The misleading language you hear regarding economics Friday, Nov 15 2019 

In science, language is important, partly because language draws a mental picture based on common experience. And if that common experience, aka intuition, is not appropriate to the science, the result can be bad science.

Consider the word “spin.” You can visualize a top spinning, or the earth spinning, or even a galaxy spinning, but did you know that electrons have “spin.”? They do, but they do not spin.

According to Scientific American Magazine:

It is misleading to conjure up an image of the electron as a small spinning object. Instead we have learned simply to accept the observed fact that the electron is deflected by magnetic fields.

If one insists on the image of a spinning object, then real paradoxes arise; unlike a tossed softball, for instance, the spin of an electron never changes, and it has only two possible orientations.

In addition, the very notion that electrons and protons are solid ‘objects’ that can ‘rotate’ in space is itself difficult to sustain, given what we know about the rules of quantum mechanics.

The term ‘spin,’ however, still remains.”

Image result for street shell game

Economics is a shell game, where what seems reasonable and obvious may be a Big Lie.

If you have been educated to believe that electrons have something termed “spin,” your understanding of electrons will be wrong if you think of a spinning object, at least according to the latest hypotheses.

The point is that many words have common meanings that are inappropriate and confusing for certain situations in science.

Economics has such words. Here is a short glossary of misleading words in economics:

1. Federal “debt” is not debt as you know it. More accurately it is net, all-time deposits into Treasury Security accounts, which are similar to interest-paying, bank savings accounts.

Because “debt” often has negative connotations, banks do not boast about the size of their debt, but they do boast about the size of their deposits, which has positive connotations.

In ordinary language, “debt” is a burden on the debtor. So, when you hear the federal debt is $20 trillion, you may visualize this as a huge burden on the federal government and/or on taxpayers. It is neither. Federal debt burdens no one.

2. “Paying off” federal debt is not like paying off a mortgage or a car loan. To pay off personal debt, one must have income or assets from which to draw dollars, then transfer those dollars to the creditor.

To pay off federal debt, the federal government needs neither income nor assets. It merely returns the dollars that reside in Treasury Security accounts. The dollars are returned to the account owners.

No tax dollars involved are involved. Dollars deposited in T-security accounts never leave the accounts. They are not used by the government. They merely stay in the accounts, accumulating interest until maturity, at which time they and the interest are returned.

The government pays interest into the accounts by creating new dollars, ad hoc.

Because the federal government never takes the dollars from the accounts, returning the dollars is no burden on the government or on taxpayers. It is a simple dollar transfer.

3. Debt/GDP ratio. This ratio is a classic “apples/oranges” ratio. It attempts to establish a mathematical relationship between two dissimilar things. While federal “debt” is the net total of deposits into T-security accounts, Gross Domestic Product (GDP) is a measure of spending in the U.S.

The formula is GDP = Federal Spending + Nonfederal Spending + Net Imports.

Those who decry the amount of total deposits into T-security accounts, often also decry some specific comparisons with total spending. In years past, warnings were issued that if the ratio ever were to reach 60%, then 80%, then 100% and other unsubstantiated and arbitrary figures, horror would befall the economy.

As each level is reached, a new, nearby level is claimed to be the line between fiscal prudence and fiscal disaster.

Today, the U.S. ratio has passed 100% and rising, and the economy is healthy by most measures. One can expect claims that if it ever reaches 110%, surely doom would ensue. The fact that the Debt/GDP ratio has no relationship to economic health, as this table demonstrates, does not seem to restrain the debt hand-wringers.

4. The Federal “deficit” is the annual difference between federal spending and federal taxing. This does not imply that federal taxes pay for federal spending. They do not.

The federal government creates new dollars, ad hoc, every time it pays a creditor, which it does by sending instructions to the creditor’s bank. The instructions (in the form of checks or wires) tell the bank to increase the balance in the creditor’s checking account.

The instant the bank does as instructed, dollars are created and instantly added to the money supply measures.

The instructions then are routed to the Federal Reserve where, unlike your personal checks), they always are cleared (approved), because unlike you, your state and your business, the federal government is a large Monetarily Sovereign.

Even if the federal government collected $0 taxes, it still could continue spending, forever. Even with zero income, the federal government never unintentionally can run short of dollars.

