–Are federal taxes destroyed upon receipt? The shorter and longer answers.

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell


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 ultimately 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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Reader tetrahedron720 asked, “How would you go about explaining the decision to destroy money upon receipt as compared to not destroying it as is the case with state and local government, i.e., is there a url or source that shows a balance sheet of local government vs. the balance sheet of the federal government that would by comparison isolate the difference clearly?”

The shorter answer is: Federal balance sheet accounts are not part of the money supply. All of the money supply is in banks or other private hands. All state and local money is in banks or other private hands.

Here’s a longer, I hope better, answer:

Semantics. That is the real problem. We all do this: We say we take, send or give dollars to anyone. But, we really take, send or give instructions, not dollars.

Readers of Why a dollar bill is not a dollar, and other economic craziness know that a dollar has no physical existence. You cannot see, touch, hear, feel, smell or give a dollar.

That dollar bill in your wallet is not a dollar. It represents a dollar, just as a title represents a car or a note represents a loan. That dollar bill is a bearer bond, telling the world that the bearer of that note is owed $1 by the U.S. federal government.

By way of analogy, consider numbers. Numbers too, have no physical existence. You cannot see, touch, hear, feel, smell or give the number seven. You can see representations like “7” and “VII” and “SEVEN,” but you cannot see the number itself.

You can give me seven bats, 7 balls or VII brooms, but you cannot send me the number seven. Similarly, and contrary to intuition, you cannot send me a dollar, although we use that phrasing all the time.

You can send me a dollar bill, a piece of paper that represents a dollar. Or you can give me your $1 check, which is nothing more than a set of instructions, telling my bank to increase the number in my checking account by 1 (and to decrease the number in your checking account).

All money measures have one thing in common: All money exists in the private sector.

The federal government has no money. Why would it? It creates its sovereign currency, the dollar, ad hoc, when it pays bills. Whenever the federal government sends a check, in payment of a bill, that check is not money. The federal government, not having money, can send no money.

You never will see a number showing how much money the federal government owns, but you always will see how much the federal government supposedly owes.

When John Boehner famously lied, “Let’s be honest. We’re broke,” he was referring to the fact that the government supposedly owes trillions, but has no money. In fact, that always is the case for a Monetarily Sovereign nation. It creates its sovereign currency ad hoc, so at any moment in time, its debts far exceed its holdings of money. It has no holdings of money.

A federal government check merely instructs a creditor’s bank to increase the number in the creditor’s checking account. It does not deliver dollars, since dollars, having no physical existence, cannot be delivered.

At the same time the bank increases the number in the creditor’s account, corresponding federal accounts are decreased, but none of those accounts are part of the money supply. So when you send tax money to the government — or more properly, send your instructions in the form of a check or wire — the dollars that existed only as numbers in your checking account are destroyed. They cease to be part of the money supply.

What about state and local tax dollars? When you send your checks to your state and local governments, the numbers in your checking account are reduced. But, contrary to what the federal government does, the state government deposits its tax receipts in private banks. Those dollars are part of the money supply.

The process is like this:
1. You write a set of instructions (a check). [You still own the dollars.]
2. You mail the instructions. [You still own the dollars.]
3. Your state receives your instructions. [You still own the dollars.]
4. Your state mails your instructions to its bank. [You still own the dollars.]
5. The state’s bank follows your instructions, increases the number in the state’s account and tells your bank to reduce the number in your account. [At that instant, dollars have been “transferred” from your account to the state’s account. The tax dollars remain in the money supply.]

Bottom line: When you pay taxes, you actually send instructions, not dollars, to various governments.

When state and local governments follow your instructions, the nation’s money supply remains the same. When the federal government follows your instructions, the nation’s money supply falls.

The difference: The federal government is Monetarily Sovereign. State and local governments are monetarily non-sovereign. A Monetarily Sovereign government has the unlimited ability to create its sovereign currency, in any amount at any time, for any reason it wishes.

So it would make no sense to ask how much money the federal government has. It would be like asking (as Warren Moseley might say) how many points a scoreboard has. The answer in both cases: “As much as it needs at any moment in time; it creates them ad hoc.”

As for you and me and state and local governments and euro-using nations, none of us has a sovereign currency. We cannot create unlimited amounts of money instantly, so it’s reasonable to ask how much money we have — and that is the Money Supply.

And that is the longer answer.

I hope it helps.

Rodger Malcolm Mitchell

Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

56 thoughts on “–Are federal taxes destroyed upon receipt? The shorter and longer answers.

  1. “All money exists in the private sector.”

    Yes. About a year ago I commented that “a Monetarily Sovereign government has no money.” (So how could it ever be “broke”?)

    ——————————————————————————

    — Off topic –

    Some random observations for amusement…

    HERE’S A RULE OF ECONOMICS

    Any nation with Monetary Sovereignty that publicly displays a “national debt clock” is a nation that…

    a. Maintains the Big Lie that central government finances are the same as personal finances
    b. Has a government dedicated to widening the gap between the rich and the rest
    c. Is based on “market fundamentalism” (i.e. based on rule by the 1%)
    d. Has a population that is brainwashed

    Taiwan’s government has one of those silly “national debt clocks.” It was installed in November 2010 over the entrance to the Ministry of Finance. It is meaningless, since Taiwan has Monetary Sovereignty, and since 1949 has used its own currency (the New Taiwan Dollar).

    According to this “debt clock,” each man, woman, and child in Taiwan “owes” TWD $225,000 (USD $7,400) to…well…someone. In reality, no one “owes” this money to anyone. The “national debt clock” simply represents the money that investors have deposited in their Treasury savings accounts. Some of that “debt” also consists of intra-government holdings (that is, money the government “owes” itself).

    “National debt clocks” are also silly because the definition of “government bond” varies from country to country. In any case, no government is fully truthful in reporting its finances.

    Taiwan’s President Ma Ying-jeou brags about his frugality, claiming, for example, that energy consumption at his official residence is 88 percent lower than that under former president Chen Shui-bian’s administration. However the opposition Democratic Progressive Party says this doesn’t matter, since Taiwan’s “national debt” has increased under the current president.

    It’s all meaningless bullshit. Here’s a picture of Taiwan’s “debt clock”…

    http://www.taipeitimes.com/News/front/archives/2012/05/08/2003532266

    Below is a meaningless “global debt clock” maintained by the Economist magazine. It claims that the global “national debt” is $52 trillion. Where the Economist gets this figure is a mystery.

    http://debtclock.s3.amazonaws.com/index.html

    ——————————————————————————

    EACH OF US OWES A MILLION DOLLARS!

    Forbes magazine says, “You think the deficit is bad? Federal unfunded liabilities exceed $127 trillion! That is roughly $1.1 million per taxpayer, and nearly double 2012’s total world output!”

