Why I agree (gasp!) with Trump and the GOP — almost.

Uncategorized 10 Minutes


It takes only two things to keep people in chains:
The ignorance of the oppressed
and the treachery of their leaders.

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Here is why I agree with Trump and the GOP — almost — even though he and they don’t understand exactly what they are lying about:

Deficit worries complicate path for Republican tax cuts
Reuters, By David Morgan

WASHINGTON (Reuters) – Unease among Republicans about a massive increase in the federal deficit could complicate passage of two tax-cut bills working their way through the U.S. Congress, endangering President Donald Trump’s top legislative priority.

The Committee for a Responsible Federal Budget (CRFB), a nonpartisan budget watchdog in Washington, on Friday called a Senate Republican tax plan a “fatally flawed budget buster,” likening it to Republican legislation in the House of Representatives that the House tax committee has approved.

Both measures would add $1.5 trillion over 10 years to the annual budget deficit and the $20 trillion national debt, according to congressional tax analysts.

O.K., immediately you know Trump and the GOP are wrong — for two reasons:

  1. They are worried about the increase in the economy’s money supply (aka the misnamed “deficit”), the increase that stimulates economic growth
  2. They are taking advice from the notorious “debt Henny Pennys,“ the CRFB, who have issued the same old warning about the debt “ticking time bomb,” year after year, for more than 35 years. During that period, the federal “debt” has risen an astounding $13 Trillion, from under $1 Trillion to $14 Trillion — and still, we wait for that “time bomb” to explode.

The so-called federal “debt” is the total of deposits in T-security accounts, which are similar to interest-paying savings accounts. 

Image result for savings account passbook
A T-security account is like a bank savings account.

When you deposit your dollars in your bank savings account, they become a debt of your bank.

Your bank owes you the dollars, but does not spend or lend your dollars.

To lend, your bank creates brand new dollars.

Your dollars stay in your account, accumulating interest until you withdraw them. Their only function is to provide legal reserves.

Similarly, when you “lend” to the federal government, you actually make a deposit in your T-security account. The government does not spend or lend your dollars. Your dollars remain in your T-security account, accumulating interest until the government pays it back.

As with a bank savings account, the government does not spend your T-security account dollars.  To pay off the “debt,” the government does not use tax dollars. It merely gives you back the dollars that currently exist in your T-security account.

The primary difference between a T-security account and a bank savings account is semantic. We call the former, “debt,” and the latter, “deposits.”

Ironically, we worry about the size of federal “debt” but not the size of bank “deposits,” though the federal government cannot go bankrupt, and banks can.

I know. I know. It makes no sense.

Nearly 10 months into his presidency, with his party in control of the House and the Senate, Trump is still without a major legislative victory.

There are two reasons Trump hasn’t had a victory:

  1. He can’t comprehend anything much longer than a paragraph. He had no idea what was in the multitude of awful “repeal & replace” Obamacare plans, so he couldn’t give Congress any guidance. Similarly, he has no idea what is in the various tax plans. He only wants to sign something, anything, no matter how terrible, so he can say he did something.
  2. The voters may be ignorant of the facts, but they are not stupid, and they can see that everything the GOP puts in front of them will take from the 99% and reward the richest 1%.

The Tax Foundation, another nonpartisan group, said the Senate plan would add $1.78 trillion to the deficit over a decade.

Translation: It would add $1.78 million more to the economy over a decade.

It estimated that over the same time frame lower taxes would expand the U.S. economy by 3.7 percent, add 925,000 full-time jobs, raise wages by 2.9 percent and generate enough new tax revenue to erase all but $516 billion of the deficit effect.

Now think very closely about the above two paragraphs. Together they tell you (rightly) that because tax cuts (i.e. deficit increases) will add dollars to the economy, they will grow the economy, add jobs and raise wages.

Those are good things, right? So if deficit spending will accomplish those good things, why is anyone opposed to deficit spending?

Here’s why:

For decades, Republicans positioned themselves as deficit hawks, refusing to raise the debt limit, opposing Democratic spending programs and warning of crushing federal debts being passed on to future generations of Americans.

