Brownback destroyed Kansas. Same concept would grow the U.S.

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

……………………………………………………………………………………………………………………………..

As readers of this blog know, the Big Lie is this: Federal taxes fund federal spending.

Unlike state and local governments, and even unlike euro nation governments, the U.S. government is Monetarily Sovereign.  That means it neither needs nor uses tax dollars. It creates dollars ad hoc, by paying invoices.

Even if all federal tax collections fell to $0, the federal government could continue spending, forever.

The Big Lie is expressed in many ways, by the left and by the right. Here is one example:

Brownback eager to see Trump repeat Kansas’ mistakes
12/27/16 10:11 AM, By Steve Benen

Arthur Laffer, the architect of Kansas’ failed far-right economic experiment, is certain that if Donald Trump adopts similar policies at the national level, it will “lead to economic ‘nirvana’ in the U.S.”

The last chief executive to listen to Laffer’s advice, Kansas Gov. Sam Brownback (R), is thinking along the same lines. The Wall Street Journal reported over the holiday weekend:

Sam Brownback, the Kansas governor whose tax cuts brought him political turmoil, recurring budget holes and sparse evidence of economic success, has a message for President-elect Donald Trump: Do what I did.

In 2013, Mr. Brownback set out to create a lean, business-friendly government in his state that other Republicans could replicate. He now faces a $350 million deficit when the Kansas legislature convenes in January and projections of a larger one in 2018. The state’s economy is flat and his party is fractured.

Still, Mr. Brownback views his signature idea – eliminating the 4.6% state individual income tax for partnerships, limited liability corporations and similar businesses – as a national model.

He’s not alone. In 2012, Senate Majority Leader Mitch McConnell (R-Ky.) said of Brownback’s radical economic experiment, “This is exactly the sort of thing we want to do here, in Washington.”

This is an unbelievably crazy idea.

As regular readers know, it’s been about six years since Brownback announced his plan to conduct “a real-live experiment” with his state’s economy.

The far-right Kansan, working with a GOP-led legislature, cut taxes far beyond what the state could afford, slashed public investments, and waited for prosperity to flourish across every corner of the state.

None of that has happened. Not only have Kansas’ job growth and economic growth rates lagged behind neighboring states, the state’s budget is in shambles, and Kansas’ debt rating has been downgraded multiple times.

Given these results, common sense suggests the governor and his allies might re-think some of their economic assumptions.

Instead, Brownback and his cohorts are convinced their failures are actually successes, and Republicans at the national level would be wise to repeat Kansas’ missteps.

Clearly, Mr. Benen, the author of the above article, does not understand the differences between a monetarily NON-sovereign government (Kansas) and a Monetarily Sovereign government (the U.S.).

Kansas uses the U.S. dollar, a currency over which it is not sovereign. It, and all other states, counties, and cities, can run short of dollars, so they need continual infusions of dollars to fund their spending.

These dollars can come from taxes, tourism, or exports.  Reducing taxes requires that more dollars come from tourism or exports, or the state will face insolvency.

By contrast, the federal government cannot run short of its own sovereign currency. The U.S. could, and indeed should, reduce taxes, as Kansas did, an act that would leave more dollars in the economy and increase economic growth.

In fact, just the elimination of FICA (see Step #1 in the Ten Steps to Prosperity, below) would provide a powerful stimulus to the U.S. economy.

Unfortunately, Mr. Brownback, being Republican, also “slashed public investments” which invariably translates into cutting programs that benefit poor and middle-income people.

The Big Lie, whether spoken by the right or by the left, leads to one result: It widens the Gap between the rich and the rest.

And, the Big Lie, whether spoken by the right or the left, has one of two causes: Ignorance or intent. Either Mr. Benen is ignorant of Monetary Sovereignty, or he intends to help widen the Gap between the rich and the rest.

Readers of Mr. Benen’s articles might conclude he has a progressive bent, and he would be among the last commentators to opt for widening the Gap.

However, the same readers might conclude he is intelligent, well-read, and understands the truths of Monetary Sovereignty.

Which is the real Steve Benen?  I cannot say. What I can say is his article damages America by spreading the Big Lie, whether intentionally or not.

