The case against Monetary Sovereignty

At long last, Monetary Sovereignty is being derided in some universities. In science, derision can be the first step toward acceptance. Here are a few excerpts from one typical article, together with my comments:

Rethinking Monetary Sovereignty: The Global Credit Money System and the State Published online by Cambridge University Press: 29 August 2022 Steffen Murau and Jens van ’t Klooster

Abstract We propose a new conception of monetary sovereignty that acknowledges the reality of today’s global credit money system.

As you will see, most of the criticism of Monetary Sovereignty (MS) has to do with the fact that the focus is on a nation’s own finances. A Brief (and Fascinating) History of Money | Britannica

A Brief (and Fascinating) History of Money | Britannica

In one sense, this criticism is warranted because every nation affects, and is affected by, the finances of other countries. But while predicting the effects of our government spending can be daunting, including other nations in the mix adds many levels of complexity. It can be akin to predicting next year’s traffic accidents at one city corner by including each car model’s auto sales last year, in each other city, everywhere. It is faux attempt at precision when an economist does not even acknowledge that MS government taxes don’t fund MS government spending.

Today, the concept is predominantly used to denote states that issue and regulate their currency. We reject that Westphalian understanding of monetary sovereignty.

The words “predominantly” and “states” may indicate the writers Murau and van ’t Klooster aren’t aware that MS refers exclusively (not predominantly) to entities (not only “states”) that issue and regulate their own currencies. The term “Westphalian” refers to what happens in one’s own country without consideration of other countries.

Instead, we propose a conception of effective monetary sovereignty that focuses on what states can do in the era of financial globalization.

The conception fits the hybridity of the modern credit money system by acknowledging the crucial role of central bank money and money issued by regulated and unregulated shadow banks.

These institutions often operate “offshore,” outside a state’s legal jurisdiction, making monetary governance more difficult.

Monetary sovereignty consists of the state’s ability to effectively govern these different segments of the financial system and achieve its economic policy objectives.

We agree that vast amounts of money are created and spent offshore of any nation. Even the mighty United States dollar is only a small part of the world’s economy. We also agree that vast amounts of money are created by non-federal entities within the U.S., as witnessed in the formula for Gross Domestic Product: GDP =Federal Spending + Nonfederal Spending + Net Exports. Finally, we agree that the world’s economy profoundly affects the U.S. economy. But today’s economists are ill-prepared to play 3-dimensional chess against multiple opponents. Until quantum computers are programmed to evaluate all the inter-nation effects of every monetary event worldwide, a good start would be to consider the intra-nation impact of a nation’s governmental spending. In short, MS tells quite a bit about how U.S. federal spending can provide benefits to the American public.

Even though monetary sovereignty remains an important reference point in academic discourse and international politics, it has repeatedly been declared dead throughout the past decades.

How did MS supposedly die? Because of:

“Creeping dollarization, globally active megabanks, asset managers, hedge funds global bond markets and the realpolitik of the IMF and the World Bank, cryptocurrencies, stablecoins, shadow banking instruments, and Basel’s Bank for International Settlements.”

This merely states the obvious. No nation is an island unto itself. The MS government does not have absolute control over GDP, inflation, deflation, poverty, unemployment, productivity, education, etc. Similarly, no person is an island unto himself. To deride MS for not providing absolute financial control is like criticizing someone for improving his financial position, though he can’t consider everyone else’s efforts. And here we arrive at the following evidence for ignorance about MS:

Lacking the ability to control money within their borders, states have increasing difficulties raising taxes and funding critical expenditures.

In what sense, if any, can states still be described as monetary sovereigns?

Apparently, the authors, not understanding MS, do not realize that:

MS nations have no difficulty “raising taxes” should they so choose, and
MS nations neither need nor use tax money to “fund critical spending.”

Today, the concept of monetary sovereignty is typically used in a Westphalian sense to denote the ability of states to issue and regulate their own currency.

This understanding continues to be the default use of the term by central bankers and economists in fields ranging from modern monetary theory to international political economy and international economic law.

As we argue in this article, the Westphalian conception of monetary sovereignty makes it unsuitable for the realities of financial globalization.

Sadly, the rest of the rather long-winded article is devoted to debunking a claim no one is making: That other currencies don’t exist, and that a MS government can control the financial effect of these other currencies. The article brushes past the fact that government spending moves a country in specific directions despite the effect of other currencies. So yes, an MS government can fight poverty by giving people money and by paying for things. An MS government can support industries, medical care, the infrastructure, the environment, the sciences, education, and a host of other benefits. Then, after all the sound and fury, comes the conclusion that MS really isn’t dead. No MS still lives; just the definition supposedly is wrong.