The deficit Henny Pennys are afraid to admit they have been lying to you and the rest of the voters about the “dangers” of what really benefits you: Federal deficit spending.

Today, they are hung on their own lies, and will try to double-talk you into believing “federal deficits aren’t so bad after all, but anyway, there won’t be deficits” — or something.

In short, they think you’re stupid.

The tax plans now being debated represent a stark reversal, with congressional Republican leadership and tax law writers urging passage of deficit-expanding tax changes. Only a handful of Republican senators already have publicly voiced misgivings.

This is one more demonstration of the Republican Party’s utter bankruptcy. Most of them hate Trump, but are frightened to say it. And most of them know that deficits grow the economy, but are afraid to tell you the truth.

This is disgusting, even for politicians, because their lies directly harm you and the economy.

After the Senate plan was released on Thursday, Republican Senator Jeff Flake said in a statement, “I remain concerned over how the current tax reform proposals will grow the already staggering national debt by opting for short-term fixes, while ignoring long-term problems for taxpayers and the economy.”

Flake repeats the Big Lie that taxpayers will have to pay off the federal “debt” (deposits). They won’t.

Questions:

  1. Do you consider your bank’s savings account deposits to be “staggering.”
  2. Do you even know or care what those deposits are?
  3. Do you think you and your children will have to pay off those deposits?

If your answers rightfully are “No,” “No, and “No,” you similarly should not care about the federal government’s so-called “debt.”

Senator James Lankford said in a statement, “As we work on tax relief, we must also not lose sight of our responsibilities to protect the nation, provide basic government services and confront our federal debt.”

Senator Bob Corker, another Republican and a critic of Trump, did not comment after the Senate bill’s release but signaled fiscal concerns after the House issued its plan, saying he did not want tax cut legislation that added to the deficit.

And then there’s the CRFB, with its usual misstatement:

“The current tax reform debate shows Congress just can’t seem to shake its addiction to debt,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

“If tax cuts paid for by debt are signed into law, Congress will have sent a massive, budget-busting tax bill to our children to pay, and it will result only in a short-term sugar high with little to no economic improvement over the long term,” she said.

May MacGuineas, would you please shut up.  Just shut up.

You should be ashamed of yourself. Either you don’t know what you are talking about or, more likely, you have been paid to spread the Big Lie for all these years.

Either way, you will do America a great service if you simply shut up.

I agree with Trump’s and the GOP’s desire to cut taxes, and I agree with the resultant, increased deficit, simply because that would do exactly what The Tax Foundation predicted: Grow the economy, add jobs and raise wages.

What I don’t agree with is the nature of the GOP’s deficits, because as always, they favor the rich, and widen the Gap between the rich and the rest.

Instead, we should increase deficits by instituting The 10 Steps to Prosperity (below).

If Congress and the President merely took Step #1 — eliminate the FICA tax — that alone would go a long way toward growing the economy, adding jobs and raising wages, while narrowing the Gap.

So, enough! Enough with calling deposits in T-security accounts “debt.” Enough with plans that favor the rich and punish the 99%. Enough with widening the Gap between the rich and the rest.

Enough with the Big Lie.

At long last, Congress and the President, forget the political BS and do what you’re paid to do. Do what’s right for the people.

Is that too much to ask?

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

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The 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.

MONETARY SOVEREIGNTY

Published by Rodger Malcolm Mitchell

MBA Northwestern, business turnaround expert, economist

Published

30 thoughts on “Why I agree (gasp!) with Trump and the GOP — almost.”

  1. “Your dollars stay in your account”….

    This makes zero sense. The obvious question is, then why are banks giving people money (even up to $300) to open an account?

    The obvious truth is that they are effectively getting a loan at pretty much zero percent rate and are re-lending it for a higher rate.

    Money is indeed created when banks lend, but this is not the way. If banks created money from thin air, as you state, they would be charged with fraud.

    You know better than this sir.

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    1. SOS, thanks for your comment.

      I assume you are a depositor at a bank. Your bank makes loans every day, yet have you noticed that not a single dollar ever is taken from your account?