    Forbes calls this an “ominous threat.”

    Moe: “The football scoreboard has only ten points.”
    Larry: “Yikes! This is an ominous threat! We need 127 points to keep pace with the game. Where we will get another 117 points? From China?”
    Curly: “Why can’t we just change the numbers on the scoreboard?”

    Moe: “No! That would make us like Greece!”
    Larry: “You mean Zimbabwe.”
    Curly: “Whatever.”

    According to Forbes, the source of these “unfunded liabilities” is “entitlements.”

    In reality, all federal social programs combined account for only 44% of the US federal budget, while the other 56% of the budget is spent on wars, weapons, bank bailouts, and so on. The latter spending is not called an “ominous threat,” since it mainly benefits the rich, and is therefore non-negotiable, i.e. an entitlement.

    The Forbes article cites the 2005 book “The Coming Generational Storm,” which claims that Social Security recipients are robbing young people. Therefore we must, “Raise income taxes by 17 percent, raise FICA taxes by 24 percent, cut federal spending by 26 percent, and cut Social Security and Medicare benefits by 11 percent.”

    Better yet, the book says, we must privatize Social Security. (Its two authors are professors of economics who seek to widen the wealth gap. Hence they are “experts.” In 2012 the same two clowns published a new book titled, “The Clash of Generations: Saving Ourselves, Our Kids, and Our Economy.” Same lies; different cover.)

    In short, we need “reforms” – i.e. we must widen the gap between the rich and the rest.

    http://www.forbes.com/sites/realspin/2014/01/17/you-think-the-deficit-is-bad-federal-unfunded-liabilities-exceed-127-trillion/

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    HOORAY!

    The “non-partisan” (i.e. right-wing) Congressional Budget Office says the federal deficit for FY 2014 will be $514 billion.

    That means there will be $166 billion less in the FY 2014 economy than there was in the 2013 economy, which itself was already depressed.

    We are now at the lowest level (and the worst depression) since Obama took office.

    Nonetheless the CBO says we need still more austerity, since “entitlements” might cause the federal deficit to rise again in the future, and also because interest payments on the “national debt” will (supposedly) quadruple over the next ten years.

    The CBO projects that interest will be $233 billion this year, or 1.3% of the USA’s projected GDP. By 2024, interest payments will reach $880 billion, or 3.3% of GDP. That means interest will account for most of the $1.1 trillion deficit projected for 2024, an amount that will come close to what will be spent on Medicare in 2024.

    So says the CBO, which is “non-partisan” because it encompasses the two opposite extremes of today’s political spectrum: the ultra-right-wing, and the fanatical right wing.

    The CBO projects that under current policies, payments on the “national debt” will reach $21 trillion — or 79% of GDP — by 2024. The CBO calls this “unsustainable.” Therefore we had better start making “hard choices” (i.e. continue to cut social programs).

    Of course, the Treasury could simply stop selling T-securities. But why be logical when you can use lies and tricks to widen the gap between the rich and the rest?

    CNN Money says, “Large and growing interest payments consume tax revenue that could otherwise be spent on the country’s priorities.” (Never miss an opportunity to promote the Big Lie that tax revenue pays for federal programs.)

    http://money.cnn.com/2014/02/04/news/economy/budget-outlook-interest-on-debt/

    Meanwhile Moody’s Investor’s Service (the fraudsters who gave “AAA” ratings to worthless mortgage-backed-securities) says that the falling federal deficit, “is a positive factor for the nation’s AAA credit rating.”

    That is, Treasury securities now have an AAA rating because, well, just because.

    Moody’s says America’s GDP growth is accelerating. It will grow by 2.8 percent this year.

    But wait…how can there be GDP growth when we are in a depression?

    Simple. Take all the trillions in paper profits that rich people and corporations are making on Wall Street. Add those figures from the financial economy to figures from the real economy. Then divide that sum by the USA’s population (318 million).

    Voila! The USA’s per capita income is great! Of course, average Americans are falling farther into poverty every day, but the per-capita figures don’t lie! If one person collects a trillion dollars, and 999 people collect only one dollar, then the GDP of those thousand people is one billion dollars per capita. See? Austerity works! (And yes, this is exactly how the “expert” pundits measure per capita GDP.)

    http://www.businessweek.com/news/2014-01-16/shrinking-u-dot-s-dot-budget-deficit-is-credit-positive-moody-s-says

    ——————————————————————————

    HOORAY!

    Last Thursday (6 Feb 2014) the US Senate declined to extend federal unemployment benefits for another three months. The benefits expired at the end of 2013, leaving more than 1.3 million Americans cut off. That number has since grown to more than 1.7 million.

    Republicans said the extension would have created more debt for future generations to deal with.

    Therefore another $6 billion has been sucked out of the US economy. (Or even more if you count the multiplier effect.)

    Last year’s Republican shutdown of the government cost the economy billions, but for some reason this did not “create more debt for future generations to deal with.”

    ——————————————————————————

    AUSTRALIA WILL HAVE A DEPRESSION

    Prime Minister Tony Abbott has vowed to keep reducing the federal deficit until the Australian Treasury has a surplus of $26 billion. Since Abbott keeps lowering corporate taxes, this surplus must come from cuts to social programs, and from higher income taxes on ordinary people. His Secretary of the Treasury, Joseph Hockey, says the surplus will also come from privatizations, from the elimination of government departments, from outsourcing public services to the private sector, and from a “restructure of the public service” (i.e. welfare cuts).

    It’s all about widening the gap between the rich and the rest.

    One of Treasurer Hockey’s lieutenants, Nigel Ray, says that budget deficits are “unsustainable” (even though Australia has Monetary Sovereignty).

    For Australia, a $26 billion surplus will be a new record in austerity. Back in 2007, Prime Minister John Howard achieved a $17.8 billion surplus, but Australia avoided a depression because there was extreme demand from China for Australia’s raw materials. Howard was with the Liberal Party. (In Australia, the Liberal Party is right-wing, since “liberal” means opposed to government regulation. Its “opposition,” the Labor Party, is also right-wing and neo-liberal. The two sides correspond to Republicans and Democrats in the USA. All sides are dedicated to widening the gap between the rich and the rest.)

    Now that Chinese demand has plummeted, there is sure to be a depression when Tony Abbott achieves his record budget surplus. This is intentional, since a depression will destroy Australia’s middle class, while achieving a wider-than-ever gap between the rich and the rest. (That’s the whole purpose of depressions.) Mr. Abbott calls this “fiscal responsibility.” As unemployment explodes, Abbott will say it is not caused by lack of demand in the job market, but because job seekers are lazy.

    Australian politicians, like those in the UK, USA, and Canada, justify austerity by falsely claiming that the Australian government is “broke” and has a “national debt crisis.”

