AI discusses the cause of inflation. Here’s an addictive example you can enjoy yourself.

Want to have a discussion about anything — ANYTHING —with an intelligent person? How about a discussion with a seemingly intelligent, seeming person?

Here’s a discussion I had with a pretty good facsimile, an exercise you can enjoy yourself by clicking the link.

We discussed the cause of inflation. Warning, it’s addictive. Unlike the humans I try to reason with, the computer never gets angry or even impolite. It always acknowledges points made. And its opinions are not its own.

Sadly, it doesn’t learn from arguments. It just keeps repeating what it already has been told by its references.

Rodger Mitchell: It widely is believed that “excessive federal spending causes inflation,” yet when I try to find an example of excessive federal spending causing inflation, I receive the explanation that, “It’s really a combination of factors of which excessive federal spending is one factor and not even an immediate factor.

“It could be a delayed part.”

Sadly, that could be said of anything. I could make the same statement about phases of the moon or children born with red hair — as being only one factor and not even an immediate factor in inflation.

**A computer-generated illustration of: A computer on a stage, talking into a microphone.”**

In short, federal spending is no more a demonstrable factor than is a sign of the zodiac.

Chat GPF: The relationship between federal spending and inflation is a complex and debated topic among economists.

While some people hold the belief that excessive federal spending directly causes inflation, the reality is more nuanced and not as straightforward as a simple cause-and-effect relationship.

Inflation is a general increase in prices over time, and it can be influenced by a variety of factors, including monetary policy, fiscal policy, supply and demand dynamics, international trade, productivity levels, and more.

Excessive federal spending can potentially contribute to inflation, but it is not the sole or immediate factor responsible for it.

When economists explain that excessive federal spending is only one factor and not an immediate one in inflation, they are acknowledging the multifaceted nature of inflation.

They are suggesting that while federal spending can have an impact on inflation, it needs to be considered alongside other variables that influence price levels.

Simply blaming federal spending without considering other factors would oversimplify the issue.

It is important to note that economic phenomena, such as inflation, are typically the result of multiple interacting factors. This complexity makes it challenging to isolate and definitively prove the direct causal relationship between any single factor and inflation.

Therefore, it is not accurate to compare federal spending’s role in inflation to unrelated factors like phases of the moon or hair color, as the former is subject to economic analysis and empirical research.

**Computer-generated image of: “A computer pondering a question in economics.”**

Economists continue to study the relationship between federal spending and inflation, and there are differing views within the field.

Some argue that excessive government spending, particularly when not matched by increased productivity or accompanied by monetary expansion, can contribute to inflationary pressures.

Others argue that other factors, such as changes in private sector spending, global economic conditions, or shifts in supply and demand, have a more significant influence on inflation.

In summary, while excessive federal spending can potentially contribute to inflation, it is just one factor among many.

The complexity of economic systems and the multitude of factors influencing inflation make it difficult to attribute it solely to federal spending. Economic analysis and research are ongoing to better understand these dynamics and their interrelationships.

Rodger Mitchell: It’s not terribly “challenging to isolate and definitively prove the direct causal relationship between any single factor and inflation.” Inflations historically are caused by shortages, usually shortages of oil or food. I see many parallels through history between oil or food shortages and inflation.

I do not see the same parallels between federal spending and inflation. Can you provide an example of an inflation that did not result from an oil or food shortage, but instead resulted from excessive federal spending?

ChatGPT: While it is true that supply shocks, such as oil or food shortages, have historically played a role in triggering inflationary episodes, it would be incorrect to assert that inflation is exclusively caused by these factors. Inflation can also arise due to other factors, including excessive government spending.

One example often cited as an instance where excessive federal spending contributed to inflation is the case of Zimbabwe in the late 2000s. The Zimbabwean government embarked on a policy of significant fiscal expansion, primarily through extensive money creation, to finance its expenditures.

This resulted in a substantial increase in the money supply, leading to hyperinflation.

During this period, Zimbabwe experienced a severe economic crisis, with skyrocketing prices, rapid depreciation of the currency, and a loss of confidence in the monetary system.

Your Creation — **Four computer generated images of: “A computer laughing at a joke”**

While there were other factors at play, such as economic mismanagement and a decline in agricultural productivity, excessive government spending and the consequent increase in the money supply were key drivers of inflation in Zimbabwe.

It’s important to note that this example is just one case among many, and the relationship between federal spending and inflation is not always straightforward.

The impact of government spending on inflation can vary depending on several factors, including the overall state of the economy, fiscal and monetary policies, and the credibility of the government in managing its finances.

In many instances, inflation may result from a combination of factors rather than being solely attributable to a single cause.