      The reason banks solicit deposits is that by law, they are required to have “reserves” as a percentage (usually 10%) of their loans. So, for example, if they lend $10,000, they would need $1,000 in reserves. They obtain reserves by accepting deposits or from the Federal Reserve Bank. This is known as “fractional reserve lending.”

      Note that banks lend far more than they have in reserve. If they have $1,000 in reserves, they are allowed to lend up to $10,000. For that reason, the notion that banks lend deposits makes no sense. If they did lend deposits, the bank with $1,000 in reserves could lend only $1,000.

      So, you may ask, where do banks get the money they lend? Answer: They simply create it from thin air.

      If you borrow from a bank, for instance, you take out a mortgage, the bank will increase the total in your checking account (which is a debit on their balance sheet), and increase the total in their Accounts Receivable (which is a credit on their balance sheet).

      The vast majority of dollars in America have been created in this way.

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      1. Not true.

        The dollar amounts in your account doesn’t change, but the actual funds are not there.

        Why do you think you have to notify the bank if you are withdrawing any significant amount?

        Just common sense should tell you that banks make money with your money. Why would anyone with a brain allow you to store your money in a safe place, while they have to spend money to keep it safe, to not make anything out of it.

        If what you are saying was true, banks would have no reason to store your money.

        With regards to reserves, that is not how the reserve requirement works. In your example, the bank would lend $90 for every $100 deposited.

        Lending $1000 while getting $100 in deposit is not only fraud, it’s impossible. Why don’t you give it a try?

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          1. Yes, definitely the bank sweeps the money from all accounts, unless they are using their own account.

            Accounts are only funded based on forecast. The numbers you see in your account reflect dollars not there. Go ask any banker and you will see that what I am telling you is true. If it helps, I’ve worked for banks my entire career.

            Banks cannot lend money they don’t have, anyone thinking banks can is not thinking straight. Again, try lending dollars you don’t have and you will see what I mean.

            Banks have accounts at the fed that must be funded before they can make a payment. Are you saying banks fund these accounts with money made from thin air? Banks have to either borrow or take in deposits before they lend.

            Again, banks take in deposit and lend 90% of it, so effectively deposit accounts are not funded until you need the money. The bank funds those accounts daily based on forecasts. Banks do not create money from thin air and lend it out. If things worked this way our economy would have collapsed long ago.

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        2. Sorry, but you obviously don’t understand how modern banking works. Banks in fact create money when they lend, and do not require depositor money to do so (bank’s ability to lend is based on it capitalization not deposits). When a bank creates a loan, it credits the borrowers demand account and in doing so it simultaneously creates both an asset (the loan) and a liability (the deposit), which net out to 0.

          When the loan is paid off, all of the “bank money” (inside money), both the liability and asset, are wiped out, but there also is a net transference of assets to the bank in the form of interest payments. Banks are able to do this due to a special relationship with the Federal Reserve in that any bank money that is created through lending can be converted to U.S. reserves or currency on demand.

          The amount of bank money created in the economy is based on market demand, which is indirectly related to interest rates controlled by the Fed, and availability of qualified borrows, and has little to do with the amount of deposits. A central bank that sets a target interest rate will always accommodate the demand for reserves through bank lending.

          As Hyman Minsky stated: “Anyone can create money, the key is getting someone to accept it”

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  2. Sos,

    You wrote, “The numbers you see in your account reflect dollars not there.”

    I’m sorry that you have spent your whole life in banking, and still believe money is some physical thing that is “there” or “not there.”

    Dollars have no physical existence. They are nothing more than numbers. My savings account balance is the same as a check or a dollar bill. They both only represent dollars.

    My bank account balance is part of the nation’s money supply. It is dollars. It does not fall when the bank lends.

    You said, “. . . banks take in deposit and lend 90% of it, so effectively deposit accounts are not funded until you need the money.”

    Now think very carefully:

    Let’s say that a “90% loan” totals $10,000. How does a bank lend that 90%? It marks up its customer’s account by $10,000.

