Wall Street Journal gets it wrong, again. Do they have a learning disability?

20 Easy Things That Will Make You the Next Millionaire | Inc.com
Being Monetarily Sovereign, the U.S. government owns infinite dollars.

You reasonably might expect that, of all the newspapers in the world, the Wall Street Journal surely would print articles by only writers who understand federal finances.

Ah, would that it were so.

Unfortunately, some writers published by WSJ either are as ignorant as the general populace or as intentionally ignorant as the bribed-by-the-rich politicians and university economists.

Here is an example saw in a recent WSJ edition (OK, the article printed in several papers, but I read in WSJ, which should know better):

U.S. National Debt Tops $30 Trillion as Borrowing Surged Amid Pandemic
The record red ink, fueled by spending to combat the coronavirus, comes as interest rates are expected to rise, which could add to America’s costs.

After a protracted standoff last year, Congress agreed in December to raise the nation’s borrowing cap to $31.4 trillion.
By Alan Rappeport, Feb. 1, 2022

We can’t even get past the headline and subheads without being subjected to WSJ ignorance.

Safe Deposit Box: What You Should (And Shouldn't) Store | Bankrate
Federal “debt” is deposits into accounts similar to safe deposit boxes. The federal government never touches those deposits except to return them to the owners.

The so-called “national debt” neither is “red ink,” nor is it debt. It is the total of deposits into Treasury Security accounts.

When you invest in a T-bill, T-note, or T-bond, you do not lend the federal government money. You merely deposit your dollars into your T-security account. It’s an account similar to an interest-paying, safe-deposit box.

As with a safe deposit box, the federal government does not touch your dollars. It merely stores them for you, and allows you to accumulate interest.

Upon the maturity of your account, the government “pays it off” simply by returning to you, the dollars in your account. Since the dollars already exist in your account, and remain yours, this payoff is no burden on you, on the government, or on taxpayers. It’s merely a transfer of your dollars.

If the national “debt” were a real governemnt debt, it would go something like this:

The government needs dollars to pay its bills. Federal taxes are insufficient to pay all the creditors, so the government must borrow dollars, and in return it gives the lenders its IOUs in the form of T-securities (T-bills, T-notes, T-bonds).

Later, to obtain the dollars to pay off the T-securities, the government levies more taxes. This means we taxpayers ultimately are liable for the government’s debts.

You have just read what the Wall Street Journal and the vast majority of Americans believe about the federal debt.

And it is 100% wrong.

Back in the late 1770s, the federal government created the U.S. dollar from thin air. The government simply passed laws (from thin air) that created as many dollars as it wished, and gave those dollars whatever value it wished.

The first U.S. silver dollars were coined on Oct 15,1794. On that day, 1,758 of them were produced, but no more the rest of the year.

In 1794, a new coin called the Draped Bust Dollar, featuring a matronly Liberty of considerable endowment wearing a draped blouse. Over 40,000 Draped Bust dollars were minted in 1795.

Why 1,158 and 40,000? Because the government arbitrarily based its coin on silver. Each coin contained 0.7737 oz of silver. Why 0.7737? Because the government arbitrarily made its dollar similar in weight to the Spanish dollar.

Note the word “arbitrarily.” The government could have produced any number of dollars, and could have made them equivalent to anything it wished. The base could have been gold, lead, tin, or nothing at all.

Because we were a new country, we tried to create demand for the dollar by making it equivalent to an existing coin. But it was all arbitrary.

The federal government arbitrarily has changed the metal content of all U.S. coins many, many times over the years.

Today, the vast majority of dollars are nothing more than numbers on spreadsheets, and have no physical existence.

The federal government retains the infinite ability to create laws from thin air, and those laws have the infinite ability to create dollars from thin air.

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

Quote from Ben Bernanke when, as Fed chief, he was on 60 Minutes:
Scott Pelley: Is that tax money that the Fed is spending?
Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.

Statement from the St. Louis Fed:
“As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”

Read the above quotes carefully, then ask, what is Alan Rappeport talking about when he refers to the federal “debt” (i.e. deposits) as “red ink?”

