Big Lie on display: Jack Lew, a “broke” America, and the “ticking time bomb.” Wednesday, Jan 3 2018 

 

Image result for Jack Lew

Jack Lew’s lies exposed

It takes only two things to keep people in chains:
.

 

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

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If you ever have wondered what we mean by the “Big Lie,” you need wonder no more. Here it is, as demonstrated by Jacob L. (Jack) Lew, former U.S. Treasury Secretary.

Remember, as you read this, we’re not talking about ignorance.  We’re talking about outright lying. A Treasury Secretary knows how the U.S. financial system operates. Lew surely does. But he repeatedly misstates the facts, i.e. lies.

Former Treasury Secretary Lew Says Tax Cuts Will Leave the U.S. Broke
Marcus Bensasson, Bloomberg, January 2, 2018

Jack Lew said the Trump administration’s decision to add a significant amount of debt through last year’s tax legislation is leaving the country broke.

Immediately we see lie #1: The United States cannot be “broke,” if being “broke” means being unable to pay its bills.

The United States, unlike you, and me, and unlike the cities, counties, and states — the United States uniquely is Monetarily Sovereign. It has the unlimited ability to create its sovereign currency, the U.S. dollar.

The U.S. government cannot run short of dollars. Period.

Yes, I know. Back in 2009, GOP Speaker of the House John Boehner lied:

“We’re broke. America’s broke. All year long, our friends on the other side of the aisle have been on a massive spending spree that our nation can’t afford.

“Our Democrat friends want to raise the debt limit next week by $1.8 trillion. Instead, let’s stop the madness and vote no.”

That was eight years ago, when the federal debt was under $8 Trillion.

Today, the federal debt has almost doubled, to $15 Trillion, and guess what: We still aren’t “broke.” We continue to pay all our bills, and oh yes, the GOP has voted to add $1.5 trillion more to the federal debt — and we won’t be “broke” then, either.

It was a lie, a Big Lie when Boehner said it, and it’s a Big Lie today when Lew says it.

You who are regular readers of this blog may remember, Federal Debt: A “ticking time bomb (November 2009), and From ‘ticking time bomb’ to ‘looming collapse.’

Both articles detailed the ongoing references, beginning in 1940 (!), to the federal debt as a “ticking time bomb.” Well, that phony 78-year-old  “time bomb” still is ticking:

“It’s a ticking time bomb in terms of the debt,” Lew said in a Bloomberg Radio interview withTom Keene and Jonathan Ferro. “You cannot run a fiscal policy by spending trillions of dollars you don’t have at a time that the economy is doing well.”

For 78 years, the debt-nuts have warned us about imminent disaster. Seventy-eight years of being wrong, wrong, wrong. How many more years of lies will be required for the public to catch on?

Not only is the “time bomb” analogy a lie, but so is the “dollars you don’t have” phrase a lie. I challenge Mr. Lew to tell us how many dollars the U.S. federal government “has.”

The answer would be either none or infinite, depending on how one wishes to count, for the government has the unlimited ability to create dollars, ad hoc, every time it pays a bill.

(If you owned a dollar-printing press, how much money would you have?)

Having chosen to make tax policy without including Democrats in any of the conversation, now the administration probably can’t rally Republicans in Congress to do the basic business of government, such as making sure the country doesn’t default on debt and children don’t get thrown off health insurance, he said.

IF (big “if”) the Republicans don’t want the U.S. to default on its debt, all they need do is simply to pay the bills. The government does this every day, by sending instructions to each creditor’s bank, instructing the bank to increase the numbers in the creditor’s checking account.

So long as the federal government doesn’t run short of instructions, the country won’t default on its debt.

And as for throwing children off health insurance, all the GOP Congress needs to do is to vote to pay for health care. Simple and obvious, but the GOP prefers to claim that our Monetarily Sovereign nation is “broke.”

“The next shoe to drop is going to be an attack on the most vulnerable in our society,” Lew said. “How are we going to pay for the deficit caused by the tax cut?

We are going to see proposals to cut health insurance for poor people, to take basic food support away from poor people, to attack Medicare and Social Security.

One could not have made up a more cynical strategy.”

