THE PROBLEM: ECONOMIC MYTHS HINDER ECONOMIC GROWTH
Myth #1: The federal debt and deficits are too high. The fact:
Myth #2: Federal debt as a percentage of Gross Domestic Product is too high and unsustainable. The fact:
Myth #3: Inflation is too much money chasing too few goods and services. The fact:
Myth #4: Federal deficit spending causes inflation. The fact:
Myth #5: Oil prices aren’t the primary cause of inflation. The fact:
Myth #6: COVID was not an important cause of inflation. The fact:
Oil production dropped dramatically in 2020, at exactly the time when COVID came to be rampant throughout the world.
When oil production drops, the resultant shortage causes prices to rise, which causes virtually all other prices to rise.
COVID-caused scarcities such as computer chips, cars, lumber, homes, food, shipping resources, baby formula, and labor exacerbated these other price increases.
THE SOLUTION: FEDERAL DEFICIT SPENDING TARGETED AT GROWING THE ECONOMY AND CURING INFLATIONS BY ELIMINATING SHORTAGES.
Unlike state and local governments, the federal government is Monetary Sovereign. It has the unlimited ability to create its own sovereign currency, the U.S. dollar.
The federal government never unintentionally can run sort of dollars.
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.”
Even if all tax collections totaled $0, the federal government could continue spending forever.
The economy, as measured by GDP, is a spending number, a formula for which is:
Federal Spending + Non-federal Spending + Net Exports = GDP
Therefore, by formula, adding dollars to the economy via federal spending increases GDP.
This leads to the question, will this cause inflation?
As we have seen in Myths #4, 5, and 6, inflation is not caused by federal deficit spending but rather by shortages of critical goods and services, most often oil (energy)
To eliminate that shortage, increase federal support for the energy sector.
- Oil drilling & refining in the short term
- Electric cars, buses, and trains.
- Electric homes, factories, farms, and cities
- Solar energy
- Nuclear energy
- Geothermal energy
- Wind energy
- Hydrogen energy
- Research & development of other non-carbon energy sources
Additionally, there should be financial support for other scarce products and services:
- Food shortage: Farm aid to increase farm output and the development of more productive crops.
- Shipping shortage: Aid for improved ports, workers, trucks, and driver training. Improved national railroad system.
- Housing shortage: Aid for housing, the lumber industry, and training for carpenters, electricians, plumbers, etc.
- Shortages of cars, trucks, planes, and electric/electronic machines: Support the production of improved computer chips.
- Shortage of health providers: Aid for medical training, hospital building, pharmaceutical R&D
- Labor shortage: Eliminate FICA, which would help businesses pay more for workers. Also, provide free, comprehensive Medicare for every man, woman, and child in America, thus removing that expense from companies.
- Other shortages: Eliminate duties on scarce items.
In summary, all inflations are caused by shortages, and the prevention/cure of inflations is to cure those shortages. Raising interest rates, as the Fed now is doing, will attempt to fix inflation via recession, a poor cure.
Rodger Malcolm Mitchell
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:
- 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.