The making of poverty

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Twitter: @rodgermitchell; Search #monetarysovereignty
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Mitchell’s laws:
•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 the rest..
•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..
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Before we describe how poverty is made, we must answer the question, “What is poverty?”

The U.S. Census Bureau counts “only cash income in determining whether a family is poor; cash welfare programs count, but benefits from noncash programs, such as food assistance, medical care, social services, education and training, and housing are not included.

“Taxes paid, such as Social Security payroll taxes, and tax credits received, such as the Earned Income Tax Credit, are also excluded from poverty calculations.

Is “poverty” simply lack of income as the Census Bureau seems to think?

Imagine you and your family are the only people occupying a small island. You have plenty of food, water and clothing, and a tent provides warm shelter. You have zero income, because there is no money on this island. Are you poor?

Imagine you and your family live among several other families on that island. You still have the same amount of food, water, clothing and a tent, but other families have far more and far better food and drink, far more and better clothing and they live in large, centrally heated houses, not in tents. Are you poor?

For years, money had not been necessary on that island. People grew their own food, sewed their own clothing and built their own houses. If any family lacked anything, they traded with a neighbor.

Now, the population of the island has grown, and the lack of money has made commerce more difficult. So, the elders of the island come together and decide to create money to facilitate trade.

The money will consist of a large wooden board, kept at the center of the island, on which is written the names of every resident. After each name is written a number showing how much money each resident has.

The board is called the “Money List,” and the keepers of the list are called “The Money Committee.”

For reasons lost to history, the residents decide to call their money “dollars.”

Initially, “The Money Committee” decides to write the number “1000” after each resident’s name. In essence, each resident now “has” 1,000 dollars, though all this means is that each resident has “1000” written after his/her name.

The Money Committee could have decided to write “10” or “100000,” or any other number. It just arbitrarily decided on “1000.”

If resident “A” sells something to resident “B,” the number after “A” will be increased and the number after “B” will be reduced. Nothing physical will change hands. All that will happen is the numbers on the Money List will change.

This leaves the question, “What is a dollar worth?” which easily is determined.

Each resident, knowing he/she has 1000 dollars, estimates how many of his dollars he is willing to sacrifice to acquire one pound of beef, a loaf of bread, or a candle. Similarly, the butchers, bakers, and candlestick makers decide how many dollars they will ask.

As those decisions are made thousands of times each day, a consensus develops regarding how many dollars should be added after the butcher’s, the baker’s, and the candlestick maker’s names in return for their goods and services.

And this consensus becomes known as “The Consumer Price Index.”

Notice that dollars have no physical existence. They merely are numbers on a list. And the Money Committee is not limited in the size of the numbers on the list. The “1000” was just an arbitrary starting point.

The Money Committee has the power to create more dollars as needed, merely by increasing the numbers on the Money List.

One day, the Money Committee decides it wants to build a large new building in which to house a huge, fancy Money List. This will require the labor of many carpenters, who will demand many dollars. The Money Committee will need to increase the numbers next to the names of those carpenters.

But the Money Committee has no dollars of its own. There is no line on the Money List that says, “Money Committee.”

So where will the Money Committee obtain the dollars to pay the carpenters? It simply can increase the numbers next to the names of the carpenters. Remember, it created the original numbers — the 1000 dollars per person — arbitrarily and from thin air. It can continue to create more numbers, arbitrarily and endlessly.

Some residents object, saying that increasing the carpenters’ numbers will decrease the value of everyone else’s numbers (aka “inflation). Instead, they want the Money Committee to reduce the numbers next to other people’s names, to equal the increase in the carpenter’s numbers.(This is known as “taxation.”)

The Money Committee knows it easily can maintain the value of numbers (dollars), i.e. prevent inflation, by increasing the demand for owning numbers (as opposed to owning goods and services), by awarding the owners of numbers a small stipend (aka “interest.)

Let’s summarize to this point:

1. “Poor,” being the basis of “poverty,” is a comparative, not an absolute. For instance, living in a tent might be considered poor in some societies, but quite normal, even rich, in others. If you live in a tent, and everyone else lives in the open, you might be rich. But if you live in that same tent, while everyone else lives in a house, you might be considered poor.

2. The Money Committee arbitrarily created dollars out of thin air, simply by putting numbers on a list. The Money Committee never can run short of dollars, nor does it ever need to ask anyone for dollars.