Mr. Lew, who are you trying to kid? “Cutting health insurance for poor people, and taking basic food support away from poor people” is exactly what the GOP wants to do.

That is the way the GOP satisfies its rich base — by widening the Gap between the rich and the rest.

Widen the Gap. That, in three short words, is the entire GOP platform. It is what their wealthy backers want. 

So Lew, a Democrat, carries water for the Republicans, proving again that political liars come in all stripes.

“What we’ve seen is a tax cut that spends money we don’t have to have very concentrated benefits for global corporations and the top 1 percent, and it’s leaving us broke,” according to Lew.

Oh, shut up, Lew.  Please, just shut up.

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

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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.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
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.
5. SALARY FOR ATTENDING SCHOOL
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.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
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.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
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.

MONETARY SOVEREIGNTY

From “ticking time bomb” to “looming collapse.” Wednesday, Feb 10 2016 

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

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Are you still here? I am, though one wouldn’t know it by the endless, hysterical headlines regarding the federal budget.

Just by way of reminder:

Back in 1940, the federal budget was a “ticking time-bomb which can eventually destroy the American system,” said Robert M. Hanes, president of the American Bankers Association.

By 1960: the debt was “threatening the country’s fiscal future,” said Secretary of Commerce, Frederick H. Mueller.

By 1983: “The debt “probably will explode in the third quarter of 1984,” said Fred Napolitano, former president of the National Association of Home Builders.

In 1984: AFL-CIO President Lane Kirkland said. “It’s a time bomb ticking away.”

In 1985: “The federal deficit is ‘a ticking time bomb, and it’s about to blow up,’ U.S. Sen. Mitch McConnell.

Later in 1985: Los Angeles Times: “We labeled the deficit a ‘ticking time bomb’ that threatens to permanently undermine the strength and vitality of the American economy.”

In 1987: Richmond Times – Dispatch – Richmond, VA: “100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB'”

Later in 1987: The Dallas Morning News: “A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government.”

In 1989: FORTUNE Magazine: “A TIME BOMB FOR U.S. TAXPAYERS”

In 1992: The Pantagraph – Bloomington, Illinois: “I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion.”

Later in 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion.”

In 1995: Kansas City Star: “Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.”

In 2003: Porter Stansberry, for the Daily Reckoning: “Generation debt is a ticking time bomb . . . with about ten years left on the clock.”

In 2004: Bradenton Herald: “A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB”

In 2005: Providence Journal: “Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb.”

In 2006: NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.

In 2007: USA Today: “Like a ticking time bomb, the national debt is an explosion waiting to happen.”

In 2010: Reason Alert: “. . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”

In 2011: Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode.”

In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb”

*On Jun 18, 2015: The ticking economic time bomb that presidential candidates are ignoring: Fortune Magazine, Shawn Tully,

*On January 23, 2017: Trump’s ‘Debt Bomb’: Deficit May Grow, Defense Budget May Not, By Sydney J. Freedberg, Jr.

*On April 28, 2017: Debt in the U.S. Fuel for Growth or Ticking Time Bomb?, American Institute for Economic Research, by Max Gulker, PhD – Senior Research Fellow, Theodore Cangero

[*Added to the list subsequent to first publication of this post]

After seventy-seven years, that ole’ federal debt still is ticking. Meanwhile, it also has been “unsustainable,” “insane,” and “irresponsible.”

I mention all this again, because today, 2/10/16, the Daily Bell added a new fright wig to the wax devil: “Obama’s $4.1 Trillion Budget Is Latest Sign of America’s Looming Collapse”

Well, the time bomb still is ticking, you and I and America still are here, and we still are sustaining and the collapse still is looming. The apocalypse has not arrived, except for the occasional rescession exacerbated by deficit reduction.

To paraphrase something Albert Einstein supposedly said, “Insanity is saying the same thing over and over again and expecting different results.”

Rodger Malcolm Mitchell
Monetary Sovereignty

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Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually Click here
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here and here)

10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.
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10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

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.
1. A growing economy requires a growing supply of dollars (GDP=Federal Spending + Non-federal Spending + Net Exports)
2. All deficit spending grows the supply of dollars
3. The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
4. The limit to non-federal deficit spending is the ability to borrow.

