“There’s No Such Thing as ‘Free Money.'” Yes, there is, Mr. Greenhut.

Economics is a unique science.

It is the only science in which people who have no background, no education, no history, and no knowledge, feel absolutely confident in their opinions about it.

I’m sure they don’t feel confident in arguing about quantum mechanics or about relativity, or about rocket science, but when it comes to economics, everyone is an “expert” — often a laughable expert with a way-too-loud megaphone.

I suggest Steven Greenhut is one such “expert.” Here are excerpts from his recent article:

There’s No Such Thing as ‘Free Money’ or Meaningless Deficits
STEVEN GREENHUT, Reason Magazine

Vice President Dick Cheney famously said that “deficits don’t matter.”

Such conservatives weren’t interested in using federal spending to fight poverty and inequality, but they didn’t want growing deficits to curtail their military efforts in Iraq or quash their desire to step up tax cuts.

Greenhut is 100% correct about the motivations of the conservative right.

Cheney’s ideological heirs now argue that deficits are fine as long as interest rates are low and the Gross Domestic Product keeps growing.

Deficits not only are “fine,” but deficits are absolutely necessary for economic growth, and this has nothing to do with low interest rates.

Federal deficits add dollars to the economy. It is functionally impossible for an economy to grow, without the money supply growing.

In fact, the formula for Gross Domestic Product, our most common measure of economic growth, is a money measure.

GDP = Federal and Non-federal spending + Net Exports

When federal deficit spending doesn’t grow, the economy doesn’t grow. Reduced deficits cause recessions, and increased deficits cure recessions, as the following graph demonstrates:

Recessions (vertical gray bars) begin with reduced deficits; they are cured by increased deficits.

Sorry, but deficits and debt do matter.

There’s no short-term crisis, for sure, but debt “will depress economic growth over time and could potentially lead to a fiscal crisis if borrowers lose faith in the country’s ability to pay,” explained Yuval Rosenberg in The Fiscal Times.

Federal “debt” is nothing more than deposits into Treasury security accounts (T-bills et al).  The government pays back the “debt” every day simply by returning the dollars in those accounts.

And what does this phrase mean, “borrowers lose faith in the country’s ability to pay.”? Makes no sense, unless he means “lenders lose faith . . . ”

Even then, the federal government does not borrow. It accepts deposits into T-security accounts and it never touches those dollars.

The federal government, being Monetarily Sovereign, creates all the dollars it needs, ad hoc, each time it pays a creditor. The government never has any difficulty returning those dollars to the account holders.

See: It is 2019, and the phony federal debt “time bomb” still is ticking. Thursday, Jan 24 2019.

Periodically, I remind you about a disaster that was considered to be so imminent, it repeatedly was referred to as a “ticking time bomb.” I have evidence of the warning as early as 1940, and then every year thereafter.

I’m talking about the federal debt that not only was said to be a “ticking time bomb,” but “unsustainable” and “the time bomb of doom“!

Year after year, that time bomb of doom has kept ticking, and here we are, in 2019, with a  healthy economy, and still that bomb hasn’t exploded. Eighty years of warnings, eighty years of being wrong, eighty years, and people still believe the doomsday sayers.

The phony “time bomb” began to “tick” back in 1940, when the total debt was $40 Billion. Today, 80 years later, it has risen 52,500% (!) to $21 Trillion, and still it ticks.

Go to the above reference, and you’ll see that year, after year, after ridiculous year, “experts” like Greenhut repeatedly referred to the federal debt as a “ticking time bomb.”

Wrong for 80 consecutive years.

Continuing with his article:

Furthermore, he (Rosenberg) notes, debt hampers government’s ability to react to real emergencies “such as recessions, wars or natural disasters.

As debt soars, federal payments to service the debt will crowd out the government’s core spending responsibilities.

The above is a perfect example of closing one’s eyes and ignoring the reality standing before one.

Here we are, looking at 80 past years of a dramatically increasing debt (deposits), and the federal government’s continual “ability to react to real emergencies “such as recessions, wars or natural disasters.

Since 1940, America has fought dozens of wars, all over the world, had numerous recessions, and dealt with all manner of natural disasters. And today, the nation is wealthier than ever.

Explain that Messrs. Rosenberg and Greenhut.

In a way, these denials-of-the-obvious remind me of Mohammed Saeed al-Sahhaf  (aka “Baghdad Bob”). He was the Iraqui, who during Desert Storm, kept going on television to deny that American tanks were in Baghdad, while they were visible over his shoulder.

Rosenberg’s and Greenhut’s comments are that ridiculous.

And now for the source of their ignorance: They don’t understand the differences between personal financing and federal financing.

