–Much ado about nothing. The end of the dollar as reserve currency Thursday, Oct 25 2012 

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor,
which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.


People often predict the dollar’s imminent demise as world’s “reserve currency,” and cite this as proof of something or other – i.e. U.S. bankruptcy, hyper-inflation, depression, global warming, the Chicago Cubs or anything else that’s bad in this universe.

The following article is an example:

Radio Free Europe Radio Liberty
China, Others, Urge Move Away From Dollar As Reserve Currency
March 24, 2009

(RFE/RL) — Should the world ditch the dollar as its reserve currency? It’s an idea that seems to be gaining ground.

The latest call came from China’s central bank governor, who said on March 23 there should be a new international reserve currency. And a UN panel this week is to recommend moving away from the dollar and adopting a shared basket of currencies instead.

Zhou Xiaochuan’s message seemed aimed at an international audience. His essay was published on the central bank’s website in English, as well as Chinese.

In it, the governor said the global financial crisis had revealed “vulnerabilities and systemic risks” in the current monetary system.

Instead, he said the world needed something more stable — what he called a “super-sovereign reserve currency.”

Zhou didn’t mention the dollar specifically. But his comments came two weeks after the Chinese Prime Minister Wen Jiabao expressed concern over the safety of China’s estimated $1 trillion worth of U.S. investments.

A “reserve” currency is nothing more than the currency most nations use in international trade. It is just a trading convenience. International trade is easier if nations quote the same currency when pricing goods and services, and nations use the same currency when paying bills. And that’s it: A convenience.

The euro was invented as a European reserve currency, and it functions quite well in that role, though it’s a screwed up mess in its role as a common currency. Any benefit that accrues to the U.S., as a result of the dollar being the reserve currency, is so minuscule as to be unworthy of mention.

Getting back to China’s “concern over the safety of China’s estimated $1 trillion worth of U.S. investments”:

1. China isn’t concerned about the safety of its financial investments.

2. It’s a political concern. China’s aspiration is to be viewed as the big dog of international economics, and ending the dollar as reserve currency is part of that political aspiration.

Let’s assume that a giant meteor selectively destroys the U.S., and the dollar, not just becomes worthless, but disappears from the world. Is this a problem for China and its $1 trillion worth of T-securities? Not a bit. China is Monetarily Sovereign. It can continue to buy goods and services as always, using its unlimited availability of renminbi. China would be no poorer for the loss of all its dollars.

And as for Chinese citizens who owned T-securities: The Chinese government merely could give them renminbi to make up for their losses, and everything would be as before.

The giant meteor might be a problem for the euro nations, because they are monetarily non-sovereign, so can’t create euros — except the EU could do what it should have been doing all along: Provide euros to all euro-using nations. It might be a problem for a tiny island nation that pegs its currency to the dollar (are there any left?), but they simply could peg to some other currency.

The whole reserve-currency brouhaha is silly, which is why government leaders pay attention to it. (Heaven forbid they address real economic issues.)

China Not Alone

The worry is that U.S. efforts to tackle the financial crisis — including printing money — could erode the value of the dollar and of China’s dollar-denominated reserves. Chinese officials are not alone in calling for a move away from the dollar as the world’s chief reserve currency.

Earlier this month, Russia said it would propose a new reserve currency for discussion at the G20 summit set for April 2. And a UN panel of experts is this week recommending a switch away from the dollar as part of an overhaul of the global monetary system.

If anything should send shivers of fear up your spine, it’s the thought that a UN panel of “experts” (experts at what?) has become involved. Are these related to the experts who created the disastrous euro, or the experts who run the International Monetary Fund, those austerity loving buffoons?

And if China is worried about a U.S. inflation that would result from erroneously called “printing money,” where is the inflation? The U.S. has “printed” more than a trillion dollars each year, for the past four years, and we are closer to deflation than inflation.

(In fact, money creation has not caused inflation in the U.S. The reason: The Fed controls inflation by controlling demand for dollars via interest rate changes.)

“Now is the moment to think seriously about a new reserve currency, a shared reserve currency,” panel member Avinash Persaud told Reuters. “When part of the world wants to save more than it did before, this won’t lead to a concentration of assets in one place, but more spread around the world. It’s good for those people who’ve got the savings, [because] their assets are diversified, and it’s good for those people where the money is flowing.”

A beautiful example of gibberish. A reserve currency has nothing to do with a “concentration of assets” or “where money is flowing.”