    No other customer’s account is reduced, so at the instant the bank marks up the borrower’s account, the bank’s total deposits go up $10,000.

    Now, the bank is able to lend another 90% of that 10,000, or $9,000, which it deposits into another customer’s account. The bank’s reserves go up
    $9,000.

    Then, it lends another 90%, or $8,100, which increases bank deposits by $8,1000. And on and on, lending $7,290, $6,561, $5,905, etc., etc., etc.

    With each loan, the nation’s money supply rises.

    WHERE DID ALL THOSE ADDITIONAL DOLLARS COME FROM?

    The bank created them from thin air. That is the way most of the dollars in existence have been created — by bank lending.

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    1. No,

      You should know what reserves are. The bank will lend 9000 out of the 10000 and keep 10000 as “reserves”. That is the bank requirement from the fed.

      Money is “created” when the next bank lends 8000 out of the 9000 – this is because the same money is being lent again. This is how money is created.

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        1. Savings? Investments?

          The funds are placed in your account by the time your deposit matures, not before. Checking accounts are swept daily.

          Basically, the money won’t be there if all depositors showed up for their money – most likely, about 10% will be available because of the reserve requirement.

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          1. You are confusing the bank’s internal bookkeeping with the existence of money. The money exists in your account and never leaves. It is part of M2.

            If the there is a run on the bank, and the bank is unable to pay, the money may disappear, unless it is insured by FDIC. Money is just a notation. If you have $1,000 in your account, that is not affected by the bank’s lending.

            Look at your savings passbook. It tells you how much money is in your account. Whenever you update it, there is no change due to bank lending.

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        1. No, no, no and no…

          You deposit $10k on bank a savings account. Bank a sweeps the $10k into one of the banks pool accounts. Bank a lends $9k to bank b and keeps $1k as reserves against the $10k you lent the bank.

          Bank b receives the $9k from bank b, places it on it’s on account. It now lends $8k of bank as loan and keeps $1k as reserves against bank as loan. Etc…

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  3. Perhaps a more authoritative source is required:

    From the Bank of England Quarterly Bulletin 2014 Q1:

    “Money Creation in the Modern Economy”

    “In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money. The reality of how money is created today differs from the description found in some economics textbooks:

    • Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.
    • In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.”

    Full article:

    Click to access qb14q1.pdf

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    2. That article is not detailed enough, it doesn’t explain how money is created at all.

      Tell me, a bank lends a custome money who has his account in a different bank.

      Does the lending bank not have to debit an account internally and does the receiving bank not apply a credit?

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      1. Yes, money is created, and it then is at the receiving bank. I’m trying to be patient with you Sos, but it’s wearing thin. You are arguing in circles. It has become apparent you are more interested in defending your wrong position, than in learning the facts.

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      1. One last time and I am done. Part of the issue seems to be semantics. Money isn’t a commodity, it is a record of credits and debits and exists mostly as electronic entries at private banks and the Federal Reserve. All money creation involves the acceptance of another’s debt, which results in the simultaneous creation of an asset and offsetting liability. Bank deposits represent the customers acceptance of the bank’s debt, which happens to be denominated in the state money of account. Reserves and deposits are not the same thing. Deposits are bank liabilities and can’t be loaned out. Reserves are bank assets (Fed liabilities) and can only be used within the Federal Reserve system to settle interbank payments. When payments are made between banks, there is an associated transfer of reserves between their respective accounts at the Federal Reserve.

        So in your example, a loan to a customer at a different bank will result in the transfer of reserves from the lending bank to the depositor bank, at which point the depositor bank will create a new deposit (liability) offset by the new reserves (assets). The debit that occurs is in the lending banks reserve account at the Federal Reserve. The lending bank has a loss of reserve assets that is offset on their balance sheet by the new loan. Those reserves could come from deposits, but they don’t have to; they could come from an interbank loan in the overnight market or through the Federal Reserve (e.g. discount window loan or sale of T-securities through QE). When the customer at the other bank makes payments, those reserves get transferred back to the lending bank’s reserve account (plus interest), with an associated drop in the loan value. If the loan and deposit are within the same bank, then there is no involvement of reserves whatsoever. Banks only need to have enough reserves to manage their payment system and to meet federal liquidity requirements, and those reserves can come from multiple sources, including deposits.