It is also worth noting that the effects of excessive government spending on inflation may not be immediate but can manifest over time as the economy adjusts to the increased money supply and the potential distortionary effects of government interventions.

In summary, while oil or food shortages have historically been associated with inflation, excessive federal spending can also contribute to inflationary pressures under certain circumstances.

The example of Zimbabwe illustrates how a combination of factors, including excessive government spending and monetary mismanagement, can lead to inflation.

However, it is important to recognize that the relationship between federal spending and inflation is complex, and various factors can interact to influence price levels in an economy.

Rodger Mitchell: The Zimbabwe inflation was caused by a food shortage. Farmland was taken from farmers and given to non-farmers. The result: Food shortage and inflation.

The money “printing” was a response to, not a cause of, inflation.

ChatGPT: While it is true that Zimbabwe’s land redistribution policies and subsequent disruptions in agricultural productivity were significant contributors to the country’s hyperinflation, it is essential to note that excessive money creation by the central bank played a crucial role as well.

The Zimbabwean government resorted to financing its budget deficit by effectively printing money, leading to a significant expansion of the money supply.

This, combined with the loss of agricultural output, created a situation of excess money chasing limited goods, fueling hyperinflation.

The land redistribution policy disrupted agricultural production by displacing experienced farmers and replacing them with individuals who lacked the necessary skills, resources, and incentives to maintain productive farms. This resulted in a decline in food production, contributing to shortages and price increases.

However, it is important to understand the sequence of events. The initial cause of the inflationary spiral in Zimbabwe was the disruption in agricultural productivity due to the land redistribution policy.

As the economy faced shortages of food and other goods, the government responded by printing money to finance its spending obligations, exacerbating the inflationary pressures.

Inflation is a complex phenomenon, and it rarely has a single cause. In the case of Zimbabwe, both the land redistribution policy and the subsequent monetary expansion played significant roles in the hyperinflationary episode. It is crucial to recognize the interplay between these factors rather than attributing the entire inflationary outcome to a single cause.

This example underscores the importance of considering multiple factors and their interactions when analyzing the relationship between excessive federal spending and inflation. While it is true that supply shocks like food shortages can trigger inflation, the subsequent monetary and fiscal responses to those shocks can amplify and prolong the inflationary effects.

Rodger Mitchell:

(At this point I decided not to get into the fact that Zimbabwe was not Monetarily Sovereign, so though it could print currency, it’s money was tied to the dollar, and important inflationary consideration.)

It would be helpful if you could point to a single inflation in history that was precipitated by government spending rather than being precipitated by a shortage of oil, food or some other critical factor.

I suspect all inflations really are caused by shortages.

ChatGPT: There have been cases in history where excessive government spending has contributed to inflation, even in the absence of shortages in critical factors like oil or food. One notable example is the hyperinflation experienced by Germany in the early 1920s.

After World War I, Germany faced significant war reparations and a massive budget deficit. The German government resorted to financing its spending by issuing large amounts of debt and, eventually, by printing money.

The excessive money creation, combined with a lack of corresponding increase in production and output, led to a rapid devaluation of the German mark and hyperinflation.

During this period, there were no significant shortages of oil or food in Germany. Instead, the excessive government spending and the resulting increase in the money supply caused a loss of confidence in the currency, leading to skyrocketing prices.

People’s wages and savings quickly became worthless as the value of the mark rapidly declined.

This example illustrates how excessive government spending and the subsequent expansion of the money supply, without corresponding increases in productivity or output, can lead to inflation.

It demonstrates that inflation can occur even in the absence of shortages in critical factors.

While supply shortages can certainly contribute to inflation, it is not accurate to claim that all inflations are solely caused by shortages. Economic phenomena such as inflation are influenced by a multitude of factors, including both demand and supply-side dynamics, monetary policy, fiscal policy, and other macroeconomic conditions.

It is crucial to recognize that inflation is a complex phenomenon with multiple potential causes, and it can arise from different combinations of factors in different historical contexts.

Rodger Mitchell: So, prices of food and oil went up even though there was no shortage of these products? And it was all due to government spending? Then the inflation was cured by even more government spending to create the greatest military force the world had ever known? Does any of this make sense to you?

ChatGPT: I apologize if my previous responses were not clear. Allow me to clarify.

In the case of Germany’s hyperinflation in the early 1920s, it is important to note that the excessive government spending and subsequent increase in the money supply were contributing factors to inflation.

However, it would be inaccurate to say that the inflation was solely caused by government spending without considering other factors at play.

During that period, Germany faced a complex set of circumstances, including war reparations, economic disruptions from World War I, and political instability.

The excessive government spending and the resulting expansion of the money supply added to these challenges, leading to hyperinflation.

Inflation is a multifaceted phenomenon influenced by various factors, including monetary policy, fiscal policy, supply and demand dynamics, productivity, external factors, and more. It is rarely driven by a single cause.