THE RECESSION CLOCK

Recessions begin an average of 2 years after the blue line first dips below zero. There was a dip below zero in 2015. Recessions are cured by a rising red line.

Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.

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Mitchell’s laws:
•Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money.
•The more federal budgets are cut and taxes increased, the weaker an economy becomes..

Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

•The single most important problem in economics is the Gap between rich and the rest..
•Austerity is the government’s method for widening
the Gap between rich and poor.
•Until the 99% understand the need for federal deficits, the upper 1% will rule.
•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..

MONETARY SOVEREIGNTY

–Federal Debt: A “ticking time bomb” Tuesday, Nov 24 2009 

An alternative to popular faith

Popular faith holds that the federal debt is a ticking “time bomb,” ready to explode into inflation and high interest rates, and destroy our economy. Here are a few references, beginning 70 years ago. Note that the language remains the same, down through the years — repeated predictions of a disaster that never seems to come.

Even with the end of the gold standard in 1971, arguably the most significant economic event since the Great Depression, the debt-hawk language never changes — as though 1971 were a non-event.

Sept 26, 1940, New York Times: Deficit Financing is Hit by Hanes: ” . . . unless an end is put to deficit financing, to profligate spending and to indifference as to the nature and extent of governmental borrowing, the nation will surely take the road to dictatorship, Robert M. Hanes, president of the American Bankers Association asserted today. He said, “insolvency is the time-bomb which can eventually destroy the American system . . . the Federal debt . . . threatens the solvency of the entire economy.”

Feb 11, 1960, New York Times: Mueller Assails Rise in Spending: The enormous cost of various Federal programs is a time bomb, threatening the country’s fiscal future, Secretary of Commerce, Frederick H. Mueller warned here today “. . . the accrued liability is a ticking time bomb. Some day someone will have to pay.”

Oct 4, 1983 Evening Independent – The United States and the developed world face a “ticking time bomb” because of the huge foreign debt involving loans to Third World nations

Oct 26, 1983, David Ibata: “ . . . home-building officials called for a commission to propose ways to trim the $200 billion federal deficit. The deficit is a ‘ticking time bomb‘ that probably will explode in the third quarter of 1984,’ said Fred Napolitano, former president of the National Association of Home Builders.

Feb 21, 1984, James Warren: “‘We now hear from them (the Reagan administration) that deficits don’t cause high interest rates and inflation,’ AFL-CIO President Lane Kirkland said. ‘If that’s the case, we’ve suddenly discovered the horn of plenty and should stop worrying and keep borrowing and spending. But I don’t believe it. It’s a time bomb ticking away.”

January 12, 1985, Lexington Herald-Leader (KY):The federal deficit is “a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell, a Louisville Republican, said yesterday.

Feb 17, 1985, Los Angeles Times: We labeled the deficit a `ticking time bomb‘ that threatens to permanently undermine the strength and vitality of the American economy.”

Jan 5, 1987, Richmond Times – Dispatch – Richmond, VA: 100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB

November 28, 1987, The Dallas Morning News: THE TICKING TIME BOMB OF LONG-TERM HEALTH CARE COSTS A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government and our nation’s elderly. The ticking bomb is the growing cost of long-term care.

October 23, 1989, FORTUNE Magazine: A TIME BOMB FOR U.S. TAXPAYERS The government guarantees millions of mortgages, bonds, deposits, and student loans. These liabilities, now twice the national debt, are growing fast.

May 1, 1992, The Pantagraph – Bloomington, Illinois: I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion and growing now at an annual rate of $400 billion per year.

October 28, 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion. Seventy-five percent of this debt is due and payable in the next five years. This is a bomb that’s set to go off and devastate our economy and destroy thousands of jobs.

Dec 3, 1995, Kansas City Star: Deficit is sapping America’s strength. Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.

April 14, 2003: Porter Stansberry, for the Daily Reckoning: The baby boomers are heading into retirement with no savings and no productive companies to support them in old age. Generation debt is a ticking time bomb…with about ten years left on the clock.

October 1, 2004, Bradenton Herald: A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB: Lawmakers approved Bush’s request without cutting federal spending by a penny, thereby fattening the country’s projected record deficit of $422 billion by another $145 billion next year.