The bottom line to all of the above is that state finances are different from federal finances, monetary non-sovereignty is different from Monetary Sovereignty,  and tax cuts that were disastrous for Kansas could work quite well for the U.S.

Ignorance has its penalties, and the public, not understanding the above differences, pays dearly for its ignorance.

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.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can 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 benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
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.
6. ELIMINATE CORPORATE TAXES
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.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
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.

14 thoughts on “Brownback destroyed Kansas. Same concept would grow the U.S.

    1. @ ejhr2015:

      Regarding that article, I say that runaway inequality is the most common reason why nations, empires, and civilizations die. (There are other causes like war, or prolonged droughts, but these are far less common.) With runaway inequality, the 1% becomes a lethal cancer on the rest of society, and they eventually kill their host.

      What causes runaway inequality?

      The cause is not capitalism, but GAP DYNAMICS, in which most people at all levels seek to keep as many people as possible trapped below them on the ladder of social power.

      People do this by maintaining the Big Lie through denial or apathy. And since they affirm the Big Lie as “truth,” they deny that they deny the “truth.” (It’s like a social taboo that forbids certain actions, and especially forbids any mention of the forbidding of actions. Every taboo includes a taboo against mentioning the taboo.)

      In the Roman Empire, inequality was indulged in at all social levels except the bottom. Rich Romans owned lower class Romans, who in turn owned slaves. All Romans became more concerned with maintaining the gap than with defending themselves from outsiders. As a result, the Roman Empire was destroyed by inequality.

      GAP DYNAMICS is both the engine and the doom of all empires.

      The USSR collapsed despite being supposedly based on communism and equality. I’ll bet that gap dynamics was involved there as well. Social strata can be maintained by wealth, and / or by political connections. I’ll bet that the Soviet 1% (the commissars, apparatchiks, and party bosses) became a parasitical cancer on the rest of the USSR. In place of the “divine right of kings,” the USSR had the “divine right of the Party.”

      (In the USA we have the “divine right of the rich,” in which the Big Lie is mass-worshipped as much as any religious dogma has been worshipped throughout history.)

      All the chatter about “equality” and “civil rights” is mere window dressing. It is political correctness. It’s what makes establishment Democrats. It is yet another form of gap dynamics and denial of the Big Lie. For example, actor-comedian Steve Martin had always supported actress Carrie Fisher. When Fisher died (27 Dec 2016) Martin tweeted that “When I was a young man, Carrie Fisher was the most beautiful creature I had ever seen. She turned out to be witty and bright as well.” For this tribute, politically correct fake-leftists on Twitter attacked Martin as “sexist.” Such attacks manifest the desire to claim that, “I am better than you.” They are examples of gap dynamics, and their damage is cumulative. The rich get richer, and the poor attack each other as “sexists” (or “racists,” or “terrorists,” or whatever).

      In maintaining gap dynamics, liberals are right-wing fanatics in “leftist” clothing. I call them “fake leftists.” The only true leftists are those who expose and oppose gap dynamics.

      None of this is new. Plato and Aristotle discussed it. So did German sociologist Robert Michels in his 1911 book “Political Parties.” Michels wrote of the “iron law of oligarchy” in which elitist rule is inevitable within any organization. All organizations, regardless of how democratic they are when they start, eventually develop into oligarchies.

      “Who says organization, says oligarchy,” Michels wrote. Bureaucracy happens. Bureaucracy leads to centralization of power by the leaders, which leads to corruption, which dooms civilizations. Michels explained many reasons for this, but my own reason is gap dynamics.

      What causes gap dynamics? The illusion that you and other people are entirely separate beings.

      Like

      1. Yes, anyone wanting to read more about the Gap needs only to type “the Gap” into the search box in the upper right of this page.

        As we said in the introduction to the Ten Steps to Prosperity, “The single most important problems in economics involve the excessive income/wealth/power Gaps between the rich and the rest.”

        We discuss what Elizabeth calls “gap dynamics,” (good name) in Are You Gap Dumb?

        Like

    1. Obama’s proxy war against Syria has failed. Hence there is no need for the USA to be involved in “peace talks” between Obama’s terrorist mercenaries and the people of Syria.

      Obama is probably thinking. “Before the Russians became involved, we should have bombed Syria to dust like we did Libya.”