The Money Committee neither needs to borrow nor to tax. It can pay all its bills forever, by increasing the numbers on that list.

3. The Money Committee can maintain the value of dollars, i.e. maintain the demand for dollars, by paying interest to owners of dollars.

All of the above is logical and mathematical, but it ignores the sometimes illogical, emotional human desire to win, to grow, and to be superior.

The island residents could be taught that the Money Committee never needs to tax or to borrow dollars — it can change the numbers at will — but that is not the information the few, most influential residents want the rest to have.

No, the influentials want the rest to believe the Money Committee somehow is limited in its number-changing ability. The purpose: To put distance between themselves and the rest (i.e. “the Gap”).

So they disseminate the false information (“The Big Lie“) that the Money Committee must reduce some residents’ numbers before it can increase other resident’s numbers.

By controlling the Money Committee, the influentials control money creation and dispersal. Thus, it is the influentials who create poverty on the island.

Poverty never is necessary or inevitable. It always is created by the influentials.

So when you see poverty, anywhere in the world, know this: Poverty is not caused by the poor. Poverty is not the result of laziness or any other character weaknesses on the part of the impoverished.

Poverty is made — made intentionally — by the rich, to widen the Gap and to create a servant and subservient class.

Always.

Rodger Malcolm Mitchell
Monetary Sovereignty

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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.
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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

Recessions begin an average of 2 years after the blue line first dips below zero. There was a dip in 2015. Recessions are cured by a rising red line.

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.

#MONETARYSOVEREIGNTY

Published by Rodger Malcolm Mitchell

MBA Northwestern, business turnaround expert, economist

Published

7 thoughts on “The making of poverty”

  2. Regarding who makes poverty:

    The GOP’s Obamacare alternative? Don’t hold your breath
    01/11/16 10:40 AM, By Steve Benen

    At an event over the weekend, South Carolina Gov. Nikki Haley (R), who’ll deliver her party’s State of the Union response this week, made a curious boast about her congressional allies.

    House Speaker Paul Ryan (R-Wis.), the governor argued, “said that when he took his leadership role, things were going to change. How about the fact that they repealed Obamacare? Was that not fantastic?”

    The comments left many confused. House Republicans voted last week for the 62nd time to repeal the Affordable Care Act, but that doesn’t mean they succeeded.

    On the contrary, President Obama vetoed the repeal bill on Friday afternoon, issuing a statement to Congress that read in part, “Because of the harm this bill would cause to the health and financial security of millions of Americans, it has earned my veto.”

    monetary sovereignty

    Haley may have been impressed, and Republican lawmakers themselves may have had a grand time pretending to take Americans’ health benefits away – see the above photo – but nothing has changed.

    So, now what? If we’re to believe the congressional GOP’s rhetoric, the next step is the release of the long-awaited Republican alternative to the current health care reform law. On CBS’s “Face the Nation” yesterday, host John Dickerson asked Speaker Ryan about this:

    DICKERSON: You said you wanted the Republicans to offer an alternative to the president. One of the first things you did this year, though, was offer [an ACA repeal bill]. How is that an alternative?

    RYAN: It’s not. That’s why we have to come up with an alternative.

    Evidently, that’s easier said than done. The GOP’s alternative has been in the works since June 2009 – a mere six-and-a-half years ago – and asked last week why he’s moving forward with a repeal bill before the Republican alternative ready, Ryan told reporters with a smile, “Just wait.”

    Around the same time, the House GOP leadership quietly signaled just how long that wait is likely to be.

    Politico reported that the Speaker’s office is pushing Republicans to “go big on ideas” in the 2016 election cycle, but for now, it appears “those ideas might just remain, well, ideas.”

    Senior House Republican aides and lawmakers say they do not plan to hold votes on many of the agenda items the party plans to unveil – such as a health care plan to replace Obamacare, or tax reform – because of a tight legislative calendar over the next few months and the reality that none of the bills would be signed by the president, anyway.

    The idea that Congress shouldn’t work on bills that won’t earn the president’s signature might be more compelling if Congress hadn’t just sent an ACA-repeal bill to the White House, knowing all the while that the legislation stood no chance of success.

    Indeed, the House Republican majority has spent roughly five years repeatedly working on measures that they knew would never receive Obama’s support. Why change now?