We propose considering monetary sovereignty as states’ ability to use financial governance tools to achieve economic policy objectives.

Monetary governance involves controlling pure public money, regulating private-public money, and managing private money within the state’s monetary jurisdiction.

Using “tools for monetary governance” is what all nations do, whether or not they are Monetarily Sovereign. The entire article boils down to an incorrect, inappropriate, meaningless definition of MS. The article does clarify that a nation pegging its currency to another currency is not MS, which seemingly has not been understood by someone, somewhere. Also (OMG!), euro nations are not MS! And that is it. I have given you the link (twice) to their article. Nothing in it changes the sad fact that:

Most economists don’t teach Monetary Sovereignty
Most economists don’t even understand Monetary Sovereignty.
Monetary Sovereignty is the foundation of economics, and if understood, taught, and applies, it could make for a better world.
Economics is where astronomy was during the popularity of the geocentric model, 2,500 years ago.

IN SUMMARY The main problem “exposed” by the article is that an MS government does not have absolute control over the results of its spending because other forms of money have offsetting effects. The government “only” has partial control. My concern is that the federal government’s infinite ability to spend is not understood by the masses because economists, journalists, and politicians have failed to provide that information. Thus, people have been led to believe many benefits to every man, woman, and child are not easily affordable for the federal government. So we continue to do without:

A comprehensive, no-deductible, no-cost form of Medicare, regardless of health
Long-term care
Social Security, regardless of age
College and post-grad for everyone who wants it
Reduced federal taxes, with support for state and local governments

The people have been led to believe these benefits require tax increases, are unsustainable, and would cause inflation. All untrue. Instead of informing their students and the populace, and providing solutions based on Monetary Sovereignty, the economists dither about the exact definition of MS, focus on what MS doesn’t do, and argue in esoteric terms about how many angels could dance on the head of a pin. As a result, the people live without easily provided benefits. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

Is money real? No.

Is money real? Let’s first define “real.” Then you decide.

A case could be made that nothing is “real” in that everything is constructed in our brains. René Descartes addressed that problem when he wrote, “I think, therefore I am.” (“cogito, ergo sum”).

It was the one statement he felt he absolutely could accept as accurate. He couldn’t know for sure that the earth, the seas, the stars, and the people were not illusions or dreams.

But since we are defining, we can define real as we choose, so let’s say that “real” means something most people accept as having a physical existence. In one way or another, it can be seen, felt, heard, smelled, tasted, or otherwise having a physical presence.

In that sense, many things we commonly deal with are not real. Numbers are not real. You cannot see, taste, feel, smell, or hear a number. What does the number 6 look like? Does it look like this?

Or like this: Six, SIX, √36, IIIIII, seis

Numbers are concepts or ideas with no physical existence.

In a similar vein, is a story or a novel real? No, a story can be told or written on paper or in a computer’s electrons, but the story itself is not physical. By our definition, that novel you are reading is not real, though the paper and ink are real.

A Complete Guide to Car Titles - CARFAX — **This is a representation of a title, not a title in itself.**

A car and house are real, but is the title to a car or house real? The paper and ink are real if the title is printed on paper. But the title is not real. That title exists not only in printed forms but in electronic form.

The printed form can be in a certificate or computer output, listing one or hundreds of titles.

The title is a legal concept that can exist in many forms and places.

Being a law, a title can exist in the records of one or more government agencies and in the electronic or paper files of a title insurance company, your attorney, or your own files.

You can see a car, but you cannot see a title. At best, you can see a representation of a title. If someone asks for an “original title,” they mean an original copy of a title.

Now we come to the question, “Is money real.” Consider $10 (ten dollars). Amazon.com: 1907 Morgan Indian Head Ten Dollars Coin,Great American Commemorative Old Coins, Uncirculated Morgan Dollars,Discover History of USA Coins for Collectors (Gold) : Collectibles & Fine Art

How $10 dollar bill has changed through the years

Although the gold $10 coin is worth more in barter than the paper $10 bill, the two are worth exactly the same as money.

They both are titles to ten dollars.

So, where are the real dollars if the coin and bill are titles?

All U.S. dollars exist only as numbers on the books of the issuer of dollars, the federal government. And as we have seen, numbers have no physical existence. All numbers are nothing more than concepts.

