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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..
In comment #4 of the previous post titled, Someone please tell me what this means, reader Elizabeth Harris disagreed with the notion, stated by Warren Mosler and others, that the gold standard limited the amount of money the federal government could create.
What follows is my answer:
Elizabeth, you have identified a fundamental Truth about a sovereign government and money: A sovereign government has the power to do anything it wishes with its money, but creates rules and laws that temporarily can limit that power.
The U.S. federal government always has been Monetarily Sovereign, even during gold standard days, but has chosen to act as though it didn’t have that sovereignty.
Even now, after the gold standard ended, the government still chooses to act as though it is not MS, by enforcing a “debt limit,” issuing T-securities and engaging in complex intra-governmental loans between imaginary “trust funds.”
All laws are temporary, and the government can change or disobey any laws, at will. And that leaves us with the fact that all sovereign governments are MS.
By that logic, even the euro nations are Monetarily Sovereign, because they elected to join the EU and have the power to leave, if they so choose. Sovereignty is the power to choose.
But that logic leaves us with no way to differentiate between Monetarily Sovereign nations.
So, for convenience, we say that today’s U.S. government became MS in 1971, while in reality, it exhibited only a greater degree of MS after 1971.
Depending on ones’s perspective, Mosler and Wray were wrong — and right — for referring to limits on money creation. With current law, the government still is limited, though less limited than it was with the gold standard.
In essence, the government has created a game — call it “Monopoly” — for which it originally created the rules, and ever since, has changed those rules at will.
According to past rules, it could run short of Monopoly money, so then it changed the rules. According to current rules, it still could be unable to pay its debts (though less so), and at the appropriate time, it will (we hope) change the rules further.
Since it is both a player and the rules maker, it cannot lose at its own game.
And through all the 235+ years of its existence, the U.S. government (its leaders, actually) has pretended an inability to change the very rules it created.
At some level of awareness, we the people understand this, but we submerge that understanding so as to widen the Gap below us. (The “Gap” is the difference in income, wealth and power between those who have more and those who have less.
It sometimes mathematically is expressed as the “GINI ratio.”)
Mentally, we say:
“I know it’s a lie, but I go along with it, because it suits me.
“Deep within me, I know there isn’t a magical being, who looks like me, who made everything five thousand years ago, and who controls every atom of the universe. But I go along with the story, because for various reasons, it makes me feel good.
“And deep within me, I know bigotry is evil, but I go along with our government deporting undocumented families and police shooting unarmed blacks, and I know Mexicans aren’t rapists and the poor aren’t lazy, because bigotry comfortably separates me from those below me.
“And deep within me, I know the government can change the rules, and never run short of its own sovereign currency, but I like the unnecesary limitations, because they push the poor down and away from me.”
So where does that leave us? How do we provide the Truth, when the populace prefers the Lie? How do we narrow the Gap, when the populace likes the Gap?
I suspect the answer lies in the nature of the Gap, for there is not one Gap but many, at all levels from the upper .001% all the way down to the bottom, where people have nothing.
Each of us exists at a level, which is above some levels and below others. This is described in the post, “The Gap, the whole Gap and nothing but the Gap . . .”
The people at any given level generally wish to distance themselves from levels below (widen the Gap), while coming closer to levels above (narrow the Gap).
The problem in providing the Truth, is that the higher levels have more power than the lower levels, so the push to widen the Gap is greater than the desire to narrow it. And widening the Gap is facilitated by the Lie about government money shortages.
It would seem then, that in order for the Truth to be accepted, the upper income/wealth/levels — especially the upper 1% — somehow must come to believe there is a greater benefit to narrowing the Gap than to widening it.
Perhaps that can be accomplished by demonstrating how the Gap can be narrowed without threatening the upper 1%, the people who hold the real power in America. That is, can the poor be brought up closer to the middle classes, while the rich maintain their distance from the middle?
The middle might not accept it at first, but their minds and hearts are ruled by the rich, and eventually the middle will believe what the rich tell them, as always.
Why would the rich want this? Because increasing the incomes of the poor provides the rich with more consumers of goods and services provided by rich-owned businesses.
There are several ways this might be done, and perhaps you can visualize some. But, for example, the first seven steps of the “Ten Steps to Prosperity” might compress the Gaps within the lower levels, while allowing the 1% to maintain or even increase the Gap between them and the rest:
1: Eliminating FICA would help the low-middle-to-middle classes, and help business owners, too, who wouldn’t have to pay for FICA.
2: Federally funded Medicare for all, would compress the Gaps within the 99%, while not bringing them “uncomfortably” close to the 1%.
3: A $5,000 (for example) bonus for every man, woman and child, would help the lowest and low-middle classes to be better consumers, while being viewed as “fair” to the highest classes.
4, 5, 6, 7: Free education for all, salary for attending school, eliminate corporate taxes and increase the standard deduction all would benefit the poor and middle classes, but also benefit, in different ways, the businesses the rich own.
Bottom line: The world is run by the rich. Nothing will happen unless the rich want it to happen. There is no use bemoaning the Gap; the rich want the Gap. And with ownership of politicians, the media and university economists, the rich create their version of the truth.
A strategy must be found to compress the Gaps between the poor and the upper middle classes, while allowing the 1% to maintain their Gap.
If the 1% are satisfied that their Gap is maintained, they will feel comfortable in telling the 99% that lifting the poor is good. And the 99% will follow.
What do you think?
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 Click here
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. Recessions come after the blue line drops below zero and when deficit growth declines.
As the federal deficit growth lines drop, we approach recessions, each of which has been cured only when the growth lines rose.
Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.