Zhou, the Kremlin, and to a lesser degree the UN panel — all are advocating an expanded role for the SDR, or “special drawing right.” That’s a kind of artificial currency created by the International Monetary Fund 40 years ago. Its value is based on a basket of “real” currencies — the dollar, the euro, and others.

And this is where it really gets squirrelly. A basket of currencies has a value based on the cumulative values of all the currencies in the basket. But that leaves the problem of weighting. Say you have a basket consisting of dollars, yen, euros, renminbi, zlotys, pounds and a few other currencies. How many of each will be in the basket? How will that be determined, and will that allocation always remain the same?

All forms of money are forms of debt, and all debt requires collateral. The collateral for the U.S. dollar is the full faith and credit of the U.S. government. What would be the collateral for a basket of currencies?

The basket of currencies is a complex, cockamamie solution to a non-problem — in short, a perfect “panel of experts” solution.

Zhou says the SDR could become a “widely accepted” means of payment in international trade and financial transactions. He also advocates creating financial assets denominated in SDRs. Such a move would, the argument goes, reduce the kind of “global imbalances” that contributed to the current economic crisis.

Chief among them are America’s huge current-account deficits and China’s equally huge surplus. China invested its surplus in massive purchases of U.S. treasuries, a factor blamed for contributing to low borrowing costs in America that fueled its housing bubble.

More gibberish. America’s current-account deficit merely means the U.S. imports more than it exports. Does the world really want America to import less? And China’s “massive purchases of U.S. treasuries” did not create low borrowing costs. It is the Fed, not the treasury market, that determines borrowing costs.

So the United States might even take a favorable view, says Vanessa Rossi, a senior research fellow in international economics at the Chatham House think tank in London. “Since they’ve complained so much about these problems about imbalances, and the flows of money associate with it, they might welcome some of the strain being taken off the dollar and the dollar markets in the future. Very immediately they might think that,” Rossi says.

“Imbalances,” “flows,” “strain,” blah, blah, blah. It’s all meaningless spouting, with no basis in reality. But I will allow that U.S. politicians might favor something ridiculous. They are good at that.

But Rossi says a new reserve currency would pose major challenges, and any move would be over the longer term. That’s because even if the idea picked up more steam, it’s likely to face huge technical, logistical, and political obstacles.

And it would clearly have negative implications for the dollar. Even those taking aim at the dollar wouldn’t welcome a sudden move, as this could trigger a sell-off of the dollar and erode the value of their holdings.

Perhaps explaining why Zhou said the establishment of a new reserve currency “may take a long time.”

Sergei Seninski of RFE/RL’s Russian Service contributed to this report

Yep — “huge technical, logistical and political obsticals — in addition to being foolish. Which probably is why it will remain a topic of discussion.

Bottom line: A reserve currency is just a convenience. It needn’t be an “official” reserve. The market naturally seeks a reserve just to make trading easier. In our ever-more computerized world, there very well may emerge a non-political currency — a currency of no specific nation.

But whatever emerges, let’s not give it more significance that it deserves. It’s just a convenience.

Rodger Malcolm Mitchell
Monetary Sovereignty


Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports


Knowing nothing about the role of the Federal Reserve, Trump hires a wrong-headed sycophant. Sunday, Feb 2 2020 

Trump’s knowledge of the Federal Reserve approximates his knowledge of men’s hairstyles, tie length, and the truth.

Trump Called Powell an ‘Enemy.’

“My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” Mr. Trump wrote.

Kevin Cramer, Republican of North Dakota criticized Mr. Trump’s attacks on Mr. Powell: “This is an area where I frankly disagree with the president. He’s forever attacking the Federal Reserve and particularly Jay Powell.

They are independent of politics, and they ought to remain independent of politics.”

To Trump, nothing is independent of politics. Trump has but one criterion in evaluating people: Do they express eternal fealty for him?

As for other criteria: Talent? No.
Knowledge” No.
Honesty? Are you kidding? In a Trump administration?
Intelligence? Only if it’s low.

Lawmakers from both parties routinely give the Fed chair high marks.

Their view of the chair matters, because while the president nominates members to the Fed’s Board of Governors, the White House has no other significant power over the central bank.

Monetary policymakers answer to Congress.

Sadly, the President does have the power to fire the Fed Chairman “for cause,” which with a slavish, timid, immoral GOP, “cause” would be any nonsense Trump could dream up.

Thank heavens Trump feels reluctant to take that step, or by now we would have had half a dozen Scott Pruits and Paul Manaforts as Fed Chairmen.

And yet::

Trump has recently nominated a Fed critic, Judy Shelton, to sit among the Fed’s leadership in Washington.

