–A brief reference to the Ten Steps: What you need to know when discussing economics

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

Mitchell’s laws:
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The more federal budgets are cut and taxes increased, the weaker an economy becomes. .
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 single most important problem in economics is
the gap between rich and poor.
●Austerity is the government’s method for widening
the gap between rich and poor.
●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.
●Everything in economics devolves to motive,
and the motive is the Gap.



Now that the American middle and lower income/wealth/power classes — the so-called “99.9%” — seemingly have, counter to logic and fact, voted for the party that most despises the 99.9%, one can expect discussions of economics to increase in volume and intensity, particularly if the 99.9% somehow realizes they have stepped off a cliff.

Unlike the case with virtually all other sciences, everyone has opinions about economics, and not just opinions, but strong opinions, and not just strong opinions, but strong, wrong opinions.

So to help you understand and discuss the flood of strong, wrong opinions you surely will encounter, here are what I believe to be the correct opinions. Mostly, they involve Monetary Sovereignty.

You have seen the following thoughts, in abbreviated form, on every post. Here is a more instructive and easier-to-use format. Not a comprehensive reference, the purpose is to provide an “everyman’s” foundation for discussion, analysis and belief.


Mitchell’s laws:

●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

This link takes you to a post that summarizes the fundamentals of Monetary Sovereignty and how it differs from monetary non-sovereignty, that is, how the U.S. federal government’s finances differ from yours, mine, local government’s and business’s.

The link is listed first, and should be read first, because nearly every misstep in economics is based on ignorance or disregard for these differences.

●The more federal budgets are cut and taxes increased, the weaker an economy becomes..

The link takes you to a post (“I just thought you should know lunch really can be free”) that simplifies the fundamentals even further. Read this article second.

●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.

Here you see just an observation, not a researchable fact. You may agree with it or not, but both purposes are valid. All groups need protection from other groups. The masses need protection from the rich, and yes, the rich need protection from the masses.

Make your own determination about who needs more protection, and how that compares with how people voted.

●Austerity is the government’s method for widening the gap between rich and poor.

This link takes you to a discussion of the Gap, which actually is not just a Gap between rich and poor, but more importantly, the many Gaps ranging from the most powerful to the powerless.

You’ll see that without Gaps, no one would be rich and powerful, and the wider the Gaps, the richer and more powerful they are. The growing Gaps are the single, most serious problem facing America and the world.

●Until the 99% understand the need for federal deficits, the upper 1% will rule.

Here, we learn why the so-called “federal debt” is:
A. Unlike personal debt,
B. Not a burden on the government or on taxpayers, and
C. An interest-paying asset for the economy.

To survive long term, a monetarily non-sovereign government must have a positive balance of payments.

Federal Deficits + Net Exports = Private Saving. When we reduce federal deficits, we reduce private saving, a circumstance that negatively impacts the economy.

You also will see the only two ways in which the euro nations can survive long term, and neither approach is likely to occur.

●Everything in economics devolves to motive, and the motive is the Gap.

Economics primarily is a social science, rather than a physical science. Study of the physical sciences delves into the mechanics of cause and effect. Study of the social sciences requires understanding motivation.

Economics’s effects cannot be foretold by charts (though so-called “chartists” devote their lives trying to refute that fact,) because charts do not take into consideration, motive.

Those are economics laws, as I see them. They are an attempt to find consistency in a science where free will has such great effect.

Now, here are my ten suggestions for growing our economy and narrowing the Gap between the rich and the rest:


Ten Steps to Prosperity:

1. Eliminate FICA (Eliminate FICA )

Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:

*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and

*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.

2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (H.R. 676, Medicare for All )

This article is a continuation of #1, above. It addresses the questions:
*Why government?
*Is it necessary or beneficial for the rich to be able to afford better health care than the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”

3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.

This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012

MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012

Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012

“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.

4. Free education (including post-grad) for everyone. Five reasons why we should eliminate school loans

Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.

Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.

An educated populace benefits a nation, and benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.

5. Salary for attending school

Even were schooling to be completely free, many young people could not attend. The reason: They and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.

If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.

6. Eliminate corporate taxes

Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-tranferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).

Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.

7. Increase the standard income tax deduction annually. (Refer to this.)

Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.

Cutting FICA and corporate taxes would be an good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.

8. Tax the very rich (the “.1%”) more, with higher, progressive tax rates on all forms of income. (TROPHIC CASCADE)

There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.

