Federal Reserve Bank of St. Louis admits federal “debt” is not a real problem

It takes only two things to keep people in chains:

The ignorance of the oppressed
and the treachery of their leaders.


The Committee for a Responsible Federal Budget (CRFB), that notorious disseminator of economic fabrication, published yet another “Henny Penny, sky is falling” article about the federal debt.

But this time, they inadvertently referenced an article by the St. Louis Federal Reserve Bank that revealed the truth. (Oops!)

First, let’s introduce the Big Lies, after which we’ll get to the Federal Reserve Bank of St. Louis admits federal “debt” is not a real problem admission.

The CRFB article is titled: “Marc Goldwein: Debt Matters Even More After Tax Bill’s Passage, DEC 20, 2017
(Marc Goldwein is the Senior Vice President and Senior Policy Director for the Committee for a Responsible Federal Budget.)

His article is filled with charts and graphs “proving” what no one is arguing about: The so-called federal “debt” and the federal deficit are increasing.

Why should we be concerned? Here’s what Goldwein says:

With an aging population and rising health costs, debt is already rising unsustainably.

“Unsustainable” is the CRFB’s favorite word. You’ll see it in most of their articles.

Yet despite my frequent requests for clarification, no one at the CRFB will say what exactly is “unsustainable” about the so-called “debt” (which actually is the total of deposits in T-security accounts, similar to bank savings accounts.)

In 1940, the “debt” was $40 Billion. Then, and continuously since, it has been described as a “ticking time bomb, (i.e. unsustainable.) Today, that “unsustainable” debt has risen to $14 TRILLION — a gigantic 36,000% (that’s thirty-six thousand percent) increase, and that old time bomb still is a’tickin’, and the CRFB still is handwringing about its “unsustainability.”

“High and rising levels of debt slow economic growth . . .”

As always, with CRFB statements, there is zero evidence that rising levels of debt “slow economic growth.” Quite the opposite, in fact.

U.S. depressions tend to come on the heels of federal surpluses.
1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

Recessions tend to come on the heels of reductions in federal debt/money growth (See graph, below), while debt/money growth has increased when recessions were resolving.

Reductions in federal debt growth lead to inflation

Recessions repeatedly come on the heels of deficit growth reductions, and are cured with deficit growth increases. That’s what took us out of the “Great Depression” and the “Great Recession.”

“High and rising levels of debt reduce fiscal space . . .”

We think by “fiscal space,” Goldwein means that the U.S. government can run short of its own sovereign currency, the U.S. dollar. This is so patently false that he should be ashamed, but I suppose his salary soothes any shame.

That 35,000% growth of the debt is ample proof that the “fiscal space” claim is a fraud.

“High and rising levels of debt erode generational equality.”

High and rising levels of debt are what pay for Social Security, Medicare, Medicaid, aids to education, anti-poverty efforts and all the other social programs that narrow the Gap between the rich and the rest.

It’s the debt Henny Pennys who foster generational inequality.

“High and rising levels of  debt prevent thoughtful policymaking.”

No, actually, its the CRFB’s nonsense that prevents thoughtful policymaking.

“And debt cannot sustainably grow faster than the economy, meaning any tax cuts or spending hikes allocated to today’s votes will ultimately be paid for by younger and future generations.”

Now that the debt has grown 35,000% and reached $14 trillion, we continue to wait for younger generations to pay for it.

That never will happen, because the so-called debt (deposits) are not paid for by taxes.


O.K., now that we have slogged once again, through the CRFB’s nonsense, we can look at how the Federal Reserve Bank of St. Louis admits federal “debt” is not a real problem.

The admission came in an article titled, What Is the Outlook for the Federal Budget?,
Tuesday, October 10, 2017, published by the St. Louis Federal Reserve Bank, and written by Senior Economist, Fernando Martin.

Fernando M. Martin
Fernando Martin

After a series of graphs and statements about the horrid dangers of rising debt, Martin provides us with a tiny paragraph of truth, almost unnoticeable ending his the thicket of statistics:

“However,” he added that if another big adverse shock hits the U.S. economy, this outlook might change for the worse.

“Even in this case, the U.S. has the advantage of issuing debt in its own currency, so outright default (as in Greece) is not a likely outcome, though inflation might be (as was the case during and immediately after World War II),” he concluded.

Get it? The U.S., being Monetarily Sovereign, has the advantage of issuing debt in its own currency, so it cannot run short of dollars.


What are the implications of issuing debt in your own currency, so not running short of dollars? Contrary to the CRFB’s scare articles:

  1. No amount of debt is “unsustainable.” (We already have proved that with our 35,000% debt increase, that easily has been sustained.)
  2. High and rising levels of debt slow cannot “slow economic growth.” On the contrary, increasing debt is the federal government’s method for stimulating the economy.
  3. High and rising levels of debt do not “reduce fiscal space.” Fiscal space is the ability to spend. The federal government has the unlimited ability to spend as Martin acknowledged.
  4. High and rising levels of debt do not “erode generational equality.” Quite the opposite. Cutting debt results in cuts to benefits for the middle- and lower-income groups.
  5. Federal debt can sustainably grow faster than the economy and has been doing that for many years.
  6. High and rising levels of debt are the result of thoughtful policymaking.