        From Cullen Roche at Pragmatic Capitalism: “Banking is a spread business so banks will always seek the least expensive source of funds to manage their payment systems and maximize profit. Bank deposits are one of the lowest cost sources, so it often gives the appearance that the deposits are funding the loans, but that is not necessarily the case.”

        Banks create money because they can create their own debt, and customers accept that debt because they know they can convert it to government money on demand. More than 90% of the money in the economy is from private credit creation; how can it be any other way?

        More for your reading pleasure:
        https://www.pragcap.com/the-basics-of-banking/

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        1. Correct, but it may be hopeless. Sos is confusing the banks internal bookkeeping (the “sweeps” he keeps mentioning) with the existence of M2. He worked for a bank and that is all he knows. Has no concept of what money is.

          It should be obvious that the banks lending does not decrease the amount of money in a customer’s account — but when there is no desire to see, one is blind.

          ===============================================================================================================================================

          Note to Sos: Yesterday my bank lent someone $1,000. Has money been taken out of my savings account? Am I now poorer?

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  4. I’m glad there had been a discussion on lending and money creation by private for profit commercial banks. Hopefully somebody (Sos) had been enlightened today.

    On the topic of Trump’s tax cut enabled by Republican congress, it seems more likely that those who lobby for these cuts (billionaires, donors, corporate executives, Trump Inc., congress people who work for plutocrats) do in fact understand monetary sovereignty. That the knowledge or idea of sovereign money that you and folks at MMT have, through the years, patiently explained might have most probably seeped through the awareness of those important people and they might have exclaimed, “hey, this MMT and sovereign money thing is an awesome idea, why don’t we use it to benefit our fortunes and just keep the rest of the hoi polloi out of it.” They then just turn around and keep the pretense on so called fiscal responsibility by going after the low income earners and the middle class.

    One major event that may have precipitated the understanding of MMT and monetary sovereignty by those very important people is the major league bailout of wall street after the 2008 financial cataclysm. It helped of course that Bernanke went on prime time TV to specifically explain those were not tax money given to wall street crooks.

    Another indicator they might have finally get it is the appearance of less drama in the debt ceiling debate. Ever stubborn, these fiscal vampires were driven out of their conservative caves and had to reluctantly give up their shut-down-the-gov’t ruse.

    The wealthy class and some of their puppets in gov’t already understand MS and MMT. It’s the hoi polloi who still don’t.

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  5. On commercial bank money creation…

    If 97 percent of our total money supply were created through bank loans, would it be safe to say that monetary sovereignty had been co-opted or hijacked by these for profit banking cartels from the federal gov’t?

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    2. Yes, co-opted with a complicit congress and media. Money only comes from the government (outside money) or private credit creation (inside money). The sum of all inside money (asset + liabilities) in the economy = 0; the sum of all outside money = private sector wealth (government debt).

      The problem with reliance on inside money is it ultimately involves the transfer of wealth to Wall Street in the form of interest payments, which increases inequality. If interest rates > GDP, then the magic of compound interest will drive the economy into debt deflation (slow crash we are experiencing now) as an increasing share of household income is diverted to Wall Street banks to service debt rather than purchase goods and services.

      Outside money is only net added to the economy when the government deficit spends, so the media driven deficit hysteria (that Rodger rails against in this blog) is really all about a self-serving ploy to convince an unwitting populace that we should rely on private credit creation rather than sovereign spending, since government debt is “bad”, and therefore personal debt must be “good”. This only serves to increase the gap as the 99% become more and more indebted to the 1%.

      If the Republicans in congress, and their wealthy overlords, have their way, they would transform the U.S. from a democracy to a neo-feudalistic society where the 99% are in debt bondage to the 1%.

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      2. Thanks for confirming that. I understand that in step 9 of Rodger’s TSTP he advocates to nationalize all banks which is probably the right thing to do in light of wall street banks’ continuing unmitigated greed and predatory behavior.

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