    Of course the “national debt” simply represents the amount of Australian Treasury securities that investors have bought, which is now $667 billion. This “debt” imposes no limit on the Australian government’s ability to create money out of thin air and spend it.

    Nonetheless, the Australian masses believe the lies, since they are as stupid as the masses in any other nation, and since the Australian corporate media is owned by the 1%.

    ——————————————————————————

    GET THEM WHILE THEY’RE YOUNG

    Most adults in the USA are too stressed out to worry about the fictitious “national debt crisis.” Hence the rich now focus on university students, who are idealistic and “brilliant” (i.e. gullible), with enough energy to cheer for mass suicide.

    For example, there is the “It’s Up to Us” campaign to privatize Medicare and Social Security. Funded by Pete Peterson, this is a nationwide competition to see which university’s students come up with the best lies to spark a “generational war” between younger Americans and beneficiaries of the “Big Three” entitlements (Medicare, Medicaid, and Social Security).

    http://www.itsuptous.org/

    Five-member teams of students from 24 leading universities have been selected to devise utter bullshit about the fictitious “national debt crisis.” Pete Peterson gave each team $2,000 to run their respective campaigns for six weeks. The student campaigns consist of videos, Facebook activity, newspaper op-eds, media outreach, community petitions, and so on. The goal is to see which team’s lies most fire up the student population to hate their parents, and to push for the privatization of the “Big Three” entitlements so that FICA tax revenue flows directly to Pete Peterson and Wall Street.

    Entries will be judged by a panel of right-wing CEOs and media hacks. The winning team will receive $10,000 and be invited to an award ceremony where they will be personally recognized by Pete Peterson and former president Bill Clinton. Afterward the winning team’s bullshit will be broadcast to the American public at large.

    (Bill Clinton is very tight with Pete Peterson, who supports the “Clinton Global Initiative University”: an ultra-right-wing “non-partisan” push to privatize Social Security. Curiously, another of Clinton’s donors is Norway’s government at 20 million Norwegian kroner per year, or USD $3.2 million).

    The winning bullshit for last year (2013) came from five students at the University of Virginia, whose three-minute video, funded by Pete Peterson, focused on the (fictitious) “national debt crisis.” You can see it here…

    Of course, a few students in the “It’s Up to Us” campaign are simply sociopaths who dream of getting ahead by kissing Pete Peterson’s ass and burning their fellow Americans.

    Popular among these kids is a 2008 “documentary” titled “I.O.U.S.A.,” an 85-minute video that warned about the fictitious “federal debt crisis” and “national debt crisis.” The video demanded that Medicare and Social Security be privatized, since they are “unfunded liabilities.” It featured the usual garbage about “mortgaging our children’s future,” and about the US government not being able to “spend more than it earns,” and so on. It said that young people should feel guilty for being “greedy consumers.” (That is, for having a buy-now-pay-later attitude toward the fictitious ‘national debt.’) The video said the (non-existent) “cost” of the “Big Three entitlements” is “catastrophic.” It said that as a nation, we are “living beyond our means.” It said that China “owns us.” It said the US federal budget is “entitlement-driven.” Blah-blah-blah. The solution to all these false crises is to privatize the “Big Three entitlements.”

    On 21 Aug 2008 the movie was simulcast live to 350 theaters across the United States. Immediately after the screening was a “town hall” meeting (also simulcast) featuring Warren Buffett and other debt hawks. The following night it opened theatrically. (That is, people PAID MONEY to see it!!!!).

    “IOUSA” was also screened on over 100 college campuses and community centers. It was also screened for members of Congress at the Library of Congress.

    CNN also broadcast it. So did Swedish public TV.

    The film was so full of lies that it was nominated for an Academy Award, a Critics Choice Award, the Chicago Film Critics Association Award, the Online Film Critics Society Award, and the Grand Jury Prize at the Sundance Film Festival (where it was one of sixteen films selected from over 950 submissions.) Pete Peterson calls “IOUSA” as an “award-winning documentary,” even though it won no actual awards. Pulitzer Prize-winning film critic Roger Ebert listed it among the “top five documentaries of 2008.”

    Audiences praised the movie for being “non-partisan” and “fair” without any political motive. (!!!!!!) Some people called it a great date movie, because it gave audiences plenty to discuss afterward. Some referred to it as “brutally honest,” and a “film for all ages.” Some said it should be mandatory viewing for all Americans, so that people gladly make the “hard choices” to privatize Medicare and Social Security. Some praised it for explaining why there is “no free lunch” (for the 99%). A few questioned it, saying the Social Security “trust fund” is not insolvent. (You remember the “trust fund” — that simple three-ring binder hidden in a small town in West Virginia.) Some called it a commercial for Republicans. Some called it a commercial for Democrats and Obama.

    It’s viewable on YouTube (“IOUSA”) — an hour and twenty minutes of lies you’ve heard a million times before. Guaranteed to cure your insomnia.

    Or you can do your patriotic duty and buy 1,000 copies of the DVD from Amazon for $14.00 each.

    Think of the $14,000 as a down payment on the fictitious “national debt.” 🙂

    Speaking of “getting them while they’re young,” the right wing knows that brainwashing must begin in childhood if the gap between the rich and the rest is to continue widening forever. That’s why conservatives throw tantrums when a children’s movie doesn’t promote the dogma of “Screw you, I’ve got mine.”

    For example, Fox News is whining that “The Lego Movie” (released on 7 Feb 2014) is “anti-business” because it features a corporate CEO who is not a saint, and who looks a bit like Mitt Romney. The power-mad CEO, named “Lord Business,” rules a totalitarian state, and seeks to enslave all by gluing together every block in the Lego universe. His regime creates virtually everything in the Lego society—generic pop music, lousy TV comedy, surveillance cameras, rigged voting machines, you name it. “Lord Business” also uses televised broadcasts to inform his citizens (with a friendly grin on his face) that they’ll be executed if they disobey him. The police are robots whose purpose to keep “Lord Business” and his cronies in power.

    Fox News says the movie is “threatening,” because it “embeds” children with an “anti-capitalist message.” (In 2011 Fox attacked “The Muppet Movie” for having an “anti-corporate message” because its villain was a tyrannical oil baron.)

    Amazing, isn’t it? From birth to death the masses are hammered with the Big Lie and the US cultural ethos of “Screw you, I’ve got mine.”

    The slightest deviation from this relentless right-wing propaganda is condemned as a “left-wing assault on our children.”

    ——————————————————————————

    The New York Daily News gives an example of how the corporate media’s lies are the exact opposite of the truth…

    “Economists say that too-high deficits and federal debt are a drag on the economy and, if unchecked, could eventually precipitate a European-style fiscal crisis.”

    http://www.nydailynews.com/news/politics/federal-budget-deficit-drop-514-billion-article-1.1601636

    Like

    1. Good comment. You could have pointed to another 500 examples, and not even scratched the surface.

      For me, the worst part, after 15 years of this, has been the sneering, name-calling and damn-fool stone-headedness of the suicidal people who are affected most — lower/middle income people who buy into, and as a result are punished by, the Big Lie.