Her confirmation hearing could come as soon as Feb. 13, 2020.

True to form, Trump has nominated a useless sycophant:

Which Judy Shelton will the Fed get? Gold standard advocate or Trump defender?
By Sam Bell, Jan 29, 2020
Fed nominee has flip-flopped 180 degrees on monetary policy since Trump’s election; will she flip back?

After describing low interest rates as an assault on democratic capitalism during the Obama years, Shelton now embraces lower rates and suggests that the next Bretton Woods conference to reshape international monetary arrangements should be held at Mar-a-Lago.

Many have already written about her flip-flops, including the Wall Street Journal’s Greg Ip and Bloomberg’s Ramesh Ponnuru.

As Ip writes, “Having accused the Fed, under Mr. Obama, ‘of catering to the political class,’ she now says it should support Mr. Trump’s agenda by cutting interest rates to ‘ensure maximum access to capital.’”

If the above doesn’t send shivers up your spine, you have become far too inured to Trump’s own lies and incompetence.

Not only does Shelton have no consistent or coherent policy regarding interest rates, and not only is she an obvious fawner to a compulsive “fawnee,” but she wants to return us to a (fools) gold standard.

And not just an ordinary gold standard but . . .

A “Universal Gold Reserve Bank that would have the potential to become a sort of global monetary authority.”

Thus, does Shelton want the U.S. to surrender the single most valuable asset any government can have — its Monetary Sovereignty — but she also wants the entire world to give up Monetary Sovereignty to an unelected group of what? Honest bankers?

And she fleshes out this truly dumb idea, by making it even worse, if that’s possible:

Circa 2000 Shelton toyed with the idea of a common currency for North America.

“The common currency for this union could be an ‘amero,’” — and she even favored a global common currency.

She asked, “how can we ignore the parallel need for a common unit of account, a global form of money?”

Ah yes, a a global common currency, a cousin of the truly awful euro, which essentially has destroyed the economies of those nations that have adopted it.

The euro nations, having surrendered control over their own money, and given control to the new Masters, the European Union bankers and their billionaire patrons, have “had” to foist austerity on the masses.

For a monetarily non-sovereign government, austerity is necessary, because unlike a Monetarily Sovereign government, such a government needs some form of income. This income must be derived from taxes, which eventually requires net exports.

But because exports must equal imports, if some nations have net exports, other nations must have net imports, and net imports send money out of the country.

That’s fine for a Monetarily Sovereign government like the U.S., which has the unlimited ability to create its sovereign currency,  so it never can run short of money. But it’s not so fine for the euro governments, which gave away that power, and who now live at the mercy of rapacious EU bankers.

And that is what Shelton wants for America.

And she is what Trump wants for the Federal Reserve, An obsequious “yes” woman to run  an institution he feels is unnecessary, even harmful.

Trump’s ignorance is reflected in such headlines as:
Trump says the Federal Reserve has ‘gone crazy,’ and
Trump says the Federal Reserve caused the stock market correction, and
Trump says U.S. Federal Reserve ‘too proud to admit mistake’, and
Trump knocks ‘boneheads’ at Federal Reserve, says interest rates should be ‘zero, or less’ and the best one,
Trump: I Will Abolish The Federal Reserve

See the plan? When the economy and/or the stock market do well, it’s because of Trump. But if they do poorly, it’s because of the Fed. Perfect

The self-anointed “stable genius” has all bases covered. He can’t lose.

Judging by her record, a Shelton Federal Reserve would like nothing better than to end the Fed and hand the powers to a new global monetary authority, the Universal Gold Reserve Bank.

She believes that setting monetary policy to address domestic conditions is “selfish.” (Really.)

In the absence of a proper gold standard, she says she favors fixing the dollar to rival currencies or gold. (Never mind that this would put American monetary policy at the whim of gold speculators and European central bankers.)

For Shelton, limiting the Fed’s power is the point.

Of course, this all assumes she would show up for the job. The last time the Senate confirmed her for a position — U.S. envoy to the European Bank for Reconstruction and Development — she missed about half the meetings, as the Wall Street Journal reported in August.

If the lousy attendance record, the ceding of Monetary Sovereignty and the flip-flopping for Trump don’t disturb the Senate, perhaps Milton Friedman’s assessment of Shelton will.

In 1994, he wrote of then-colleague Judy Shelton’s op-ed, “It would be hard to pack more error into so few words.”

A few years ago Shelton supported a Virginia effort to study an alternative Virginia currency should the dollar collapse. Since then that effort has faltered.