How can accepting deposits into T-security accounts be considered “borrowing,” when, as Greenspan, Bernanke, and the St. Louis Fed say the federal government has the infinite ability to create dollars? Why would the government ever need to borrow?

It wouldn’t and it doesn’t.

WASHINGTON — America’s gross national debt topped $30 trillion for the first time on Tuesday, an ominous fiscal milestone that underscores the fragile nature of the country’s long-term economic health as it grapples with soaring prices and the prospect of higher interest rates.

It’s not “ominous.” On the contrary, it’s a sign of a growing economy. It would be “ominous” if the misnamed national “debt” were declining. That would demonstrate we are in a recession or depression.

In fact, the so-called”debt” isn’t even debt or borrowing. It’s the total of investments in T-securities (T-bills, T-notes, T-bonds).

The government never touches the dollars invested in these securities, and the government pays them off every day, simply by returning the balances in the accounts. No tax dollars are involved. This is not a burden on the government or on taxpayers.

The sole purpose of T-securities is not to provide the federal government with its own dollars, but rather to provide a safe “parking place” for unused dollars. This stabilizes the dollar. It is not borrowing in any sense of the term.

The breach of that threshold, which was revealed in new Treasury Department figures, arrived years earlier than previously projected as a result of trillions in federal spending that the United States has deployed to combat the pandemic.

That $5 trillion, which funded expanded jobless benefits, financial support for  small businesses and stimulus payments, was financed with borrowed money.

No, no, no. It was NOT financed with borrowed money. Every penny the government pays for anything is created, ad hoc, with the press of a computer key. The federal government never borrows the currency it has the infinite ability to create from thin air. Here is how:

To pay a creditor, the federal government creates instructions. These instructions tell the creditor’s bank to increase the balance in the creditor’s checking account.

At the instant the instructions are obeyed, new dollars are created and added to the money supply measure called “M1.”

That is how the federal government creates money: By using its infinite ability to create instructions telling banks to increase checking account balances.

Why would the federal government borrow, when as Chairman Ben Bernanke said, it can “produce as many U.S. dollars as it wishes at essentially no cost.”

The borrowing binge, which many economists viewed as necessary to help the United States recover from the pandemic, has left the nation with a debt burden so large that the government would need to spend an amount larger than America’s entire annual economy in order to pay it off.

Utter nonsense. The so-called “debt” (that isn’t a debt) is not a debt “burden.” The government pays off all T-securities simply by returning the dollars in T-security accounts. It does this every day.

And the phrase, “entire annual economy” is a non-sequitur based on ignorance. The size of the U.S. economy (i.e. the Gross Domestic Product) does not pay for any part of the “debt.”

That comparison of the so-called “debt” vs. the US. economy — known as the “debt/GDP ratio — often is quoted as a way to shock the reader, though it is a meaningless comparison.

Here are a few similar comparisons.

Country Debt To GDP Ratio  2022 Population
Japan 237.00% 125,584,838
Greece 177.00% 10,316,637
Lebanon 151.00% 6,684,849
Italy 135.00% 60,262,770
Singapore 126.00% 5,943,546
Cape Verde 125.00% 567,678
Portugal 117.00% 10,140,570
Angola 111.00% 35,027,343
Mozambique 109.00% 33,089,461
United States 107.00% 334,805,269
Djibouti 104.00% 1,016,097
Jamaica 103.00% 2,985,094


Guinea 18.00% 13,865,691
Nigeria 17.50% 216,746,934
Libya 16.50% 7,040,745
Palestine 16.40% 5,345,541
Republic of the Congo 15.70% 5,797,805
Burundi 15.20% 12,624,840
Kuwait 14.80% 4,380,326
Russia 12.20% 145,805,947
Bhutan 11.00% 787,941
Eswatini 10.75% 1,184,817
Egypt 9.00% 106,156,692
Estonia 8.40% 1,321,910
Afghanistan 7.10% 40,754,388
Cayman Islands 5.70% 67,277











Do you see any relationship between the Debt/GDP ratio and the economic strength of the nation? Of course not, because there is no such relationship.

The Debt/GDP relationship is meaningless. So why does Rappeport refer to it? Either he doesn’t understand federal finance or he is trying to scare you. 

