Economics is simple, though you wouldn’t know that if you ever were confronted with an economics text.
Filled with jargon and maths, an economics textbook can be a daunting read, intentionally so, because nothing tells the world “I am real science” better than arcane language and impenetrable maths.
Part of the problem with labeling economics a science is that it is the study of the psychology of money, and psychology is a “science” only in the broadest, most charitable definition:
Wikipedia: Science (from Latin scientia ‘knowledge’) is a systematic enterprise that builds and organizes knowledge in the form of testable explanations and predictions about the universe.
Sadly, neither psychology nor its little sister, economics, are systematic, provide testable explanations or worthwhile predictions. Rather than being sciences, they are faith/belief systems (religions without mythical gods), filled with self-congratulatory experts, who endlessly expound with certainty, while providing scan proof, few tests, and laughably wrong predictions.
I apologize to tell you, I am an economist.
In this post, I provide you with none of the aforesaid maths and as little jargon as I can manage, hoping only to provide a bit of counterbalance to the flood of woolly-headed, faux expertise that confronts you every day.
Economics is simple because you can understand virtually everything of importance by understanding just two simple things — Monetary Sovereignty and Gap Psychology — and having understood them, you will know more than any politicians, any media pundits, and any economics professors, who don’t wish you to understand these simple things.
“Monetary” means relating to money. “Sovereignty” means having ultimate power or authority. Thus the term “Monetary Sovereignty” means having ultimate power or authority over money.
The U.S. government created the first dollar from thin air by creating laws from thin air. These laws are entirely arbitrary in inception and they repeatedly have been changed, arbitrarily.
Because the laws that created U.S. dollars were created by the U.S. government and remain under the complete control of the U.S. government, and no other entity, dollars themselves are under the complete control of the U.S. government.
Laws have no physical existence. You cannot see, smell, taste, feel, or hear a law. It is an idea, a concept, a description. A lawbook might contain descriptions of thousands of laws, but the book itself contains no laws. The paper and ink that comprise the book are not laws. They merely represent laws.
This does not mean that laws are not real. Laws are very real. They just are not physical.
Consider, for instance, a law against murder. What does that law look like? How does it feel to the touch? How does it taste or smell? Despite being non-physical, the law is real, and because it is non-physical the law can be anything its creators deem it to be.
The U.S. government is legally sovereign over U.S. laws. These laws can be anything the government and the American voters wish them to be. The degree to which voters influence laws is known as “democracy.”
Not only are the U.S. government and the American voter sovereign over our laws, but we never can run short of laws. The federal government does not need to collect laws from you in order to create more laws. The U.S. government creates endless laws, ad hoc, arbitrarily.
Even if American voters did not supply a single law to the federal government, the government could continue creating new laws, forever. This difference between the number of laws supplied to the government, and the number of laws created each year might be known as a federal “deficit of laws,” and the totality of all laws in existence might be known as the federal “law debt.”
Among the laws created by the federal government and the people, are the laws creating dollars. Just as laws have no physical existence, dollars also have no physical existence.
The reason gold coins, for instance, are not money, is that laws cannot create gold coins. Laws cannot create gold, and laws cannot create coins. Only people can do that. And just as law books are not laws — they represent laws — gold coins only represent money.
Similarly, paper dollars are not dollars. They represent dollars, which are non-physical bookkeeping entries.
To create dollars, the federal government neither needs nor uses any input of dollars. Even if all federal taxes were eliminated, the Monetarily Sovereign federal government could continue creating new dollars, forever.
The mathematical difference, each year, between dollars sent to the federal government vs the dollars created by the federal government is known as the federal “deficit,” and the total of all deficits is known a the federal “debt.”
Money, like the laws that create it, is ideas, concepts, abstractions. And because laws and ideas are not physical, they are whatever their creator deems them to be at any given moment.
Very soon, we will endure the annual “debt limit” fight, a fake conflict having absolutely nothing to do with the federal government’s ability to service its debt. The federal “debt” is not a debt and even if it were, the federal government has the unlimited ability to fund anything.
Why the fight? It’s all theater, the purpose of which is to convince you that the actors are financially prudent. So the party that is out of power will protest, and the party in power will assure, and everyone one will huff and puff, and eventually, having made their points, the fakers, feigning anger, reluctantly will agree to set a new, higher debt limit for the future.
There can be no greater proof of government duplicity than the federal “debt” limit.