American Maximum Speed Limit 65 Mph Road Sign Stock Illustration - Download Image Now - Number 65, Speed Limit Sign, Sign - iStock — **This is not a law. It is a representation of a law.**

Six houses, six cars, and six chickens differ; only their “sixness” is the same. Numbers are not physical, though they exist as concepts.

How did the dollar concept come into existence? They were created by laws, which also have no physical reality. You cannot see, hear, feel, taste, smell, or sense in any material way, a law.

You can read the representation of a law in a book of rules (of which there are many thousand), or you can hear the representation of a law from a judge or police officer.

You can see the representation of a law on a traffic sign. The law says you cannot drive faster than 65 (sixty-five) miles per hour.

You also can see a representation of the speed-limit law in law books.

But you cannot see the law itself.

Why is the non-physicality of laws and money important?

If something is physical, its creation relies on the availability of its material constituents. A government is limited in producing gold coins by the availability of gold.

Laws have no such limitations. They have no physical constituents. The federal government can create as many laws as it wishes, whenever it wishes.

And since dollars, which have no physical existence, are created by laws, which also have no physical presence, the federal government has the infinite ability to create dollars. If the federal government wished, it could pass endless laws making infinite dollars.

That power is known as Monetary Sovereignty. The federal government is the absolute sovereign over its creation, the U.S. dollar.

If you were a supplier to the federal government and sent them a bill for a trillion, trillion, trillion dollars, they could pay that bill instantly by passing a law and pressing a computer key.

Thus, the so-called federal debt is no burden on the federal government.

Claims that the federal debt must be limited or is “unsustainable” are ignorant at best and heinous lies at worst.

Similarly, no federal government agency (Social Security, Medicare, etc.) can run short of dollars unless that is what the Monetarily Sovereign U.S. government wants.

Then we come to the claims that Social Security and Medicare “trust funds” are on the brink of insolvency. I am too much of a gentleman to term claimers as dirty, rotten liars, so I’ll just leave it as “misguided souls who are spouting ignorance.” Better.

When I call these ignorant claims into question, I am greeted by throat-clearing, followed by the equally ignorant claim that “printing too much money causes inflation.”

First, we do not print money. As we have demonstrated, printed dollar bills are not money.

Second, most dollars are not represented by printed dollar bills.

And third, inflation is not caused by too much money; it is caused by scarcities of significant goods like oil, food, or services like shipping. Scarcities cause prices to rise. That is no revelation.

Governments can prevent/cure inflation by obtaining and distributing the scarce items — and this often requires more money creation, not less.

Our inflation was reduced not by the Fed’s interest rate hikes (which made products and services cost more) but by the government’s release of oil reserves and the financial support given to the manufacturers and shippers of scarce commodities.

The Fed wrongly is tasked with using recession as a tool against inflation. Congress and the President are responsible for reducing the shortages that cause inflation. They need only use their infinite dollar-creation ability to cure those shortages.

The pretense that the finances of our Monetarily Sovereign U.S. government are the same as the finances of monetarily non-sovereign state and local governments stands in the way of doing what a government should do: Improve and protect the lives of the people.

So, “Is money real?” No, if “real” means a substance, the availability of which is physically limited. But yes, if “real” includes concepts, ideas, laws, emotions, beliefs, preferences, and creativity.

Think of money as the Monetarily Sovereign government’s ability to imagine and fund a better world. No limits.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

Is Medicare For All too good to be true and too much to ask?

Visualize this:

A federally funded Medicare program that doesn’t just begin when you reach a certain age but covers every man, woman, and child in America, regardless of age or physical condition.
That Medicare has no deductibles, so Medicare Supplements are unnecessary. All doctors, hospitals, nurses, and other healthcare professionals would be covered.
It pays for all approved drugs, 100%.
It covers every body part, including teeth (dental), eyes, and brain (psychiatry).
It covers all equipment, from crutches to wheelchairs to eyeglasses.
It covers all forms of long-term care with no age or dollar limits.
It covers all forms of approved preventive medicine, including spas, gyms, fitness centers, exercise equipment, etc.
It would be free to all. No healthcare taxes (FICA) would be collected. Companies would not fund employees’ health care insurance.

Further, visualize (correctly) that for the Monetarily Sovereign federal government, money is no object. The federal government can afford anything. Is that too good to be true? I thought about that question again when I read an article about Medicaid terminations. Here are some excerpts:

Lawsuit accuses state of ‘illegal’ Medicaid terminations By Caroline Catherman, Orlando Sentinel

Three Florida residents are suing the state’s Agency For Healthcare Administration and Department of Children and Families, alleging the public health insurance program for low-income and disabled people sent out illegal termination notices.