Regarding your statement about inflation being “cured by even more government spending to create the greatest military force the world had ever known,” it is important to differentiate between the context of post-World War I Germany and the broader discussion about the relationship between government spending and inflation.

Government spending, particularly in the context of wartime mobilization or rebuilding efforts, can have stimulative effects on the economy.

However, the impact on inflation depends on various factors, including the state of the economy, fiscal management, and monetary policies implemented.

It is crucial to approach the analysis of inflation and government spending with nuance, considering the specific historical context and the multitude of factors involved. There is no one-size-fits-all explanation, and each situation requires careful examination of the unique circumstances at hand.

Rodger Mitchell: There is a widespread fear that government spending causes inflation. It is the foundation of the “debt-limit” laws. Because the federal government cannot run short of dollars, the only ostensible purpose of the debt limit is to prevent inflation.

But, government spending alone doesn’t cause inflation. There needs to be, as you said, “war reparations, economic disruptions, and political instability.”

Absent these factors, which cause shortages of key goods and services, government spending does not cause inflation. Thus, the excuse for a debt limit disappears.

ChatGPT: You raise an important point about the relationship between government spending and inflation. While it is a common belief that government spending alone leads to inflation, the reality is more nuanced.

As you mentioned, inflation typically occurs when there are shortages in key goods and services or when there is excessive money creation that outpaces the productive capacity of an economy.

Government spending can potentially contribute to inflation if it is not matched by increased productivity or accompanied by appropriate fiscal and monetary policies.

The purpose of debt limits, including the ones imposed on governments, can indeed be aimed at controlling inflationary pressures. By limiting the amount of debt the government can accumulate, policymakers aim to prevent excessive money creation and potential inflation.

However, it is important to note that debt limits are just one of many tools governments use to manage their fiscal policies, and their effectiveness in curbing inflation can vary.

In practice, the relationship between government spending, debt limits, and inflation is complex and dependent on various factors. These factors include the overall state of the economy, fiscal management, monetary policies, external economic conditions, and more. Each situation requires careful analysis of the specific context to understand the potential impacts on inflation.

While shortages of goods and services can exacerbate inflationary pressures, it is not accurate to dismiss government spending as irrelevant to inflation in the absence of such shortages. The impact of government spending on inflation is influenced by a range of economic factors, and it is subject to ongoing debate and analysis among economists.

In summary, the relationship between government spending and inflation is multifaceted. While shortages of key goods and services can contribute to inflation, government spending can also have inflationary effects if not appropriately managed. The role of debt limits in preventing inflation depends on various factors and can differ from one economic context to another.

Note the repeated use of the “This, but on the other hand, that” argument.

Also, while the public believes excessive” “federal spending causes inflation, ChatGPT says other factors must be present. (It is these “other factors” that are the cause of inflation. Increased money creation is a response to inflation, not a cause.)

While the complaint often is made that https://chat.openai.com/ is not a reliable source of information, that same complaint can be made about every other source of information — books, newspapers, encyclopedias, and certainly the government, the Internet and television (perhaps except for FOX and Breitbart, which are reliably wrong).

For example, you’ll notice that https://chat.openai.com/ never does provide any data to demonstrate that federal spending causes inflation. It dances around that central point by making the “various factors” claim.

Unfortunately, it cannot yet receive pictures or graphs, else I would have provided it with graphs demonstrating the lack of a historical relationship between inflation and federal spending along with the profound historical relationship between oil shortages and inflation.

I suspect that by the time this year ends, we will be able to show the AI pictures, graphs, videos, and music.

It might even admit that debt limits are a lie foisted on the innocent public by the rich, the purpose being to widen the Gap between the rich and the rest.

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

Because the Republican Party seems to have . . .

Because the Republican Party, the self-proclaimed party of Patriotism, Family Values, and Law & Order, seems to have made its selection for the next President of the United States, we offer this portrait to be hung in RNC offices and/or used on yard signs.

It should serve as a reminder to all Americans, especially Republican voters and their families, what the Republican Party really stands for.

Do you favor a Universal Basic Income? Pro, Con and Chaos

We’ll begin with a reminder of a few facts:

The U.S. federal government is Monetarily Sovereign. It has infinite dollars at its disposal. It never unintentionally can run short of U.S. dollars.
Unlike state and local governments, the federal government is not funded by taxpayers. Instead, it pays all its bills by creating new dollars ad hoc.
Even if the federal government did not collect a single penny in taxes, it still could continue spending as always.
37.9 million people are living in poverty in the U.S., according to 2021 Census Bureau figures.
Congress is in a political battle over a meaningless — no, fraudulent — debt limit that handcuffs federal spending for no good reason.