(The Wall Street Journal is designed for the rich, and the rich want to convince the populace that the government cannot afford to give benefits to the not-rich.)

Some economists contend that the nation’s large debt load is not unhealthy given that the economy is growing, interest rates are low and investors are still willing to buy U.S. Treasury securities, which gives them safe assets to help manage their financial risk.

Those securities allow the government to borrow money relatively cheaply and use it to invest in the economy.

More nonsense. The so-called “debt load” is not unhealthy, and low interest rates are not a factor. The federal government, having the unlimited ability to create dollars, has no difficulty paying any amount of interest. Totally painless.

And the federal government doesn’t need investors to buy Treasury securities. These are offered as a benefit to investors, not to the government. And in any event, any unsold T-securities are purchased by the Federal Reserve.

For years, presidents have promised to limit federal borrowing and bring down the nation’s budget deficit, which is the gap between what the nation spends and what it takes in. Under President Bill Clinton, the United States actually ran a budget surplus between 1998 and 2001.

Yes, Presidents have made this promise, and every time they actually kept the promise, we had depression or a recession. Mr. Rappeport fails to mention that Clinton’s surplus led to the recession of 2001.

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.

But taming deficits had fallen out of fashion in recent years, including during the Trump administration, when lawmakers blew through budget caps and borrowed money to fund tax cuts and other federal spending.

Deficits don’t need to be “tamed.” Remember what Greenspan, Bernanke, and the St. Louis Fed said about the government’s infinite ability to pay its bills.

Further, the federal government does not borrow its own sovereign dollars, the dollars it has the unlimited ability to create from thin air.

And all federal spending is funded, not by taxes, but by ad hoc creation of new dollars.

Why does the federal government levy taxes? To control the economy. It taxes what it wishes to discourage, and it gives tax breaks to what it wishes to encourage.

Further, taxes give the impression that federal benefits must be limited. The rich, who control Congress and the President, want the Gap between the rich and not-rich to widen. The wider the Gap, the richer are the rich.

It’s called “Gap Psychology“, the human desire to widen the Gap below and to narrow the Gap above.

“Hitting the $30 trillion mark is clearly an important milestone in our dangerous fiscal trajectory,” said Michael A. Peterson, the chief executive officer of the Peter G. Peterson Foundation, which promotes deficit reduction. “For many years before Covid, America had an unsustainable structural fiscal path because the programs we’ve designed are not sufficiently funded by the revenue we take in.”

The Peter G. Peterson Foundation is notorious for crying “wolf” about the deficit and predicting calamity that never happens — until we actually do reduce the deficit, at which time we have the aforementioned depressions or recessions.

Until then, it’s all warnings and hand wringing about the “ticking time bomb of debt.” It’s a “time bomb” that has been ticking since 1940 and still no explosion.

The gross national debt represents debt held by the public, such as individuals, businesses and pension funds, as well as liabilities that one part of the federal government owes to another part.

Right, the so-called debt (T-bills et al) are assets of the private sector. When you own a T-bill, that is one of your assets.

Alan Rappeport doesn’t want you to have that asset. He wants the government, which has infinite assets, to take that asset from you. Smart?

While Republican lawmakers helped run up the nation’s debt load, they have since blamed Mr. Biden for putting the nation on a rocky fiscal path by funding his agenda.

After a protracted standoff in which Republicans refused to raise America’s borrowing cap, threatening a first-ever federal default, Congress finally agreed in December to raise the nation’s debt limit to about $31.4 trillion.

It was all political theater — cynical politicians trying to convince the innocent public that they are fiscally prudent. But if they really were prudent, they would spend more on global warming, poverty, healthcare, education, transportation, infrastructure, science, ecology, etc. — not debating about how to spend less.

In January 2020, before the pandemic spread across the United States, the Congressional Budget Office projected that the gross national debt would reach $30 trillion by around the end of 2025. The total debt held by the public outpaced the size of the American economy last year, a decade faster than forecasters projected.

Yes, as usual, the economic forecasters were wrong about the meaningless Debt/GDP ratio. So?

The nonpartisan office warned last year that rising interest costs and growing health spending as the population aged would increase the risk of a “fiscal crisis” and higher inflation, a situation that could undermine confidence in the U.S. dollar.

