It takes only two things to keep people in chains: The ignorance of the oppressed and the treachery of their leaders.
I like lists. Not only do they help to organize thought, but by their length, they can demonstrate quantity better than can mere paragraphs.
Here is a long list of lies you have been told about our economy. Most first were published back in 2011, but they even are more relevant today.
Following each lie is a quick truth in parentheses. If you don’t understand why any are lies, or don’t understand the truths, feel free to ask via the comment section.
- There is no difference between Monetary Sovereignty and monetary non-sovereignty. (The former cannot run short of its own sovereign currency; the latter can.)
- Like us, the federal government should live within its means. (Unlike you and me, and state and local governments, the federal government has unlimited “means.”)
- Money and debt are two different things. (Every form of money is a form of debt, though all debt is not money.)
- A growing economy does not need a growing supply of money. (GDP measures money spent; a greater money supply allows more to be spent.)
- Federal surpluses help the economy grow. (Federal surpluses are the economy’s deficits. Taking dollars from the economy, surpluses cause recessions and depressions.)
- Some federal spending must be cut to allow room for other spending. (The federal government’s ability to spend is unlimited. Federal spending adds dollars to the economy, which stimulates private spending.)
- The federal debt is too large. (The so-called “debt,” unlike personal debt, consists of deposits in T-security accounts at the Federal Reserve Bank, neither too large nor too small.)
- The federal debt is caused by federal deficits. (The federal debt is the total of deposits in T-security accounts, which resemble bank savings accounts. Deficits are the difference between taxes and spending. We could have deficits without a “debt” [simply stop allowing deposits in T-security accounts]. And we could have a “debt” without deficits [allow deposits in T-security accounts, even if the federal government runs a surplus.])
- The federal debt ceiling has a beneficial function. (The “debt ceiling” is 100% harmful with no redeeming qualities. The debt ceiling doesn’t limit federal spending; it limits the government from paying what it already owes.)
- The current level of deficits is unsustainable. (The deficit is the difference between taxing and spending. There is nothing about it that needs to be “sustained.” The U.S. can “sustain” unlimited deficits, forever.)
- The current federal debt is unsustainable. (The so-called “debt” is the total of deposits in T-security accounts. The government can accept deposits in T-security accounts, forever and can repay all those deposits instantly.)
- Federal taxes help pay for federal spending. (As soon as a federal tax dollar is received, it disappears from the money supply. Thus, unlike state and local governments, the federal government destroys tax dollars upon receipt; it does not use them for anything.)
- The federal government cannot create money; only the Fed can. (The federal government causes new dollars to come into existence by paying bills, i.e. by instructing creditors’ banks to increase the numbers in creditors’ checking accounts.)
- State, county, and city finances are similar to federal finances. (States et al are monetarily non-sovereign, and so can run short of dollars. The federal government, being Monetarily Sovereign cannot run short of its own sovereign currency.)
- Federal borrowing helps pay for federal spending. (Federal “borrowing” pays for nothing. So-called “borrowing” is just deposits in T-security accounts, dollars which are not used by the federal government.)
- The federal government spends taxpayers’ money. (The federal government destroys tax dollars upon receipt and creates brand new dollars each time it pays a bill. Dollars received by the federal government are not part of any money supply measure.)
- Our children and grandchildren will pay for today’s federal deficits. (No one pays for deficits. They are just an arithmetic calculation — the difference between taxes and spending — not a financial obligation for anyone.)
- Each of us is liable for a share of the federal debt. (No one is liable for the federal debt [i.e. deposits in T-security accounts]. Taxpayers do not pay for the federal debt. These deposits are an obligation of the Federal Reserve Bank, not of taxpayers.)
- A balanced federal budget is more prudent than running federal deficits. (Deficits, which add dollars to the economy, are more prudent. They grow the economy. Balanced budgets shrink the economy by removing dollars from the economy.)
- The federal debt/GDP ratio measures the government’s ability to service its debts. (The federal government always has the unlimited ability to service any debts, no matter what GDP may be. The government does not service its debts with GDP.)
- The federal debt/GDP ratio measures the health of the economy. (GDP growth is one of the economic health measures. The federal “debt” is irrelevant to economic health.)
- Federal earmarks, pork barrel spending and unnecessary spending hurt the economy. (All federal spending, even “wasteful” spending, adds dollars to the economy, and so, is beneficial.)
- The single biggest cause of inflation is excessive federal deficit spending. (Inflation is a function of the Supply & Demand for dollars and goods. Federal spending, in of itself, does not cause inflation.)
- Inflation is too much money chasing too few goods. (Inflation = Supply/Demand for money vs. Demand/Supply for goods and services.)
- Consumer saving helps the economy grow. (Consumer spending helps the economy grow.)
