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●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.
If I had a dollar for every time I am told America is about to experience hyper-inflation (given with the examples of Weimar Republic, Zimbabwe, Argentina and Venezuela) I might be able to give Bill Gates a “run for his money.”
O.K., not really, but it does become tiresome. So perhaps I can put a small dent in the Henny-Penny, sky-is-falling, phony hysteria, by providing a short, simple explanation of what causes very high or “hyper” inflations. And no, I’m not talking about a 10% inflation rate for a couple of months. I’m referring to really big inflations, like 50% annually or even monthly.
Let’s begin with the absolute basics: All money is a form of debt. There is no money that is not debt. When you own a dollar, you own a debt of the United States government. That dollar bill in your wallet is a Federal Reserve Note. The words “bill” and “note” signify debt.
The value of any debt is based, in part, on the value of its collateral. When you take out a mortgage, the bank evaluates the property and the full faith and credit of the mortgagee. Together, they comprise the collateral for the loan.
The collateral for a debt/dollar also is “full faith and credit” — the full faith and credit of the U.S. federal government. This may sound nebulous to some, but it actually involves certain, specific and valuable guarantees, among which are:
1. The government will accept U.S. currency in payment of debts to the government
2. It unfailingly will pay all it’s dollar debts with U.S. dollars and will not default
3. It will force all your domestic creditors to accept U.S. dollars, if you offer it, to satisfy your debt.
4. It will not require domestic creditors to accept any other money
5. It will take action to protect the value of the dollar.
6. It will maintain a market for U.S. currency
7. It will continue to use U.S. currency and will not change to another currency.
8. All forms of U.S. currency will be reciprocal, that is five $1 bills always will equal one $5 bill and vice versa.
If any of the elements of full faith and credit — items 1-7 — were to change, and the value of the federal government’s full faith and credit were to decline, the value of the debt/dollar would decline, i.e. we’d have inflation. If the full faith an credit declined enough, we’d have hyper-inflation.
Every hyper-inflation in history has been caused, not by excessive “money printing,” as is widely and falsely believed, but rather by a change in the full faith and credit of the sovereign currency creator.
Yes the value of a currency, as with all commodities, is affected by supply and demand, and increases in supply without compensating increases in demand, can cause some inflation. But hyper-inflation is a different animal altogether, and it never is caused by increases in the money supply. It always is caused by a change in full faith and credit.
Each of the title-mentioned nations experienced a political problem, not a “too-much-money” problem, that caused their extreme inflations. In fact, it was the inflations that caused the “too-much-money” to be created and not the other way around.
Whenever you hear of a nation experiencing hyper-inflation, remember that the problem was not caused by excessive spending, but by a reduction in that nation’s full faith and credit.
For the United States, about the only thing that could cause the first hyper-inflation in our existence, would be if a reckless fool like Ted Cruz, John Cornyn or some other Tea Party nut, prevented the paying of federal debts (as repeatedly the nuts have threatened to do). That would cause an extreme change in item #2 of full faith and credit (above), which would debase the value of the U.S. debt/dollar. And we’d have hyper-inflation.
So don’t worry about a “government-‘printing’-too-much-money” inflation; worry about a Cruz/Corwin/Tea Party hyperinflation.
Rodger Malcolm Mitchell
Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)
10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt
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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports
THE RECESSION CLOCK
As the federal deficit growth lines drop, we approach recession, which will be cured only when the lines rise. Federal deficit growth is absolutely, positively necessary for economic growth. Period.