How America can save the entire world — or sink it, along with itself. A Marshall Plan.

BACKGROUND
The U.S. government is Monetarily Sovereign, meaning it:
1. Created the first U.S. dollars from thin air, by creating laws from thin air. It arbitrarily created as many dollars as it wished and gave them the value it wished.
2. Never can run short of its own sovereign currency, the U.S. dollar. Even if it collected zero taxes or had no other form of income, it still could continue spending forever.
3. By arbitrarily changing laws, the government has absolute control over the relative value of the dollar, a value it arbitrarily has changed many times over the years.

Monetarily non-sovereign governments like state/local governments and euro currency governments do not have the above powers.

These governments resemble you, me, and businesses in that we all require some form of income in order to spend.

There are, however, Monetarily Sovereign governments whose credit history does not allow them to freely exercise power #3. above.

Consider, for instance, Argentina, which in the past century, as suffered from hyperinflation caused by extremely bad management, combined with the fact that they are a minor player in the currency-exchange markets.

Argentina finally was able to solve its hyperinflation by pegging its peso to the U.S. dollar. But, pegging the peso to the dollar requires that Argentina maintain a supply of U.S. dollars, which it buys on the open market, as collateral for its debts.

When its debts exceed its supply of dollars, it is unable to maintain its collateral,

Creditors then make demands that can’t be met or refuse to provide goods and services in exchange for pesos.

5 Surprising Facts about Hunger in America | United Way Worldwide
Tomorrow’s COVID-19 world?

 

Covid-19, The Coming Developing Country Debt Crisis and The Argentina Debt Reduction Proposal
Posted on April 30, 2020 by Yves Smith
Yves here. By Jayati Ghosh, Professor of Economics, Jawaharlal Nehru University. Originally published at the Institute for New Economic Thinking website

As the United Nations warns that the “Great Lockdown” threatens to become the “Great Meltdown”, it’s now clear that most sovereign debt of developing countries is simply unpayable.

Even before the Covid-19 pandemic, total public and private debt in developing countries was nearly double their GDP. External short-term debt is a real problem: as much as $1.62 trillion is due to be repaid by developing countries this year, with another $1.08 trillion due in 2021.

All Monetarily Sovereign nations, even small ones with bad credit history, easily can pay internal debt, simply by creating their own sovereign currency. (Monetarily non-sovereign nations raise taxes which recirculate to the populace.)

Only external debt can be a problem if that debt is owed in a foreign currency.

(Argentina’s debt) would have been a struggle before; now, the Covid-19 crisis makes it impossible.

Developing countries are being battered by a tsunami of falling export and tourism revenues and dramatic outflows of capital, causing sharp currency depreciation.

Without quick and substantial action, many governments will be forced into debt defaults.

So does the international community want a perfect storm of disorderly defaults that could wreck the global financial system?

Or a more equitable distribution of costs among lenders and borrowers, with less damage to people?

The UN has argued for a new “Global Debt Deal” for developing countries, involving a $1 trillion debt write-off, recognizing that this is one of those unusual moments in history when the fate of the international system hangs in the balance.

As usual, the UN is intentionally or unintentionally clueless about international finance.

A mere $1 trillion debt write-off would be like taking a bucket of water from the ocean, hoping to reduce the tide.

But the concept is good. Monetarily Sovereign governments, and especially a powerhouse like the U.S. can afford unlimited debt writeoffs.

The new government in Argentina has proposed a set of principles and a framework for debt sustainability that make eminent sense. If adopted by creditors, it would set the stage for a manageable debt reduction in Argentina that would enable the country to grow its way out of the currently unsustainable debt.

It would also provide a template for dealing with other unsustainable developing country debt.

A brief history first. (To deal with its hyperinflation, Argentina called in the International Monetary Fund (IMF), which provided a controversial bailout with its usual conditions—massive budget cuts, primary budget balance in 2019 and a reduction of the external deficit.

Argentina did everything the Fund asked for, and the economy got steadily worse. Growth had collapsed well before the pandemic, inflation is surging, and there is immense hardship among people.

The IMF is the world’s loan shark. Like the typical loan shark, it provides money along with onerous conditions that are guaranteed to further impoverish the borrowing nations.

“Massive budget cuts,  a balanced budget, and a reduction of external debt” are known together as “austerity,” which always causes a financial disaster ore exacerbates an existing disaster.

As such, austerity is a favorite of the rich, because it creates a needy and beholden public, willing and desperate to labor at difficult jobs for minimal wages — in short, a helpless slave class.

One is reminded of the onerous financial conditions the Allies placed on Germany after WWI, which only 25 years later led to WWII.

Argentina is offering to restructure $65 billion of foreign debt to bondholders, under which interest payments would resume in 2023 and principal payments in 2026.

While some creditor groups rejected the offer, the negotiations continue.

Creditors who want to be paid at all should recognize that they have to take a haircut now.

Asking the private sector to “take a haircut” for public sector debt is bad economics, especially when there exists a primary creditor that has no need for repayment, and can take endless “haircuts” without suffering a burden.

The U.S. government, for instance, neither needs nor has any use for debt repayment. Any dollars received would cease to exist. The federal government very simply destroys all income it receives.

In the case of a nation that has pegged its currency to the U.S. dollar, and has more debt than dollars, the U.S. should supply the needed dollars. No strings.

Other than that, the U.S. should simply give dollars, on a per capita basis, to every nation meeting certain criteria, for example, a democratically elected government, a government with, or in danger of, impoverishment, or a friendly nation.

It would be similar to a “Marshall Plan” for the COVID-19 virus:Marshall Plan - Wikipedia

The Marshall Plan: Following WWII, some of the leading industrial and cultural centers of Great Britain, France, Germany, Italy, and Belgium, had been destroyed.