      I almost understand how Ignaz Semmelweis must have felt. Or perhaps, how a parent with a drug-addicted child must feel.

      This blog has 1300 posts, mostly saying the same things. So much for “The truth will set you free.”

      Like

      1. Nicely done Rodger. Great post. And I feel your pain every time I get on the Bankrupting America Facebook page and debate the self-appointed debt/deficit/spending sheriffs who post there. They rant about wasteful spending, spending, spending of taxpayer dollars. No amount of preaching makes them believe that the spending is going into their pockets, not out of their pockets, and that their real enemy is taxation, not spending.

        Like

        1. Devaluing a currency makes the nation’s products and services less expensive to other countries, and makes other countries’ products more expensive to the nation.

          This will tend to increase inflation and Net Exports, both of which may or may not be desirable, depending on current circumstances.

          Austerity, for a Monetarily Sovereign nation, is a form of self-flagellation that always hurts the economy, especially the lower income groups, regardless of current circumstances.

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      2. Do the youth even take a course on economics in high school these days? Even if they did, would the course teaching get it right? Probably not.

        Here is more economic misinformation (unintentional or not) regarding the new MyRA accounts:

        http://www.examiner.com/article/the-new-myra-accounts-and-a-possible-surprise-for-investors

        “Presumably, having a large number of Americans using the MyRA funds would significantly increase the money available to the government to spend to finance government operations.”

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        1. Correct. FICA does not pay for Medicare. Federal taxes do not pay for federal spending.

          Now that you know what to look for, aren’t you astounded at the amount of misinformation being fed to the American public, every day!

          Then ask yourself, aside from ignorance, what else could be the author’s motive?

          Like

      3. Then you will know the truth, and the truth will set you free.
        (John 8:32)

        Unless everyone else rejects the truth, in which case you might as well live as a hermit in a cave.
        (John 8:33)

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      4. @RMM: I feel rather hopeless. If the rich are in control, that is, totally in control of the media, politicians, lobbying groups, academic institutions, etc., then educating people about MS and MMT is an insurmountable task – how can all that be countered? At first glance, MS/MMT appear to many people as being against “common sense” and counter-intuitive I suppose – they just outright reject it without bothering to think about it. People have to want to learn and educate themselves. It would take a revolution in thinking among the population akin to the Protestant Reformation to wake people up and really take hold. This economic ignorance I think unfortunately is pretty much insurmountable and can go on forever. I’m not optimistic (although I try to be) – I think it will never change, at least not in my lifetime.

        Like

  2. Perfect Mr. Mitchell. Just this past week some fellow on Slate.com had an article about how the US should switch to electronic money to compete with Bitcoin because paper money is to inflationary or something. It was so mind numbing I had to hit myself with a ball peen hammer to try and understand. Didn’t work.
    We should review Government “borrowing” as well.
    I want to lend the government money so I send instructions to the fed that I want to deposit $10 into my treasury account. That $10 is not gone, it’s still my asset and it is earning interest like a savings account. It is still part of the economy. Now the fed creates a brand new $10 dollars and deposits it into the treasury account. As soon as the treasury spends those dollars, ABRACADIZZIAL, where there was only my $10 there is now $20.
    The money to pay the “debt” is what originated the “debt” in the first place.
    Cheers.

    Like

  3. “A Monetarily Sovereign government has the unlimited ability to create its sovereign currency, in any amount at any time, for any reason it wishes.”

    That statement always gets me. I believe that it needs to be qualified every single time that it is made because without a proper qualifier it is, from a practical not a theoretical point of view, pure bullshit. (I apologize for the emphasis).

    Like

    1. A MS government has unlimited legal ability. But what it can do and what it should do aren’t the same. It can only spend what congress legally agrees to in the budget. And there’s inflation, also legal.

      Unlimited ability is scary but shouldn’t be. We could blow up the world and almost did- but we don’t. We could eat a 72 oz steak but we don’t. Unfortunately, we could provide everyone with a good income, but we don’t.

      However, the 1% fear we-the-people. They think we-the-people will want it all if the MS cat gets out of the bag. What the 1% don’t understand is we-the-people aren’t as uber-selfish and greedy as they are. All we want is to have a decent income, confidence in the system and hope for the future of our children.

      The 1% suffer from what psychologists call “projection.” They feel everyone is like them and thank God that isn’t true. If it was true, the middle class would have taken up armament and stormed the Wall Street “Bastille” cutting slashing and killing everyone in sight. So far so good for the Wall Streeters, but not so much for the middle class which is self-annihilating, going postal on each other, etc. There’s as much terrorism in the USA as outside it.

      The best plan for the 1% is not more lies and austerity. Rather simply give people what they want and leave them alone to proceed with life as they wish to define it.

      But they don’t get it; they don’t understand themselves nor the average person whom they distrust as well as their own kind, unless you’ve got a hot insider tip for a quick million. They can trust that.

      Like

      1. tetrahedron720, I always enjoy your comments, but on this matter I have a different perspective.

        You seem to blame everything on the 1%. I agree that the 1% merit special condemnation, since the 1% have the power to change the mass mind, but I also say that the 99% share much of the blame for their own suffering, since they insist on keeping it going. They consistently vote against their own interests.

        Consider how the 99% would rather bicker about minutiae than cooperate to improve their lives. (There are exceptions. I speak of general tendencies.) Consider the flaming hatred shown by Tea Party types and evangelical Christians who condemn the poor, and who say that children must be protected from conception to birth, and then allowed to die. Consider how the 99% voluntarily choose to be brainwashed by the corporate media. For example, the corporate media replaced the word “war” with “intervention,” and now everyone uses the word “intervention.” The media call imperialist proxy wars “civil wars,” and the masses believe it. The media call someone a “dictator,” and most people obediently do likewise. Corporate media outlets falsely portray Zimbabwe as a nightmare, and everyone believes it, including the MMT types. And so on. Most people believe whatever the corporate media tell them, no matter how many times the lies are exposed. (That’s why it’s so easy to send millions of people off to die in wars, in order to make rich people richer.)

        I’m saying that if we spend all our time calling ourselves “victims,” then we overlook our own complicity in our problems, both individually and collectively.

        The 1% and their toadies are the enemy, but much worse is an average person who smugly rejects the facts of Monetary Sovereignty. He is a traitor.

