The doofus science

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.”

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

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.

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

What is there about economics that every doofus sitting on a bar stool, thinks he is an expert, and entitled to voice loudly his doofus opinions about federal financing?

And why does every said doofus, whose interest in economics has not progressed beyond buying the daily Lotto scratch-off, think he understands the effects of federal trade deficits and federal budget deficits. (Attention all doofusi: They are different.)

And why does an equally uninformed columnist, whose professed forte is political philosophy and baseball (yes baseball), and definitely not the science of economics, continue to confound himself and his readers, by conflating federal finances with personal finances?

Here, for instance, are excerpts from an article by the above-described George Will:

Do economic expansions die of old age (the current one began in June 2009), or are they slain by big events or bad policies?

What is known is that all expansions end. God, a wit has warned, is going to come down and pull civilization over for speeding.

When He, or something, decides that today’s expansion, in its 111th month (approaching twice the 58-month average length of post-1945 expansions), has gone on long enough, the contraction probably will begin with the annual budget deficit exceeding $1 trillion.

How prescient. “All expansions end, and “God or something” will do it. Did you know that? Are you stunned by these brilliant words?

And when the expansion ends, what does that have to do with the deficit exceeding $1 trillion? Nothing.

Equally meaningless: The expansion also will end with a U.S. population above 330 million and with the rich even richer than they are now. So?

The president’s Office of Management and Budget projects that the deficit for fiscal 2019, which begins in six weeks, will be $1.085 trillion. This is while the economy is, according to the economic historian in the Oval Office, “as good as it’s ever been, ever.”

Wow, the deficit will be $1,085 trillion, and the economy is “as good as it’s ever been, ever.” What does that tell us about the deficit?

What is the connection between federal deficit spending and the economy? Doofuses don’t realize that federal deficit spending adds growth dollars to the economy, which is why the government increases deficit spending to get us out of recessions.

Federal deficit spending is stimulative.

Doofuses also don’t know this formula: GDP = Federal Spending + Non-federal Spending + Net Exports. Federal deficit spending increases the first two of the three right-side terms of the equation.

Continuing with George Will’s article:

Another hardy perennial among economic debates concerns the point at which the ratio of debt to GDP suppresses growth: Within a decade, the national debt probably will be 100 percent of GDP and rising.

As Irwin Stelzer of the Hudson Institute says, “If unlimited borrowing, financed by printing money, were a path to prosperity, then Venezuela and Zimbabwe would be top of the growth tables.”

Here’s the scary part:

“Irwin Stelzer is a Senior Fellow and Director of Hudson Institute’s Economic Policy Studies Group. Prior to joining Hudson Institute in 1998, Stelzer was Resident Scholar and Director of Regulatory Policy Studies at the American Enterprise Institute.

He also is the U.S. economic and political columnist for The Sunday Times (London), a contributing editor of The Weekly Standard, and a member of the Advisory Board of The American Antitrust Institute.”

This guy, with all his background, is hopelessly clueless about how a Monetarily Sovereign nation, with a functioning government, operates.

He thinks the U.S. borrows (it doesn’t), and that the federal government finances this non-existent borrowing by printing money (it doesn’t), and finally that the U.S. is in any way similar to Venezuela and Zimbabwe (it isn’t).

The word “borrow” refers to obtaining money in order to spend or save. When you borrow, you do that to spend or save the money you borrow.

But, the U.S. creates money, ad hoc, by spending.  And it does not save money.  Having the unlimited ability to create dollars, it has no need to save dollars.

The misnamed federal “debt” isn’t money the Monetarily Sovereign federal government needs or uses. It is dollars that are deposited by investors (and never touched) into T-security accounts. To pay off those accounts, the government merely sends those dollars back to the account owners.

And, when Seltzer mentions Venezuela and Zimbabwe, he is talking about hyperinflation,  which is not caused by money “printing.”

All hyperinflations are caused by extreme shortages, usually shortages of food, and only after the hyperinflations have begun do countries respond with money creation. That is what happened to Venezuela and Zimbabwe, et al.

In all our history, through wars, recessions, depressions, a multitude of  Presidents, and economic misrepresentations about deficits and debt, the U.S. never has had a hyperinflation. But still, the doofuses compare us with Zimbabwe.

Our federal “debt” went from $40 billion in 1940 to $16 trillion today — a 40,000% increase — and inflation remains near the Fed’s annual goal of 2.5%.