    As for the “tight legislative calendar,” note that this has nothing to do with a busy work schedule – Congress has very little on its to-do list for the rest of the year – and everything to do with vacation time lawmakers have given themselves. In other words, “tight legislative calendar” refers to the limited amount of time members have given themselves for actual work.

    If the House Republican majority wanted to give itself more time to do actual work, it could – it’s within the GOP’s power to expand the “tight legislative calendar” by weeks or months. Party leaders simply prefer not to.

    The end result suggests we won’t see any real consideration of the Republicans’ ACA alternative until 2017 – at the earliest.

    Postscript: The Washington Post published a piece last week saying it was “time for an Obamacare checkup,” assessing how the law is performing along multiple metrics. The prognosis? “Despite much doom and gloom portended for years by the law’s opponents, Obamacare looks surprisingly … healthy,” the Post reported.

    What if Obama had signed this latest of 62 repeal bills? What would the Republican majority have done, then?

    Answer: Nothing. They are good at opposing, but not good at governing.

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    And then there’s this:

    From ‘Where are the jobs?’ to ‘Where are Republicans on jobs?’

    The economic news on Friday was even better than optimists expected: the United States added nearly 300,000 jobs in December, wrapping up the second best year for the American job market in over a decade. In fact, looking at the last two years combined, 2014 and 2015 were the best back-to-back years for job creation since 1998 and 1999, at the height of the dot-com boom.

    While no mainstream American politicians publicly root against the U.S. economy, the fact remains that this strong job growth must be baffling to Republicans. GOP orthodoxy, repeated ad nauseam, is that President Obama’s domestic agenda – the Affordable Care Act, higher taxes on the wealthy, Wall Street regulations, environmental safeguards, et al – is crushing the economy and stifling the American job market.

    The only way to put Americans back to work, Republicans insist, is to do the exact opposite of the policies that cut the unemployment rate from 10% to 5%.

    Over the weekend, for example, I checked House Speaker Paul Ryan’s (R-Wis.) official blog, which used to publish a statement with the release of every new jobs report. Friday, however, featured plenty of new content, none of which referenced the job numbers.

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    Koch Brothers’ Culture Grab: Latest Donation, to Western Carolina University, for “Center of Study of Free Enterprise” Despite Faculty Vote “No”

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  3. Three things, Rodger…

    [1] You mentioned how money is created. Some corners of the blogosphere are buzzing about Hillary Clinton’s emails while Hillary was U.S. Secretary of State. People say the emails reveal that one reason why NATO destroyed Libya is that Libya’s gold reserves (estimated to be 143 tons, with a similar amount in silver) where a “threat” to the West African CFA franc, plus the Central African CFA franc. (These two currencies combined are used by 154 million people in fourteen countries, and both are pegged to the euro).

    That is, these French-controlled currencies were supposedly threatened by Gaddafi’s plan to launch a pan-African currency called the African gold dinar.

    My point is that here – once again — the average person falsely thinks that a currency has no value unless it is “backed” by a precious metal such as gold.

    I say this is nonsense. I say that throughout history, all true money and true currencies have been fiat currencies. No true currency has EVER been “backed by” gold, except as a gimmick. In your hypothetical example of a “Money Committee,” no gold was needed to establish the wooden board and the accounting system.

    What “backs” a currency (any currency) is people’s full faith and credit, which is “backed” by habit, custom, convenience, convention, and by governments’ readiness to use force to police and maintain the monetary system.

    Average people’s insistence that money is worthless unless “backed by gold” is one reason why we have inequality.

    The money masters, i.e. the Masters of Capital, are those who control the scoreboard.

    [2] As you noted above, the sensation of “wealth” is relative. It is based not how much we have, but how much more we have than others have. In a primitive village, the richest man might have only five cows, while everyone else has one or two cows. We might think him poor, but within his milieu, he is rich. Thus, “wealth” and “power” are always functions of human interaction. The larger the scale, the more the power.

    Imagine being marooned on an island with a handful of other people — an island that had a mountain of solid gold. To the handful of islanders, the gold would be worthless, and would not make any person more powerful than any other. The people could start a currency system if they wanted, but it would have nothing to do with the gold. Currency made out of sea shells was once used in many parts of the world until the 1800s. It was not “backed by” gold. See https://en.wikipedia.org/wiki/Shell_money

    [3] “Poverty never is necessary or inevitable. It always is created by the influential.’ ~ RMM

    I say it is created by everyone at all levels who subscribes to the Big Lie for his own reasons. Poverty is created by lack of empathy. It is created by the illusion that each of us is an independent entity. This illusion is sustained by fear, belief, habit, and ego.