INFLATION: Can there be too many laws? Can the annual “deficit of laws” and the “law debt” be too high? In essence, can there be law “inflation,” in which the addition of new laws depreciates the value of existing laws?
For instance, can the creation of say, a new law against speeding, make all other laws less valuable, i.e. cause law inflation?
Or by parallel, can the creation of new dollars make all other dollars less valuable, i.e. cause inflation?
The federal government has access to infinite laws and to infinite dollars, both of which it sends into the economy, at will.
Neither the creation and promulgation of new laws nor the creation and promulgation of new dollars depreciates the laws and dollars already in existence. New ideas, concepts, and abstractions do not depreciate existing ideas, concepts, and abstractions.
Infinity plus one equals infinity.
The U.S. government is uniquely Monetarily Sovereign over the U.S. dollar. No other entity has this God-like power over the dollar.
Having this power and authority means the government can control the supply of dollars at whatever levels it arbitrarily chooses. It never can run short of dollars. The federal government can afford anything and does not need to have income. It simply creates, by fiat, any number of dollars whenever the mood strikes.
(That is why the term “fiat money” is a redundancy. All money is fiat, i.e. created by fiat.)
The government also can control the value of the dollar in relation to any other product or currency. It can decide, by fiat, that a dollar is worth an ounce of silver, a pound of beef, or a partridge in a pear tree.
This means inflation is not caused by government spending but rather is caused by scarcities of key goods and services.
Inflation can be prevented and cured by preventing and curing scarcities. The federal government can accomplish this by federal deficit spending to obtain, or facilitate the creation of, the scarce goods and services.
Example: The notorious Zimbabwe hyperinflation was caused by food scarcity. The government took farmland from experienced farmers and gave it to inexperienced non-farmers. The resultant inflation could have been cured by government financing to support farming via education and material support.
Instead, the Zimbabwean government merely created money, while the scarcities grew unabated.
The other “simple thing” upon which economics stands is:
The “Gap” represents the distances between those who have more income, wealth, privilege, and power vs. those who have less.
The Gap (or rather, “Gaps”) are what makes the richer richer and the poorer poorer. Without the Gaps, no one would be rich; we all would be the same. And the wider the Gaps, the richer are the richer.
The richer always wish to grow richer yet.
The rich can grow richer, that is widen the Gaps, by gaining more for themselves or by making sure those below them lose, or at least gain less. Either method will do.
The rich generally oppose and demean aids to those who have less. They claim Social Security and Medicare are running short of dollars, though no federal agency runs short of dollars unless that is what Congress and the President want.
The rich, who control Congress, have made sure the FICA tax falls most heavily on the poor and middle classes. It is why capital gains are taxed more lightly than salaries. These are evidence of the rich growing richer by widening the Gaps.
The rich despise the poor. Hatred is a symptom of fear. There can be no hatred without fear, and the rich fear the poor masses. The rich fear not only lanterns and pitchfork uprisings, but more realistically, the latent voting power of the masses.
If the masses ever were to realize how false are the claims by the bribed media, the bribed politicians, and the bribed economists, those masses would rise up and demand that the Gaps be narrowed.
Yes, bribed. The media are bribed by rich ownership and advertising dollars. The politicians are bribed with campaign contributions and promises of lucrative employment. The economists are bribed with university endowments and promises of well-paying jobs at think tanks.
Wide Gaps are economically corrosive. They 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.
Economics studies money and its movement, which is controlled by human psychology.
The foundation of today’s economics is Monetary Sovereignty, the ability of an entity, usually but not always a nation, to create and control unlimited amounts of money and to determine the value of that money.
The engine that drives economics is Gap Psychology, the common human desire to widen the income/wealth/power Gaps below, and to narrow the Gaps, above.
Rodger Malcolm Mitchell
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:
- Eliminate FICA
- Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
- Social Security for all
- Free education (including post-grad) for everyone
- Salary for attending school
- Eliminate federal taxes on business
- Increase the standard income tax deduction, annually.
- Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
- 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.
8 thoughts on “Economics is simple while being complex.”
Rodger, well done. I am saving this broad, but accurate and clear description of monetary economics. I will often be referencing it for a foundation of clarity when I discuss all this with others.
A perfect example of the Idiocy of Indoctrination being stuffed into American heads: Economist John Cochrane Is Still Worried About the Debt
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Do you think adding something more specific to the constitution we would get better results from our Government? Or maybe we need a General Macarthur:)
Japan with the help of General Macarthur apparently were able to turn things around. Are there any other examples like Japan?