But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way.

Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year.


The article also discusses methods and motivation.

9. Federal ownership of all banks (Click The end of private banking and How should America decide “who-gets-money”?)

Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.

Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.

10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Federal agencies)

Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.

Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

Rodger Malcolm Mitchell
Monetary Sovereignty


Monetary Sovereignty

Monetary Sovereignty

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.


16 thoughts on “–A brief reference to the Ten Steps: What you need to know when discussing economics

  1. As I was saying:

    Financial Times
    Blow for Cameron as UK faces deeper cuts

    George Osborne will be forced to swing his axe much deeper into the budgets of departments such as the army, police and courts as the annual savings the chancellor must find to meet his austerity targets are set to nearly double to £48bn, according to analysis by the Financial Times.

    Hey, who needs the army, police and courts?

    And to think: The UK is Monetarily Sovereign, never can run short of pounds and can afford any expense of any size. Yet, it pretends it is monetarily non-sovereign.

    The Big Lie is alive and well in Britain.


  2. Why not end all taxes and have the federal government supply the money for public needs at local state and national levels?


    1. Good question.

      Yes, that functionally would be possible.

      #3 suggests that the federal government provide each state with a per-capita bonus. This would have the advantage of local control and better understanding of local needs, while reducing the need for local taxes.


      1. bad answer. you should have emphasized the need to control inflation, which the federal govt does, with bonds and taxes, with your #3 suggestion..


  3. Rodger,

    At #9 you said that “Banks have created all the dollars that exist”. This leaves me confused. I thought the federal gov’t is the sovereign issuer of all dollars, including those that private banks lend out from their pool of reserves at the central bank.


    1. Another good question.

      This gets into a cause and effect philosophy. While an effect can be identified, the cause can be part of a long series.

      Example: Who created a touchdown? Was it a receiver catching the ball? The quarterback throwing the ball for the receiver to catch? The offensive coach calling the play? The head coach telling the offensive coach what kind of play to call? All of the above?

      To answer your question more directly:

      Congress and the President authorize expenditures.

      Federal agencies, based on those authorizations, send instructions to creditors’ banks, telling the banks to increase the numbers in creditors’ checking accounts.

      The banks obey those instructions, and it is at that moment, dollars are created.

      So who created the dollars? Congress? Federal agencies? Banks?

      The answer is, “Yes” to all.

      All are part of the process, but the actual dollar creation occurs at the instant banks increase the numbers in checking accounts.


      1. bad answer, as you have previously stated that the federal govt ‘creates’ 20% of new dollars and banks, 80%. what is it?


        1. I should have been clearer for you.

          Lending by banks instigates about 80% of all dollar creation.

          Spending by the federal government instigates about 20% of dollar creation.

          Nearly, all dollar creation involves banks in one way or another.


          1. Not to mention the Fed is a bank, albeit a public bank. Maybe thats what is confusing him. “money” exists on bank computers, excluding cash obviously


      2. So when I, for example, use my Chase credit card to buy a $10 worth of burger meal at McDonalds, when, exactly, is the moment of money creation?

        Did that $10 already existed in the Chase universe before they decided to lend it out to me? Or, did it only began to exist in the burger buying transaction?


  4. @RMM: This is curious: Does Bill Gross understand MMT/MS? Is understanding of MMT/MS breaking through?

    “Bill Gross should stick to the shuffleboard courts because his call for bigger deficits is illogical, according to David Stockman, the still-outspoken U.S. budget chief during the Reagan White House years.”

    “… Gross, in his November investment letter at Janus, called for more money printing and more spending from the debt-ridden federal government to boost the economy.”

    (Stockman appears to be an either an economic ignoramus or a liar.)




  5. Rodger,

    Is there any idea why banks have departments proofing their books? The process you outline above would definitely result in a proof break – how do banks handle those?


  6. An Alternative to Capitalism (since we cannot legislate morality)

    Several decades ago, Margaret Thatcher claimed: “There is no alternative”.
    She was referring to capitalism. Today, this negative attitude still persists.

    I would like to offer an alternative to capitalism for the American people to consider. Please click on the following link. It will take you to my essay titled: “Home of the Brave?” which was published in the OPEDNEWS:


    John Steinsvold

    Our deepest fear is not that we are inadequate.
    Our deepest fear is that we are powerful beyond measure.
    ~ Marianne Williamson


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