5. ‘Unsustainable” is a term sometimes applied to the federal debt, to indicate that the debt is so high, it cannot be sustained. But specifically, what does it mean?

Does “unsustainable” mean the federal government somehow cannot “sustain” the increasing deposits into T-security accounts? No, that cannot be. Those deposits place no financial burden on the federal government, other than paying interest.  And being Monetarily Sovereign, the U.S. federal government has the unlimited ability to create the U.S. dollars used to pay interest.

Does it mean the economy somehow cannot sustain the deposits? No, that cannot be. Those deposits reflect the addition of growth dollars into the economy, which benefits the economy.

Does “unsustainable” mean the deposits, reflecting growth dollars, also portend hyperinflation? No, contrary to the popular myth, hyperinflation is not caused by an increase in dollars. Rather, hyperinflation (an extreme, general increase in prices) is caused by shortages, usually shortages of food and/or energy (currently, oil).

The myth persists because hyperinflations precipitate government currency printing, with its memorable “wheelbarrows-filled-with-currency” visuals. Ironically, hyperinflations are cured when shortages are cured, which generally requires the government to buy and pay for the scarce food and/or energy. Rather than causing hyperinflations, money creation is necessary to cure hyperinflations.

By contrast, small inflations, of the single-digit variety, can be caused by a decrease in the value of money. A large, Monetarily Sovereign government exerts total control over the value of its sovereign currency, by controlling the Supply/Demand relationship or by fiat.

The government controls the money Supply by taxing and spending. The government controls money Demand via interest rates. (Raising rates increases the Demand for money, also called “strengthening the currency.)

Finally, the government controls the value of its currency by fiat, that is by unilaterally lowering or raising the value (also known as “devaluation” and “revaluation”).

In short, no level of federal T-security deposits (“debt”) is unsustainable for a large, Monetarily Sovereign government.

6. “Balanced budget” has a pleasing ring, and many who are ignorant about federal finances often demand that the federal government run a balanced budget. These people claim the federal government should “live within its means” (i.e its income).

However, the federal government, being Monetarily Sovereign, needs no income, and when it receives income (taxes), that income is destroyed. The federal government has the unlimited ability to create dollars, at will.

People achieve personal balanced budgets by “living within their means,” which is considered “prudent.”

A federal balanced budget indicates that because federal taxes equal federal spending, the federal government pumps zero net growth dollars into the economy. Thus, a federal balanced budget yields economic stagnation, recessions, and depressions, which historically only are cured by federal budget deficits.

A federal balanced budget (aka “austerity”) is the least “prudent” financial activity a Monetarily Sovereign government can implement.

7. “Trust funds.” The federal government operates several bookkeeping accounts that wrongly are termed “trust funds,” among which are Social Security, Medicare Part A, the Highway “trust fund,” and federal pension “trust funds.”

Federal trust funds bear little resemblance to their private-sector counterparts, and therefore the name can be misleading. A “trust fund” implies a secure source of funding. However, a federal trust fund is simply a bookkeeping mechanism used to track inflows and outflows for specific programs.

In private-sector trust funds, receipts are deposited and assets are held and invested by trustees on behalf of the stated beneficiaries. In federal trust funds, the federal government does not set aside the receipts or invest them in private assets.

Rather, the receipts are recorded as accounting credits in the “trust funds.” The federal government owns the accounts and can, by changing the law, unilaterally alter the purposes of the accounts and raise or lower collections and expenditures.

More importantly, the Monetarily Sovereign federal government unilaterally can increase or decrease the balances of any federal trust funds at the tap of a computer key.

8. “Insolvent,” and “bankrupt,” and break the bank,” are terms used for personal, business” and even state/local government accounts. Sadly, these terms also are misleadingly used to describe federal accounts, which cannot become unintentionally insolvent or bankrupt, and the federal “bank” cannot be broken.

Ever since August of 1971, when President Nixon took the U.S. off its last gold standard, the federal government has had the unlimited ability to fund anything — ANYTHING — merely by deciding to do so.

Organizations like the Committee for a Responsible Federal Budget (CRFB) are paid by wealthy donors to make Americans believe federal finances are like personal finances. The purpose is to prevent the middle- and lower-income groups from complaining about cuts to Medicare, Social Security, and other beneficial programs.

