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●Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.
●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, and the motive is the gap.
In the beginning there was nothing. There were no American laws. There was no America. There were no American dollars.
Then, in the late 1700’s AD, men created from nothing, American laws. And from nothing, these laws created a nation named “The United States.” And these laws also created the United States dollar.
All from nothing.
The men could have written their laws any way they wished. America could have been a monarchy. It could have been a theocracy. But the men decided to create laws to make America a Presidential Democracy. From nothing.
And these laws, created from nothing, also created the American dollar, also from nothing. And because the men had complete control over these laws, there was no limit to the number of dollars they could create from nothing.
This power is called “Monetary Sovereignty,” the ability to create and to rule, unlimited amounts of your own sovereign currency.
And they continued to create and distribute these American dollars all over the land and all over the world, so that many millions of people owned these dollars, that never had existed and were created from nothing.
Then, for reasons lost to history, men decided the American government should borrow some of the dollars it already could create without limit, from nothing. And thus were laws enacted creating the T-bond, T-note and T-bill.
There is no limit to laws, no limit to T-bonds, no limit to T-notes, no limit to T-bills and no limit to dollars.
All are created from nothing.
The federal government, being Monetarily Sovereign, never needs to ask anyone for its sovereign currency, the dollar — not you, not me, not China. The federal government (unlike state and local governments and euro governments) never can run short of its own sovereign currency, and has no need for tax dollars or “borrowed” dollars.
Now, over the years, the populace had forgotten how the dollar was created, and came to believe the American government no longer could control its own laws — the laws that allow the unlimited creation of the dollar.
And this belief led to articles like this one:
Bullard Says Fed Should Consider Delay in Ending QE
By Steve Matthews and Craig Torres, Oct 16, 2014
The Federal Reserve should consider delaying the end of its bond-purchase program to halt a decline in inflation expectations, said St. Louis Federal Reserve Bank President James Bullard.
“Inflation expectations are declining in the U.S.,” he said in an interview today with Bloomberg News in Washington. “That’s an important consideration for a central bank. And for that reason I think that a logical policy response at this juncture may be to delay the end of the QE.”
Bullard is the first Fed official to publicly suggest the central bank should extend its asset-purchase program when policy makers meet later this month.
For those who don’t understand “QE” (Quantitative Easing), it refers to one agency of the federal government, the Treasury, creating and issuing bonds, notes and bills to the public, while another agency of the federal government, the Federal Reserve Bank, takes them back and destroys them.
Left pocket to right pocket.
The populace believes something like this: When T-securities are purchased, dollars flow from the public to the Treasury, which uses them for spending. Then when T-securities are purchased by the Federal Reserve Bank, new dollars must be created.
That is completely false. That belief results from not understanding the enormous difference between personal financing and federal financing.
The reality is a weird merry-go-round that goes like this:
A. To acquire these newly created bonds, notes and bills, the public takes dollars from privately-owned checking accounts at private banks, and deposits those dollars into privately-owned T-security accounts at the Federal Reserve Bank.
No dollars are created or destroyed. They merely are transferred from one privately-owned bank account to another — much like transferring dollars from a checking account to a savings account.
B. Then, with QE, the Federal Reserve Bank, transfers the dollars from T-security accounts to checking accounts — and destroys the T-bonds, notes and bills. Again, no dollars are created or destroyed.
If one believes inflation is caused by an increase in the money supply, QE does not fight inflation, as QE does not reduce the money supply. No new dollars are created or destroyed.
Except for one thing: QE, by transferring ownership of T-securities from the public to the Federal Reserve Bank, also transfers interest payments from the public. Fewer dollars are created by QE.
All of the above devolves to three questions:
1. Since the issuance and redemption of T-securities neither increases nor decreases the money supply, what is the purpose of T-securities?
I suspect the only answers are: Some thing T-securities may give the government more control over long-term interest rates. And they do provide a small, hidden, off-budget method for pumping interest — growth dollars — into the economy. Finally, they provide a reasonably safe investment for those who want a low-paying place to park dollars.
In my opinion, these effects are too small to be worth the effort and deception involved.
2. On balance, is an increase in the money supply beneficial to the economy (economic growth) or detrimental to the economy (uncontrollable inflation)?
Evidence indicates an increase in the money supply stimulates the economy (See: Introduction and numerous subsequent posts on this blog) and has not caused inflations (See: Federal deficit spending doesn’t cause inflation
3. Does QE really give the government greater control over interest rates?
The Fed has absolute control over short term rates, merely by fiat. Long-term rates, though heavily influenced by short-term rates, can drift. But QE is a slow, clumsy, imprecise way to adjust them. A simpler option would be for the Fed to issue rules to member banks, controlling rates.
Bottom line, a complex, convoluted, Rube Goldbergian T-security process has evolved over the years — a process that does not accomplish what is claimed and confuses not only the public but also those who implement the process.
The federal government creates dollars from nothing, at will, and has no need to “borrow” dollars from anyone — not you, not me, not China. And to “pay off” this so-called “debt,” the government merely transfers existing dollars from private T-security accounts to private checking accounts.
No dollars created or destroyed.
On balance, we could eliminate T-securities and simplify our money controls.
But then, the Fed could not fool the people into believing it actually is doing something constructive about the economy.
And we all do enjoy riding the Fed merry-go-round.
Rodger Malcolm Mitchell
Ten 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. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here and here)
10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
The Ten Steps will add dollars to the economy, stimulate the economy, and narrow the income/wealth/power Gap between the rich and the rest.
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
Vertical gray bars mark recessions.
As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.