Perhaps America would be better served if she focused on helping her home state of Virginia prepare for a catastrophe rather than causing one as a Federal Reserve official.

Because of Trump’s brilliance, his administration, indeed his entire life, has been famous for its revolving door of fools, toadies, liars, and/or miscreants. Consider this cast of characters:

HHS Secretary Tom Price
EPA Administrator Scott Pruitt
HUD Secretary Ben Carson
Campaign manager Paul Manafort

Image result for alfred e. neuman

Deputy campaign manager Rick Gates
National security adviser Michael Flynn
Personal Lawyer Michael Cohen
Commerce Secretary Wilbur Ross
Mobster Salvatore Testa
Mobster Fat Tony Salerno
Roger Stone
Jeffrey Epstein
Secretary of Labor Alexander Acosta
Foreign Policy Adviser George Papadopoulos
Kellyanne Conway
Konstantin Kilimnik
and now, Judy Shelton

What President ever has surrounded himself with such people?

November is coming. Can we survive that long?

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. 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.


Federal Reserve Bank of St. Louis admits federal “debt” is not a real problem Friday, Dec 22 2017 

It takes only two things to keep people in chains:

The ignorance of the oppressed
and the treachery of their leaders.


The Committee for a Responsible Federal Budget (CRFB), that notorious disseminator of economic fabrication, published yet another “Henny Penny, sky is falling” article about the federal debt.

But this time, they inadvertently referenced an article by the St. Louis Federal Reserve Bank that revealed the truth. (Oops!)

First, let’s introduce the Big Lies, after which we’ll get to the Federal Reserve Bank of St. Louis admits federal “debt” is not a real problem admission.

The CRFB article is titled: “Marc Goldwein: Debt Matters Even More After Tax Bill’s Passage, DEC 20, 2017
(Marc Goldwein is the Senior Vice President and Senior Policy Director for the Committee for a Responsible Federal Budget.)

His article is filled with charts and graphs “proving” what no one is arguing about: The so-called federal “debt” and the federal deficit are increasing.

Why should we be concerned? Here’s what Goldwein says:

With an aging population and rising health costs, debt is already rising unsustainably.

“Unsustainable” is the CRFB’s favorite word. You’ll see it in most of their articles.

Yet despite my frequent requests for clarification, no one at the CRFB will say what exactly is “unsustainable” about the so-called “debt” (which actually is the total of deposits in T-security accounts, similar to bank savings accounts.)

In 1940, the “debt” was $40 Billion. Then, and continuously since, it has been described as a “ticking time bomb, (i.e. unsustainable.) Today, that “unsustainable” debt has risen to $14 TRILLION — a gigantic 36,000% (that’s thirty-six thousand percent) increase, and that old time bomb still is a’tickin’, and the CRFB still is handwringing about its “unsustainability.”

“High and rising levels of debt slow economic growth . . .”

As always, with CRFB statements, there is zero evidence that rising levels of debt “slow economic growth.” Quite the opposite, in fact.

U.S. depressions tend to come on the heels of federal surpluses.
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.

Recessions tend to come on the heels of reductions in federal debt/money growth (See graph, below), while debt/money growth has increased when recessions were resolving.

Reductions in federal debt growth lead to inflation

Recessions repeatedly come on the heels of deficit growth reductions, and are cured with deficit growth increases. That’s what took us out of the “Great Depression” and the “Great Recession.”

“High and rising levels of debt reduce fiscal space . . .”

We think by “fiscal space,” Goldwein means that the U.S. government can run short of its own sovereign currency, the U.S. dollar. This is so patently false that he should be ashamed, but I suppose his salary soothes any shame.

That 35,000% growth of the debt is ample proof that the “fiscal space” claim is a fraud.

“High and rising levels of debt erode generational equality.”

High and rising levels of debt are what pay for Social Security, Medicare, Medicaid, aids to education, anti-poverty efforts and all the other social programs that narrow the Gap between the rich and the rest.

It’s the debt Henny Pennys who foster generational inequality.

“High and rising levels of  debt prevent thoughtful policymaking.”

No, actually, its the CRFB’s nonsense that prevents thoughtful policymaking.

“And debt cannot sustainably grow faster than the economy, meaning any tax cuts or spending hikes allocated to today’s votes will ultimately be paid for by younger and future generations.”

Now that the debt has grown 35,000% and reached $14 trillion, we continue to wait for younger generations to pay for it.

That never will happen, because the so-called debt (deposits) are not paid for by taxes.