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        1. Quatloosx I agree with your perspective. But MS has to be the world’s best kept secret. How can something so true be so suppressed? I feel our pre-1971 experience has sunk so deep into the mass subconscious that we carry it forward to this day as Biblical truth. Adding to the problem is the boring complexity of money and banking plus the centuries head start on MS. Furthermore we as children are taught to look up to adults who are trying to teach us. We retain that respect as we grow to adults and transfer the adulation to the politician who is supposed to care for us. We yield.

          Because we yield, the general system we know as “the economy” is being run by the least competent. The whole show is undertaken by invisibly supported, spineless nitwits while geniuses are specialized into jobs to survive and make money for owners.

          I blame not only the 1%, but the entire educational system for its love of specialization (divide and conquer) while the least imaginative go into politics to “lead.” The system is on its head.

          Computerization will eventually force the issue of monetary sovereignty. As people are displaced into ever greater unemployment, and other very costly social issues take their toll, we will be forced to concede that we can afford to take care of everyone whether they work or not. With the internet “telling all,” the whole world cannot hide the face of the miserable and displaced. Computers will make obvious what this and all other blogs fail to do. We will learn the hard way, but nevertheless we will learn. Do or die.

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        2. @tetrahedron720: You write, “Computerization will eventually force the issue of MS. As people are displaced into ever greater unemployment, and other very costly social issues take their toll, we will be forced to concede that we can afford to take care of everyone whether they work or not.”

          I hope you’re correct, but I fear that mankind could just as easily continue to descend into a Dark Age that may be permanent. I say this because I have lived in several countries, and I saw how poverty and corruption continue decade after decade without change.

          Rodger and I believe that our curse is the gap; i.e. the desire to be “better than” the people around us. For most people at all levels, it is not enough that they succeed. Others must fail. The “others” are whoever a given person happens to hate.

          Perhaps this phenomenon is unavoidable. Most social mammals (including marine mammals) exhibit social strata, i.e. a pecking order, with alpha males, tribalism, exploitation of the weak, and so on. I have seen this in nature programs, even among dolphins.

          In humans this drive to maintain a pecking order contributes to the rejection of the facts of Monetary Sovereignty. If there is enough money for all, then how can I justify my hatred of Blacks, or Mexicans, or poor people, or whoever? If scarcity and poverty are 100% artificial, then how can I be “superior” to my chosen group of “inferiors”? Most people at all levels have a vested interest in denying the reality of MS.

          You correctly note that technological change is unstoppable, and with it, social change. Again I hope you are correct, but hate and the pecking order are perennial, and they always give rise to some Big Lie, whether it be the “divine right of kings,” the “insolvency” of the US government, or whatever. All Big Lies are essentially religious, i.e. 100% irrational. They depend on faith and the drive to maintain the pecking order. I fear that we will have Big Lies for as long as we have pecking orders.

          Anyway thanks for your comments.

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        3. “….Rodger and I believe that our curse is the gap; i.e. the desire to be “better than” the people around us…”

          It seems we don’t have an economic problem per se. We have a psychological problem. The desire to be better than the people around us is a holdover from Victorian thinking and all the other elitists of the past. It’s a powerfully ingrained subconscious reflex passed from generation to generation, father to son. The ultra rich have a mental problem with superiority.

          MS isn’t like other theories, because it’s based in technical reality and that means potential abundance. Scarcity is at the heart of traditional theory, communist, capitalist, etc. Abundance is “potentially” at the heart of MS. Hi-tech abundance and MS are lying in wait for their moment of controlled release. Whether that release is by means of cool headedness or bloody revolt remains to be seen.

          Each succeeding generation of youth is more worldly conscious, more compassionate than the previous generation. IF the new generation of ultra rich can become convinced, by logical comprehension of MS or by pressure of impending economic disaster, that we can all make it without anyone taking a hit, then we may dodge a bullet.

          As I’ve stated, unemployment from automation and other huge disasters waiting around the corner are going to run up a fantastic bill that will have to be paid. MS’ affordability cannot go on hidden from popular view.

          BTW, those who say “get rid of government and privatize” don’t realize getting rid of government means a moneyless state. Government issues money. The call for smaller government is simply a right wing disguise for trying to make more money such as by dismantling New Deal legislation that cuts into profits. History proves beyond a doubt that private business cannot be trusted to act in the public interest. You can’t put the fox in the henhouse or give a loaded gun to a toddler.

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    2. Luis Magno says: “That statement always gets me.”

      This is understandable. When we have been brainwashed into thinking that our slavery and poverty are justified, we defend our suffering at all costs. We would rather die than be prosperous. Literally. It is a variant of the “Stockholm syndrome.”

      http://en.wikipedia.org/wiki/Stockholm_syndrome

      Luis Magno says: “I believe that it needs to be qualified every single time that it is made, because without a proper qualifier it is, from a practical not a theoretical point of view, pure bullshit. “

      Alas, it is you who are spewing pure bullshit. Since austerity hurts us, the burden of proof is on YOU to show why austerity is good, and why the US government is “broke” and “in debt.” The burden of proof is on YOU to show why we must apply more leeches to address economic anemia. This is what you are claiming when you deny the Truth as explained in this blog.

      If you deny that you are claiming this, then you are so confused that you are beyond reach.

      Helpful hint: When we claim that an assertion is bullshit, and we do not list and justify any counter-assertions, we look like idiots.

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      1. squatloose:

        That is exactly what you look like! You are also a hate monger. We need more of you not. I was asking RMM not you. My complaint is a valid complaint and the complaint of the 90% who haven’t a clue. My comment was meant to point out a deficiency in RMM’s presentation. If the idea is to inform and to explain the essence of Money than RMM ought to take a complaint such as mine into account and not throw it back at me. I appreciate RMM’s perspective on Money. There are many others out there as well and they all cover different aspects of the Money problem. I can name a dozen.

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      2. Apparently Mr. Mango just loves conspiracies, from which a quick glance at his Facebook page amply reveals. Luis is just another in a long line of annoyingly self-righteous set in stone ‘progressives’ enamored by such impractical and unnecessary nonsense as ‘greenback restoration,’ of the type which is continually promoted by ignorant clowns like Ellen Brown (who, as you’ve previously mentioned, is running for California State Treasurer). Need I say more?

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  4. Great Post Rodger. The net effect of all Govt transactions is basically zero wrt to bank deposits. This fits in perfectly with you line “All money exists only in the private sector.”

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  5. @RMM: In order to be helpful, I prepared a little “boiler plate” response for explaining MS and MMT that everyone can consider using in response to web articles or other misinformation. I hope my understanding is correct (I understand that there are slight differences between MS and MMT, but I hope I got the gist of everything). Please correct and/or make any changes if needed:

    Federal taxes do not fund federal government operations. The U.S. is Monetarily Sovereign and that has important implications for federal government funding policy. Federal income taxes (including FICA) and borrowing are obsolete relics of the U.S. being monetarily non-soveriegn and are actually not necessary. Dollars received by the federal government are actually “destroyed” or just deleted from the taxpayer’s account and merely removed from circulation in the economy, and not actually used by the federal government (However, state and local governments do collect and use the dollars received as tax payment from citizens, since they are “currency users” not a “currency issuer” like the federal government). It is impossible for the federal government to run out of dollars and become insolvent and bankrupt. The federal government controls it’s own currency and issues debt in that currency. It can always fund it’s spending, regardless of access to external debt markets or tax revenues, so long as it keeps inflation under control, which can be easily done, and doesn’t push aggregate spending beyond the nation’s economy’s capacity.