“An important difference between the Japanese and US constitutions is that Japan’s details the “rights and duties of the people” in 31 clauses. Three of these clauses have the important impact of forcing the Japanese government to reduce economic disparity and improve the health status of citizens. For example, according to article 11, “the people shall not be prevented from enjoying any of the fundamental human rights”; article 14 declares that “all of the people are equal under the law and there shall be no discrimination in political, economic or social relations because of race, creed, sex, social status or family origin”; and, finally, article 25 gives all people a “right to maintain the minimum standards of wholesome and cultured living. In all spheres of life, the State shall use its endeavors for the promotion and extension of social welfare and security, and of public health.”15 The Japanese government has, with the exception of several interpretations of the peace clause, followed these constitution-defined articles.22
MacArthur saw centralization of wealth and power in Japan as antithetical to the growth of democracy. The Fundamental Law of Education, passed in 1947, declared that the primary goal of the education system was to “esteem individual dignity and endeavor to bring up people who love truth and peace.”15(p549) Textbooks were rewritten to emphasize the virtues of democracy and pacifism. The most radical change was that students were required to complete 9 years of public education as opposed to 6 years. In addition, because MacArthur recognized the important role of women in society, women were ensured educational opportunities equivalent to those of men.21
There is no doubt that if there were a Constitutional Convention to re-write the constitution, it would be significantly different. Sadly, that difference would be dictated by the people in power, i.e. the rich.
The Gap is alive in good Ole Mississippi still trying lately to overthrow Roe V Wade as a “local” concern only, thereby skirting/violating federal law.
The rich can travel and afford an abortion; the poor are physically and monetarily stuck. This economic fact isn’t considered by those who ceaselessly argue “Human Life! ” and have NO concern at all about destroying the unarguable human life of a woman yearning to breathe free. https://nypost.com/2021/07/22/roe-v-wade-mississippi-ag-says-high-court-should-reverse-ruling/
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And all those phony “pro-lifers” refuse vaccination or mask-wearing. The sooner they win their coveted Darwin Awards, the better.
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I’ve thought about the self-imposed “debt ceiling” before. In fact, I published an article about it during a similar crisis in Obama’s Administration during 2013, and AGAIN with mods in 2015, seen here: https://www.opednews.com/articles/Updated-Debt-No-More-How-by-Scott-Baker-Banks_Constitution-In-Crisis_Constitution-The_Constitutional-Amendments-151026-698.html
Since i like to turn problems into opportunities, I used these previous occasions of so-called debt limits to point out that the president (then Obama, now Biden) cannot Constitutionally pick-and-choose which previously authorized Congressionally expenditures to pay for. He has to pay for all of them. What to do then, when Congress won’t raise the “ceiling?” Simple: he should tell the Treasury Secretary – part of the Executive Branch – to reissue United States Notes, this time in electronic form, instead of the original paper money in 1862-1863 and reissued in series through 1972 (not coincidentally, a year after Nixon took the U.S. off the gold standard, removing the last self-imposed impediment from the Fed from issuing unlimited amounts of money too) and in circulation through 1996. U.S. Notes can be used to pay all domestic debts, though not foreign debts, so that would take care of all contracted obligations – say, like what the DoD owes Lockheed for warplanes. I also cited two Constitutional provisions that say the country MUST pay its debts (I don’t expect that to matter much to Congress or the President, since both violate the Constitution on a daily basis, for example, not “coin(ing) Money” (Art. 1, Sec. 8, Clause 5) when needed or even desired. The Constitution says zero about banks, let alone Central Banks, which weren’t a “thing” in the modern sense until the Income Tax was allowed by the 16th Amendment; heavily funded World Wars and the Central Bank soon followed.
I still think these manufactured crises would be a great opportunity for a president (Biden) to show the power of Monetary Sovereignty to “coin Money” (capitalization in the original clause).
But, like so many things, Biden won’t take any step that is the least bit radical, preferring to be a lame duck who can pass or in this case, do by executive order, anything important 3.5 years before his term is up. Sure, the republicans would try and stop it, perhaps through the Supreme Court. I’d like to see that: how the Supreme Court decides whether the federal government is obligated to pay its previously authorized debts already passed by Congress, or whether some silly self-kneecapping rule made up entirely by Congress should prevent the President from carrying out his Constitutional duties.
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There are several “work-arounds” for the Big Lie that is manifested in the debt ceiling. One is the trillion-dollar platinum coin.
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