May 31, 2005, Providence Journal, Defusing the Medicare time bomb, Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb, set to wreak havoc on the budget and shoot future tax rates sky-high.

April 5, 2006, NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.

Dec 3, 2007, USA Today: US debt: $30,000 per American. WASHINGTON (AP): Like a ticking time bomb, the national debt is an explosion waiting to happen.

*September 24, 2010, Email from the Reason Alert: ” . . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”

*July 7, 2011, Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode as the cost of health care rises and the nation’s population ages.

[*Added subsequently]

And on and on and on. You get the idea. That time bomb has been on the verge of explosion at least since 1940. Even today, the media, the politicians and sensationalist economists refer to the debt as a ticking time bomb. Please look at the following graph and see if you can find any relationship between deficit spending vs inflation and/or interest rates.

This graph shows there is no predictable relationship between federal deficits vs. inflation and or interest rates.

If the debt is a time bomb, it surely has the slowest fuse in history. The pundits have been wrong, wrong, wrong, all these years. We should understand federal deficits, even large federal deficits, have not caused inflation or any other negative economic effect, and the debt is not a ticking time bomb? It’s an economic necessity. Let us turn away from faith and start to rely on facts.

The faith healers* are killing our economy by restricting money growth. See: The damage done by deficit cuts.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

*Faith is belief without evidence. Science is belief from evidence.

Time flies and Time (Magazine) Lies Thursday, Apr 21 2016 

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

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Thank you to reader Zen, for sending us this article from Time Magazine.

Rarely, it’s due to stupidity. Often, it’s just ignorance of the subject. But sometimes it’s blatant lying, and I suspect this is one of those times.

Time Magazine and James Grant have collaborated in publishing the most inaccurate, misleading, wrongheaded article I’ve seen in many years — and that’s saying something.

I mean, I’ve see stuff by such as Sarah Palin, and Rush Limbaugh, and Sean Hannity, and Michael Savage, and Glenn Beck, so I thought I had seen and heard the worst of the worst. This beats all.

Let me introduce Grant’s article with a reminder that a bit more than a year ago, we published, Congress, the media, the economists: The same Big Lie since 1940. What the hell is the problem?

The post reminded us all that way back in 1940, the New York times published an article titled, “FEDERAL DEBT, A TICKING TIME BOMB (Sept 26, 1940, New York Times). Subsequently, through the years, there have been hundreds, probably thousands, of articles using the “Ticking Time Bomb” analogy to describe the federal debt.

At the time of the 1940 article, the Gross Federal debt was in the neighborhood of $50 billion dollars. Today, Gross debt is about $18 Trillion, and that so-called “time bomb” still is ticking. So much for the New York Times accuracy.

monetary sovereignty

That is why I believe Time Magazine and James Grant are not stupid or ignorant, but must be lying. It simply does not require much intelligence to understand that if a $50 billion debt is a “ticking time bomb,” and it still has not exploded at $18 trillion, there must be a fallacy involved.

Maybe, just maybe, the debt is not too high after all.

Here just a few of the Time/Grant comments. You decide whether they are lies or just accidental misstatements:

The United States of Insolvency
James Grant, April 14, 2016, (Grant is the editor of Grant’s Interest Rate Observer)
$13,903,107,629,266. Can the nation afford this much debt? James Grant offers his view

Immediately, with the headline, Time/Grant provides wrong info. If by “insolvency,” Time/Grant means the federal government might be unable to pay its bills, then that is 100% impossible for the United States Government to be insolvent.

As a Monetarily Sovereign nation, the world’s leading nation financially, a nation whose money is used universally, the United States creates dollars, ad hoc, by the very act of paying bills. It cannot run short of its own sovereign currency to pay bills, because paying bills is the way the government creates dollars.

Even if all tax collections were $0, and all federal lands and all other federal assets also were $0, the U.S. federal government still could continue paying bills, forever.

That is why the Gross Federal Debt was able to increase 3,600% in just the past 75 years, through recessions, depressions, World Wars and smaller conflicts, and still we’ve had no “insolvency.” Not even close.

Here’s what Time/Grant said next:

This much I have learned about debt after 40 years of writing and study: It is better not to incur it. Once it is incurred, it is better to pay it off. America, we have a problem.

