetary systems are fiat systems, even when systems use gold as a benchmark (i.e. the “gold standard.”) A benchmark does not mean that a monetary system is “backed” by gold. On the contrary, gold is backed by a monetary system. Gold only has value within the system. It has no value in a world of pure barter. If you wanted to trade with Native Americans on the frontier in 1700, the natives would reject gold as worthless, since they would not be participants in your monetary system. Instead, the natives would ask for something they valued, such as guns, or seeds, or metal tools. A few tribes valued gold as charms, ornaments, and decorations, but not as money. Other than that, gold had no intrinsic value. The invading Spaniards wanted gold because they dreamed of going back to Europe as rich men within the European money system.

      “Horrowitz reiterates the history of state chartered banks from the birth of our nation, through their battle with national banks, and ultimately the regional federal reserve we enjoy today, stressing the failure of these institutions to provide economic stability.”

      >>The USA spent its first century as a loose patchwork of colonies, territories, and states that tried to destroy each other in the Civil War. (Some of the New England states had success with colonial scrip, until the British outlawed it, thereby causing the War of Independence.) The contradictions between this chaos and the idea of a “United States” caused instability in society and government, thereby causing instability in various banking systems. The “United” States did not become a modern nation until the dawn of the American Empire, which occurred with the Spanish-American War of 1898. Fifteen years later came the Fed as the USA geared up for World War One. THE POINT is that a stable banking and money system requires a stable society and government – and Horrowitz hates government. Without a stable society and government, everything falls to pieces, as we see in Europe. The bankers have supremacy now, but this will end when the entire system collapses. The collapse is inevitable, because when everyone and everything exists to serve the bankers, human society ceases.

      Larry says, “In today’s modern global economy, we should understand the role of central banks as score keepers of assets and liabilities. They neither have or don’t have money. Keystrokes on spread sheets mark citizens’ accounts up or down at the Fed, as well as foreign central banks who hold dollars or treasuries.”

      >>Yes. Exactly. Banks are “scorekeepers” in the money system, and to a large extent they control the scoreboard, and thus have power. Likewise, for the rich, life is about “keeping score.” It’s like a football game with the 1% on one side, and the 99% on the other. No matter how many “points” the rich score (i.e. no matter how wide the wealth gap grows), they imagine that the score could change any minute. So they always want more points, more austerity, and more poverty for you and me. It’s all they have to live for, since they already enjoy every materal thing they could possibly want.

      Larry says, “Taxes extinguish excessive currency created from stimulus programs as a lever against inflationary propensities, and are used to persuade those engaged in business to pursue socially beneficial enterprises, as well as deterrents against harmful engagements that might be legal but publicly malignant.”

      >>That’s the ideal view. The fantasy view. The MMT view. My own view is that federal taxes are not necessary. Inflation can be controlled via interest rates, while the authority of fiat money can be maintained by state, county, and municipal taxes. And even if federal taxes are the essential “glue” that sustains federal authority, there is no reason for federal taxes to be so high. The FICA tax is particularly odious. And why tax corporations, which provide jobs?

      Larry says, “Unfortunately, this ability for government to procure dollars, without economic constraints to fund goods and services, irrespective of tax revenue or debt, can stink of socialism.”

      >>Without socialism, there is no “society.” There is only the law of the gun, with every man for himself, and oligarchs against all. Even in the Old West days there was socialism in the form of fire departments and town marshals. Where there is society, there is socialism. The question is whether everyone works for the rich, or works for each other. Both extremes are forms of socialism. Societies only have problems when they lose the balance between socialism and capitalism (that is, between altruism and selfishness). Pure socialism is rule by a Kafka-esque bureaucracy. Pure capitalism is rule by a savage plutocracy. Currently the world is rushing toward pure capitalism. Politicians are destroying socialism in any form that helps average people. They are creating a pure welfare state for the rich.

      Larry says, “Redistribution of wealth comes to mind. This is an anathema to classical capitalism.”

      >> Capitalists only scream when wealth is distributed fairly to all. They love to redistribute wealth from the 99% to the 1%.

      Larry says, “The idea that a modern government isn’t restrained in its spending (like a citizen or business is constrained) is difficult to comprehend, since we have all been taught otherwise. This relatively fresh and new idea, when taken to its logical conclusion, can conjure ridiculous assumptions in which we imagine no one working and everybody getting as much as they want.”

      >> Everybody getting as much as he wants. Oh the horror! Better for the 1% to get what they want, and the rest of us to starve. So thinks the average person. You bring up a good point about people’s rejection of the facts of Monetary Sovereignty. Whenever we suggest an alternative to today’s extremes, they imagine that we want the opposite extremes. “Yes the ship is sinking, and we are all doomed, but people might argue about who has to bail water. It’s possible. It’s conceivable. So let’s do nothing.”

