The really, really, really simple arguments for Monetary Sovereignty

Beyond all the sound and fury, there lies utter simplicity.

Monetary Sovereignty says the federal government can afford to, and should, reduce the Gap between the rich and the rest by implementing the Ten Steps to Prosperity (below) via deficit spending. The naysayers claim federal deficits and debt are “unsustainable” because of two myths:

  1. They are unaffordable and taxpayers will pay for them, and
  2. They lead to inflation or hyperinflation.

I. The “unaffordable and taxpayers will pay” myth
As those who understand federal finances know, taxpayers do not pay for federal spending. The federal government creates dollars ad hoc, to pay for federal spending.

Who says so?

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”Image result for bernanke and greenspan

Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills.”

II. Inflation or hyperinflation myth
Historically, defict spending has not caused inflation (See: Federal deficit spending doesn’t cause inflation; oil does).

The myth that federal deficit spending leads to inflation or hyperinflation probably comes from the fact that in response to hyperinflations, some nations “print” money.

That is, the hyperinflations cause the money “printing” and not the other way around. Hyperinflations, in turn, are caused by shortages — often food shortages — not by money printing.

As for the U.S., which despite wars, recessions, depressions, and stagflations, never has had a hyperinflation, here are the facts regarding the relationship between deficit spending and inflation — shown in one simple graph:

Red line = U.S. federal debt. Blue line = U.S. inflation

The above graph compares inflation and federal debt on a long-term index. While debt (which results from deficit spending) has risen substantially, inflation has risen moderately.

Here are the same statistics on an annual basis:

Red line = U.S. federal debt. Blue line = U.S. inflation

Again, there is no relationship between federal deficit spending and inflation. The rises and falls in the federal deficit do not parallel the rises and falls in inflation. The primary reason is that the Fed is able to control inflation via interest rate adjustments.

So the two arguments of the anti-deficit group are exploded:

  1. The federal government cannot run short of dollars and does not need taxes to fund its spending.
  2. Federal deficit spending does not cause inflation or hyperinflation.

Now, what could be simpler than that?

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-lesses.

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.



6 thoughts on “The really, really, really simple arguments for Monetary Sovereignty

  1. Hello Rodger,

    Another great post. Thank you.

    I have received, read and thought about your book over the last weeks.

    It is a great read and as relevant today as the day, it was the written.

    The Concord addendum discussions are funny.

    I was relieved to read right at the end that you make the point that treasuries are not functionally required.

    As I see it, Treasury issuance is a veil over Fedgov money creation. If we set a support rate on reserves instead of a target fed funds interest rate and did not have a law requiring that Treasuries be issued to MATCH deficit spending, there would be no reason to have them. No more debt discussions, debt clocks, Henny Penny fear mongering.

    Also, the $21T of private sector money that is held as treasury deposits could be more productively invested in the economy. These impounded savings must be an enormous economic distortion. What are your views on that? We have always done it so do not know how it might otherwise have been.




    1. I agree. The money in Treasuries exists as wealth and potential backing for private lending and investment, but is relatively stagnant. Nevertheless, T-securities do serve a couple of functions.
      1. They assist the fed in its control over interest rates
      2. They provide a safe haven for dollars, which reduces the potential risk of owning dollars. This assists in dollar and price stability.

      On balance, I don’t think that T-securities in themselves are harmful, but rather the name given to them: “Debt.” When people hear that the “debt” is $15 Trillion (or $20 Trillion) and that their children owe the “debt,” they easily are led to believe the federal government can’t afford to support social spending.


  2. “there is no relationship between federal deficit spending and inflation”

    But, in recent decades, as you know or should know, the fedgov began lying about inflation in its inflation statistics, leaving out most things formerly part of the basket of things calculated. Hence — presto! — if you leave out all the things that are inflating wildly, like healthcare, education and rent, it appears that inflation is very very low!

    That being said, I think it is OK fo the fedgov to print lots of money and give it away. What is not OK is to give most of it away to the rich and the 10%-ers, i.e. the military-industrial-security complex, the medical-industrial complex, the education-industrial complex, etc. THAT is what is causing the problems for common people. Simply printing scads more money, as you suggest, without critical qualitative reform (i.e. redirection of the flows of funds to the bottom 90%), will not help.

    On Mon, Apr 30, 2018 at 11:24 AM, #Monetary Sovereignty – Mitchell wrote:

    > Rodger Malcolm Mitchell posted: “Beyond all the sound and fury, there lies > utter simplicity. Monetary Sovereignty says the federal government can > afford to, and should, reduce the Gap between the rich and the rest by > implementing the Ten Steps to Prosperity (below) via deficit spending.” >


  3. Rodger, I just wanted to share Dean Baker’s critique of Job Guarantee with you:

    I would rather just see unemployment insurance paid for by the federal government, and for it to pay around $4,000 per month.

    Regarding JG, the proponents inadequately consider the rise in carbon emissions which would almost certainly be a consequence of an unemployment rate of zero percent.


    1. Thanks, Tyler,

      The jobs guarantee is an idea only an economist could love. It is completely, 100% unworkable in the real world.

      1. Exactly who will find jobs for everyone — from NY city to the empty reaches of North Dakota — for every person who wants one? Describe the bureaucracy that will handle that assignment everywhere in America.
      2. Who exactly will interview, hire, supervise, and fire if need be, the millions of people who want and get these jobs?
      3. And who exactly will find jobs for the people who are fired for all the different causes?
      4. And what will they be paid? Minimum wage (to lower America’s average wage) or above minimum wage (to compete with the private sector)?
      5. And what about healthcare, maternity leave, vacation days, IRAs and myriad other benefits? What will they be and where will they come from?
      6. And most important, will these be real jobs or bullsh*t jobs (

      It would be far, far, far better to institute the Ten Steps to Prosperity (

      There is no shortage of jobs. There are millions of jobs. There is a shortage of jobs that people want. The jobs guarantee won’t solve that.


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