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    BY THE WAY, yesterday I saw a curious thing. Just outside a grocery store entrance sat a man with a box, a U.S. flag, and a sign soliciting donations for “disabled veterans.” Most people ignored him, but some people dropped their change into his box.

    Fifty yards away, at the entrance to the store parking lot, was different man. This one had a dog, plus a sign that said he was homeless and hungry, and would appreciate any help. Everyone ignored him. (EVERYONE.)

    My point is that people gave money to the guy with a sign for “disabled veterans,” not knowing who the guy was, or where the money would go to. However people gave nothing to the guy who was desperate for something to eat.

    I gave fifty cents to the “disabled veterans” guy, telling him I’d like to be more generous, but I didn’t know what he represented. On my way out of the parking lot, I gave five dollars to the starving guy, who was so grateful he almost burst into tears.

    If I had not been in a hurry, I would have told him, “You should get a U.S. flag and devise a scam like that guy there at the store entrance.”

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  5. Your theory begins with a completely incorrect assumption, and you know what happens when you make assumptions.

    Not too many will have much to argue against a proposal “to help the poor”. But i will say your goal is far from that and most that do generally have a different goal.

    1. People dont just hop on the money wagon “to facilitate trade”. They have responsibilities to attend and will only agree, at least initially, if they are led to believe and get promise that their production will not be stolen.

    2. The amount of goods in the market cannot be controlled via printing. If printing goes up while goods stay the same, price goes up. This is a basic equation.

    3. With the exception of food, we may have more resources than we meed as individuals. I dont think we have enough food to feed all the poor while eating the way we do. If we had more food, than we have a large portion just being dumped – its not the case.

    Lets keep it simple, try telling one of those islanders that you will be adding new money as you wish ahead of time and i bet they will opt out. I would because it simply mean some of my hard sweat and tear production would go to someone else. And Mrs Harris, the proponent of the free world (only when it suits her fanstical agenda) loves government force. Whats that called again?

    What is more interesting is that in one sentence you say that the amount of money doesnt matter, and i agree (new money wont grow cows and chickens) yet in another you think money is the only driver for prosperity. Yikes…

    Whats even more interesting is that those talking about helping the poor, do nothing as individuals but are trigger happy when its others peoples money. And no, i dont have golf and country club memberships.

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  6. $368.28 MILLION TO BE REMOVED

    The Powerball Lottery jackpot for tomorrow’s drawing will be $1.5 billion.

    The actual lump sum “cash value” is $930 million. Of that, the IRS will take 25% up front, plus another 14.5% at tax time.

    This means a total of 368.28 million dollars will be removed from the (already depressed) U.S. economy. Cool!

    (People in New York City must pay an additional 12.72 percent in state and municipal taxes. But at least that extra tax money stays in the economy. So if the jackpot is $1.5 billion, and there is only one winner, and the winner lives in NYC, he would take home $486.6 million. That’s only 32% of the “jackpot,” but it would still be nice. Incidentally, relocating won’t help, since the local tax is based on where you bought the ticket.)

    By the way, the Powerball people are constantly thinking of ways to scam money out of you. The last time the jackpot was $1.5 billion (Feb 2015) the odds of winning were 1 in 175 million against you. In Oct 2015 the Powerball people added more numbers, increasing the odds to 1 in 292.2 million against you. Previously, players chose five numbers out of 59, but now it’s five in 69 numbers. It’s now much harder to win the massive, life-changing jackpot, and much harder to win the second prize of $1 million that goes to players who get all the numbers right except for the Powerball. Those odds are one in 11.7 million, more than twice as tough as they used to be.

    Put another way, the odds of winning are about the same as having your name randomly pulled from a hat filled with the names of everyone in the US.

    It’s all about building up huge jackpots so people will buy, buy, buy (and the IRS can suck more and more money out of the economy).

    >>>>NOTE: Lottery winnings are not taxed by the Canadian federal government. So a Canadian winner of Powerball would still have to pay U.S. local and federal taxes on the winnings, but he would not be nailed again by the Canadian government. Evidently the Canadian government is not as “broke” as the U.S. government.

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