Alan Greenspan: “The United States can pay any debt it has because we can always print the money to do that.”

Scott Pelley (On “60 Minutes”): “Is that tax money that the Fed is spending?” Ben Bernanke: “It’s not tax money… We simply use the computer to mark up the size of the account.”

With the federal government having limitless financial resources, why does poverty continue as a persistent problem in America?

The U.S. Could Help Solve Its Poverty Problem with a Universal Basic Income A universal basic income wouldn’t lead to adults leaving their jobs and could lift millions of children into a brighter future. By Michael W. Howard on January 6, 2023, Scientific American Magazine

When the child tax credit, first established in 1997, was expanded for a year in 2021, it was a major political and social win for the country. The Biden administration’s decision not only added to the amount of the tax credit and converted the payment from a year-end lump sum to monthly payments; it also abandoned the work requirement for parents.

This immediately affected one third of all children in the U.S., including 52 percent of Black children and 41 percent of Hispanic children, whose families were formerly excluded because the parents earned too little to qualify for the tax credit. ,

The tax credit expansion lifted 3.7 million children out of poverty by December 2021 without significantly reducing parents’ work participation.

Then in January 2022, the expanded tax credit expired, which plunged 3.7 million back into poverty, with higher percentage increases in poverty among Hispanic and Black children.

The credit showed us that cash assistance could help families stay afloat and, contrary to some political beliefs, parents would not leave the labor system because of it.

The child tax credit expansion is one step toward a universal basic income that could eliminate poverty without increasing unemployment.

Providing a government-funded monthly payment to every individual would broadly lift them out of poverty while providing millions of children a better chance at a good education, improved health, and higher future earnings.

This payment would benefit millions and save hundreds of billions of dollars by reducing the social costs of poverty.

The question becomes: Can we convince our elected officials that poverty is not a moral failing but a social condition that can be addressed by establishing an income floor below which no one falls.

There is a widely held expectation that able-bodied adults should work for their income.

Empirical evidence from the means-tested minimum income experiments of the 1970s in the U.S. and recent analysis of a similar experiment in Manitoba, among other research, support the idea that few people actually stop working when they are simultaneously receiving a guaranteed income.

Such research also shows that those who stop working for wages do so for good reasons, such as attending school or taking care of young children, and that a modest guaranteed minimum income can enable people to work who otherwise could not.

The norm that every abled person receiving cash payments should be seeking a job can also be challenged.

First, holding a job is not the only form of work. Taking care of children and elders is work—work that is performed mostly by women without compensation.

A basic income is a way of supporting and recognizing that work without intrusive state monitoring and reinforcement of gendered division of labor.

Poverty negatively affects health and longevity, education, housing, law and crime, bigotry, supply and demand, GDP, scientific advancement, the environment, human motivation and well-being, and virtually every other economic issue. Why, then, are we more interested in Hunter Biden’s business dealings and Donald Trump’s groping of women than we are in poverty when the cure for poverty lies within easy reach?

11 Pros and Cons of Universal Basic Income By Kishore Bhatt,

Last Updated on March 15, 2021, by Filip Poutintsev

A Universal Basic Income (UBI) is an unconditional cash payment given at regular intervals by the government to all residents, regardless of their earnings or employment status.

It isn’t clear from the article whether non-citizens or even criminals would be included or excluded. I suggest that every resident, legal or not, except only convicted felons in jail, receive the UBI. No public purpose would be served by refusing to include non-citizens, as they have the same human needs and make the same contributions to the economy as citizens.

Pros and Cons of Universal Basic Income The intention behind the payment is to provide enough to cover the basic cost of living and provide financial security.

The concept is also seen as a way to offset job losses caused by technology. In times of crisis, a UBI can also provide a social safety net with minimum admin costs.

For a Monetarily Sovereign government, administrative costs are irrelevant.

Different programs outline who exactly receives the income—some state that all citizens would get it regardless of what they make, while other programs may only give it to those who fall below the poverty line.

A universal basic income has three key components. It is universal – no citizen is excluded. Everyone gets the same assistance, irrespective of their gender, wealth, age, or occupation.

It is unconditional, that is, the transfer is done without any per-condition which means the recipient does not have to perform any task to be eligible for the income.

It is direct – money reaches the targeted beneficiary directly, without the involvement of any middleman.

It also should not be taxed by the federal government or by any state/local government.

Automation has fundamentally changed the structure of the world’s economy. Elon Musk said, robotics will take away most people’s jobs, so a universal income is the only solution. Here are some of the pros and cons of UBI:

Pros of Universal Basic Income 1. Reduces Poverty A UBI is a program to be delivered in cash, unconditionally, and to everyone.

