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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.
I seldom have read The Motley Fool, though I understand that many people do. I don’t know about its success record in predicting stock prices or predicting anything else about our nation’s economy.
Perhaps I shouldn’t be too surprised to read the following article authored by Brian Stoffel, who “has been a Fool since 2008, and a financial journalist for the Motley Fool since 2010.”
Based on the article, I suspect he has been a Fool for much longer than “since 2008,” but you can decide for yourself.
Will the Social Security System Go Broke in the Next 20 Years?
By Brian Stoffel, Dan Dzombak, and Dan Caplinger | April 11, 2015
It’s no secret that Social Security, in its current form, is in trouble. Many young workers today are told to plan for retirement as if Social Security will no longer be around.
And many soon-to-be retirees lose sleep over whether or not their safety net will be in place when their Golden Years begin.
Social Security “in its current form,” is an agency of the Monetarily Sovereign U. S. federal government.
Here is a little secret the politicians and journalists don’t tell you: Unlike the states counties and cities, and business and individuals — all of which are monetarily NON-sovereign — the U.S. government has the unlimited ability to create its own sovereign currency.
The federal government never can run short of dollars.
Even if all taxes fell to $0 and all so-called federal “borrowing” also fell to $0, the U.S. government could continue paying all its bills, forever. It never needs to ask anyone for dollars — not you, not me, not China.
Social Security, being an agency of the U.S. federal government, also cannot run short of dollars, unless Congress wishes it.
The article continues:
The program has current workers pay for the benefits of retirees. If there’s a relative balance between the number of workers and the number of retirees, then the program runs fine.
But with a wave of baby boomers entering retirement — and living longer than any generation before them — the program is out of whack and spending much more than it’s taking in.
This would be true if Social Security were operated and owned by privately-held insurance companies. All such companies are monetarily non-sovereign, so indeed they require incoming dollars to pay for outgoing dollars.
(Republicans want to privatize Social Security, which would guarantee that it would, in fact, run short of dollars.)
Federal agencies require no incoming dollars. The federal government creates dollars from thin air.
You can’t. I can’t. Illinois, Cook County and Chicago can’t. But the federal government can and does.
That is the difference between Monetary Sovereignty and monetary non-sovereignty.
We asked three Motley Fool analysts whether they thought the program would go broke within 20 years. Here’s what they had to say.
Dan Caplinger: [Dan Caplinger is a contract writer for The Motley Fool. In addition to his writing, Dan works as an independent financial consultant and estate-planning attorney.]
No — technically, it can’t (go broke).
Strictly speaking, the Social Security system won’t go broke so long as there’s payroll-tax revenue coming in to fund it.
Wrong, Dan. Contrary to popular myth, payroll tax revenue (aka FICA) does not pay for Social Security. In fact, FICA pays for nothing.
When FICA dollars are received by the Treasury, they no longer are part of the money supply. They cease to exist as money. When Social Security benefits are paid, new dollars are created, like this:
The Treasury sends instructions to each benefit recipients’ bank, telling the bank to increase the balance in the recipient’s checking account. At the moment the bank obeys those instructions, new dollars are added to the money supply.
You may ask, “Why then is FICA collected?” The answer: To give the illusion that people pay for Social Security as though it were an insurance annuity.
It has been said that President Roosevelt knew this, which is why he created FICA. Supposedly, his idea was that so long as people believed they paid for Social Security, the politicians would not have the nerve to cut benefits.
He didn’t reckon with the gall of today’s politicians.
Dan Caplinger is ignorant of Monetary Sovereignty. I personally would be reluctant to take his advice on anything related to the U.S. economy.
Dan Dzombak: [Dan Dzombak joined the Motley Fool through its Analyst Development Program in 2008. After completing the 1-year program, he became the Motley Fool’s Energy Editor, focusing on the oil and natural gas markets.]
Yes, the Social Security system will go broke in the next 20 years.
The current status of the Social Security system is like someone who has a huge savings account but spends more than their paycheck each month and has to draw down their savings.
Dan Dzombak thinks the Monetarily Sovereign federal government’s finances are like monetarily non-sovereign personal finances. Another example of economic ignorance.
Perhaps he should focus his gas on the oil market.
Brian Stoffel: [For six years after graduating from Grinnell College, Brian Stoffel was a middle school teacher. Five of them were spent in inner-city Washington DC at a KIPP charter school that focused getting 100% of students accepted to college.]
No — Congress will eventually figure something out
It’s difficult to understate just how important Social Security is to today’s (and tomorrow’s) retirees. The program’s Office of Policy estimates that “Social Security will account for about two-fifths of projected income for baby-boomer retirees.” That’s an enormous amount.
While I agree with Dan Dzombak that raising taxes to help close the funding gap will be a politically difficult task, I don’t think we should underestimate the political force tomorrow’s retirees will have.
I believe these combined forces will help usher in political leaders who are able to work out some solution to the depletion of Social Security’s Trust Fund.
Another Motley Fool writer — this time a middle school teacher — who seems to know nothing about Monetary Sovereignty and federal financing.
Here is MY advice. If you plan to accept THEIR advice, consider its value in light of their knowledge about the U.S. economy.
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.