O.K., now that we have slogged once again, through the CRFB’s nonsense, we can look at how the Federal Reserve Bank of St. Louis admits federal “debt” is not a real problem.

The admission came in an article titled, What Is the Outlook for the Federal Budget?,
Tuesday, October 10, 2017, published by the St. Louis Federal Reserve Bank, and written by Senior Economist, Fernando Martin.

Fernando M. Martin

Fernando Martin

After a series of graphs and statements about the horrid dangers of rising debt, Martin provides us with a tiny paragraph of truth, almost unnoticeable ending his the thicket of statistics:

“However,” he added that if another big adverse shock hits the U.S. economy, this outlook might change for the worse.

“Even in this case, the U.S. has the advantage of issuing debt in its own currency, so outright default (as in Greece) is not a likely outcome, though inflation might be (as was the case during and immediately after World War II),” he concluded.

Get it? The U.S., being Monetarily Sovereign, has the advantage of issuing debt in its own currency, so it cannot run short of dollars.


What are the implications of issuing debt in your own currency, so not running short of dollars? Contrary to the CRFB’s scare articles:

  1. No amount of debt is “unsustainable.” (We already have proved that with our 35,000% debt increase, that easily has been sustained.)
  2. High and rising levels of debt slow cannot “slow economic growth.” On the contrary, increasing debt is the federal government’s method for stimulating the economy.
  3. High and rising levels of debt do not “reduce fiscal space.” Fiscal space is the ability to spend. The federal government has the unlimited ability to spend as Martin acknowledged.
  4. High and rising levels of debt do not “erode generational equality.” Quite the opposite. Cutting debt results in cuts to benefits for the middle- and lower-income groups.
  5. Federal debt can sustainably grow faster than the economy and has been doing that for many years.
  6. High and rising levels of debt are the result of thoughtful policymaking.

And so the entire Henny Penny handwringing is all about inflation, the inflation that “high and rising levels of debt are sure to cause” — except for one minor truth: For the past ten years of extraordinary debt increases, the inflation has averaged below, the Fed’s target of about 2.5%.

Being Monetarily Sovereign, the U.S. government has the unlimited power to fight inflation (i.e increase the value of the dollar) at will.


In Summary:

Even the St. Louis Federal Reserve Bank has admitted (though reluctantly, because they too spread the “unsustainable debt lie) that federal debt is not a problem — not a problem for the government, not a problem for the economy, and not a problem for taxpayers.

On the contrary, federal deficit spending adds spending dollars to the economy, and so, is necessary for economic growth.

An economy cannot grow without a growing money supply.
GDP = Federal Spending + Non-federal Spending + Net Exports.

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


The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.


Once again, Reason Magazine promulgates the Big Lie to stifle the economy. Friday, Jul 3 2020 

The “Big Lie” comes in various forms. It is stated as:

  1. Federal spending is funded by federal taxes.
  2. The federal debt will lead to insolvency.
  3. Cuts in federal spending are financially prudent.
  4. Federal finances are like state/local government finances.
  5. Federal spending causes inflation.
  6. The federal government should live within its means.
  7. The federal debt is a ticking time bomb.
  8. China will stop lending to us.
  9. Profligate federal spending reduces our ability to deal with financial crises.
  10. Federal debt reduces economic growth
  11. The “debt”/GDP ratio is too high

All are widely promulgated, even by some economists and virtually all politicians and media writers — and all are absolutely untrue. They all are facets of The Big Lie.

Consider the following article from Reason Magazine:

The Next Pandemic Will Be Caused by the National Debt. It Will Crater the Economy.
Debt held by the public equals about 100 percent of GDP. That’s hurting growth and will fuel a major crisis. By Nick Gillespie,7.2.2020
Nick Gillespie is an editor at large at Reason, the libertarian magazine of “Free Minds and Free Markets.”

When President Donald Trump said on March 6 that the coronavirus “came out of nowhere,” it wasn’t quite accurate.

Actually, it was 100% wrong:

  1. A pandemic is caused by germs, not by debt, and . . .
  2. Federal debt not cause a financial crisis (lack of federal debt causes financial crises), and . . .
  3. A pandemic has been anticipated by every administration of the past few decades.

The Obama administration compiled a detailed plan for dealing with a pandemic — a plan the Trump administration completely ignored, costing many thousands of lives.

So far, more than 125,000 Americans have died — most unnecessarily — and many more will follow. To say Trump’s statement was not “quite accurate” is like saying the Pacific Ocean is somewhat damp.

Now, move to another comment that is “not quite accurate,” another statement of “The Big Lie.”