- In fractional reserve banking, banks keep a fraction of deposits and lend the rest. (Bank lending is not constrained by reserves, but rather by the amount of bank capital. Banks do not lend deposits or their own assets. Banks lend by increasing the balances in borrowers checking accounts.)
- The best way to cure inflation is to increase taxes and/or to cut federal spending. (Tax increases and spending decreases cause depress the economy. Interest rate increases, which increase the Demand for money, are the fastest, most incremental, least political way to cure inflation.)
- FICA taxes pay for Medicare and Social Security. (Federal taxes do not pay for any federal spending. Even if FICA were $0, the federal government could pay Medicare and Social Security benefits, forever.)
- The Medicare and Social Security Trust funds are running short of money. (These so-called “Trust Funds” are accounting fiction, and do not fund anything. Government agencies do not pay their bills from trust funds.)
- The government cannot afford to fund Medicare or Social Security. (The federal government’s ability to pay for anything is unlimited.)
- The U.S., like the euro nations, can go bankrupt. (The Monetarily Sovereign federal government never can run short of dollars. The euro nations, being monetarily NON-sovereign, can run short of euros.)
- Without increased taxes or decreased spending, Medicare and Social Security will go bankrupt. (Neither the federal government, nor any of its agencies, can go bankrupt unless Congress wills it.)
- Gold is safer and more prudent than “paper” (fiat) money. (Unlike fiat money, gold pays no interest and is costly to store, and costly to ship, buy, sell, and insure. “Fiat” money is backed by the government, whereas gold is not backed by any authority.)
- The federal government needs to borrow to pay for deficit spending. (The federal government needs and uses no income — taxes or borrowing. It creates dollars ad hoc by paying bills.)
- Federal borrowing reduces the availability of lending funds. (Federal “borrowing” results from federal deficit spending, which increases the availability of lending funds.)
- The main causes of the 2008 economic collapse were low interest rates and excessive bank regulation. (The main cause of the “Great Recession” was inadequate bank regulation and supervision, leading to bad lending practices.)
- Low interest rates stimulate the economy; high rates slow it. (Historically, high rates have not slowed the economy. High rates stimulate economic growth by forcing the government to pay more interest, which increases the money supply. )
- Taxing the rich does not hurt the poor. (Federal taxes remove dollars from the economy, which depresses the economy, which in turn, hurts the poor more than the rich.)
- Cutting payments to doctors and/or taxing “Cadillac” health insurance plans, is one good way to help pay for improved health care. (The former cuts medical care; the latter hurts the economy by cutting the money supply. The government can help improve health care by paying doctors more and by funding Medicare for every man, woman, and child in America.)
- America should try to export more and import less, i.e. achieve a positive balance of payments. (America does not need a positive balance of payments; the federal government creates dollars at will. Importing helps prevent inflation by lowering prices on goods and services.)
- The U.S. states, counties and cities should be self-supporting via local taxes, and not rely on federal assistance. (Being monetarily non-sovereign, local governments need net outside income to survive. This can come from net exports, tourism, and/or federal deficit spending.)
- Rather than being a net borrower, the federal government should be a net lender. (The government does not need to receive repayment of loans. Loan repayment to the federal government, like federal taxes, reduces the money supply.)
- Greece, Ireland, and the other troubled euro nations need to exercise spending restraint and austerity. (Austerity drains an economy of money. These monetarily non-sovereign nations are like American states, in needing to run a positive money balance vai exports, tourism, and/or euro infusions frome the EU.)
- Without tax increases, the federal government cannot afford to increase support for education, infrastructure improvements, bailouts for states, counties and cities, the military, research and local police. (The federal government can afford anything; it never can run short of dollars. Deficit spending stimulates the economy. Unlike state and local governments, the federal govenment does not spend tax revenue.)
- Immigrants hurt the economy by taking jobs from Americans. (Immigrants are consumers and producers, who stimulate the economy via their spending and their labor. Even non-working immigrants, who receive federal benefits, are an economic because of their spending.)
- The poor are lazy “takers,” who won’t work if they receive federal benefits. (This never has been shown to be true. Even people receiving benefits work for more income than benefits alone can provide.)
- Privatization is good because private for-profit organizations are more efficient, honest, creative, and hard working than are government agencies. (The opposite often is true. The basic motive of for-profit organizations is profit. The basic motive of government organizations to do a job. History is replete with examples of privatization that has been costly, inefficient, and often criminal.)
- Federal regulations are bad for the public because they destroy businesses and jobs. (Federal regulations mostly deter illegal businesses, while protecting the jobs in legal businesses and protecting the public.)