Namibia’s UBI program, the Basic Income Grant (trialed in 2007-2012), reduced household poverty rates from 76% of residents before the trial started to 37% after one year.

Child malnutrition rates also fell from 42% to 17% in six months.

Advocates for UBI believe that in some of the richest countries in the world, no one should be too poor to live. UBI would bring everyone’s income above the poverty line. It gives people enough money for their basic needs and necessities.

2. Fights Unemployment With advanced technology taking over more and more blue and white-collar jobs, UBI would act as a security net for the millions of people who will be left jobless by the tech revolution.

The concept of UBI is also seen as a way to offset job losses caused by technology.

Some people argue that a universal basic income gives people the incentive to do the jobs that they want to do and not the ones that they have to do.

Also, workers could afford to wait for a better job or better wages.

3. Greatly Improves Work Incentives Under existing arrangements, people may see their welfare payments reduced if they find work, gain promotion, work more hours, or gain better-paid work.

A critical reason “means-tested benefits” can be counterproductive. They decrease the net benefit of labor, especially at the lower levels. Example: A person receiving $5,000 a month, only if he earns nothing, is less likely to accept a $6,000 a month job. His labors would earn him a net of only $1,000 a month.

People find themselves in a poverty trap — a poverty trap that has been created by the same system that is supposed to be helping them out of poverty.

Under a Basic Income system, however, people will no longer be penalized for finding work or working harder. Finding work or increasing their hours won’t result in any reduction in their Basic Income payments.

4. Provides Financial Security Many of the jobs that we take for granted today are going to be gone in the future due to artificial intelligence, robotics, and other technology. People will be able to know that they will have enough money to meet their fundamental needs, even though their circumstances may change quite substantially.

In times of crisis, a UBI can also provide a social safety net.

5. Controls Discrimination UBI guarantees an income for non-working parents and caregivers, thus empowering important unpaid roles, especially for women.

Those who suffer domestic abuse, mainly women, become trapped in violent situations because they don’t have the means to leave them. UBI would make leaving an abusive partner easier from a financial point of view.

6. Boost Self-Employment and Entrepreneurship Somebody who wishes to work on new business ideas could use UBI income to support their initiative.

Even the most successful businesses often had a tough time making a decent profit in their early years. But to have a dynamic, enterprising economy, we need people to be able to take risks involved in starting a new business.

And UBI would enable more people to take those risks.

I’ll add to the “Pro” list: 7. The UBI dollars would be added to the private sector, increasing economic growth. Economic Growth usually is measured by Gross Domestic Product (GDP). GDP=Federal Spending + Non-federal Spending + Net Exports. Increased federal deficit spending mathematically must increase economic growth. Obviously, UBI would require federal spending. It also would result in more non-federal spending by the people receiving UBI, which leads to: 8. UBI would stimulate business growth by enriching customers’ spending ability. In response, businesses would hire more, pay more, and provide better working conditions to attract workers. 9. UBI would help utilize America’s brainpower by making it possible for more people to be educated through high school, college, and beyond. Those are the people who would create the inventions, arts, sciences, and businesses that advance America.

Cons of Universal Basic Income 1. Decreases Motivation to Work The biggest concern is that UBI would encourage millions of workers to stop working.

This is the false message about “paying people not to work.” Because the UBI would be given to everyone, it doesn’t pay people not to work. Work or not, everyone would be paid. As the earlier article showed, the “stop working” dictum is false:

1. a If people aren’t working, there is less taxable income.

For the federal government, “taxable income” isn’t an issue. It neither needs nor uses nor even retains tax dollars. It destroys them upon receipt and creates new dollars, ad hoc, to pay its bills.

The problem here is that people will get money without doing anything. It may encourage people to be lazy and live off benefits.

Free income may not incentivize people to get jobs and could make work seem optional.

Sneering at the poor reflects the false belief that the poor are poor because they are lazy, and if they only would try harder instead of getting drunk, taking drugs, and lounging in front of the TV, they no longer would be poor. Psychologically, this is how those who aren’t poor justify their better financial situations while exalting themselves in their own estimation. The reality is that the poor, on average, work harder in less gratifying jobs than those who have more income and wealth. Everyone wants a better life. America is one of the world’s wealthiest nations. On average, Americans have more money than the residents of almost any other country. Even poor Americans often lead better lives than the average people in many other countries. Yet we work. Think about it: If people with money were disincentivized from working, we would be a nation of the unemployed. But we work because we want more and better no matter what we have. That Chevy you once lusted for is no longer good enough. Now that you have more money, you’ll want a Lexus. If you make even more, you might want a Bentley, a Hawaiian vacation, and a second home in Florida. The sum of human wants never is satisfied. The poor have even greater desires than the rest of us and are even more motivated to have more money to pay for those wants. Giving a poor person extra money creates the taste for even more. So ingrained is the common myth of impoverished laziness that the author repeats it here;

2. Retards Economic Growth If people get money without doing anything, it may encourage people to be lazy. Some people may choose to work part-time instead of full-time.