There’s another totally predictable crisis that promises to be even more damaging to our way of life: The national debt—the amount of money the federal government owes—is already choking down economic growth, but in the future, it could lead to “sudden inflation,” and “a loss of confidence in the federal government’s ability or commitment to repay its debts in full.”

It must be extremely difficult to pack so much misinformation into one short paragraph, but Nick Gillespie has accomplished the seemingly impossible.

1. The misnamed “national debt” is not the amount of money the federal government owes. It is the amount of money deposited into Treasury Security Accounts at the Federal Reserve bank.

The government does not “owe” this money; the government does not even “have” this money. It is owned by, and controlled by, the depositors.

To invest in a T-security (T-bill, T-note, T-bond), you open a T-security account. Visualize a bank vault into which you put your money, jewels, deeds, etc.

The bank does not “owe” you the value of your deposits. It possess them but does not own them. It merely holds them for you, and gives them back to you upon your demand.

Similarly, the government does not owe you your deposit. The bank possesses your deposit, but does not own it. It simply keeps it for you, and whenever you want it back, the government returns your deposit to you, plus accumulated interest.

2. Your deposits (the so-called national “debt”) do not “choke down” anything. In fact quite the opposite. Until COVID-19, both the economy and the federal “debt” had been growing massively.

The federal “debt” is a reflection of federal deficit spending which stimulates economic growth. In fact, whenever the national debt has been reduced, America has suffered a depression or recession.

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.

Even when the federal debt grows insufficiently, America suffers recessions.

Recessions (vertical bars) occur after a period of reduced Federal Debt Held by the Public (red line) and are cured by increased Federal Debt.

The reason, quite simply, is that a growing economy requires a growing supply of money, so recessions are caused when the money supply does not increase sufficiently.

Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports

That also is why recessions are cured when the federal government pumps dollars into the economy via deficit spending.

3. Contrary to popular myth, federal debt does not cause inflation, much less “sudden inflation.”

All inflations in world history have been caused by shortages of vital goods or services, most often food or energy.

While Federal Debt (red) has risen massively in the past 70 years, Inflation (blue) has risen moderately.

There is no relationship between changes in Federal Debt (red) and changes in Inflation (blue).

4. There never has been, and never will be a “loss of confidence” in the federal government’s ability to pay its debts.

All federal debt either is denominated in dollars or denominated in a currency that can be exchanged for dollars.

The federal government has the unlimited ability to create dollars — every knowledgeable economist knows this — so the federal government cannot run short of dollars with which to pay its debts.

Further, there is a vast difference between what erroneously is termed “the federal ‘debt'” and the federal government’s debts.

The federal “debt” is the total of deposits into T-security accounts, which the federal government pays off simply by returning the dollars in those accounts.

Federal government “debts” are dollars owed to creditorGreenspan quote.pngs for goods and services purchased by the federal government.

These debts are paid off by the creation of new dollars.

The federal government accomplishes this by sending instructions to each creditor’s bank, telling the bank to increase the balance in the creditor’s checking account.

When the bank does as instructed, brand new dollars are created and added to the nation’s money supply. The federal government can do this endlessly

Mr. Gillespie’s scare-article continues:

“Such a crisis could spread globally” causing some “financial institutions to fail.”

That’s all according to the nonpartisan Congressional Budget Office (CBO), which has been warning Americans about the long-term consequence of the ballooning debt for years.

Yes, the CBO and other organizations have issued the same warning for at least 80 years, and we still are waiting for that “loss of confidence in the federal government’s ability to pay.”

Since 1940, the growing federal debt has been called “a ticking time bomb.”  After 80 years, it surely is the slowest “time bomb” in history.

But despite being wrong for 80+ years, the warnings continue.

Congress and presidents from both major parties have accepted Dick Cheney’s false maxim that “deficits don’t matter.”

Instead, they just keep spending more than we take in during good times and bad, even though being so deeply in hock will make us less able to deal with a future crisis.

Sadly, Mr. Gillespie does not understand the difference between the Monetarily Sovereign, U.S. government, and the monetarily non-sovereign state & local governments.

A Monetarily Sovereign government never can run short of its own sovereigBernanke quoten currency. A monetarily non-sovereign entity (like you and me) has no sovereign currency, so can become insolvent.

The amount of money the government owed to the public was 79 percent of gross domestic product at the end of 2019, up from 31 percent in 2001.

The COVID-19 lockdowns and subsequent emergency spending will push the curve above 100 percent of GDP by the end of 2020, and it’s expected to keep rising.

Emergency spending and plunging tax revenues are making a bad situation worse.