    Please see:

    http://mythfighter.com

    http://moslereconomics.com

    Click to access 7DIF.pdf

    http://mikenormaneconomics.blogspot.com

    http://www.economonitor.com/blog/author/rwray/

    http://softcurrencyeconomics.com

    http://neweconomicperspectives.org/p/about.html

    http://bilbo.economicoutlook.net/blog/

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    1. @BJS: Good comments, but can I express three minor quibbles based on mere semantics?

      [1] “It is impossible for the federal government to run out of dollars and become insolvent and bankrupt.”

      Actually the US government could choose to go “bankrupt,” but this would be a political choice, i.e. voluntary. By contrast, euro-zone nations are involuntarily stuck in permanent insolvency, since their governments voluntarily chose to surrender their Monetary Sovereignty (in order to widen the gap between the rich and the rest).

      [2] “The federal government controls its own currency and issues debt in that currency.”

      It is confusing to say the US government “issues debt.” Loans come from banks and other private lenders. Anything from the US government that is called a “loan” is a misnomer. The government sells T-securities, but these are not loans. The “national debt” is simply money that investors have deposited in their Fed savings accounts. There is also intra-government “debt” that the government “owes” itself, but this is meaningless slight-of- hand. Or perhaps you refer to the fact that all money is debt. That is a different matter. All money is debt, but not all debt is issued as loans, or carries an interest charge.

      [3] “It can always fund its spending, regardless of access to external debt markets or tax revenues, so long as it keeps inflation under control, which can be easily done, and doesn’t push aggregate spending beyond the nation’s economy’s capacity.”

      When people reject the facts of Monetary Sovereignty, and their bullshit is debunked, they always resport to “Plan B,” which is to claim that, “If what you say were true, we would have hyper-inflation.”

      Inflation is their back-up bullshit; their fail-safe bogeyman. It is a life preserver for their smug stupidity.

      I don’t mention “inflation” unless someone brings it up. Then I note that since the USA went off the gold standard in 1971 there has never been any correlation between inflation and US government spending.

      I also note that inflation is not a product of the money supply. Instead, it is a product of the ratio between (a) the money supply, (b) the demand for money, goods, and services, and (c) the general stability of a nation’s government, society, and banking / monetary system.

      Anyone who claims that deficit spending causes inflation is flat wrong.

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    2. Nice summary BJS.

      Personally, I phrase it this way:

      “It is impossible for the US to run out of dollars and become insolvent and bankrupt. We control Our own currency and issue T-bonds in that currency. We can always fund Our spending, regardless of access to external securities markets or tax revenues, so long as We keep inflation under control, which can be easily done, and We dont push aggregate spending beyond Our nation’s economic capacity.”

      1) Don’t ever call T-bonds “debt”. This feeds into the Big Lie mythology.
      Debt = bad in the common mind
      T-bonds = financial wealth

      2) Too often, the federal government is referred to as if it were some foreign body, when in reality, We are the Govt. If We can never run out of money to invest in killing Germans and Japanese, then We can never run out of money to invest in ourselves.

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      1. Auburn Parks:Don’t ever call T-bonds “debt”. I don’t think this is a good idea. It is bad rhetoric to avoid correct, common descriptions that way. Because T-bonds are debt = credit. And so are dollar bills or reserves. IMHO there really isn’t need for “reframing” – and most I’ve seen makes things worse. All that is needed is careful reasoning and calm explanation instead of the Alice-In-Wonderland illogic of mainstream economics.

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        1. Hey Cal, thats certainly one way to look at it. Human psychology is what it is. As much as I’d like if “careful reasoning and calm explanation” were the way of the world, thats not how it works. Madison avenue didn’t get built on guesses. There is a long history of psych research that emotional responses are more powerful than logical ones. Republicans live on emotional response same with religion, just to name to small examples 🙂

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    3. BJS says: “It can always fund it’s spending, regardless of access to external debt markets or tax revenues, so long as it keeps inflation under control, which can be easily done, and doesn’t push aggregate spending beyond the nation’s economy’s capacity.”

      LBJ says: “You nailed it!”

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  6. tetrahedron720 and quatloosx,

    Taking the bright side, things are better than they were 50, 100, 500, 2000 years ago. We have better killing machines, but we are less savage.

    The greatest nations today are more responsive to their citizens. We aren’t slaves to kings, czars or popes, and women and children are treated with somewhat more respect, in most nations.

    We still have Evolution deniers and Holocaust deniers. Perhaps we always will. But thankfully, they slink at the margins of our society.

    The Depression was a big step backward, and the contagious bigotry spread by Hitler and caught by Europe, and Japan’s ruthless aggression, were huge backslides. But Britain and America saved the world, while Russia suffered for its failings, and still suffers, though much less so.

    Today’s China is better than Mao’s China, but no one can say whether China will become the next North Korea or the next South Korea.

    In the U.S. Gini has been rising, but only for the past 45 years. Before that it was falling. At least it’s being discussed as a problem, though solutions are slow to be accepted.

    During the Kennedy/Johnson era, America took a giant social step forward, only to stumble over Viet Nam and to fall during these cruel, paranoid Tea Party and NRA days.

    Smallpox is defeated. Polio almost. Malaria next? Cancer is less a death sentence. We live longer and more comfortably. Poverty remains with us, but what we call “poverty” today is not the same deathly poverty of history,where starving in the street was a common occurrence.

    The Internet and the smart phone are bringing us ever so slowly up from anonymous tribalism and its associated bigotry. We are more sympathetic to those we know.

    So where are we headed? Society doesn’t move in a straight line. We can’t project today into the future. The butterfly principle is at work. Had Florida been less close and the Supreme Court had not illegally voted for Bush, how might the world be different today? Who knows what the next flap of the butterfly’s wings will bring?

    Will Europe come to its senses and follow a leader who will return it to Monetary Sovereignty? Will America find economic truth and social compassion? Will the right wing have the courage to climb out of its New Dark Ages? Will the left wing return from its bribed isolation and disappearance during the later part of the Clinton administration?

    Will Fukushima, or some technology not yet dreamed of, destroy us all?

    If we could develop a measure of the human condition, and apply it to a 10000 year graph, we would see ups and downs, but overall, a rise in that line, especially recently.

