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●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.
●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.
Here is an equation you should understand:
CRFB + Debt/GDP = BS
CRFB = Committee for a Responsible Federal Budget
Debt/GDP = the ratio of federal debt to Gross Domestic Product
GDP = Federal Spending + Non-federal Spending + Net Exports
BS = Ceaseless, constant, unrelenting bullsh*t
Now for the latest from the masters of deception, the CRFB (with assistance from the federal government).
CBO’s Analysis of the President’s FY 2016 Budget
March 12, 2015
Today, the Congressional Budget Office (CBO) released its re-estimate of the
President’s FY 2016 budget, using its own economic and technical assumptions.
According to CBO, debt held by the public in the President’s budget would reach 73.1 percent of GDP by 2025, 1 percentage point lower than in 2014 (and about what OMB estimated), but 1 percentage point higher than in 2020.
What does this mean? It means the total of deposits in T-security accounts at the Federal Reserve Bank will reach 73.1% of: Total spending by the federal government, plus spending by everyone else in America, plus Net Exports.
That’s the GDP = Federal Spending + Non-federal Spending + Net Exports equation.
If you are perceptive, you may wonder why Total Deposits in T-security accounts at the Federal Reserve Bank should be compared with everyone’s spending. Why, indeed?
The Committee for a a Responsible Federal Budget would like you to believe that for some mysterious reason, there should not be lots of deposits in T-security accounts, especially when compared with U.S. spending: The ultimate apples/oranges comparison.
CRFB’s Debt/GDP fear-mongering would be ludicrous if it weren’t so harmful.
Why then, do government agencies even bother to publish this meaningless fraction? The only reason I can imagine is: For a similar looking fraction, Deficit/GDP, has some value. That is, there is some value to comparing federal government deficit spending with total spending.
But federal deficits and federal debt debt are quite different. We could have deficits without debt (Simply stop accepting T-security deposits). And we could have debt without deficits (Continue to accept T-security deposits, while running a surplus).
For our Monetarily Sovereign U.S. government, that thing misleadingly called “federal debt,” isn’t what ordinary people would call “debt.” It’s really just the total of deposits in specific bank accounts, in this case, T-security accounts at the Federal Reserve Bank.
While technically, all bank account deposits are forms of debt, I doubt whether you spend many sleepless nights worrying about the amount of deposits in your neighborhood bank, and even fewer nights worrying about the amount of deposits in the Federal Reserve Bank.
But that is exactly what the CRFB wants you to worry about: The size of T-security deposits in Federal Reserve Bank accounts.
Now, if we were talking about monetarily non-sovereign state and local government borrowing, that would be a different story. For any monetarily non-sovereign entity (including you and me), debt and the repayment of debt, can be a real problem.
But for the Federal Reserve Bank, repayment of deposits requires only a transfer of existing dollars from T-security accounts to checking accounts. No problem at all, and no new dollars needed.
And the story gets even worse for the CRFB nonsense. They compare a non-problem, Federal Debt, to an unrelated figure, Gross Domestic Product.
Even for monetarily non-sovereign entities, the Debt/GDP fraction makes no sense.
For example, consider you and your cousin. You both are monetarily non-sovereign. You do not use your own sovereign currency, but rather you use the sovereign currency of the United States government, the dollar. Unlike the U.S., you cannot create dollars out of thin air.
Say you and your cousin both spend the same amount of money (i.e. your personal Gross Domestic Product), but you have half the debt your cousin has.
That is, your personal Debt/GDP is half of your cousin’s.
Who will have the easier time paying their debt, you our your cousin?
Answer: It’s a nonsense question, because you don’t pay your debt with your spending but rather with your income. And in the Debt/GDP fraction, there is no mention of income.
And while your monetarily non-sovereign income is limited, the Monetarily Sovereign federal government neither needs, nor uses, income. It creates dollars out of thin air, ad hoc, when it pays bills.
The CRFB article continues for six long pages, all pounding on the “high” debt and “high” debt/GDP ratio, and ends with this sentence:
In additional to tax reform and spending cuts, such entitlement reform will be necessary to put the county on a sustainable fiscal course for this and future generations.
First, as we have discussed, CRFB conflates “debt” with “deficit,” and demands decreases in the deficit to reduce the so-called “debt.” It doesn’t work that way.
And second, they love to use euphemisms to hide their economy-crushing suggestions:
“Tax reform” is a euphemism for “tax increase.” Any tax increase takes dollars out of the economy, and so is recessionary.
“Entitlement reform” is a euphemism for “cut benefits to the poor and middle income people. This serves to widen the Gap between the rich and the rest.
Here are some of the “entitlement reforms” the CRFB advocates:
–Reduce spending on prescription drugs
–Raise Medicare means-tested premiums and cost-sharing (i.e. punish the sick)
–Reduce spending on post-acute care (i.e. punish the recovering sick)
–Reduce farm subsidies (punish farmers)
–Increase Pension Benefit Guaranty Corp. premiums (make pensions riskier)
–Enact immigration reform (i.e. punish immigrants)
So, in addition to teaching nonsense, the CRFB advocates cruelty to the not-rich — and then complains it’s not enough.
What manner of people are these?
Rodger Malcolm Mitchell
The 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. Federally funded, 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. (Refer to this.)
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)
Initiating The Ten Steps sequentially 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.
1. A growing economy requires a growing supply of dollars (GDP=Federal Spending + Non-federal Spending + Net Exports)
2. All deficit spending grows the supply of dollars
3. The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
4. The limit to non-federal deficit spending is the ability to borrow.
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.