Suddenly, I’m a genius. How did that happen?

Answer: The COVID-19 crisis. There’s nothing like a crisis to force people to re-think the myths that helped exacerbate the crisis.

For about 25 years, I’ve been telling anyone who would listen that, contrary to popular myths:

  1. The U.S. government’s finances are unlike state and local governments’, and unlike euro governments’, and unlike businesses’, and unlike yours and mine. The federal government uniquely is Monetarily Sovereign. Two hundred forty years ago, it created from thin air an arbitrary number of the first U.S. dollars. It did this by creating laws from thin air. The U.S. dollar is a product of U.S. laws.Greenspan quote.png
  2. The U.S. government still retains the ability to create laws and its own sovereign currency, the U.S. dollar from thin air. Using its laws, the government can give its dollars any value it chooses (which it arbitrarily has changed multiple times).
  3. Even if all federal tax collections fell to $0, the U.S. government could continue spending forever. It never can run short of U.S. dollars.Bernanke quote.png
  4. The government creates dollars by spending. To pay a creditor, the government sends instructions (via check or wire), to the creditor’s bank, telling the bank to increase the balance in the creditor’s bank account. The instant the bank obeys those instructions, new dollars are created and added to the M1 money supply.
  5. The federal government destroys all its income, including all your tax payments, upon receipt. When the government receives your tax dollars, your checking account is reduced, which reduces the nation’s M1 money supply. Meanwhile, the received tax dollars cease to be part of any money supply measure, so they effectively are destroyed.St louis fed quote.png
  6. The federal government does not borrow. It accepts deposits into T-security accounts. When you buy a T-security (T-bill, T-note, T-bond), you actually deposit your dollars into your T-security account at the Federal Reserve bank. There, the dollars remain, gathering interest, until maturity, at which time the government returns the dollars to you. No tax dollars are involved at any point in the process.
  7. Neither you, nor anyone else, owes or pays for the federal “debt.” Federal debt is not typical debt. It is the total of dollars deposited into T-securities accounts. The federal government, having no need for these dollars, does not touch them. They remain in your account until the T-securities mature.
  8. The purpose of T-securities is not to provide the government with dollars, which it creates at the touch of a computer key. The purposes are: To provide a safe storage place unused dollars (which stabilizes the dollar) and to make Americans believe dollars are scarce to the government (so the people will not ask for benefits).
  9. Neither the federal debt or federal deficit are a burden on anyone. The federal deficit is the net amount of money the federal government has added to the economy. Thus the federal deficit is the economy’s surplus.warren buffet quote.png
  10. A growing economy, by definition, needs a growing supply of money. Gross Domestic Product (GDP), the prime measure of an economy = Federal Spending + Non-federal Spending + Net Exports.
  11. Mathematically it impossible for an economy to grow unless its money supply grows. That is why federal deficits grow the economy (GDP.)
  12. Federal surpluses cause recessions and depressions by shrinking the supply of dollars in the private sector. Every depression in U.S. history has come on the heels of federal surpluses. Most recessions have resulted from reduced deficit growth.
  13. The GDP/Debt ratio, so often cited, is a meaningless fraction.  The amount of national (public and private) spending vs. the total of all T-security accounts has no relevance in economics. The federal government could accept deposits in T-securities’ accounts without running a deficit, and it could run a deficit without accepting deposits into T-securities accounts. The two are not related.
  14. Federal deficit spending does not “crowd out” private spending. The opposite is true. Because federal deficit spending adds dollars to the economy, it facilitates private spending. A more complete discussion can be found here.
  15. The U.S. government should not try to increase the balance of trade. Imports are more beneficial than exports. With imports, the federal government exchanges easily created dollars for difficult-to-create goods and services.
  16. Inflations and hyperinflations are not caused by government “excessive” spending. They are caused by shortages of key goods, usually food and/or energy. Ironically, inflations and hyperinflations can be cured by increased government spending to obtain the scarce goods and tribute them to the public.
  17. The most important problems in economics involve: Monetary Sovereignty, which describes money creation and destruction, and Gap Psychology, which describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
  18. The rich, who run America, wish to widen the Gap, because it is the Gap that makes them rich. Without the Gap, we all would be the same, and the wider the Gap, the richer they are.
  19. The sole purpose of government is to improve and protect the lives of the people. 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.
  20. The Ten Steps to Prosperity should be implemented to grow the economy and to narrow the Gap between the rich and the rest.

That’s a great number of popular myths, debunked. For lo these 25 years, I have enjoyed receiving epithets ranging from “commie” to “stupid,” to the carnal, to “lib,” and now suddenly, I’m a genius. And being a “lib” isn’t quite so outrageous.

With the government BV (before virus) already planning to run a $1 trillion deficit, and now DV  (During Virus) planning to add about $2 trillion more to the deficit — and all without raising taxes —  it has become clearer to my intelligent friends and enemies that the above 20 statements have validity.

Now, if only we could communicate the facts to the nation’s opinion leaders — the media, the politicians, and the economics professors — we might detach ourselves from the COVID-19 depression that hovers in our future.

Sadly, America needs more trillions than the government already has allocated, to stave off a massive depression. I calculate that at least $7 trillion is needed, depending on how it is allocated.

Though I now have become, in the eyes of some, an “instant” genius (after 25 years), the myths continue to dominate popular thought — just somewhat less.

But it doesn’t take a genius to see what is plain and simple right before your eyes. It doesn’t take a genius to understand the basics of Monetary Sovereignty and Gap Psychology.

You can do your part to disseminate the truth and to diminish the lies by repeatedly — daily, hourly — contacting your Senators and Representative, and telling them about Monetary Sovereignty. Do it, if not for you, then for your children and grandchildren.

You can help save the world. You have nothing better to do.

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

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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and 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 the rest.

MONETARY SOVEREIGNTY