Others may leave the labor force for years when they would have otherwise worked. If people transition away from full-time work, the economy will suffer.

UBI has the potential to directly decrease the growth of the economy, namely GDP growth, through reductions to labor force participation.

#1 and #2 repeatedly have been proven wrong.

3. Highly Expensive The best argument against UBI is its feasibility. UBI has been seen as a flawed idea, not least because it would be prohibitively expensive unless accompanied by deep cuts to the rest of the safety net.

Sacrificing all other social programs for the sake of a UBI is a terrible idea. According to a study, the cost of implementing UBI in the United States is estimated to be about 3.9 trillion annually.

The figure varies depending on whether children are included and at what benefit level. So, UBI is either very expensive or very stingy.

The authors, Bhatt and Poutintsev, must be ignorant of Monetary Sovereignty. The federal government has infinite spending dollars. Whether the cost is $3.9 trillion a year or $39 trillion, the government could create and spend those dollars with just a touch on a computer key. The federal debt has risen from about $50 billion in 1940 to about $ 30 TRILLION this year, and at no time has the government ever had difficulty paying its bills. Taxes aren’t the issue. The government simply creates the dollars to do it. Always has. Always will. The UBI can be considered “very expensive” (depending on how that term is defined), but there never is a reason for it to be “stingy.” As you ponder that, your thoughts may turn to inflation, which we will discuss after we review point #4,

4. Inequality/Injustice Is it necessary to give the same amount of money to billionaires as those born into poverty?

Universal Basic Income (UBI) takes money from the poor and gives it to everyone, increasing poverty and depriving the poor of needed targeted support.

UBI takes money from no one, not the poor or rich. Federal finances are different from state/local government finances. Federal taxes do not fund federal spending. Federal taxes remove money from the private sector (aka the economy). They are economically recessive. Federal spending adds money to the economy and is economically stimulative. While federal taxes go to the U.S. Treasury, where they are destroyed, state and local tax dollars go to banks, where they are recirculated and remain in the M2 money supply. State/local taxes are neither recessive nor stimulative, and state/local government spending likewise is neither recessive nor stimulative. The federal government does not spend taxpayer dollars. To pay for things, the federal government creates new dollars ad hoc, and these dollars grow the economy.

UBIs are less cost-effective than targeted welfare programs because many people lack more than just cash.

Some proponents have suggested UBI could be restricted to certain populations and only allowed for those who are below the poverty line.

“Targeted” welfare programs come with the implicit belief that government knows what is best for each family and can provide individualized solutions. I suggest the best course is to give people money and allow each person or family to determine their own best use of that money.

5. High Tax and Inflation There is a question, what gets cut to fund UBI? The answer is the cost of a universal basic income will have to be met through higher taxes. That will lead to higher taxes to pay for the benefits.

That would increase poverty and inequality rather than reduce them.

This question is based on ignorance of Monetary Sovereignty. The federal government has the infinite ability to pay any amount while not collecting any taxes at all. Nothing needs to be cut to fund UBI.

If everyone suddenly received a basic income, it would create inflation.

Inflation will be triggered because of increased demand for goods and services. There won’t be an improved standard of living in the long run because of inflated prices.

The above is based on the false belief that federal spending causes inflation. There is no evidence of that ever happening. All inflations through history have been caused by critical goods and services shortages, notably oil and food. While giving people money will cause an increase in demand for many products, it also causes an increase in supply as manufacturers respond.

**The two lines would move on parallel paths if federal deficit spending (red) caused inflation (blue). There is no relationship between the movements of the lines.**

Inflation is caused by shortages of crucial goods and services, the most important of which is oil. The lack of oil is quickly reflected in its price. Price changes in oil are substantially parallel to inflation changes.

The two above graphs demonstrate that federal deficit spending has not caused inflation, but oil shortages have.

Conclusion The concept of UBI has been under debate for some years in global forums. The main advantage is that it ensures a minimum income standard for everyone.

Opponents of UBI say that it does not reduce poverty, deprives the poor of needed targeted support, provides a disincentive to work, and weakens the economy.

The opponents are demonstrably wrong. UBI absolutely would reduce poverty by providing the poor with money. Giving money to the poor and allowing them individually (instead that a government bureaucrat) to determine how best to use it is the best form of “targeted support.” Like all of us, the poor want more in life than just enough dollars to afford to laze at home rather than work. It is a terrible myth, fostered by the rich, that the poor are inherently lazy, unambitious slugs with no desire for improvement. The UBI would strengthen the economy by adding dollars to the GDP and improving business sales. The Remaining Question That UBI works cannot be doubted. Medicare, Social Security, the earned income tax credit, and the child tax credit are relatives of UBI that have successfully reduced poverty and increased overall GDP. The federal government easily can afford any level of UBI.