Some regions of the continent were on the brink of famine because agricultural and other food production had been disrupted by the fighting.

In addition, the region’s transportation infrastructure – railways, roads, bridges, and ports – had suffered extensive damage during airstrikes, and the shipping fleets of many countries had been sunk.

Aid was distributed to 16 European nations, including Britain, France, Belgium, the Netherlands, West Germany, and Norway, essentially on a per capita basis.

The countries that received funds under the plan didn’t have to repay the United States, as the monies were awarded in the form of grants.

Note that when the Marshall Plan was instituted, the U.S. was somewhat less than Monetarily Sovereign, as it still was on a gold standard. This limited the amount of money the U.S. could afford to give.

Today, no such limitation exists, and the U.S. easily can afford to support not only our own states, counties, cities, businesses, and citizens, but also other nations.

Such aid easily is affordable, and it would come back to us as prosperity by preventing a virus-induced world-wide depression and its economic devastation.

A COVID-19 “Marshall Plan” for Americans and for the world would truly make America “great again” and restore us to that “shining city on a hill” we always imagine ourselves to be.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
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:

  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

12 thoughts on “How America can save the entire world — or sink it, along with itself. A Marshall Plan.

  1. Jared Kushner: “I think that we’ve achieved all the different milestones that are needed. So the government, federal government, rose to the challenge and this is a great success story. I think that’s really what needs to be told.”

    Yet, nearly 2,000 people still die every day — and the death toll is surely is higher than the official numbers.

    Another day, another few dozen lies, and the dumb Trump followers still believe. Amazing. Is there no limit to stupidity?

    Like

    1. The worse everything gets, the better the chances of accepting what we don’t accept, i.e., reaching the pinch point of pain. MS is starting to look better and better to the naysayers who previously have been in love with debt accumulation and class structure.

      With the imminent threat of total disaster, hopefully the idiots of economics will step out of the way and allow for the possibility of renewal. I’d say the limit to stupidity is the End of civilization as we know it.
      And Jared is the chief White House sycophant.

      Like

      1. Facts alone don’t penetrate. It would take someone like a President of the United States to state that deficit spending is necessary for growth, the more the better, and it doesn’t cause inflation. The rich would howl, of course, but a strong President could change the course of history.

        Like

          1. I hope you’re right, but I see too many references to the “serious concerns” about the debt and “getting our fiscal house in order” to be very optimistic. It’s that same old BS we have been told for 80 years.

            Like

  2. Hi Rodger,
    South Korea seems to be doing everything right even though they pay taxes.

    “Take South Korea’s biggest international airport, Incheon. As a publicly managed airport, it is consistently ranked among the best in the world.

    Likewise, the Seoul metro system is world renowned for its cheap fares and efficiency, making it one of the top five underground systems. By far the most impressive aspect is South Korea’s single-payer healthcare system which was ranked the first among OECD countries in 2015.

    Although hospitals in Korea are mostly privately run, 97% of the Korean population is covered by the compulsory national health insurance scheme. This balance between privatized hospitals and public insurance system has ensured universal accessibility and ample resources, proving its effectiveness in the coronavirus crisis.”

    https://www.theguardian.com/commentisfree/2020/apr/11/south-korea-beating-coronavirus-citizens-state-testing

    Like

      1. Supposedly taxes fund service and workers supply taxes and employers fund workers. The chain gets broken at the employment stage. Not only is Covid19 destroying employment, so is automation and job expatriation. I don’t see how traditional economics can survive this onslaught of reality.

        Liked by 1 person

        1. Taxes fund state and local spending, not federal spending.

          The future sees the end of the traditional 40-hour week. My crystal ball sees a 30 hour week.

          The federal government can fund the economy by providing the Ten Steps to Prosperity at any level needed. Even if machines did 90% of the labor, and most everyone just enjoyed a vacation, the federal government could fund all needs, including state/local government needs.

          Liked by 1 person

  3. Part of the problem is attachment to reality. Ford had an idea and it became the moving mass production assembly line. The Wright Bros. had an idea and we got airplane flight. MMT has physical labor as its counterpart. MS has none except distribution of the idea of free credit by already existing computers and electricity from which to operate them; in short, a plan to rethink the obvious that’s right in front of us, but it still remains “an idea w/o a physical cofunction.” You might say it’s a true and wonderful speech but where’s the beef? Where is the airplane, car, sewing machine?

    Just trying to get at the heart of the problem to open up a solution that seems to be going around in circles, i.e., the Ten Steps. The 11th step might be a physical reality of some kind that makes Monetary Sovereignty more palatable to the touchy feely aspect.

    Liked by 1 person

  4. tetrahedron720,

    You are correct that a physical reality is much easier to visualize and explain.

    Yet, Social Security, Medicare, Medicaid, and free schooling for K-12, are concepts that were accepted without a physical reality.

    They were demanded by Washington, Roosevelt, and Johnson, strong leaders with strong parties.

    I suspect our solution would be for a powerful and respected leader – a John Kennedy, for instance – to explain the realities of MS and to demand passage.

    Today, we have an extremely unstable and immoral leader with an extremely unstable and immoral Congress, so passage of anything that narrows the Gap is unlikely.

    Sadly, Obama didn’t, and Biden doesn’t, have “the right stuff” to pass such legislation, though Obama did try with a Republican-created “Obamacare” plan.

    Today, we have a President and GOP so bereft of morals they fight strenuously against anything that benefits the lower income groups, even something that was created by a Republican.

    I can’t explain why I feel this way, but I believe that if Biden would be able to snare Michele Obama as his VP, and then quickly die, the stronger of the two Obamas would lead us to the Ten Steps.

    Just a feeling.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s