      Oh well.

      Obama will still have his billion-dollar presidential library, whose operations will be handled by federal employees funded by federal dollars. Plus he will enjoy a federal pension of $17,141 per month for life. Plus he and his wife will each have offices in Washington DC, funded by federal dollars, and they will both enjoy Secret Service protection for life.

      Sweet.

      Like

  1. OFF TOPIC

    I just read a blog post by someone who claims to oppose the privatization of Social Security, but whose errors promote the privatization.

    Examples…

    “TRUST FUND”

    If you believe the falsehood that the U.S. government has “trust funds,” then you will be helpless when politicians claim that a federal “trust fund” is “insolvent,” and must therefore be cut or privatized.

    The truth is that federal dollars are more infinite than air molecules. There is no “trust fund” for air molecules, or for federal dollars.

    If you could create infinite dollars by simply changing the numbers in your bank account, would you create dollars from a “trust fund”? If you could add points to a sports team by simply changing the numbers on the scoreboard, would the points come from a “trust fund”? There is no physical pool of dollars (or points) since there are no physical dollars (or points).

    Arguing about the “solvency” of the non-existent “trust fund” is like arguing about the appearance of the emperor’s new clothes. No matter what you say, you cannot avoid supporting the central lie.

    “TAXES FUND SOCIAL SECURITY”

    If you believe this lie, then you let politicians say they must increase your federal taxes to pay for Social Security. Where do tax dollars come from anyway? The Chinese? Where do the Chinese get their dollars? Ellen Brown and her disciples claim that all dollars are created by bankers as loans. For them, there is no government spending. There is only government borrowing. Their error supports tax increases to pay for the U.S. government’s (non-existent) “borrowing” to pay for its operations.

    RAISE THE CAP

    This is a variant of the lie that “taxes fund Social Security.” It goes like this…

    “Social Security could be fully funded for another 75 years by simply eliminating the cap on income subject to the FICA tax (currently only the first $118,500 of income is taxed, rising to 127,200 next year). Social Security benefits could even be expanded by adding a small transaction tax of a fraction of a percent on all short-term stock trading (a measure that would not impact long term investors or retirement funds).”

    If you believe this lie, then you will let politicians falsely claim that Social Security will be “insolvent” in 75 days, not 75 years, with or without the cap in FICA taxation.

    CUT MILITARY SPENDING

    This is yet another variant of the lie that “taxes fund Social Security.” It goes like this…

    “Social Security could be fully funded for another 75 years by simply reducing spending on the military.”

    If we believe the lie that federal dollars are limited, we let politicians fabricate any lie they like, whether or not there is war. And we will support imperialistic war in order to defend our “limited dollars.”

    I myself would like to see cuts in all military spending that does not directly help average Americans, but my reason concerns equality, not solvency. (Most dollars for the military go to the top executives of military contractors.)

    ****************************************************************

    If you believe in the emperor’s new clothes, then no matter how well intentioned you may be, you let politicians dictate what the emperor’s “new clothes” look like.

    Like

    1. “Off topic” means a comment is not a direct response to the original post above it.

      ***************************************

      Below is another example of why economics discourse is 99% nonsense.

      BUSINESS INSIDER: “Saudi Arabia’s national debt has exploded since the oil crash”

      Quote >> “Saudi Arabia’s national debt rose to 316.5 billion riyals in 2016 (about 12.3% of the projected GDP in fixed prices for 2016), up from 142.0 billion in 2015, according the Ministry of Finance’s 2017 budget report. The national debt has increased by about 619% from 2014 — the year OPEC decided not to cut production, after which oil prices plummeted — to 2016. You can see the rise in debt in the chart shared by the Saudi Ministry of Finance in their report. Note that the x-axis goes from right to left…”

      Blah, blah, BLAH! Here we see how economists use meaningless techno-bullshit to sustain the Big Lie.

      First of all this article (like all the others) does not explain the term “national debt.” The writer, a female, simply says “debt,” which is sufficient to deceive most people.

      Second, she says that Saudi Arabia’s “national debt” rose because of the fall in oil prices, but she does not explain how or why.

