Just a reminder: The Recession Clock

We haven’t published this graph in a while.

Now, as we enter the final stages of the election cycle, and the Presidential candidates boast about their anti-deficit, pro-growth plans, I wish to remind you that:

  1. Anti-deficit actually is anti-growth and
  2. Both candidates seem to be offering plans for future deficit spending.


They talk anti-deficit, and plan deficit, so whither goes the country?

I suspect it will go here:

  1. There will be deficits, but far too small to support strong growth.
  2. To reduce deficits, social spending will be cut again and regressive taxes (FICA and sales taxes) will be increased further.
  3. The Gap between the rich and the rest will continue to widen, thus exacerbating crime, education, bigotry, poverty, health, housing, the environment, scientific progress, economic growth and human well-being.


                              THE RECESSION CLOCK

Monetary Sovereignty
Vertical gray bars mark recessions.

Recessions begin an average of 2 years after the blue line (Federal Debt Held By The Public As A Percentage Of GDP) first dips below zero.

(A common phenomenon is for the line briefly to dip below zero, then rise above zero, before falling dramatically below zero.)

There was a brief dip below zero in 2015, followed by another dip – a familiar pre-recession pattern.

Recessions are cured by a rising red line.

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.

Rodger Malcolm Mitchell
Monetary Sovereignty


The single most important problems in economics involve the excessive income/wealth/power Gaps between the rich and the rest.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
This article addresses the questions:
*Does the economy benefit when the rich afford better health care than the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.


11 thoughts on “Just a reminder: The Recession Clock

  1. Mind if I ask you a favour? I have endless trouble trying to convince people that Federal Government Debt is investor deposits, savings accounts etc.

    You often mention it, but I would like to quote you with reference to a full article on it, [ including back up evidence ] I don’t have any gravitas.

    Can you do this please?
    John Doyle


    1. You have my sympathy. I’ve been trying to do the same thing for more than 20 years.

      Monetary Sovereignty is not easily digested in one gulp. The best overall description is at: https://mythfighter.com/2010/08/13/monetarily-sovereign-the-key-to-understanding-economics/

      With regard to federal debt, I try to explan that the way to lend to the government to buy a T-security.

      When you buy a T-bill, what do you get in return? Nothing physical. It is the same thing you get when you make a deposit in a bank savings account: Nothing physical.

      You just get a little sheet of paper with a number on it — exactly what you get with a T-security.

      That sheet of paper says you have an account, with a certain amount of money in it — just an account, nothing more.


      1. Thanks. I guess my difficulty in saying its just the sum of T-securities is that it may not be totally true. I read Treasury has a general account in the Fed for day to day needs. There are “Intragovernmental Holdings” at $5.37Trillion, plus various trust funds. I can see these are all savings accounts., but do some of them actually spend money, unlike bonds accounts. What can you say ?


        1. There are hundreds, perhaps thousands, of accounts at the FRB. I suspect every government agency has checking accounts there.

          There are two federal “debts.” Gross debt includes intergovernmental accounts — money the government owes to itself, such as when agencies borrow from the mythical Social Security trust fund.

          It’s a form of accounting fiction.

          “Debt held by the public” is what usually is considered “federal debt,” and that is the total of T-securities. The graph refers to “Debt Held By The Public.”


          1. OK, so when you write here in your blog that federal debt is the sum of bonds held by investors, it’s not the whole story. Perhaps we should refine it to say it a bit differently. It’s been a little bit misleading.


  2. ejhr2015,

    I’ll repeat:

    Gross debt includes internal debt, i.e. dollars one federal agency owes another federal agency — the right pocket owes the left pocket — essentially meaningless. (If your checking account owed your savings account, would you count that as your “debt”?)

    The only people who discuss Gross Debt are those who wish to make the debt sound larger, so they can act outraged.

    The “real” debt is “Debt Held By The Public,” — dollars owed by the federal government to all non-federal-government lenders, which is the total of T-securities accounts.

    In short, the real debt is bank account deposits.


    1. The $20 Trillion therefore is not the actual debt total? What do you get when the “meaningless debt” above is deducted. I get that the “real debt” is investor savings accounts, but that is just $14 Trillion or so. Yes?


        1. Thank you. I needed to know. Funny how hard it is to make sense of reality when all around are pushing falsities. Economics is an extreme case and so damaging to society as well. At least we have a few beacons of understanding. You are one. Congratulations!


          1. I get plenty of that on line already. But also agreement too. It can be counterintuitive to tell people taxes are destroyed, money can be free [sort of] and the government has no need to cut services as it’s just a political decision. Etc. The most long winded responses all turn out to be trolls. Funny that.


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