- If the people ever realized the federal government’s spending is not limited by taxes, they would make incessant demands for more and more benefits, leading to excessive spending and inflation. (The demands would help close the Gap between the rich and the rest. The federal government has absolute control over inflation via interest rate control, taxes, and the power to revalue the dollar.)
- The biggest problem in economics is the debt, or the deficit, or unemployment, or health care, or crime, or immigration . . . etc. (Actually, there are two “biggest” problems: The wide and widening Gap between the rich and the rest, and the ignorance of Monetary Sovereignty).
If you would like to debate or question any, or add lies, feel free.
Rodger Malcolm Mitchell
The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.
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 A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) 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 EVERYONE Five 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 FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce 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 business 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 “Fifty lies you have been told about our economy. Do you believe any?”
I’ll disseminate this blog in my posts. There’s a huge amount of falsehoods and downright deliberate misinformation in circulation that need an antidote like this post provides. Thank you.
Point 49 is an interesting one. My female good friend agrees with MS but is afraid the politicians will not be able to manage the economy. If everyone realised the government can spend without restriction it will be like a free for all.
Being misinformed is the default position in humans. It will take a careful spokesman or men and women to keep that idea under wraps and so able to be countered at every occasion.
It already is a free-for-all, with the beneficiaries being the rich.
When a big contributor asks for a favor, do you think any federal politician tells him, “the country can’t afford it”?
The myriad of special tax breaks for the rich proves that “unsustainablility” applies only to benefits for the 99%.
Some know. The example Bill Mitchell told me about was the recent Queensland flood damage. The bill was paid “free” to the State. No tax revenue mentioned. Your political example is not one of knowledge or understanding however just political favours doing the rounds.
I think part of the issue with your friend is that she is not recognizing that there are real, non-monetary limits which constrain us. We could afford, in dollars, to buy everyone their own aircraft carrier, but we can’t afford to use all the actual real resources like steel, labor, etc to do so.
Just because we have an infinite bank account does not mean we live on an infinite planet. What we need to do is make a switch from analyzing the dollar costs and instead focus on the ecological and social costs of our actions and policies. One of the major problems with the myth of finite money is that we have been ignoring the real, harmful, and often irreversible costs and consequences of our policies.
I understand all that. Finite resources is though not so often explained as brief comments leave it out. I am constantly blogging on The Conversation and constantly have to combat the rank ignorance our politicians like us to believe.
It’s very harmful as you say.
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Yes, it is a constant battle between brevity and nuance.
We are fighting an uphill battle for sure. Especially as education and combatting propaganda are largely thankless in our action-oriented society. Many (most?) seem to believe shouting slogans in a street is far more effective form of action.
I’d like an example of this “free for all” idea.
Give me one single example of it.
After USA funded scientists successfully went to work on the Manhattan Project during WW2, private electrical energy utilities jumped in and pushed the “Atoms for Peace” concept promising cheap energy forever. The utilities had nothing to do with the development of controlled nuclear power; it was all handed to them for free by the USA’s nuclear scientists and taxpayers. The utilities simply waited for the end of the war to get their hands on the blueprints.
It seems to new that there are a couple flaws here though most is sound.
Your advocating for economic growth seems too simplistic. On a finite planet, one where we’re already overshooting our ecological limits, it seems that growth is going to be a problem. We certainly need to grow in some areas but in most we will need massive degrowth.
Regarding taxation of the rich harming the poor: this seems to only be a problem if one is relying on private individuals to supply basic needs to the poor, but it seems to be much better to have the government do this due to lack of a profit motive.
These two criticisms combined would argue for a massive amount of wealth destruction (via taxation and nationalization) for the rich and massive increase in benefits and aid for the less well off. You seem to be on board with one and not the other. Is this an accurate reading?
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See Step #8 of the Ten Steps to Prosperity (above)
Ah ha, makes much more sense now. While I know you include that at the bottom of every post, I might also recommend you weaving that into the actual posts on occasion like you do with many of other ideas listed there. I suspect I’m not alone in having read it once, only remembering parts (though of course we never recognize the depths of our own ignorance), and then ignored that section on subsequent posts.
Thanks for the quick reply and the work you’ve been doing spreading awareness and fighting such harmful propaganda.
Is there an error in no 27? Surely interest rate increases DECREASE the demand for money and therefore reduce inflation?
Increasing interest rates increases the amount of interest lenders receive from U.S. debt (T-bills, T-bonds, T-notes, mortgages, etc.).
In order to own U.S. debt, you first must have U.S. dollars to lend. That is why increasing interest rates increases the Demand for U.S. dollars.
By definition, inflation is the reduced value of the dollar compared to the value of goods and services.
Increasing the Demand for dollars increases the value of dollars, and so is counter-inflationary.
That is why interest rate increases fight inflation.