      Let’s expose her nonsense…

      The term “national debt” can mean two different things. (Economists maintain the Big Lie by refusing to clarify this.) It can mean the amount of money deposited in central bank savings accounts via the purchase of treasury securities. Or it can mean the “foreign debt” — i.e. money in foreign currency that the central bank has borrowed from abroad in order for the nation to buy imports. If you are a Saudi grocer who wants to buy food from abroad, you must go to a bank to exchange your Saudi riyals for dollars, or euros, or whatever the foreign seller wants.
      Saudi Arabia creates its own currency (riyals) out of thin air. Since the Saudis can create infinite riyals, they can have no “national debt crisis” if their “national debt” is in riyals. And indeed the article gives debt figures in Saudi riyals, which is meaningless, but intentional.

      Saudi Arabia does indeed have a debt crisis, but with foreign debt. Saudi Arabia is one of the least self-sufficient nations on earth. The Saudis export oil, and they import EVERYTHING ELSE. The Saudis cannot use riyals to buy imports, since foreign producers want to be paid in dollars or euros. Therefore the Saudis sell oil, and accept payment in dollars or euros. If oil prices fall, the Saudis cannot get enough dollars or euros to buy imports with. Therefore the Saudis must borrow dollars or euros to buy imports. Now the Saudis have a debt problem. If oil prices do not rise, then the Saudis must sell national assets in order to get dollars or euros with which to pay their foreign debts. And indeed this is what the Saudis are doing.

      It’s all quite simple, but economists never explain it. They bullshit in order to pose as “experts” so they can keep their cushy jobs at universities, rather than having to work at McDonald’s or Wal-Mart.

      The author simply says that because of Saudi Arabia’s “national debt” the government must impose “reforms” (i.e. austerity) on average Saudis. This means spending cuts.

      But wait…if the Saudi government can create infinite riyals, then why is there any need for spending cuts? The reason is that increases in government spending cause increases in the strength of the economy. This is great for the USA, but it is not good for Saudi Arabia, which imports everything except oil. A stronger Saudi economy means a stronger demand for imports, which the Saudis cannot pay for, since oil prices are down. Therefore the Saudis have a huge problem, which is getting worse all the time because they are too stupid and prideful to end their wars against Yemen and Syria. (When the Saudis’ oil runs out, Saudi Arabia will become the most primitive, impoverished, and backward nation in the entire Middle East.)

      By refusing to clarify this, the author makes it seem that the Big Lie in the USA is legitimate, and therefore we must privatize Medicare and Social Security. We must have more federal austerity. We must do whatever is necessary to widen the gap between the rich and the rest.

      http://www.businessinsider.com/saudi-arabia-national-debt-budget-2017-report-2016-12

      Like

  2. It’s more confused than that. “National debt” even can include the private debts a nation’s citizens owe.

    The Saudis can pay their foreign debts via Forex — exchanging their currency for foreign currencies. Since they never can run short of riyals to exchange, they never will experience difficulty paying foreign debts — except — except the exchange value of the riyal would go down if too many are offered for exchange.

    That doesn’t seem to be a problem currently. Their inflation rate has been dropping.

    Consumer prices in Saudi Arabia increased 2.3 percent year-on-year in November of 2016, easing from a 2.6 percent rise in the previous month.>

    It was the lowest inflation rate since December 2015, as food prices fell further (-2.6 percent from -2.1 percent) and cost rose at a slower pace for housing and utilities (+6.4 percent from +6.5 percent in October).

    In contrast, transport prices rose faster (+7.7 percent from +7.3 percent). On a monthly basis, consumer prices declined 0.2 percent. Inflation Rate in Saudi Arabia averaged 2.81 percent from 2000 until 2016, reaching an all time high of 11.10 percent in July of 2008 and a record low of -2 percent in January of 2001

    The article either is “much ado about nothing” or “a tempest in a teapot.” Even the graph is a bit off. Who reads a time-line from right to left??

    Like

    1. “It’s more confused than that. “National debt” even can include the private debts a nation’s citizens owe.” ~ RMM

      You’re right. A common way to support the Big Lie is to intentionally conflate public debt with private debt.

      *********************************

      “The Saudis can pay their foreign debts via Forex — exchanging their currency for foreign currencies.” ~ RMM

      That’s assuming that anyone on the Forex market wants to buy riyals. I suppose there are a few parties that buy riyals for speculative purposes, but I doubt that this brings enough dollars, euros, or whatever for Saudi Arabia to buy the imports it needs.