And now, right below the misleading headline, we have the misleading first sentence. Time/Grant wants you to believe that federal financing is the same and personal financing.

Yes, if your personal debt gets large, you might become insolvent. The same is true for businesses and state and local governments, all of which are monetarily NON-sovereign. You and they cannot create dollars by paying bills.

The federal government can and does. Every day.

And no, it is not “better not to incur (debt)” if you’re the federal government. Federal debt actually is moderately beneficial, because it forces the government to pay interest into the economy, and that federal interest is stimulative.

And no, it is not “better to pay it off.” The federal debt is absolutely no burden of any kind on the federal government, or on federal taxpayers or on anyone else. Neither you, nor your children nor your grandchildren ever will be asked to pay off the federal debt, or will your taxes be increased to pay the debt. Never.

The bullsh*t continues:

We owe more than we can easily repay. We spend too much and borrow too much. Worse, we promise too much. We conjure dollar bills by the trillions–pull them right out of thin air. I won’t insist that this can’t go on, because it has. I only say that it will eventually stop.

How much BS can a writer pack into one tiny paragraph?

First, we do not “owe more than we can easily repay.” The so-called federal debt is nothing more than the total of T-security accounts at the Federal Reserve Bank. The (misnamed) “debt” is bank deposits, similar to savings accounts.

To “lend” to the government, you buy a T-bill (or T-note or T-bond). Dollars are transferred from your personal checking account and added to your T-bill account at the FRB. It’s as though you transferred dollars from your bank checking account to your bank savings account.

So how does the government “pay off” this so-called “debt”? The same way any bank “pays off” its depositors: It transfers existing dollars in one account to another account. “Paying off” deposits involves simply transferring dollars. No new dollars needed.

Do Time/Grant not know this? Well, in fact, they do know it, because think of the next sentences: “We conjure dollar bills by the trillions–pull them right out of thin air. I won’t insist that this can’t go on, because it has. I only say that it will eventually stop.”

And there, Time/Grant may have proved his article is the result neither of stupidity nor of ignorance, but rather of outright lying. We, in fact, do create dollars out of thin air. We always have.

In 1775, there was no such thing as a U.S. dollar. A few years later, there were millions. Where did they come from? A sovereign nation creates its own sovereign currency by passing laws (which it creates from thin air), and these laws create money from thin air.

So long as the U.S. government does not run short of laws, it never can run short of dollars, for it is laws that create dollars.

I don’t know the date, but I believe that I know the reason. It will stop when the world loses confidence in the dollars we owe. Come that moment of truth, the nation will resemble Chicago, a once prosperous polity now trying to persuade its once trusting creditors that it is actually solvent.

By now, Time/Grant’s nose must be 10 feet long. He falsely equates Chicago with the U.S. government. But cities, counties and states are not sovereign over the dollar. They cannot create dollars at will, simply by paying bills. The U.S. government can and does.

And as far as the world losing confidence in the dollar, I pray you and your great, great grandchildren live long enough to see that happen, for your family would set all sorts of records for longevity.

To date, not only does the world have confidence in the U.S. dollar, but it has confidence in Canadian, Australian, Japanese, British, Mexican, and Brazilian sovereign currency, plus the currencies of dozens of other nations. The threat that somehow the world would lose confidence in the American dollar is silly.

To understand our financial fix, put yourself in the position of the government. Say you earn the typical American family income, and you spend and borrow as the government does. So assuming, you would earn $54,000 a year, spend $64,000 a year and charge $10,000 to your already slightly overburdened credit card. I say slightly overburdened–your outstanding balance is about $223,000.

Of course, MasterCard wouldn’t allow you to run up that kind of tab. At an annual percentage rate of 15%, the cost to service a $223,000 balance would absorb 62% of your pretax income.

But the government is different from you and me (and Chicago). It has a central bank.

The first paragraph is false, because as we have discussed, your finances are different from federal finances.

Then, in the last paragraph, the misstatement is admitted. Yes, the government is different from you and me (and Chicago). And that is the whole point.

The Federal Reserve is the government’s Monopoly-money machine. It sets some interest rates and influences many others. It materializes dollars.