Alan Greenspan: “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”

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

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

The remaining question is: How much UBI should the federal government provide? The U.S. economy and the economies of individuals in the U.S. comprise what in mathematics is known as a “level two chaotic system.”

A chaotic system is a dynamic system highly influenced by its beginnings. A chaotic system can’t be explained because it’s impossible to see how all its variables interact. There are two kinds of chaotic systems: level one chaotic systems and level two chaotic systems.

A level-one chaotic system is not affected by predictions we make about it. For example, the weather is a level one chaotic system. We can make predictions about the weather tomorrow, but those predictions don’t have the ability to change the weather tomorrow.

A level two chaotic system is affected by predictions we make about it. For example, the oil market is a level two chaotic system. If we predict that the price of oil will increase from $90 a barrel today to $100 a barrel tomorrow, traders will buy a bunch of oil today to benefit from the rise in price tomorrow. But this action increases oil prices today, changing the price of oil tomorrow.

Similarly, politics is a level two chaotic system. If someone were to have predicted the Arab Spring and told Egypt’s President Mubarak that a revolution was imminent, he would have taken action to prevent it, perhaps lowering taxes and increasing government handouts.

In doing so, he likely would have prevented the Arab Spring, nullifying the original prediction.

Level two chaotic systems are inherently unpredictable.

The classic example of chaos is the “butterfly effect,” wherein a butterfly flapping its wings in Brazil causes a hurricane to damage the coast of North Caroline. Economics is highly chaotic because it blends two chaotic systems, business, and psychology. Thus, while economists make predictions and are eager to point to successful forecasts, the fact is that forecasting success is, at best, intermittent. That said, while I feel sure that any level of UBI would reduce poverty and grow the economy, caution is the best approach to uncertainty. One thought would be to give each man, woman, and child in America $1000 per month — $12,000 per year — tax-free. That would add about $4 trillion to the economy. For comparison: Federal spending totaled $4.4 trillion in 2019. Pie chart showing mandatory (62%), discretionary (30%) and net interest (8%) portions of federal spending in fiscal year 2019.

Pie chart showing mandatory (62%), discretionary (30%) and net interest (8%) portions of federal spending in fiscal year 2019.

Bar chart showing shares of federal mandatory spending on Social Security (38%), Medicare (23.5%), income security (16.2%), Medicaid (15%), Veteran Benefits/Services (4.2%) and other in fiscal year 2019.

The $1000 would be on top of whatever is received from Medicare, Social Security, and other benefit programs. After the first year, Congress could evaluate the program’s effectiveness in lifting the poor and growing the economy. There is no valid reason not to do it. It’s how America can regain its moral and economic leadership. 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

The right-wing wants you to believe Social Security and Medicare benefits must be cut. They are liars.

We have discussed this for many, many years. But because of the new, ultra-partisan, endlessly repeated efforts led by the right wing to reduce any benefits to the non-rich, the truth must be repeated so it can fight through the fog of lies to be remembered.

No rational person would take dollars from the economy and give them to a federal government that has the infinite ability to create new dollars.

Yet, that same rational person approves collecting tax dollars from the private sector and giving them to the federal government.

It is illogical to the extreme, yet it is universally countenanced. So much for human mental superiority.

Economics is a combination of mathematics and psychology. Economists lose their place during attempts to blend the two, for instance, when they claim that something must happen when historically it seldom or never happens.

The most important problems in economics involve just two issues:

Monetary Sovereignty describes money creation and destruction.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Insolvency, the phony issue: Cutting SS and Medicare is again being touted as the “only” way to avoid national insolvency. It is a lie.

The federal government, being Monetarily Sovereign, has infinite money to support all its agencies. No federal agency becomes insolvent unless Congress and the President want that.

The notion that funds for Medicare and Social Security — and no other federal agency — are limited by a tax on the lower side of the income scale — FICA — is absurd. Billionaire Donald Trump doesn’t pay that tax; you do.

The fact that the so-called “debt ceiling” has arbitrarily been raised 94 times should give any thinking person pause to consider the idiocy of the ceiling itself.

An astounding 94 increases, the sky hasn’t fallen, and still we debate it.

Ask your neighbor why we have a debt ceiling that we have increased 94 times. I promise he will give you an ignorant answer. Why?

Because the sole purpose of the debt ceiling is to take advantage of the ignorant.

Your neighbors believe they understand economics. They don’t. They think federal financing resembles personal financing. It doesn’t.