CBO forecasts that the budget deficit this year will be 17.9 percent of GDP, meaning that the government is running much larger deficits, racking up significantly more debt, than it did even at the height of the financial crisis of 2007-2008.

Also, contrary to popular myth, the “debt”/GDP ratio is meaningless.  GDP is a measure of spending in any one year. Federal “debt” measures the net amount of deposits into T-security accounts.

Two completely different measures and two completely time scales. The “debt”/GDP ratio isn’t just apples and oranges. It’s apples and adverbs — two measures that could not be more different.

Mr. Gillespie sounds the ominous warning about the ratio exceeding 100%. As of June 2019, the nation with the highest debt-to-GDP ratio is Japan with a ratio of 253%.

The next highest ratio is from Greece, which at 181.1%, lags significantly behind Japan.

Other nations with high debt-to-GDP ratios include: Cape Verde: 123.4%, Portugal: 121.5%, Congo: 117.7%, Singapore: 112.2%, Mozambique: 110.5%, Bhutan: 108.64%, United States: 105.4%, Jamaica: 103.3%, Cyprus: 102.5%, Belgium: 102%, Egypt: 101.2%

The nations with the lowest debt-to-GDP ratios include: Brunei: 2.4%, Afghanistan: 7.1%, Estonia: 8.4%, Swaziland: 9.95%, Russia: 13.5%, Burundi: 14.4%, Cayman Islands: 14.5%, Kuwait: 14.8%, Libya: 16.5%, Republic of the Congo: 17%, Kosovo: 17.12%, Palestine: 17.5%, Cuba: 18.2%, United Arab Emirates: 18.6%, Guinea: 18.66%

As you can see, there is zero relationship between the “debt”/GDP ratio and a nation’s ability to pay creditors.

It, very simply, is a meaningless ratio used by those who either wish to scare the public, or who are ignorant of economics.

Economists such as Nobel Prize-winner Paul Krugman and proponents of modern monetary theory (MMT) look at the absence of inflation and higher interest rates so far as justification for ever-more spending and borrowing.

While it’s true that the cost of paying interest on the debt is still dwarfed by other expenditures, that’s because historically low interest rates have made government borrowing cheap.

But there’s no reason to believe that interest rates won’t rise over time. According to conservative estimates from the CBO, as the total budget grows as a percentage of GDP, the cost of paying interest on the debt will increase faster until, by 2050, it accounts for about 24 cents of every dollar spent.

And these estimates don’t take into account emergency spending for COVID-19, which will make servicing the debt even more costly over time.

No, economists don’t “look at the absence of inflation and higher interest rates so far as justification for ever-more spending and borrowing.”St louis fed quote.png

The U.S. federal government does not borrow. Unlike state/local governments, the federal government has the unlimited ability to create dollars, so why would it borrow?

That is what the Fed means when it says “the government is not dependent on credit markets.”

T-securities not represent borrowing. They represent the acceptance of dollar deposits for safe-keeping.

And low interest rates are meaningless for a government that has the unlimited ability to create dollars.

High interest rates actually have a stimulative component. The higher the rate, the more interest dollars — i.e. growth dollars — the federal government pumps into the economy.

The justification for ever-more spending is quite simple: Federal spending not only grows the economy, but federal spending buys valuable goods and services for the American people.

It is federal spending that brings us roads, bridges, dams, healthcare, the military, scientific research & development, education, farming, courts, a government — the list goes on and on.

And now, Mr. Gillespie reveals either ignorance or perfidy:

Like a monthly credit card payment that eats into a household budget, federal debt means less money to buy other things.

He equates federal finances with personal finances. Either he doesn’t understand the difference, or he hopes you don’t understand the difference.

The U.S. federal government neither has nor needs anything resembling a “credit card.” It creates unlimited dollars at the touch of a computer key. The government does not borrow, and it pays creditors simply by issuing instructions to banks.

And when governments run large, persistent deficits, it also has a devastating impact on economic growth over time.

Our current debt levels could reduce GDP by about one-quarter over 23 years, according to research by Harvard economists Carmen Reinhart and Kenneth Rogoff.

It’s a case of what French economist Frédéric Bastiat referred to as “the unseen” because we’ll never get to experience how much wealthier we otherwise would have been had the federal government practiced fiscal prudence.

Anemic growth will impact the poorest Americans most of all, causing their material progress to slow considerably. It means less leisure time, smaller homes, older cars, and less health care.