      Larry says, “Why people want to hobble themselves through austerity is beyond me, it is sort of like a religious fanatic self-flagellating.”

      >> Yes, Rodger has analyzed this in past posts. I attribute it to smugness and selfishness among ordinary people, which I call, “peasant thinking.” Not everyone is a peasant, suffused with envy, spite, and self-righteousness, but the general social level is high enough to keep the 99% in poverty. Everyone wants austerity for others. Thus, austerity is imposed on all.

      Larry says, “How the hell can the media miss the obvious contradictions that arise when Presidents declare the congress broke?”

      >> The corporate media is a lie factory, owned by the 1%. Thus, media hacks are fired if they do not champion austerity. And most people believe whatever the hacks tell them.

      Larry says, “We do live in a political economy, but why cause ourselves unnecessary hardship and pain?’

      >> Most people are not happy unless they are miserable. That’s just the way it is.

      Larry says, “Just as every student learns about supply demand relationships, so should they understand that government deficits provide for non-governmental sector savings…etc.”

      >> Yes, but delusion rules all. Humans can rationalize anything. ANYTHING.

      Larry says, “Congressman Ryan staring at Obama’s proposed budget with a sullen expression is nauseating. Either he is a liar, or an idiot.”

      >> He is both. Ryan is a sycophant that the rich have re-installed in office seven times. When austerity mania runs its course, and the rich must adjust their lies in order to maintain their tyranny, Ryan will be discarded. He is a worm who makes everyone’s skin crawl. Even the rich hate him. But Ryan is useful for the moment.

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    2. “……imagine no-one working and everybody getting as much as they want. ”

      If no one works the factory wont go nor the bus or taxi; you get nothing in return. So NOT a logical conclusion. We nurture that which nurtures us. We will never forsake a system of complete affordability.

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  8. Mark and Larry.

    The term “borrow” is misleading. When you and I “borrow,” we receive dollars, which we own and can spend. They are our dollars.

    When the government borrows, it does not receive dollars it owns and can spend.

    Instead, those dollar are deposited in T-security accounts at the Federal Reserve Bank, where ownership remains with the holder, not with the federal government.

    This is more similar to buying a bank CD. The money goes into your CD account. That is why it’s called a Certificate of Deposit.

    The bank can’t spend that money, any more than it can spend your savings account deposit.

    All the bank can do is use it as reserves against lending.

    People think the government is like them, in that it spends the dollars it “borrows.” Huge misunderstanding. Ownership of those dollars never passes to the government.

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    1. Please, tell me if i got this charade right,,, A private citizen, or corporation, or sovereign central bank, takes its dollars, or digital credits from its bank accounts, and transfers the liquid, easily transferable credits that are not interest bearing, into treasuries, or bonds if you will, that are of various interest rates depending upon maturity, like a c.d. The Federal reserve keeps a record of these transactions, the currency used for the purchase is until the maturity date locked in the bond, though it can be further traded in secondary markets, its basically withdrawn from circulation just as if the same saver buried it in a hole. The federal government is not borrowing this money and using it for expenditures, as a private citizen might if they borrowed money from a friend. This governmental savings option is offered as a benefit to users of its currency, often the safest but least attractive in regards to yield. .

      So China, or any other foreign country we trade with, takes its surplus trade receipts, represented in digital markers or dollars wired out of U.S banks,probably conveniently converted into their own monetarily sovereign points, and than parks these credits, not necessarily exactly equaling their trade surplus, back at the federal reserve in the form of bonds they purchase from primary dealers , which at this point is probably via their own sovereign currency, which like us they need not physically save,These treasuries they purchase are similar to a savings passbook that offers an interest rate. The best analogy being transferring funds from a non interest bearing checking account into a certificate of deposit offering a nominal interest rate. Truth is they really dont even have to do this,since modern central banks today can keystroke all the credits their government needs at any time, but international governments like to hold each others currency as a hedge. The benefit of treasuries, really just reserve notes that are slightly less liquid, is interest.

      None of these processes resemble borrowing between people and businesses. China obviously doesnt own America, and the treasuries they have on account at the Fed. just represent net dollars they received via a trade surplus with us. These bonds, whether purchased by citizens, businesses, or nations, are not loans to the U.S government anyway. The purchaser retains the ownership of the account the bond represents. The monetarily sovereign government of America doesnt need to borrow dollars, or tax its citizens for that matter, in order to fund operations. The federal reserve acts as score keeper for all those playing with its dollars., or points if the analogy helps. .These treasuries represent dollars already created, so inflation is not a problem, though the interest rate represented by the matured value could be. But the net loss of dollars in circulation domestically from trade deficits might be economically recessionary with regards to decreased levels of the money base.