    As a species, we live on a knife’s edge. Our closest relatives have disappeared: Neanderthals and Denisovans, gone. What befell them? Could it happen to us?

    My guess: Survival is the key. The longer we can survive, the better we will be. Things will be great by 2100 — if we don’t destroy ourselves first.

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  7. @RMM and anybody else knowledgable on this economic stuff:

    So which economic paradigm is more compelling?: MMT or Austrian Economics in describing the true nature of our present economic system? Why? I see constant debate and arguing between the proponents of these two schools of economic thought: MMT proponents tend to be viewed as pro-government (interventionist), whereas the Austrians are more libertarian or “anarchy-capitalistic.” Ideology and politics biases people’s thinking on how they view as to how the economic system currently functions, or should function.

    See:

    http://hbhblog.blogspot.com/2014/02/lets-see-modern-monetary-theory-play.html

    My own thought is that MMT/MS accurately describes our current economic system, like it or not, although that doesn’t mean that it is the best.

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    1. We as a nation-state are technically MS (sounds like Multiple Sclerosis?) but the reality on the ground is different. TPTW (the powers that were) used to be MS in a higher but perverse material and spiritual synthesis until quite recently. It’ all up in the air now. Como decíamos en mi juventud del anglosajón: Gringo salado. Brinca pa’rriba y cae aplastado. The good guys are winning though. But watch out for the Trolls. They never give up and the pay gets better and better…

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    2. Which paradigm is more compelling?

      MMT is not a paradigm. It is not “a way of looking at things.” Instead, it is a nuts-and-bolts theory, like the theory of aerodynamics, or thermodynamics. It is scientific, meaning it makes falsifiable predictions. Its claims are testable. (However some MMT people favor a “jobs guarantee,” which is is not a scientific theory. It is a vague hypothesis.)

      By contrast, Austrian economics is not scientific. It is mere ideology, just like neo-liberalism and market fundamentalism it supports. Everything about it is false, hypocritical, and designed to widen the gap between the rich and the rest.

      For example, Friedrich Hayek (1899 –1992) espoused “free markets,” which is typical Austrian bullshit, since there is no such thing as “free markets.” All markets must have rules. Otherwise there can be no trade, and thus no markets. The question is who makes the rules, and who benefits from them. The public? Or the rich? Austrians pretend that this question does not exist. For them the “free market” is all-good, all-just, all-wise, and all-benevolent. Greed is irrelevant, as are fraud, scams, bribery, monopolies, and engineered scarcity.

      Hayek was the Austrian equivalent to the sociopathic Ayn Rand, and his hypocrisy was just as limitless. For example, he purported to champion liberalism (freedom from State coercion), yet he supported the totalitarian policies of Augusto Pinochet, the US-installed dictator of Chile who ordered the murders of tens of thousands, and who imposed “reforms” that created a mammoth gulf between rich and poor. Hayek was also a hypocrite regarding individualism, which for him meant brutal conformity to the cult of “free markets” (i.e. rule by oligarchs).

      Ronald Reagan loved Hayek, and invited him to the White House as a special guest, so Reagan could hear about how government spending on programs like Social Security harms an economy, whereas private investment (i.e. plutocracy) is the road to wealth (for the 1%).

      Reagan’s budget director, David Stockman, was a devoted disciple of Hayek, and of Austrian economics. More money for weapons and Wall Street! Less money for social programs! Anything that narrows the gap between the rich and the rest is evil and unsustainable! Anything that widens the gap is patriotic and fiscally responsible! Privatize! Privatize! More austerity for the masses! More billions for Wall Street! We need reforms! (That is, we must widen the gap between the rich and the rest.) There is no alternative!

      Many Austrians (e.g. Murray Rothbard) claim that every act of government intervention benefits some people at the expense of others. Thus, programs like Medicare create millions of “victims.”

      Ludwig von Mises claimed that socialism is “economically unfeasible.” (In reality, no society has ever existed that does not have some elements of socialism.)

      Such excrement saturates Austrian economics, whose mumbo-jumbo cannot mask the stench of greed and hypocrisy. The only clowns who cherish this filth are the rich, their toadies, their wannabe toadies, Tea Party twits, and young people who are “brilliant” (i.e. too young to have experienced real life). All these critters want “smaller government” (i.e. they want a wider gap between the rich and the rest, with a gigantic and ever-growing Police State to enforce the gap). They only hate those aspects of government that narrow the gap between the rich and the rest. They LOVE those aspects that widen the gap.

      Many Austrians are flat-out stupid, with no understanding of money, and certainly no understanding of Monetary Sovereignty. They claim, for example, that fiat currencies are always bad, and that gold is the only “true” currency. (In reality ALL currency is fiat currency, including gold when gold was used as currency.) They claim that fiat currencies are “bad” because fiat allows the volume of money to be manipulated (as though this does not exist with gold).

      Austrians think that inflation is caused by “money printing.” I’ve debunked this garbage so many times that I shall not take the trouble to do it again.

      Many Austrians are flat-out racists, such as Ludwig von Mises (1881–1973) who claimed that British colonialism and imperialism had “civilized” its slaves and victims. For Murray Rothbard the problems of blacks or other minorities have nothing to do with racism and prejudice. Instead they are caused by “those very parasitic values of idleness and irresponsibility” found in those communities. (“For a New Liberty,” 1978, p. 154).

      Austrian economics so full of right-wing bullshit that it only survives because it is financed by right-wing tycoons. Most professors don’t both defending it. They don’t need to. They have the Big Lie.

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      1. Regarding economics (is economics a science, philosophy or social science?), a person’s ideology (right or left) biases them in thinking about how economic systems function or should function. Humans can be stupid and delusional – they reject facts and evidence when they go against how they think things should be.

        There are people that are completely anti-government, no matter what (Austrians and libertarians I think). They think no government and unhindered and unregulated markets are optimal. They think that any government involvement whatsoever = communism, which is not true and illogical. They reject it on ideological and philosophical grounds, saying “that’s not how it should work” and “that’s not how I want it to work.” They think it is wrong to have government involved no matter what, that government is bad. Maybe they think it should be more complicated? MMT/MS is elegantly simple, entirely logical and succinct.

        When I learned about MMT and MS (Thank God for the internet and Google), a light-bulb went off in my head. It was like: This is it! How can anybody not “get” this? Once one “gets it”, they get it, and cannot think otherwise. How can everyone else not “get” it and understand? It may not be the best system, but it is the way it is, and MMT/MS describes it, just like the laws of physics describe how the universe works – it cannot be logically denied, whether one likes it or not, it is what it is. People also have “confirmation bias” – they favor information that confirms their beliefs, and reject or ignore stuff that doesn’t, and misinterpret things to fit their beliefs.

        Also, people, who do understand it, want to perpetuate a system that benefits them, even at the expense of others unfortunately.