Could it be that Mr. Gillespie doesn’t realize the Reinhart and Rogoff conclusions have been debunked, not only for mathematical errors, but perhaps more importantly, because Reinhardt and Rogoff did not differentiate between Monetarily Sovereign governments and monetarily non-sovereign governments.

The former do not borrow and cannot run short of money. The latter do borrow and can run short of money. Quite a difference to overlook.

Remember that equation: GDP = Federal Spending + Non-federal Spending + Net Exports. There is absolutely no mechanism by which a reduction in federal spending can increase GDP.

Mr. Gillespie may be one of the last remaining economic writers who still believes  austerity can grow an economy, though he never explains how that works.

In the short-term, there’s no question that the government can and will be able to borrow massively, and interest rates are likely to stay low for the time being as the world shifts into recession.

The federal government does not borrow. Interest rates will stay low if that is what the Federal Reserve wants. The Fed has absolute control over the interest the federal government will pay on T-security deposits.

And now we move from the merely wrong to the outright ridiculous:

But there’s also the specter of investors here and abroad refusing to buy U.S.-issued debt as our economy flattens, China flexes its economic and political might, and alternative instruments such as bitcoin and gold offer safe refuge.

The federal government doesn’t need China or anyone else to buy its “debt.” The Federal Reserve itself has the unlimited ability to buy T-securities, which it does, every day.

The government “lends” to itself in an endless circle of finance.

And, bitcoin offers “safe refuge”?? Is this a joke?

Gold, which has only minimal intrinsic value, pays no interest or dividends, costs money for storage and shipping, and the value of which is not guaranteed by anything or anyone — that is “safe refuge”?

Many nations have suffered depressions while on gold standards.

And it keeps getting worse and worse and worse:

Even the most hubristic economist or president would have to admit that there will come a time when the U.S. dollar is no longer the world’s reserve currency.

That change won’t necessarily be as dramatic as when German paper marks became worthless after World War I, but it will massively reduce purchasing power even as it increases the cost of everything.

Mr. Gillespie wrongly believes that “reserve currency” endows the U.S. dollar with some valuable status.

A “reserve currency,” of which there are many, depending on the bank, is nothing more than a currency a bank keeps in reserve to facilitate foreign exchange and trade. 

The U.S. dollar, the euro, the British pound, the Mexican peso, the Chinese yuan, the Brazilian real, all are reserve currencies for various banks.

The value of these currencies does not rely on being held in reserve by banks. It’s just a currency exchange convenience.

And then Mr. Gillespie tosses in the inevitable reference to German hyperinflation, which had nothing to do with reserve currencies or with over-spending or with anything else pertinent to the discussion.

The German hyperinflation, like all hyperinflations, was caused by shortages of life’s necessities — food, clothing, housing, energy — the result of onerous financial conditions placed on Germany by the Allies after WWI.

Germany simply ran out of money to pay for goods and services, so these items became scarce, and when a needed item is scarce, the price goes up. Period.

The German hyperinflation was cured when Germany issued a new currency and used it to purchase needed goods additionally to buying the greatest war machine the world had ever known. 

German government war spending actually cured the hyperinflation by curing the shortages.

Finally, Gillespie argues against his own proposition:

Between 1940 and 1945, federal spending increased tenfold from $10 billion to over $100 billion to pay for the war effort.

But when victory was won, the government immediately cut military spending.

That cut in federal spending led to the recession of 1945.

Our out-of-control spending has been driven by the persistent rise in the cost of entitlements like Medicare and Social Security.

Mr. Gillespie, as a stout libertarian, hates “entitlements,” (aka, benefits to the public). He would prefer a government that does not provide Medicare, Medicaid, Obamacare, Social Security, roads, bridges, dams, education, a military, courts, Congress, national parks, scientific research & development, food & drug inspection, weather reports, and the myriad of other benefits the public receives from the government.

To a libertarian, any government is bad government, and any government spending should be reduced or eliminated. 

When the debt crisis materializes and our options are severely limited because of decades of profligate spending, politicians sitting in the Oval Office and Congress will claim that it all just came out of nowhere, like that crazy virus back in 2020.

But nothing could be further from the truth: Budget wonks are already sounding the alarm. We need to heed these warnings now or suffer an economic lockdown later from which there may be no escape.

Back in 1940, the federal “debt” was about $40 billion. Today it is over $20 trillion, and our options are no more limited now than they were then. (Actually, our options are less limited, because federal money creation no longer is hampered by a gold standard.)

The “Big Lie” reflects ignorance of Monetary Sovereignty, which is the single biggest problem facing America’s and the world’s economies.

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 or a reverse income tax

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.


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