      When the treasury funds the congressional appropriations ( and this is where all the confusion, myths, and arcane rules surface), they print bonds and secure them at the federal reserve, which than digitally funds, or marks up, or scores, or credits, (whatever expression you would like to use,), the recipients bank account. These are federal expenditures, albeit defense contractors, federal employees, military personnel, and entitlements like social security, medicaid, medicare, and unemployment insurance . These allocations can represent over 20% of our nations GDP., this money supplementing exported and saved dollars, The bonds sold by treasury to the fed simply represent notes spent. Obsolete laws still require this de-jure practice of selling the fed bonds. The fed returns 97% of the profit it makes from bond purchases and interest payments right back to the treasury.This de-facto practice assures the meaningless of interest rate debt service costs the government pretends to fear if interest rates increased in the future.

      Our system encourages massive savings, through laws related to tax rules. Much of this savings is represented by the governments deficit, which is the difference between money spent by the federal government and taxes collected by the treasury. These taxes are extinguished, the payees bank accounts reduced. Without a government deficit people would eventually tap their savings accounts for survival to offset decreasing levels of currency in an ever expanding economy with an increasing population. There would be too much competition for ever decreasing dollars. Paying back deficits, so the accounting difference between taxes and government spending balances, is political rhetoric and recessionary. Austerity initiates a tightening on the economy, decreased dollars in circulation causes less sales and consumption , the predecessor to unemployment, encouraging lower wages that people will accept out of desperation, further accelerating deflationary conditions in prices to entice sales, as the race to the bottom speeds up. Debts become harder to service, money becomes scarcer, and depressions are inevitable.

      Wars tend to help spark economies because governments spend , without regard to deficits. So sad, we need to experience destruction before we allow the monetary system to work. We need people to understand their system so it can work without the explosion of war. Money shouldnt be the paramount measure of wealth. We see this mistake in our personal lives and it fraudulently translates into interpretations and expectations of government value. Money is just a means to an end, in socially complex ed economies it doesnt have any value in and of itself, A government, or referee ,if you like the analogy ; representative, transparent, and honest , yet enforceable and stable, is required for cohesion to give value to an abstraction like money.

      . .

      The entire economic system needs competent management and honest regulation in order to provide stability and financial opportunity for all citizens .Most people dont get lucky, but chance does play a large roll in how life turns out for many. Not all failures are lazy and stupid, and some successful people are. Free market dynamics wont fix everything. The dogma surrounding market fixes for many disequilibrium’s is almost fanatical. Mistakenly we believe that only in the pursuit of profit is society’s benevolence best served. Self interest is seen as the driving force of humanity. competing interests trying to outdo each other, persuaded by winner take all incentive’s, will bring forth the best for all to enjoy. Very Darwinian, but nature doesnt have a referee to offer critical thinking . Biological and geological processes adapted over millions of years ,trillions of chance events afforded viable results. Human economies dont have all that time ,but we can play God and alleviate suffering , changing results for the better. We dont need to adopt a survival of the fittest mentality to assure success. Human society can be altruistic, benevolent , and fair if we choose. Drastic wealth disparities caused by hyper capitalism will cause civil unrest one day. .

      Understanding Monetary Sovereignty seems like the best chance humans have for providing the greatest society possible, while minimally adversely impacting the environment .Basically humans dont have to do the horrible things they sometimes do in order to make money, justifying their abhorrent behavior. Governments dont have to make a profit, just manage their currency,GDP, and productivity. Unfortunately, banks have usurped governments, they understand this principle but refuse to elaborate, they pretend it’s a crazy idea from left wing Utopians. The financial industry funded the political campaigns for many in government, they own these guys, were bailed out during the crisis, and lobbied for more of what undermined the international system in the first place- they want to usurp the sovereignty of money creation the government implicitly has.The parasitic finance industry has become way to large, justified by their hedging ability to reduce risk through various complicated derivatives that promise to allocate capital where its most needed. The joke is that becomes so called proprietary trading that produces huge fees and commissions for bankers to loan other finance players easy money from all the zeroes they got from the fed as free loans and toxic asset dumps in exchange for more reserves that pumped up their new asset bubble , the equities market. What happens when this one bursts, are they going to get another bailout. In europe so far they have succeeded in crippling the people ,coercing them to pay back money through austerity measures, the government bondholders lent their governments to bail themselves out of bad investments. The whole finance industry is crazy, our sovereign governments are held captive by them. Cant create money for poverty disruption, only wars, and derivatives gone bad. What a joke!!!

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