And so the entire Henny Penny handwringing is all about inflation, the inflation that “high and rising levels of debt are sure to cause” — except for one minor truth: For the past ten years of extraordinary debt increases, the inflation has averaged below, the Fed’s target of about 2.5%.

Being Monetarily Sovereign, the U.S. government has the unlimited power to fight inflation (i.e increase the value of the dollar) at will.


In Summary:

Even the St. Louis Federal Reserve Bank has admitted (though reluctantly, because they too spread the “unsustainable debt lie) that federal debt is not a problem — not a problem for the government, not a problem for the economy, and not a problem for taxpayers.

On the contrary, federal deficit spending adds spending dollars to the economy, and so, is necessary for economic growth.

An economy cannot grow without a growing money supply.
GDP = Federal Spending + Non-federal Spending + Net Exports.

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


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.
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.
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.
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.
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.


16 thoughts on “Federal Reserve Bank of St. Louis admits federal “debt” is not a real problem

  1. Looking closely at the frbstl all I see (unfortunately) is a 100% conventional mainstream framing where debt traps the government between a market rock and an inflation hard place even if you issue your own currency.

    First he invokes the “fiscal space” trope:

    >Government debt levels are not yet a cause for concern in the U.S., although they might make fiscal responses to future recessions harder to implement.

    Then he goes on to acknowledge we can print money but shouldn’t because of the inflation monster under the bed:

    >though inflation might be (as was the case during and immediately after World War II)

    Conflating responses to future recessions with WWII which was a case of pumping money into an economy running quite literally at full capacity.


    1. Overall, you are correct. But let’s peer into the details.

      He says, “Government debt levels are not yet a cause for concern in the U.S. . .”
      That’s heresy in Henny Penny debt world, where government debt levels have been a “ticking time bomb” for 77 years. You never will see that admission coming from the CRFB gang, who claim all debt is “unsustainable.”

      Then he admits that the U.S. issues debt in its own currency, i.e. is Monetarily Sovereign. That too is heresy to the fear mongers.

      In short, he seems like a guy who knows the truth, but is so frightened for his job, he can’t come out and tell it. But he also can’t bear to omit it. So he whispers it at the end where it’s unlikely to be noticed by his bosses.


      1. I agree Roger,,but consensus is what keeps those types in their well paying jobs.

        The biggest problem in getting the truth out to the masses lies with the people whom are in positions of power or influence refusing to acknowledge obvious truths!! Even a progressive like Bernie hijacks his message by reverting to that favorite trove- how are we going to pay for it-, and he sure as hell was exposed to these truths via Stephanie Kelton!

        Maybe Bernie could have argued that Medicare for all was inflationary, and because of that we needed to tax those that could afford it, even though in reality a single payer option would most probably be deflationary , so there was no need to tax excess base out of the system, but instead he felt compelled to frame the discussion in the usual baloney- with someone having to pay for it ,

        Doesn’t matter what Stephanie says, she’s not renowned enough, or an influential celebrity. Nobody has time to research things that are 180 degrees opposite what they’ve been brainwashed to believe all their lives. The few who have the time lack the interest, and it doesn’t change their lives , it helps unfortunate souls just as busy forwarding the illogical lies understood as truths, and anyway most people whom should know better figure the truth probably isn’t in their best perceived interest anyhow!!

        Heck I’ve tried to show countless folks their error, even with the bulletproof points Warren Mosler forwards, and I all I get is eyes rolling and maybe a socialist label. Refer these guys to a number of heterodox economists like Blythe, Kelton, Mosler, Hudson, and even Keen and all you get back is who are they? I’m told the topic is too nuanced, subjective,and boring, plus it is so different from how the media portrays the government as a taker of funds , a behemoth out to get everybody.

        Or if one accepts the logical progression of talking points and actually understands the federal government isn’t currency constrained because it sells its bonds in its own fiat currency- well then the inflationary monster is pulled out. Or it just simply sounds like socialism. Help, Help- drives me crazy because it’s so similar to trying to convince an evangelical they’re being credulous – impossible!

        Keep up the fight, I wish I could devote all my time to it, obviously it’s the only way our democracy will continue for generations to come. Financialized hyper capitalism is too full of dangerous contradictions, incentivizing self destruction to create more zeroes on a spread sheet!


  2. Hi Mr. Mitchell.
    Thank you for this web site. I am grateful for the work you do. I bought your book and gave it as a present a year or two ago. You and JK Galbraith are my heroes…along with Noam Chomsky and Don Rickles.

    I just thought you might like to know that you’ve made a top 20 list (#14) here:

    I hope you enjoy that…an ironical site.

    Health and Happy Holidays to you and your family.


