Here it is in all its glory: The Big Lie, perfectly illustrated:
It shows the federal debt (aka “national debt”) as a gigantic ditch, just waiting to swallow an innocent homeowner. And it’s all a lie — not just a lie but, “The Big Lie.”
The Big Lie in economics is promulgated via various myths. Which of these myths have you heard:
- Federal spending is paid for by federal taxes.
- Our children will be responsible for paying the federal debt.
- The federal debt is a burden on the economy.
- China lends dollars to the U.S. federal government.
- If China demands repayment, the federal government will be insolvent.
- The federal debt is an unsustainable ticking time bomb.
- The federal debt (the total of federal deficits) can cause inflation like Zimbabwe or __[fill in the blank]__.
- If you must live within your means, so must the federal government.
- The federal government can’t afford __[fill in the blank]__.
- A balanced federal budget is more prudent than running a deficit.
You probably have read or hear some of these, and sadly you might even believe some. Not one is correct. Not one.
- Because it is Monetarily Sovereign (unlike state and local governments) the U .S. federal government has the unlimited ability to create U.S. dollars. It has no need for taxes, which in fact are destroyed upon receipt.
- The so-called federal “debt” is paid by returning the dollars that are in T-security accounts. No one has been, is, or ever will be “responsible.”
- Reducing the federal debt is what causes depressions and recessions.
- China does not lend dollars to the U.S. federal government. Nobody does. The U.S. government does not borrow. It creates dollars by paying bills. The thing erroneously called federal “debt” does not result from borrowing. It results from deposits.
- The federal government cannot become insolvent. “Insolvent” means: “unable to satisfy creditors or discharge liabilities, either because liabilities exceed assets or because of inability to pay debts as they mature.” But the government’s method of creating dollars is to pay bills.
- The “ticking time bomb” fear-mongering phrase has been thrust upon the American public for 80 years. No explosion. Being wrong for 80 years says it all.
- All inflations and hyperinflation are caused by shortages of food and/or energy, never by an excess of government spending.
- The federal government has no means. That is why those few economists who have tried to demonstrate that federal debt has a negative influence on an economy, have failed miserably. Deficit spending is necessary for economic growth; the lack of deficit spending causes recessions and depressions.
- The federal government has the infinite ability to create dollars. Therefore, it can afford anything. (See The Ten Steps to Prosperity, below.)
- A balanced federal budget is the least prudent notion imaginable. Reducing federal deficit spending leads to recessions and depressions.
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 Big Lie is promulgated by the rich to discourage the rest of us from asking for more federal benefits and as an excuse to reduce our benefits.
As a result of Gap Psychology, the rich grow richer when the Gap between them and the rest of us is widened. The Big Lie accomplishes exactly what the rich want.
Here is a revision to the misleading cartoon at the start of this post. Perhaps it can serve as a mnemonic for reality:
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:
- 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:
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
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.
3 thoughts on “An absolutely perfect illustration of the Big Lie con job you’re subject to every day.”
Hello Rodger, could you please make a detailed illustration of what actually happens when the Treasury issues bonds for public auction? How does the process itself get consummated in terms of money movement from the buyer and the accounting details in the Treasury and FRB’s books? I’m not familiar at all with the intermediary steps involving primary dealers and secondary market operations.
Sorry. Can’t do it.
The bookkeeping details are irrelevant to Monetary Sovereignty, as they do not express actual money movement, but rather are just record-keeping notations.
While private bookkeeping does reflect money movement, the federal government does not “have” money in the normal sense. For example, while tax dollars are destroyed upon receipt (they cease to be part of any money-supply measure) the federal government continues to record them on its books for record-keeping purposes.
Because the federal government has the unlimited ability to create dollars from thin air, trying to track money-movement where money either does not exist or is infinite, serves no purpose, and actually is misleading.
Perhaps Warren Mosler can give you a more satisfying answer. That is his area of expertise.
Thing is, these treasury auctions are supposed to be transparent because, afterall, aren’t these borrowings being made in the name of the public?
The narrative out there is that the Treasury borrows from private savers (wealthy individuals, pensions funds, corporations, and foreign countries) in order to fund our budget deficits.
And as long as this narrative is held as truthful, there will be no public validation of both MS and MMT. There will always be debt and deficit hawks who will peddle the BIG LIE and the unsuspecting mass will believe them.
The solution, I believe, would be to make the process of issuing bonds transparent and be publicly understood.
In the case of the $2 trillion corona bailout, for example, how much of the bonds issued were bought by private buyers and how much were bought by the Federal Reserve?
There should be transparency in the auctioning process.