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        1. [1] Questioner says: “There are people that are completely anti-government, no matter what. They think no government and unhindered and unregulated markets are optimal.”

          >> Those people are utterly delusional. In every group there is always some form of government, even if it consists of a ruling warlord or gang leader.

          [2] Questioner says: “When I learned about MMT and MS it was like: This is it! How can anybody not ‘get’ this?”

          >> Many people’s material and / or emotional livelihoods depend on them not getting it. Professors, politicians, and media pundits are paid by the 1% to spread the Big Lie, because it widens the gap between the rich and the rest. Gold traders and other hucksters use the Big Lie to sell their snake oil. Average people use the Big Lie to justify their hatred of (and superiority over) some chosen target. The Big Lie helps them maintain a gap between themselves and whatever group/s they hate.

          It’s all part of the human tendency to form social strata, caste systems, and pecking orders. This tendency is the source of all of society’s ills. It is not enough that I am comfortable. Everyone around me must be uncomfortable. The Big Lie helps me defend the pecking order, and my place in it.

          [3] Questioner says: “Once one ‘gets it,’ they cannot think otherwise.”

          >>Yes, learning the truth about Monetary Sovereignty is like learning the truth about aerodynamics. Since the airplane flies every time, we no longer regress to mindless bullshit that never gets the plane off the ground.

          [4] Questioner says: “People also have ‘confirmation bias’ – they favor information that confirms their beliefs, and reject or ignore stuff that doesn’t, and misinterpret things to fit their beliefs.”

          Yes, this applies to each and every one of us. We learn the truth about some things (e.g. Monetary Sovereignty) but we maintain delusions about other things. Indeed, we angrily defend our delusions. Recently Rodger wrote a lengthy comment in the reader response section that I considered to be LOADED with errors, delusions, and Big Lies, top to bottom. But I don’t bother going into those topics. Besides, I have my own delusions about still other topics.

          Life seems to entail a process of overcoming delusions. Some delusions we overcome. Some we don’t. (“We” meaning each of us.)

          [5] Questioner says: “Also, people, who do understand it want to perpetuate a system that benefits them, even at the expense of others unfortunately.”

          Yes, some people are not merely deluded. They are flat-out Ehen a politician seeks, for example, to cut Food Stamps in order to widen the wealth gap, he is EVIL. His lies go far beyond delusion. He is EVIL. And that’s only one example of evil among millions. (People at the NEP blog claim that the politicians mean well, but are “misguided.” That’s the NEP delusion.)

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  8. More idiocy from the top echelons of our elite academic institutions: Nassim Taleb thinks Treasuries are a bad investment and destined to collapse.

    http://www.newsmax.com/StreetTalk/Nassim-Taleb-Shorting-Treasuries/2010/02/04/id/348993

    Surprisingly (I thought his books were interesting), financial “genius” Nassim Taleb appears to be an economic ignoramus:

    “An increase in the monetary base leads to an increase in the money supply, which leads to inflation.” (I take this statement to imply he thinks that there are no other factors involved.)

    See also:

    http://mikenormaneconomics.blogspot.com/2012/06/black-swan-author-nassim-talebs-idiotic.html

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  9. And so the stupidity beings again with Lew at the Treasury department (I would think that the career bureaucrats who know better at the Treasury department would gently pull him aside and whisper in his ear that the U.S. has Monetary Sovereignty):

    http://www.bloomberg.com/news/2014-02-10/lew-moves-to-stay-under-debt-limit-while-warning-of-dire-outcome.html

    There is actually contact info. for this article:

    To contact the reporters on this story: Ian Katz in Washington at ikatz2@bloomberg.net; Kasia Klimasinska in Washington at kklimasinska@bloomberg.net

    To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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    1. “Raising the debt ceiling” simply means that the US Treasury can continue to sell Treasury securities. Looked at another way, it means the Federal Reserve can continue to accept investor’s deposits in their Fed savings accounts. Meanwhile the US government has zero “debt” in the sense of needing loans.

      Many right-wing clowns say that Republicans should have demanded more austerity in return for “raising the debt ceiling.” However the Republican leadership (e.g. John Boehner and Eric Cantor) knew that mid-term elections are coming in a few months, and it would not be politically prudent right now to once again “shut down the federal government,” especially when it would have meant cutting veterans’ benefits.

      Besides, austerity continues to expand nicely, with continual cuts to Food Stamps, cuts to federal unemployment benefits, cuts in deficit spending and so on.

      Best of all, the Big Lie remains in place – which is all that matters to politicians.

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    1. If by “equities,” you mean stocks, they are significantly different. They are not debt instruments (dollars are) and they are not backed by the full faith and credit of the U.S. government.

      Corporate bonds are debt instruments, but they too are not backed by the government’s full faith and credit.

      T-securities are very similar to dollars. They are debt instruments and are backed by the full faith and credit of the government, as are dollars However, T-securities have expiration dates and pay interest — different from dollars.

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  10. Repeal the debt ceiling:

    http://online.wsj.com/news/articles/SB10001424052702304104504579377303355489512?mod=hp_opinion&mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304104504579377303355489512.html%3Fmod%3Dhp_opinion

    The debt ceiling was created in 1917, before we became Monetarily Sovereign (this happened in 1971). In 1971, why didn’t congress also revise all the other federal funding management practices as well? Was this just being sloppy/ignorant on their part or was it intentional? How could they not understand that becoming Monetarily Sovereign would change the nature of how things would function economically?

    In this modern day, it is incredible, stunning and just plain ridiculous that people do not understand how our economic system really functions. It’s like being in the dark ages. And for those people that do know and are influencing policy decisions, how long can this great Con be perpetuated?

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    1. I don’t know how Canada keeps its books, but if it really has a balanced budget, consider this: According to http://www.tradingeconomics.com/canada/balance-of-trade, “In December of 2013, Canada’s trade deficit widened slightly to CAD 1.7 billion, up from CAD 1.5 billion in November, as imports rose 1.2 percent while exports edged up by 0.9 percent.”

      What does that tell you about Canada’s money supply? What does that tell you about Canada’s future?

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  11. http://www.cnbc.com/id/101408950

    The above article talks about how people have given a million dollars to the USG to help pay down the debt. If they knew that the money they contributed was being destroyed, they would feel foolish, right. Imagine if they saw a video of the government receiving their check, cashing it, and tearing up the bills one by one. But that is the equivalent of what happens.

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    1. Not only does it hurt the brainwashed sucker who is actually giving the money, but it hurts everyone by removing money from the economy.

      Those dollars never will be spent, never will go to business income, never will pay a salary.

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      1. How the hell can the government be offering to do this debt payback when they have to know the true nature of monetary operations? Did congressman enact legislation to make them set this up? This stuff is ridiculous.

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