      1. I thought #14 was not bad for a humor magazine ranking. Bc it was you who introduced me to MS, I added you to the list. You’re my second hero with whom I’ve corresponded. I’ve also corresponded with Noam Chomsky about MS. If you want to see that email, I can send it to you. Next on my list is Paul Farmer. Sadly, I missed out on Don Rickles.

        Bc you altered the way I see life (w/ MS), you are a hero to me. Just so we know, my web site is a comedy site. It’s fairly obvious. In theory, it’s a CIA counterintelligence web site yet horribly out of date and self important with a huge dash of German narcissism. I made it for my older brother to enjoy. I get no income from the site nor do I want any. I thought you’d enjoy it as well. If it’s a no-go for you and you want me to remove you from the list, I’ll do it. There’s no malice here. It’s a goof and I hope it makes you smile for a while.



    1. Thanks for the link Darrin.

      I clicked on it because I was intrigued Rodger made it to their list of top who-knows-what. I have to confess it’s the first time I’ve heard of this online magazine peddling toxic extreme right wing trash.

      And to think it’s this same corrosive ideology that fuels Ayn Rand worshipping Paul Ryan, Donald Trump, and the whole retrograde Fox News propaganda machine.


      1. Hi Zen, the web site is a comedy site. All that is high is low and vice versa. Philosophical and ethical concepts are twisted to fit the mold of Monetary Fascism.

        Happy Holidays to you and yours,


          1. He’s a bowdlerized version of the german word for a man’s genitalia. He’s a composite of the economic royalists who put personal wealth ahead of party, country, and fellow humans. He defends the Nazis, child labor, slave labor, and his main purpose in life is to crush organized labor on all fronts while removing any social safety net. The magazine pushes debtor’s prison and indentured servitude as ‘new ideas’ for whipping the lazy poor into shape.

            I hope you like it. I hope Mr. Mitchell understands this. I’m glad you do. For me, it’s just something I do. I pay for the site and expect no money from it. I’ve never done anything in my life for solely monetary gain but I do have a healthy respect for money.

            Thanks for the well wishes. A Happy Holidays to you and yours as well.



  3. Here’s the Noam Chomsky email on Monetary Sovereignty.

    Hello Professor,

    I am lifelong follower of your work. Do you plan to address monetary sovereignty (‘MS’)? MS, as expounded by Rodger Malcolm Mitchell, holds that taxes do not fund the federal government. The federal government creates dollars through spending. Taxation destroys dollars. The only limit to federal spending is controllable inflation. Deficit spending is crucial to economic prosperity. The budgetary crises re funding Social Security, the fiscal cliff, or any claim that the US government might run out of money are false.

    Here is a summary of Mr. Mitchell’s position:

    Mitchell’s laws:
    ●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
    ●The more federal budgets are cut and taxes increased, the weaker an economy becomes. .
    ●Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.
    ●The single most important problem in economics is the gap between rich and poor.
    ●Austerity is the government’s method for widening the gap between rich and poor.
    ●Until the 99% understand the need for federal deficits, the upper 1% will rule.
    ●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
    ●Everything in economics devolves to motive, and the motive is the Gap.
    ●Only two things keep people in chains: The ignorance of the oppressed and the treachery of their leaders

    Have a terrific holiday,

    Darrin Rychlak

    PS: You are one of my heroes. Keep fighting the good fight. And if you are ever in Milwaukee and you need a place to stay, please do not hesitate to contact me.

    Noam Chomsky


    to me

    Thanks for the note, and the kind remarks. It’s quite true that the scare stories are wrong. I think what’s below is generally right about budgets, but not taxes


    1. He’s a linguist, and as such, perhaps he will recognize that part of the problem is semantics.

      Federal “debt” is really “deposits.” Federal “deficits” are the economy’s “income.”

      A “balanced budget” is a net loss for the economy, when inflation is considered, and being “balanced,” it cannot support economic growth.

      Monetary Sovereignty is substantially different from monetary non-sovereignty.

      Federal tax dollars do not appear in any money supply definition, thus they are destroyed upon receipt. State/local taxes, by contrast, do remain in the nation’s money supply, and so are not destroyed upon receipt.

      I suspect he does not understand the above facts.


      1. He might not not understand (but I doubt it). I did not press the matter. On the other hand, he’s a generational mind / talent, and he has shown in the past the aptitude to change his opinion where change is merited.

        He is a linguist and he may rely on that for his heuristic reading of your words. Of course he might claim that your perspective on the matter gravitates to and issues from the interests and understanding of a turnaround business specialist. (Nietzschean perspectivism colors all we see and do).

        You might want to ask him yourself. If you wrote him at his MIT email, I’m sure he’d respond.

        I got an autographed pic of Noam from my brother for Christmas. My brother is a smartass.

        Happy New Year Mr. Mitchell and thanks for responding.

        PS: I get the impression that I convey insincerity in calling you a personal hero. That would be a mistake. You, Noam, Don Rickles, Paul Farmer, Galbraith…you guys fight the good fight. That’s all I expect, it is all I ask and that is all that interests me. We are our brother’s and sister’s keeper and we must never forget that. Good luck.


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