By “fiscal crisis,” we assume Rappeport means the federal government would be unable to pay its debts — which as we know is impossible for our Monetarily Sovereign government. (It can happen to state/local government, which are monetarily non-sovereign.)

And inflation always is caused by shortages, never by federal deficit spending.

In fact, federal deficit spending is one of the best methods for curing inflation, if the spending is for curing the shortages.

Todays inflation is caused by shortages of oil, food, computer chips, labor, and other needs. The federal government could stop inflation by spending more to support oil drilling, efficient farming, and chip manufacture, and by eliminating FICA (FICA lowers the net income of workers and makes them less willing to accept jobs).

Trillions in federal spending has left the United States approaching levels of red ink not seen since World War II.

Actually, the so-called “debt” is much higher than it was during WWII. And when spending for WWII ended, we had recessions.

The Biden administration has said the $1.9 trillion pandemic relief package the Democrats passed last year was a necessary measure to protect the economy from further damage.

Treasury Secretary Janet L. Yellen has argued that such large federal investments are affordable because interest costs as a share of gross domestic product are at historically low levels thanks to persistently low interest rates.

Yes, the $1.9 Trillion in deficit spending did protect the economy, just as cuts to federal spending will injure the economy. So why cut?

Interest costs as a share of GDP are irrelevant, as are low interest rates. In fact, higher interest rates have one advantage: They force the federal government to pump more stimulus dollars into the economy.

What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.

Inflation always is caused by shortages and always is cured by curing the shortages, which the federal government can do by federal deficit spending.

Esther L. George, the president of the Federal Reserve Bank of Kansas City, suggested during a speech this week that the Fed’s big bond holdings might be lowering longer-term interest rates by as much as 1.5 percentage points — nearly cutting the interest rate on 10-year government debt in half. 

As rates rise, so does the amount that the United States owes to investors who buy its debt. The Congressional Budget Office estimates that if interest rates rise in line with their own forecasts, net interest costs will reach 8.6 percent of gross domestic product in 2051. That would amount to about $60 trillion in total interest payments over three decades.

That’s 60 trillion stimulus dollars pumped into the economy — dollars the federal government easily can create with the touch of a computer key, and dollars the economy uses for growth.

“A larger amount of debt makes the United States’ fiscal position more vulnerable to an increase in interest rates,” the C.B.O. said in its long-term budget outlook.

What does he mean by “vulnerable”? Is he saying that our Monetarily Sovereign government, which has the infinite ability to create dollars, will not be able to pay interest? Nonsensical.

Biden administration officials insist that they view fiscal responsibility as a priority. They have pledged that their economic agenda will be fully paid for through tax increases on wealthy Americans and corporations and by more rigorous enforcement of the tax code.

Biden wants you to believe that federal taxes fund federal spending. It is a lie. Federal taxes are destroyed upon receipt by the Treasury.

Taxes come out of checking accounts that are part of the M1 money-supply measure. When they reach the Treasury, they cease to be part of any money-supply measure. They effectively disappear.

There is no money supply measure that includes the federal government, because the government has infinite money. No one can answer the question, “How much money does the federal government have?” The only answer is, “Infinite.”

In recent months, the budget deficit has started to shrink as a stronger economy has boosted tax receipts and as government payments of pandemic relief money have slowed.

And this means economic growth will slow. If federal deficits fall enough, we will have a recession or depression.

And some economists argue that a more recent economic phenomenon — inflation — may have a silver lining in that it could chip away at the nation’s debt burden.

The federal “debt” is not a burden on the federal government or on taxpayers or on anyone else. It’s not debt, and even if it were, the federal government has the unlimited ability to pay.

Kenneth Rogoff, a Harvard University economist, said “You would rather have no debt, of course, but compared to other issues at the moment that’s not the principal problem.”

He’s a Harvard economist and he thinks that having no debt (which would require removing $30 trillion from the economy) is something we “would rather have”?? Is this the nonsense they teach at Harvard?

In summary:

A federal deficit is necessary for economic growth. The federal Debt/GDP ratio is meaningless as a measure of economic health.

The federal government creates dollars, ad hoc, by paying creditors, which it can do endlessly.