      *********************************

      Regarding Saudi inflation and food prices, the figures mentioned in the Trading Economics blog come from the Saudi government, which is notorious for lying.

      If they are accurate, and inflation is indeed under control, then it would be a product of the Saudi government’s severe and growing austerity, which reduces the amount of riyals in circulation. Without austerity, Saudi price inflation would be extreme, given the increasing scarcity of consumer goods, caused by low oil prices.

      as part of this austerity, the Saudi government has increased gasoline prices several times this year, slashed fuel subsidies, raised the cost of visas for visitors, and hiked municipal taxes, with more tax hikes coming. In 2017 the Saudi will introduce a levy on expat workers and their dependents. The tax will rise to as much as 800 riyals ($213) per month in 2020. In 2018 the government will impose a nationwide sales tax.

      *********************************

      “Who reads a time-line from right to left??” ~ RMM

      Arabic speakers do. Arabic is written from right to left. The graph could have been corrected for English, but the author wanted to seem “sophisticated” and “cosmopolitan.”

      *********************************

      I do not think that the Saudi Arabia’s foreign debt crisis is a “tempest in a teapot.” The Saudis live in oil exports, and the fall in oil prices has hurt them badly. This year they had to borrow foreign currencies for the first time ever ($17.5 billion and rising). They have also put 49% of Aramco up for sale.

      Like

      1. The Saudis, being Monetarily Sovereign, control the value of their sovereign currency. They have pegged it to the dollar for several years, but they can “unpeg” it at will.

        Also, being MS, they control the demand for their currency, via interest. These days the rate is about 2%, but if they wanted to obtain a large number of dollars in exchange, they would unpeg and raise interest rates.

        The higher the rate the greater the demand for their currency as an investment.

        Every nation acts monetarily non-sovereign, thus the unnecessary borrowing and asset sales. The U.S. does the same. The bankers demand it.

        Like

      2. Do you believe that interest rates *alone* can manage inflation?

        If so, I do not agree.

        I say that when acute shortages of consumer goods create the threat of price inflation, for example, the government may (in addition to managing interest rates) be forced to use various means to remove money from circulation. The US government did this during World War II by instituting the personal withholding income tax, and by selling “war bonds.” The Saudis are doing it via austerity.

        Like

        1. The fact that many governments sell bonds or “use various means to remove money from circulation” does not indicate that interest rates alone cannot manage inflation.

          It is more a reflection of the Big Lie than a reasoned response to inflation.

          That said, I often have allowed that in the extremely unlikely event interest rates alone didn’t increase money Demand enough to manage inflation, we would have to reduce Supply.

          That would be a very last resort however, because of the 4 reasons described at: Monetary Sovereignty for Young People, Part 3. Inflation

          Like

        2. I think I see the confusion. I was thinking globally, whereas you were thinking of the USA.

          For the USA, interest rates alone are sufficient to control inflation, since U.S. dollars can be used to buy imports worldwide. Hence for the USA there is no shortage of consumer goods in ratio to dollar supply, and therefore no inflation. The only exception to this (since the year 1900) was during the world wars when there was a shortage of consumer goods. In that case the US government took measures to temporarily remove money from circulation in order to prevent price inflation. The government also used interest rates for this purpose.

          Most other nations are different. With most nations (not all) their currencies are not widely accepted outside their borders. If their economies are not diversified, and the price of their main export drops, then they are in trouble. (Venezuela and Saudi Arabia come to mind.) In that case, the adjustment of interest rates may not be enough. The government may take measures to remove money from circulation, or may institute rationing and / or price controls.

          JUST TO RECAP FOR THE SAKE OF CLARITY, in this comment thread we have together discussed one method that economists use to maintaining the Big Lie, namely they conflate things, and keep them vague. Economists intentionally refuse to clarify the difference between…

          [1] Pubic debt vs. private debt

          [2] The “national debt” in a nation’s own currency vs. the national debt in foreign currencies (#2 does not apply to the USA, since the USA does not need foreign currencies).

          And of course the big one…

          [3] Monetary sovereignty vs. non-monetary sovereignty

          Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s