And now Time/Grant begins to walk back all the bullsh*t we have been fed in the first part of his article:

Dollars aren’t so much minted these days. Rather, they issue from the Fed’s computers in billowing digital clouds. The cost of producing them is only the energy expended on tapping the keys. The Fed emits these electronic greenbacks to attempt to control the course of economic events. It’s a heaven-sent monetary system for a big-spending government.

Exactly correct. Dollars exist as computer digits, under the control of the federal government. They indeed are Monopoly money.

Now tell us again how such a nation that creates dollars merely by tapping computer keys can be unable to pay bills denominated in those same dollars.

You may struggle to pay that midteens rate on your outstanding credit-card balance. The Treasury gets by paying an average of just 1.8% on that portion of the debt, held by savers and investors both here and abroad.

Just as the government creates dollars by paying all bills, it creates dollars by paying interest. No problem. Just push some computer keys.

One can assume that the creditors trust the currency in which they expect to be repaid. I wonder why, and for how much longer. The Fed once fought inflation. Now it actually sets out to cause it–about 2% a year is the target. Striving to inflate, it presses down interest rates and rustles up new dollars.

Yes, not only does the federal government create dollars out of thin air, but it controls inflation. In all respects, the federal government is sovereign over the dollar. So to all those folks who warn that the U.S. will turn into Zimbabwe or pre-War Germany, hyperinflation here never has happened, never will happen and can’t happen.

Contrary to popular myth, hyperinflation is not caused by “money-printing.” Hyperinflation is caused by shortages of goods, especially oil, and to a lesser extent, food. The “money-printing comes as a result of the hyperinflation, not as a cause.

And now comes the inevitable gold pitch:

From the nation’s 18th century founding until 1971, the dollar was defined as a weight of gold or silver. Americans did business with paper, of course. But these commercial bills and banknotes were convertible into monetary bedrock, the precious metals. The expression sound as a dollar derives from the ring of a gold piece when you plunked it on a counter.

Ah, that good old, reliable gold. Every depression in U.S. history has come while we were on some sort of gold standard. Allowing the value of one’s currency to be determined by the amount of gold mined, is foolish at best and suicidal at worst.

Remember, gold has very little intrinsic value. It’s a metal whose utility is less than that of copper, iron, aluminum or any other metal you can imagine. It is expensive to store, expensive to ship, expensive  to guard, difficult to use for paying bills, and it pays no interest. And the price varies wildly, so it is not safe in any sense of the word.

It is common for the same people who lie about federal debt also to lie about gold.

Sound money coincided with balanced budgets.

And thus, we are treated to yet more bullsh*t.

Fact: Recessions tend to come on the heels of reductions in federal debt/money growth. U.S. depressions tend to come on the heels of federal surpluses. See: Here.

In short, a growing economy requires a growing money supply. For a Monetarily Sovereign nation, a balanced budget is the absolute worst financial program, guaranteed to result in recessions and depressions.

Easy money rarely fails to please–at first. It buoys stocks, bonds and commercial real estate. House prices jump, and car sales zoom. (Average auto-lending rates, now 4%, have been nearly sawed in half since 2007.)

And those are bad things??

Politicians, noticing how a bull market fattens public pension funds, ratchet up the benefits they promise to retirees (a fact that state and federal pensioners are encouraged to remember on Election Day).

It’s bad enough that Time/Grant confuses federal debt with federal deficits (We can have deficits without T-securities, and we can have T-securities without deficits), but again, Time/Grant confuses state and local financing with federal financing.

Should we have grown accustomed to that kind of dissembling by now?

Maybe you had a taste of modern economics in school. If so, you probably learned that the federal budget needn’t be balanced–it’s nothing like a family budget, the teacher would say–and that gold is a barbarous relic.

To manage the business cycle, the argument went, a government must have the flexibility to print money, to muscle around interest rates and to spend more than it takes in–in short, to “stimulate.”

My teachers didn’t say that, though I wish they had. Most schools ignorantly teach that Monetary Sovereignty and monetary non-sovereignty are the same thing.

Oh, we have stimulated. Between the fiscal years 2008 and 2012 alone, federal deficits totaled $5.6 trillion. The public debt nearly doubled in the same span of years, to $11.2 trillion. The Federal Reserve tickled $1.6 trillion in new digital dollars into existence. True, our Great Recession proved no Great Depression, but the post-2008 recovery is the limpest on record.