Healthcare cancelled in Florida

A class-action lawsuit was filed Tuesday by the National Health Law Program and Florida Health Justice Project on behalf of a mom, her 2-year-old daughter, and a 1-year-old.

The suit alleges that Florida violated the Medicaid Act and the U.S. Constitution’s Due Process Clause by failing to give adequate notification to people losing coverage and failing to give them a shot at appealing.

The Due Process Clause has been interpreted by the U.S. Supreme Court as requiring “prior notice and a meaningful opportunity to be heard when an individual is in jeopardy of losing benefits,” according to the National Health Law Program.

Why did Florida terminate the health insurance coverage for some low-income and disabled people? The answer, of course, is “money.” Some bureaucrats, at the behest of Governor Ron DeSantis, decided that certain low-income and disabled should lead their miserable lives in greater misery so that the state of Florida can save money — money that perhaps could be used for shipping poor migrants to some other state? But why does the state of Florida need to save healthcare money when the federal government has infinite money? The Feds could pay for the above-described Medicare, so low-income and disabled people wouldn’t need to lack care. Here’s why:

- The politicians on both sides of the aisle claim (falsely) that the government’s money supply is limited [Being Monetarily Sovereign, the federal government never unintentionally can run short of its sovereign currency, the U.S. dollar.
- They claim (falsely) that the federal debt is “unsustainable” and will bankrupt the nation. [The federal government can instantly pay any bills of any size merely by clicking computer keys. It cannot be bankrupt for lack of dollars.]
- They claim (falsely) that federal spending is funded by federal taxes and that Medicare itself is headed for insolvency. [Because the federal government has the infinite power to create dollars, it neither needs nor uses tax dollars, all of which it destroys upon receipt. As a federal agency, Medicare can run short of money only if the federal government wants it to.]
- They claim (falsely) that federal spending for Medicare would be the dreaded “socialism.” [All governments spend money, but socialism is government ownership and control, not just spending.]
- They claim (falsely) that federal deficit spending causes inflation. [Inflation never is caused by federal spending. All inflations are caused by shortages of critical goods and services, more commonly oil and food. Federal spending can cure inflation if used to obtain and distribute scarce goods.]

The federal government and the media have been crying “wolf” (or, in this case, “poverty”) since 1940, calling the federal debt a “ticking time bomb”. Yet, no one seems to notice that it never explodes.

Some people were told they had exceeded income limits but weren’t told Medicaid’s limits or how much DCF determined they made.

There is no reason for federally funded medical insurance to have income limits. It’s possible to be wealthy while having a low income. Further, there are all kinds of income, each with different implications for a person’s ability to pay for medical services: Taxable, tax-free, liquid, hidden, deferred. No public purpose is served by income limits. The government simply should fund Medicare for everyone rather than creating Byzantine rules that accomplish nothing.

The mom of the 1-year-old named in the suit didn’t realize that the toddler was losing coverage until after her pediatrician told her that her child no longer had health insurance. She didn’t understand how to appeal, the suit states.

There is no reason for an infinitely rich government to put people through such heartache. It should pay everyone’s bills the same way, without “gotcha” rules.

“People don’t know that the reason for termination might be incorrect, that DCF was using the wrong information, or they made a wrong determination.

“They don’t know that they ought to challenge it.

More than 182,000 Floridians have been issued notices saying they are no longer eligible for coverage since April, after the end of a COVID-era policy that banned states from dropping people from the program for low-income children, families, and young adults, even if they became ineligible.”

It’s ridiculous that the bureaucratically determined “end of COVID” policy should mark the beginning of rules that already have punished 182,000 Floridians and millions of other Americans.

“The scope of terminations in Florida and the State’s knowledge of inadequate notices are certainly egregious.

In a news release, “Unfortunately, similar patterns are happening in states across the country,” said Amanda Avery, senior attorney at the National Health Law Program.

The suit says Florida has known for years that their Medicaid termination notices are flawed.

In a 2018 case study of the state’s termination process, state officials reported “being well aware that notices sent to beneficiaries generate confusion” and that the “current notices that describe applicants as ineligible are considered insufficient explicit in terms of an explanation.”

The lawsuit asks that people who received “unconstitutional” notices regain Medicaid coverage until they are given new notices, with enough information to understand how and if they can appeal, Harmatz said.

Over the last few months, Florida has faced criticism for taking away sick kids’ coverage months before they were scheduled to undergo review, according to the state’s prioritization plan.

