Discovery is realizing that the great thinkers are wrong.
Every great thinker is known as a great thinker because he/she showed how previous great thinkers were wrong. Subsequently, he will be shown to be wrong. That is called “science.”
Einstein’s gravity theories showed Newton’s gravity theories to be wrong. And though Einstein’s have stood for a century, they are incompatible with quantum mechanics, so there is a strong likelihood part of Einstein will be proved wrong.
In the previous post, On second thought, I was wrong. It’s not stupidity; it’s reasonable terror, I criticized a Chicago Tribune columnist for quoting the economics party line (aka “The Big Lie”) that federal finances are like personal finances.
His response was to send me the following survey, to prove his point:
Question A: Countries that borrow in their own currency should not worry about government deficits because they can always create money to finance their debt.
In the above survey, no economist agrees with the two statements, both of which are provably correct. Those economists who made additional comments to justify their opinions invariably mentioned inflation.
The near-unanimous belief was that creating “too much” money causes inflation, which is widely believed, but factually untrue.
Name any inflation, by country and year, and you will find that the inflation began with a scarcity, most often of food or energy. It was only in response to the scarcity, that a nation begins “printing” money
That is why the illusion of “money creation causes inflation” persists.
Here are examples of clarification comments by those who disagreed with the statements:
Marcus Brunnermeier, Princeton: “see numerous historical examples: Germany in 1920s, Latin America, …”
In every historical example, the inflation is precipitated by a food and/or energy shortage.
Darrell Duffie, Stanford: “The present value of debt issuances is equal to the present value of debt payments. So, borrowing more now means paying more later.”
Duffie provides a mere tautology that neither disproves nor proves the statement.
Ray Fair, Yale: “Surely inflation might be a problem.”
Austan Goolsbie, University of Chicago: “‘Always’ makes an ass out of you and me (reminding for a friend)”
I included this one not only because it is humorously inane — he was trying to be clever about the word “assume,” but got it confused with the word “always” — but it’s an example of an expert quoting something about which he has no knowledge.
Oliver Hart, Harvard: “This kind of behavior can quickly lead to inflation or even hyperinflation once the economy is close to full capacity.”
What will be the symptoms of an economy that is close to full capacity? Right. Shortages. It is shortages that cause inflation.
Kenneth Judd, Stanford: “A government may be able to do this once but doing this systematically will make it impossible to sell bonds in the future.”
Except: 1. If the government decides not to sell bonds or 2. If the central bank buys the bonds. The U.S. government doesn’t need to sell a single bond to acquire U.S. dollars. It creates a dollar, ad hoc, every time it spends a dollar.
Anil Kashyap, Chicago: “Money financing yields some seigniorage, but also inflation and the inflation has costs and there are limits to seigniorage capacity.”
A Monetarily Sovereign government needs no seigniorage (i.e. money creation profits).
Eric Maskin, Harvard: “Printing money causes its own problems, e.g., the risk of inflation”
Same old, same old. And wrong.
Robert Shimer, Chicago: “The real value of the money supply is bounded above. At some point, this must create inflation.”
What does “at some point” mean? He has no idea. The “ticking time bomb” claim has been made for 80 years, and still, we experience no explosion. Now that we are sliding into depression, they still worry about inflation. Insane.
AAron Edin, Berkeley: “There are limits to capacity and no limits to wants.”
So? What does that tell you? There are limits to the universe, too. Where are the limits? Should we stop firing rockets because they may fly out of the universe?
Kenneth Judd, Stanford: “Friedman wrote a book “There’s No Such Thing As a Free Lunch.” He also meant road or bridge or army or school or ANYTHING!”
And exactly what are those limits? The 80-year, 50,000% increase in federal debt hasn’t reached those “limits,” so what are the limits? He has no clue. But there is a “free lunch.”
And here are a few more comments from those whose comments already have been shown:
“. . . lots of countries have proved this to be impossible” Not Monetarily Sovereign countries
“There will come a point where the currency is so debased that further spending becomes difficult if not impossible.” The old “a point” that no one can identify.
“At some point, hyperinflation would break it all apart. However, this is an irrelevant question in an open world.” Some point. A point. Ah, that mysterious point,
“Creating money can finance a great deal of spending, but incidents of hyperinflation, collapse, and other crises indicate there are limits.” Except that every hyperinflation has been caused by shortages, and cured by deficit spending to cure the shortages.
“I don’t like this question. I guess it is true in some sense, but surely inflation looms at some point.” Surely — at some point, somehow, somewhere, maybe.
In summary, the vast majority of economists parrot each other, and the more they hear the same thing, the more believable it is. Herd mentality.
So now, with no evidence of support, they offer two objections to federal money creation:
- The federal government should live within its “means.”
- The federal government doesn’t need to live with its means, but at some unknown point, that would cause inflation.
And those two false statements are the total of economics, today, which is mouthed and printed everywhere.
Meanwhile, the people of the world are starving, because of that drivel.
Rodger Malcolm Mitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell
THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
The most important problems in economics involve:
- Monetary Sovereignty describes money creation and destruction.
- 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:
3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)
The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.