Having learned nothing from history or economics, the Henny Pennys continue running in circles, shouting, “Unsustainable.”

In short, a columnist who doesn’t understand economics quotes someone else who doesn’t understand economics. The result: A steamy brown pile of bull excrement.

Jay Powell, chairman of the Federal Reserve, says fiscal policy is on an “unsustainable path.”

And there it is, the old “unsustainable” debt BS, again. It also is “The fake ‘debt time-bomb,’ still ticking after 78 years.” 

Click the link and you’ll read the 78 years of false claims that our federal deficit and debt will destroy the U.S. as we know it.

Wrong for 78 years; wrong today; wrong tomorrow. But the Henny Pennys, having no shame, still are at it.

A recent International Monetary Fund analysis noted that among advanced economies “only the United States expects an increase in the debt-to-GDP ratio over the next five years.”

The IMF seems to be telling us that the U.S. will have the worst economy among advanced economies, over the next five years. Do you believe that?

The debt/GDP ratio is absolutely, positively, 100% meaningless. Zero, zip, zilch. The size of my underwear has more economic meaning than does that ratio.

1. The debt/GDP ratio does not indicate the federal government’s (unlimited) ability to pay its bills.
2. The debt/GDP ratio does not indicate future recessions, depressions or stagflations.
3. The debt/GDP ratio does not indicate future inflations or deflations.
4. The debt/GDP ratio does not indicate stock market advances or regressions.
5. The debt/GDP ratio does not indicate a damn thing. Period.

The federal government could pay off all its T-bills, T-notes, and T-bonds tomorrow, if it chose, simply by returning the dollars that then currently exist in those T-bill, T-note, and T-bond accounts.

Oh, did I mention that, contrary to Will’s article, the U.S. ratio already is above 100%.

Seemingly, George Will didn’t realize that.  He also didn’t realize Japan’s ratio is above 250%. By Mr. Will’s reckoning, Japan should have become Venezuela and Zimbabwe, long ago.

One would hope that a nationally published columnist and a professional economist, would at least look at the facts, rather than just writing intuitive nonsense.

Publicly held U.S. government debt has tripled in a decade.

From left to right, (the politicians have)  had a permanent incentive to run enormous deficits — to charge, through taxation, current voters significantly less than the cost of the government goods and services they consume, and saddling future voters with the cost of servicing the resulting debt after the current crop of politicians have left the scene.

The line, “charge, through taxation, current voters significantly less than the cost of the government goods and services they consume” is a demonstration of consummate ignorance.

Unlike state and local taxation, federal taxation does not fund government goods and services. The federal government funds government goods and services by creating its sovereign currency, ad hoc — a currency of which it never can run short.

Even if the federal government didn’t collect a single penny in taxes, it has the power to continue spending, forever.

Compare the U.S.’s Monetarily Sovereign situation with that of monetarily non-sovereign Greece:

The next steps for Greece now that its bailout is ending 

Greece’s exit from eight years of international bailout programmes on August 20 will be a defining moment in its emergence from the depths of austerity. But government and business acknowledge that this is just a milestone.

The end of the bailout does not end Greece’s commitments to its international creditors.

One of the most significant is that, in exchange for a major debt relief deal in June, the country needs to sustain a primary surplus — a measure of its budget balance that excludes debt payments — of 3.5 per cent of gross domestic product a year until 2022.

Failure would bring the risk that some debt relief could be withdrawn.

When the government runs a surplus, guess who runs a deficit. Right. The public. This is just another way of describing the austerity that already has destroyed Greece’s economy.

Government surpluses lead to depressions and recessions, by taking money out of the private sector:

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.

The above article contained this graph:

Not only are euro citizens overly-taxed but:

The government is speeding up foreclosures and auctions of repossessed property.

Bankers still expect the process to take as much as a decade. One said: “We are hitting our current targets on reducing non-performing loans but there is still a long way to go.”

Excessive taxation. Austerity. Foreclosures. Repossessed property. For as much as a decade. This is what the people of the euro can look foreward to, and this is exactly what our American economics doofuses wish you to suffer.

The crooked bankers get rich, while the taxpayers suffer.

There are penalties for ignorance, and those who do not wish to understand Monetary Sovereignty will pay those penalties, just as the euro nation people are.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: 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 (Guaranteed Income)) 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
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