Ccatherman@orlandosentinel.com; @CECatherman Twitter

It’s another example of an economically ignorant government, intentionally or not, punishing its poorest, least-able-to-protest citizens. The solution is a free, comprehensive healthcare insurance coverage for every American paid for by an infinitely wealthy, knowledgeable, compassionate federal government. It’s not-too-good-to-be-true. It’s just good. Is that too much to ask? Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

Do you consider yourself to be creative? Here’s how to be more creative.

My wife of 64 years died in 2021, and I was lost. She was my emotional support, and for a while, I was bereft of her stability which gave me purpose. After several months of pain, I began to realize three things.

She would have told me that just as she was my support, I was her support, and I had the means to do for myself what I had been doing for her, so “stop feeling sorry for yourself and get on with it.”
“Getting on with it” requires creating something.
Creating requires repeatedly asking, “What if?”

Many years earlier, I had enjoyed painting. I even took lessons, but interestingly, my teachers focused not on drawing but on designing. So, I always struggled to render, and much of what I did was more design than drawing. I envied Salvador Dali, who may have been the greatest renderer in history, perhaps even better than Rembrandt. Dali could draw and paint not just beautifully and quickly but without showing brush strokes, as though snapping a photograph. I decided to try turning my drawing liability into an asset by asking, “What if?” (i.e., what if I didn’t need to draw at all?) At the time, monumental fires were raging in California and elsewhere. I had heard about terrified people being extracted by helicopter, and I wished to create a painting of such a scenario. Somehow, I hadn’t been able to get it right. The helicopter repeatedly looked like a “not-helicopter.” So, now I asked myself, what if I tried painting the terror, the fire (then being called a “firenado”), the rescue, and all the emotion, without drawing the helicopter or the fire. And this is what I produced:

The title of the painting is: “Helicopter Escape from a Firenado.” But where is the tornado caused by the ferocious heat of the fire (aka “firenado”)? It’s that evil thing in the center of the picture. More importantly, where is the helicopter? You’re in it, looking down at the terrified girl climbing the ladder. I had asked myself, “What if I could illustrate a helicopter escape without drawing a helicopter.” What if I could put a helicopter into your imagination, the viewer? Might a focus on the emotions — the girl and the firenado — be more potent than any illustration of a helicopter I could produce? Would the painting be more powerful or create a better message if it showed a helicopter? Whether or not you love, hate, or are indifferent to the painting is less material than the process. Beginning with the assumption that a painting of a helicopter should picture a helicopter, I asked, “What if that isn’t true”? And that kind of question is the beginning of creativity. It is the kind of question I suggest you ask when reading about economics and Monetary Sovereignty. What if the things so many of us assume aren’t true?

What if for “A” to influence “B,” there need not be some sort of connection between “A” and “B” (aka “locality)?
What if the thing called “federal debt” isn’t a federal debt
What if federal taxes don’t pay for federal spending, while state/local taxes do fund state/local government spending.
What if federal deficit spending doesn’t cause inflation, but actually can cure inflation?
What if money is not a physical thing but rather a mere concept that cannot be seen, felt, smelled, tasted, or heard?
And then again, what if Monetary Sovereignty itself isn’t true, and there is another explanation for what we believe to be reality?

“What if” is the most significant question in science. It is a question Einstein undoubtedly asked about time (What if time doesn’t pass the same for everyone and everything? What if you see the same speed of light regardless of your own speed?) It is the question scientists continually ask (“What if reality is not as most of us think we experience it?”) The “What if” question does not require changing your beliefs. It only asks you to imagine a scenario in which your beliefs are different. For example, the question, “What if the moon does not exist?” could create an investigation of what the earth would be without a moon and why we might wish to believe in a mythical moon. If that seems far-fetched, consider this: Everything you believe is not reality but rather the result of your sensing being interpreted by your brain. You already know your brain can fool you; that is called “illusion.” So, how much of what you believe is an illusion created by your brain? Or is your brain an illusion? What if “you” are not what you think you see in a mirror but are nothing more than a concept floating free in the ether, merely imagining, imagining, imagining? What if “I think, therefore I am.” is not reality, but that thought itself needs no thinker? Is all this any more fantastic than the entanglement of quantum mechanics? If reality is not artificial, fraudulent, or illusory, then the case could be made that nothing is real, and everything is imagined, and “What if” makes perfect sense. That kind of thinking is difficult. If I exist, I evolved to be sure of my existence in my imagination and belief. But if you want to expand your imagination (whatever you may be), try imagining something you are absolutely sure about, then asking yourself the outcome of “What if?” that something you’re sure of were false. It’s quite fun. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

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