If you try to explain it to them, they will resist understanding it. In their ignorance, they will laugh at what they perceive as your ignorance.

Their ignorance is akin to flat-earth believers, who assure you that ships sailing west eventually will fall over the edge. No amount of evidence can convince a flat-earther or a federal debt worrier. They are beyond the evidence.

How do I know? I’ve been doing this for nearly 30 years. Why do I keep doing it? Every so seldom, I meet someone open to learning, which requires changing one’s beliefs.

So despite meeting thousands of learning-resistant people, the relatively few who use their brains give me hope.

In that sense, I am an Ignaz Semmelweis of economics.

I hope I don’t meet his fate.

Federal Taxes: They do not fund federal spending. The U.S. Treasury destroys all dollars it receives and creates new dollars every time it pays a creditor.

To pay an invoice, the federal government sends instructions as a check or wires (not dollars) to the creditor’s bank, telling the bank to raise the balance in the creditor’s checking account.

New dollars are added to the M2 money supply when the bank does as instructed.

At no point are federal tax dollars involved.

When you send your M2 tax dollars to the Treasury, those dollars immediately disappear from any money supply measure. The reason: Our Monetarily Sovereign government has the infinite ability to create dollars from thin air, so trying to measure its supply of dollars would make no sense.

Adding dollars to infinite dollars yields infinite dollars. No change.

The sole purposes of federal taxes are:

To discourage what the government doesn’t like and to give tax breaks to what the goverment likes
To create demand for the dollar by requiring taxes to be paid in dollars.

That’s it. Taxes do not provide the federal government with spending money.

The sole purpose of the debt ceiling is to sell the lower-income groups the false idea that the government cannot afford to give them benefits.

In short, the debt ceiling has no financial purpose other than to widen the income/wealth/power Gap between the rich and the rest. It is a program designed to make the rich richer.

Period.

There is a political purpose, however: To give the party that is out of power leverage over the party that is in power.

Federal finances are nothing like personal finances.

The useless and misleading “debt limit” should be eliminated. The so-called “debt” is the net total of deposits into T-security accounts (T-bills, T-notes, T=bonds). These deposits are:

Like the contents of safe deposit boxes: Owned by the depositors, not by the federal government
Not used by the federal government
Not borrowed by the federal government. The federal government never borrows dollars.
Not touched by the federal government
Not a debt of the federal government
Paid back simply by returning the dollars in the accounts.

The useless and misleading Social Security “trust funds” are:

Not trust funds, but simply bookkeeping notations
Not recipients of FICA tax dollars, which are destroyed upon receipt by the Treasury.
Not paying for Social Security or Medicare, which are funded by new dollar creation like all federal programs.
Illusions, established by President Franklin D. Roosevelt, in a (failed) psychological attempt to keep Congress from cutting Social Security.

And contrary to popular myth, federal deficit spending never has caused inflation. There is no historical relationship between federal spending and inflation.

**If federal deficit spending (red) caused inflation (blue), the lines would be parallel. They are not.**

Rather than causing inflation, federal deficit spending prevents and cures recessions.

**Recessions (vertical gray bars) follow decreases in federal deficit spending (red line) and are cured by increases in federal deficit spending.**

Federal “debt” reduction caused every depression in U.S. history.

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%. A recession began 2001.

All inflations in history have been caused by the scarcity of critical goods and services, mainly oil and food. This is demonstrated by the graph below:

The graph showing federal deficit spending vs. inflation shows no relationship between the two. The graph showing oil prices vs. inflation shows a strong relationship. Oil prices reflect oil scarcity. Thus, inflation is not caused by federal spending but rather by scarcity.

As we said, this has been discussed before on this site.

But past Republican parties, though heavily favoring the rich over the poor, were not led by demonic, psychopathic dictator wannabe who would burn down your house and our entire nation for the chance to rule the ashes.

IN SUMMARY

The federal government is uniquely Monetarily Sovereign. It cannot unintentionally run short of dollars.

When you are told that Medicare and Social Security benefits must be decreased and FICA taxes must be increased, that is a lie, and the person saying it is a liar, ignorant, or both.

The federal “debt” is not a problem, not even a debt, not paid for by your grandchildren, and is necessary for economic growth.

Efforts to decrease the federal “debt” are, in reality, efforts to make the rich richer by widening the Gap between the rich and the rest. The wider the Gap, the richer they are.

Unfortunately, when you try to explain this to your friends, their previous indoctrination will prevent them from believing what is in their self-interest.

So they naively will continue approving and justifying federal tax increases and federal benefit decreases, much to the amusement of the rich, who have blessed themselves with tax loopholes and income not subject to FICA taxes.

All you can do is to keep fighting, and forgive them, for they know not what they do.

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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