Unlike state/local governments, the federal government is Monetarily Sovereign. It has the unlimited ability to create its sovereign currency, the U.S. dollar, and instantly can pay any obligation based on dollars.

The government never unintentionally can run short of dollars.

Federal taxes are destroyed upon receipt and do not fund federal spending.

The federal debt is nothing more than the total of deposits in T-security accounts, which are “paid off” by returning the dollars in them. This is not a burden on the federal government or taxpayers.

Federal deficit spending does not cause inflation; shortages cause inflation. A prime way to combat inflation is with federal deficit spending to cure shortages.

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



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. 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.


12 thoughts on “Wall Street Journal gets it wrong, again. Do they have a learning disability?

  1. Rodger – While you are correct that inflation is generally caused by shortages of key goods or services, our current inflation has another cause that can’t be cured by additional spending alone.

    See Matt Stoller’s article from December 29th:


    I would venture to guess that this is the first time that price-gouging has been such a large contributor to inflation. The solution is a more robust antitrust regime where the existing antitrust laws such as the Sherman Act are actually enforced the way they once were.

    Government seems to be moving in that direction now. Lina Kahn at the FTC and Jonathan(?) Kander at the DOJ Antitrust Division have started taking action to prevent further monopolization and the consequent reduction in competition.


      1. Well, a lot has changed. It started with the problems caused by the pandemic which screwed up production, distribution, and delivery of goods, providing the traditional cause of inflation, shortages of goods and services.

        Making matters worse is the continuing consolidation of many industries and sectors into a few companies that have absolute pricing power and are using it to increase margins far above their increased cost of inputs as Matt Stoller has documented. It’s been getting progressively worse over the past 25 years or more and seems to have reached a tipping point where the monopolies and oligopolies are taking advantage of the situation to radically increase their margins.

        The rising cost of food is an example. There are four meatpackers who control about 80% of the meat market; Tyson Foods, JBS, National Beef, and Cargill Meat. The same is true of commodity foods such as wheat and soybeans; Cargill (again), Tyson Foods (again), JBS (again) and ADM.

        The labor market is also in turmoil. Although many economists, including the Fed, are calling it a “tight” labor market, nothing could be further from the truth. The issue is that the pandemic has clearly shown the working class how much they have been exploited and they aren’t eating the dog food anymore. Many sectors, especially hospitality and medicine have seen a huge exodus of workers. They simply won’t put themselves into the pressure cooker for wages that aren’t commensurate with the hard work and the risks they are taking.

        Although “gig work” is a helluva way to earn a living, it’s an option that many are finding better than the alternatives.

        I also think there is a spillover effect from all the money the Fed has been pumping into the stock and bond markets, but it’s likely indirect.


  2. Rodger – I just realized there’s an error in your description of the sale of Treasury securities.

    You wrote “And in any event, any unsold T-securities are purchased by the Federal Reserve.”

    That’s not right. The Fed is forbidden from buying securities directly from Treasury. They can only purchase Treasury securities in the secondary market. That’s where their Open Market Operations are used to facilitate interest rate policy.

    Treasury securities are sold by auction to Primary Dealers. These are large American banks and large foreign banks with a US presence, designated by Treasury, who bid on the securities for sale by submitting the interest rate they want to receive according to the maturity being offered. They are required to purchase all of the securities on offer at the auction rate of interest chosen by Treasury, usually the lowest rate in the auction. Normally the to bid-to-cover ratio is in excess of 3 to 1.

    The Primary Dealers then either sell the Treasuries into the market or hold them for their own or the clients’ accounts. That’s when the Fed can, and does, buy them.


      1. Werner finds that interest rates follow the direction of economic growth. Interest rates are the dependent variable that follow levels of growth in the economy. This is exactly the opposite of how most people think of interest rates as being the causal factor of economic expansion. In other words after collecting and statistical analyzing 50 years of post-World War II data [1957-2008] from four central banks, Werner found that lower interest rates do not stimulate the economy, rather low interest rates meant there was low growth.

        Wonder if cruddy Krugman and the rest of the clowns know this that low interest rates do not cause monetary expansion? That it is a deflationary environment that causes low rates.



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