You could borrow an immense amount of money to upgrade the kitchen and take Hawaiian vacations and then claim that it doesn’t matter as long as you can cover the monthly interest payment.

But that’s a road to eventual ruin.

The federal government is Monetarily Sovereign, meaning it is sovereign over the dollar.

At the beginning of this nation’s existence, our new federal government created laws, and those laws gave the government the unlimited ability to create U.S. money.

So the government created millions of U.S. dollars — from thin air.

So long as those laws and others like them, exist, the federal government will continue to have the unlimited ability to create U.S. dollars.

Here’s how they do it:

To pay a creditor, the federal government sends instructions (not dollars) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.

At the moment the bank obeys those instructions, brand new dollars are created.

So long as the federal government doesn’t run out of instructions, it won’t run out of dollars.

You and I don’t have this ability. Neither do our cities, counties, and states. And neither do France, Germany, and Italy, all of which don’t have a sovereign currency, but rather use the euro.

All are monetarily non-sovereign.

Ask Messrs. Rosenberg and Greenhut what “Monetary Sovereignty” means, and they won’t have a clue, even though it is the basis for modern economics.

Now we get to what Greenhut thinks is absolutely necessary and what he thinks, isn’t:

Some debts can’t be helped—e.g., capital expenses—but look at the nonsense that our massive federal budget is funding.

Easy debt drives easy spending. It enables our government to do things it shouldn’t do, such as wage unnecessary wars and create boondoggles like the Green New Deal or a space force.

Which capital expense “can’t be helped,” Mr. Greenhut? Building a wall on our southern border? Buiding cages to house children we have taken from their parents?

Which wars are “unnecessary” and which are necessary?

And as for the “Green New Deal,” it describes the various efforts to reduce climate change. To you, that’s a boondoggle?

We’ll end with Greenhut’s final bit of nonsense:

Deficit spending creates constant pressure for tax hikes. We shouldn’t spend what we don’t have.

“Constant pressure for tax hikes”???? You mean the recent tax cuts, that came with the billions in increased deficit spending?

Will someone please contact Messrs. Greenhut and Rosenbert with the facts so that they don’t continue to make fools of themselves.

It would be the charitable thing to do.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell


The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

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

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.



7 thoughts on ““There’s No Such Thing as ‘Free Money.'” Yes, there is, Mr. Greenhut.

  1. A “deficit” is a deficiency of something. For a baseball team to make up a deficit in the score to tie or win, the deficit is a deficiency of runs relative to the score of the other team based on the number standard for score consisting of a base 10 decimal number system. In the case of our accounting language, applied to the dollar issuing national government, a so-called “deficit” is a deficiency or shortage of what, exactly?


    1. A deficit occurs when taxes are said to be “deficient” (or insufficient) to pay for spending. That is the case with state, county, and city finances.

      However, the word “deficit” erroneously is also used to describe federal finances. The problem is that federal taxes do not fund federal spending.

      Federal finances are wholly unlike state & local finances, and using the same word to describe both is ignorance.

      Those who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty do not understand economics.


  2. Budget “deficits” and “surpluses” refer to a comparison with taxes.tax is surplus to spending which requires the non government sector to spend assets to balance the budget.
    You know another stupid thing the mainstream gets wrong is that their budgets have spending on both sides of the budget; deficit spending and tax revenue. How stupid is that? Instead of currency creation vs currency destruction


  3. Thank you for shedding light on things, but please, with regard to federal spending…..When you say “Here’s how they do it:

    To pay a creditor, the federal government sends instructions (not dollars) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.

    At the moment the bank obeys those instructions, brand new dollars are created.

    So long as the federal government doesn’t run out of instructions, it won’t run out of dollars.”

    Question – Am i correct to assume that an equal number is accounted for somewhere as a debit? (I didnt say debt just to avoid confusion)

    Yes i understand that, this number can potentially have more numbers than my simple computer could type – But i dont understand how this number that represents government spending could be infinite without consequences.

    I dont see anywhere in your text as to what the ramifications ie real world (political) limitations or constraints are?


    1. Current law does not allow federal agencies to run a negative balance in the general account at the Federal Reserve Bank. So, they accept deposits into T-security accounts, which from a bookkeeping standpoint, offset any negative balances.

      Note that deposits not only can come from the public, but also from the Federal Reserve. It’s similar to an overdraft-proof checking account, in which the bank automatically adds dollars to your checking account to cure any overdrafts. The difference is that your bank is limited in its ability to add dollars to your account. The federal government has no such limits.

      The only possible limit to deficit spending would be a hyperinflation, but that never has happened, because hyperinflations always are caused by shortages of food and or energy, and deficit spending can help prevent shortages. No shortages; no hyperinflation. Period.

      I’ve explained the political limitations as being a result of pressure and bribery by the very rich.


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