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•Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money.
•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.
•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..
Adam and Eve learned that snakes are sneaky liars. They not only lie outright, but they twist the truth into lies. And so it is with the debt snakes, as during election time, they once again try to deceive the populace.
Way, way back in 2009, we published, “Federal Debt: A ‘ticking time bomb’.” Here is how the article began:
Popular faith holds that the federal debt is a ticking “time bomb,” ready to explode into inflation and high interest rates, and destroy our economy.
Here are a few references, beginning 70 years ago.
Even with the end of the gold standard in 1971, arguably the most significant economic event since the Great Depression, the language never changes — as though 1971 were a non-event.
Sept 26, 1940, New York Times: “. . . unless an end is put to deficit financing, to profligate spending and to indifference as to the nature and extent of governmental borrowing, the nation will surely take the road to dictatorship, Robert M. Hanes, president of the American Bankers Association asserted today. He said, “insolvency is the time-bomb which can eventually destroy the American system . . . the Federal debt . . . threatens the solvency of the entire economy.”
The post goes on to quote articles from 1960, 1983, 1984, 1985, 1987, 1989, 1992, 1985, 2003, 2004, 2005, 2006 and 2007 (subsequently added, articles dated 2010 and 2011), all referring to the federal debt as a “time bomb.”
Just last year, Forbes ran an article titled:
“Defusing Washington’s Debt Bomb” written by Sen. Rob Portman.
Under the Constitution, only Congress can authorize the United States to borrow money to pay its bills. And since World War I, Congress, recognizing the danger of runaway borrowing, has placed a ceiling on the amount of debt Washington can accumulate.
Going over the debt limit is not the right solution. But neither is simply raising the debt limit without doing anything to address the underlying problem, especially at a time of record debt.
The American people understand this. Think about it as parents: when one of our kids goes over the limit on the credit card, we don’t just pay the bill and ask the bank to raise the limit. We take steps to address the overspending problem and make sure it doesn’t happen again.
And the beat goes on. In May, 2015,The National interest published:
Here we are, 75 (!) years after that 1940 article, still frightened, waiting for that ticking time bomb to explode.
Never mind that the U.S. federal government, being Monetarily Sovereign, never can run short of dollars to pay its bills.
Never mind that even if all federal tax collections fell to $0, the U.S. federal government could continue spending forever.
Never mind, that being Monetarily Sovereign, the federal government creates dollars ad hoc, by paying bills and does not need to borrow — ever.
And never mind that despite massive federal spending, inflation actually is below the federal goal of 2.5%, and easily is controlled by the Fed via interest rates.
Never mind that federal deficits are surpluses for the economy and necessary for economic growth, and that federal surpluses lead to recessions and depressions:
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
NEVER MIND THAT THERE IS NO “DEBT BOMB.” It’s a myth.
Never mind all these facts, because the debt snakes pay no attention to facts.
And here comes another one:
Kasich to push balanced budget amendment in 6-state tour
By JAMES NORD – Associated Press – Wednesday, January 21, 2015
Ohio Gov. John Kasich has kicked off a six-state tour pushing a balanced budget amendment to the U.S. Constitution with a meeting in South Dakota in which he called on state lawmakers to get behind the proposal.
“Who the heck thinks we should keep spending without any regard to the consequences?” Kasich, a Republican, asked the South Dakota gathering. “I don’t care … if you’re a Republican, a Democrat or a Martian. This is not what we should be doing as a nation. It’s irresponsible.”
Exactly why is it “irresponsible,” Governor Kasich? Will the federal government be like Greece and the other euro nations, unable to pay their debts?
No, Greece and the other euro nations are monetarily NON-sovereign. They have no sovereign currency.
Like our cities, counties, states, businesses and people, all of whom also are monetarily NON-sovereign, Greece can run short of the currency it uses.
The U.S. federal government, being Monetarily Sovereign, has the unlimited ability to create its sovereign currency, to pay its bills.
Well Governor Kasich, is it “irresponsible” (and a “ticking time bomb”) because our children will have to pay the federal debt?
No, federal taxes do not pay for federal spending. The federal government creates dollars every time it pays a bill. The federal debt has no effect on the federal taxes our children will pay.
Or is the debt “irresponsible” and a “ticking time bomb” because it will cause inflation?
No, inflation is caused by a multitude of factors, primarily oil prices and low interest rates.
Here is what Kasich’s nonprofit advocacy group, Balanced Budget Forever says:
In just over a year, five states have passed resolutions in support of a convention to set a balanced budget process in motion. Today, there are now 27 states committed to a convention.
Just 7 more states are needed to trigger change.
While a member of Congress, Kasich supported a federal balanced budget amendment and, as chair of the House Budget Committee, successfully led efforts to balance the federal budget in fiscal years 1998, 1999, 2000 and 2001, the first balanced budgets since 1969.
Yes, and those balanced budgets (actually surpluses) led directly to the recession of 2000. (Almost every recession in recent history has been introduced with reductions in federal deficit growth.)
And we’re coming closer and closer to passing a disastrous “balanced budget” amendment, that will push America into the same horrifying austerity problem Greece suffers from.
Knowing that federal deficit spending adds dollars to the economy, and so is stimulative, and the lack of deficit spending leads to recessions and depressions, why do Kasich and his group insist that the U.S. commit financial suicide by eliminating deficit spending?
I believe there are two reasons:
1. He wishes to become President, and in the crowded Republican field, “balanced budget” gives him a talking point. He relies on the public not understanding the difference between the Monetarily Sovereign government vs. you and me (and states, counties and cities) which are monetarily NON-sovereign.
To the economically ignorant populace, debt is bad and surpluses are good. The people don’t realize that federal debt is the economy’s surplus. So Kasich can position himself as a prudent politician, when in fact, his balanced budget would lead to a recession far worse than what we had in 2008 (a severe recession cured by federal deficit spending.)
2. Recessions generally affect the populace more than the super rich. Recessions cause unemployment among the lower paid, which leads to reduced pay, which in turn, leads to higher profits for corporations and wealthy shareholders. (Note how the stock markets rose dramatically after the most recent recession, while employment lagged.)
All of this widens the Gap between the rich and the rest, and it is the Gap that makes the rich rich. (Without the Gap, no one would be rich, and the wider the Gap, the richer they are.)
So it is the super rich, who bribe the politicians (via campaign contributions and promises of lucrative employment later) to widen the Gap. The super rich also bribe the media (via ownership) and the economists (via contributions to universities and “think tanks”) to support a balanced budget — all to widen the Gap.
Now, with the Presidential campaign in full swing, we again see the debt snakes slithering in, to steal our livelihood and our children’s futures, while pretending to be oh, so frugal.
Yes, they are frugal, if being frugal means taking from the poor and giving to the rich.
While both political parties are guilty, the Tea/Republicans especially, work against anything that helps the middle and the poor — Social Security, Medicare, Medicaid, food stamps, aids to housing, aids to education. Even the abortion issue has a money twist, for the rich always are able to obtain abortions, while the poor are forced to give birth to unaffordable children.
The next time you read or hear a politician, economist or media writer promote a federal balanced budget know this: Either he/she is ignorant of economics or has been paid by the rich to impoverish you and yours.
The debt snakes are slithering in again. Adam and Eve were punished severely for listening to a snake. Don’t let it happen to you.
Don’t listen to debt snakes.
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.
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.