The Great Recession was cured by increased deficit spending, which because of misstatements by the like of Time/Grant, was dramatically reduced with harmful debt ceilings, fiscal cliffs and the notorious sequestration, all pushed by the Time/Grants of the world.

In other words, the “limpest on record” recovery was caused by the Time/Grants et al, who succeeded in forcing cuts to federal deficit spending. Money is the lifeblood of our economy, but at a time when the nation needed more blood, the Time/Grants of the world were applying leeches to our economic body.

Then, as the patient suffered from blood loss, they claimed not enough leeches were applied.

And now, we come to the real reason for this article. Remember that Time is published by Time Inc. a big corporation, owned and operated by rich people. It publishes such magazines as Time, Fortune, and Sports Illustrated. It’s big money. And Grant not only is paid by these rich people, but his own clientele tends to have wealth.

Here is what the rich want you to believe:

The granddaddy of far-off commitments was Social Security, which dates from the 1930s. Medicare and Medicaid in the 1960s and the Affordable Care Act in 2010 duly followed.

The debt, as big as it is, is the measure of past spending in excess of tax receipts, a pattern of bad fiscal habits that traces its intellectual roots to John Maynard Keynes and has its dollars-and-cents origins with Lyndon Johnson and his Great Society.

What awaits us and our children and their children is the unpaid tab of the future.

Ah, the lies just keep on comin’. Notice how all our “problems” would be solved if only we would cut Social Security, cut Medicare, cut Medicaid and cut Obamacare — you know, the stuff that’s meaningless to the rich, but important to us not-rich.

As for defense spending, we dare not cut that. All those military supplying companies, owned by the rich, are too important, which social spending apparently is not (because it benefits the not-rich).

And finally, the most mysterious line in this whole shameful article:

Debt per se is neither good nor bad, though less is usually better than more.

What!!! Time/Grant spends an entire article telling us how awful the federal debt is, and then, at the very bottom of the piece, we are told that federal debt is “neither good nor bad”???

The public debt will fall due someday. (Some of it falls due just about every day.) It will have to be repaid or refinanced. If repaid, where would the money come from? It would come from you, naturally.

No, it won’t. You won’t pay one cent to repay the debt. The dollars already exist in the T-security accounts at the FRB.

Anyway, the rest of the article continues in that vein — confusing Monetary Sovereignty with monetary non-sovereignty — pretending that federal financing is like personal financing, and falsely claiming that federal taxes pay for federal spending.

Time/Grant ends with another shot at Social Security, Medicare, and Medicaid, hoping you will ask to receive lower benefits and pay higher taxes on the benefits you receive. The purpose is to widen the Gap between the rich and the rest.

It is the Gap that makes the rich rich, and the wider the Gap, the richer they are..

It would be frightening if the article’s goal merely were to enrich the already rich, but no, the objective of this disgraceful article is to impoverish the not-rich. Disgusting.

I wish the Time/Grant folks ill.

Lots of it.

Rodger Malcolm Mitchell
Monetary Sovereignty

 

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Ten Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually Click here
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here and here)

10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

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

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

THE RECESSION CLOCK

Recessions begin an average of 2 years after the blue line first dips below zero. A common phenomenon is for the line briefly to dip below zero, then rise above zero, before falling dramatically below zero. There was a brief dip below zero in 2015, followed by another dip – the familiar pre-recession pattern.
Recessions are cured by a rising red line.

Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.

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Mitchell’s laws:
•Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money.
•The more federal budgets are cut and taxes increased, the weaker an economy becomes..

•No nation can tax itself into prosperity, nor grow without money growth.
•Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
•A growing economy requires a growing supply of money (GDP = Federal Spending + Non-federal Spending + Net Exports)
•Deficit spending grows the supply of money
•The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
•The limit to non-federal deficit spending is the ability to borrow.

Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

•The single most important problem in economics is the Gap between rich and the rest..
•Austerity is the government’s method for widening
the Gap between rich and poor.
•Until the 99% understand the need for federal deficits, the upper 1% will rule.
•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..

MONETARY SOVEREIGNTY

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