Most recently, Medicare for All has been proposed, but its future is uncertain because of false implanted concerns about federal insolvency.

9. “Costs taxpayers.” Among the most pernicious myths in all of economics is the oft-repeated notion that federal taxes fund federal spending.

While it is true that state and local taxes fund state and local spending, federal taxes do not fund federal spending. Even if all federal tax collections totaled $0, the federal government could continue to spend as much as it wished, forever.

The fundamental difference is that while the federal government is Monetarily Sovereign, state and local governments are monetarily non-sovereign. As the word “sovereign” indicates, the federal government is the issuer and absolute rule over all aspects of its sovereign currency, the U.S. dollar.

By contrast, state and local government are mere users of the dollar; they do not share the federal government’s unlimited ability to create, devalue or revalue the dollar.

Because the federal government has no need for taxes, federal spending does not cost federal taxpayers anything. All federal taxes are arbitrary penalties on the private sector.

Why then does the federal government collect taxes”

  1. To control the economy by taxing things it wishes to minimize and by offering tax reductions to things it wishes to encourage.
  2. To propagate the myth that federal taxes are necessary to fund the government so that the public willingly will pay taxes.
  3. To please the very rich political donors, who control the government, buy helping to widen the Gap between the rich and the rest.

What We “Know” Actually Is What We Believe
And what we believe is heavily influenced by intuition, personal experience, and what we are told.

None of us has the time or ability to research everything, so we believe and even promulgate what “feels right,” without relying on strict proof. So, for instance, President Obama said, “This is my vision for America: A vision where we live within our means while still investing in our future, where everyone makes sacrifices, but no one bears all the burden, where we provide a basic measure of security for our citizens and we provide rising opportunity for our children.”

To most of us, that sounds quite reasonable, even though he really was telling you: “The federal government finances are limited just like your finances. So be prepared to make sacrifices and don’t complain if you have to bear a burden. The government can give you basic security, but not much more, and don’t expect anything more than just an opportunity, but you’ll have to make sacrifices, work like hell, and still be lucky to escape things like student debt, unaffordable medical bills, inferior housing and transportation, and overall poverty. And don’t expect much from your government, except a tax bill.

Obama, and many others, have told you the Big Lie based on the misleading language of economics.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve:

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

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

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

Another translation of another misleading THIS WEEK article. Thursday, Nov 14 2019 

On November 11, just three days ago, we published, “What THE WEEK Magazine said, and what they really meant.”

THE WEEK’s article promulgated the myth that the finances of our Monetarily Sovereign government are identical to the finances of monetarily non-sovereign entities, like states, counties, cities, businesses, you, and me.

We demonstrated the falsity of the article.

Today, THE WEEK repeated the “crime,” by publishing a short summary, which we will now dissect.

October deficit jumped 34 percent over same month last year
The federal deficit rose to $134 billion in October, a 34 percent increase over last October, according to Treasury Department data released Wednesday.

Translation: This October, the federal government pumped 34 percent growth dollars into the economy than it did last year.

The federal deficit rose to $134 billion in October, a 34 percent increase over last October, according to Treasury Department data released Wednesday.

The Treasury Department estimated that the full 2020 fiscal year deficit would be greater than $1 trillion for the first time since 2002.

President Trump promised during his 2016 campaign that he would eliminate the deficit while in office, but the shortfall has jumped due to the GOP tax cuts and several bipartisan spending deals that have increased defense and domestic spending.

Translation: The federal government pumped $134 growth dollars into the economy in October, a 34 percent increase over last October, according to Treasury Department data released Wednesday.

The Treasury Department estimated that the full 2020 fiscal year economic surplus would be greater than $1 trillion for the first time since 2020.

President Trump promised during his 2016 campaign that he would eliminate the economy’s surplus while in office, but the economy’s growth-dollar increase has jumped due to the GOP tax cuts and several bipartisan spending deals that have increased defense and domestic spending.

TheHill.com

A bigger deficit and rising overall federal debt can push up interest rates and limit actions leaders can take to avoid a recession. [The Hill]

Translation: A bigger total of investment in T-securities and a rising overall economic surplus has no unintended effects on interest rates, because the Fed has the unlimited ability to control rates). Further, the increase in T-security investment and rising economic surplus do absolutely nothing to limit actions leaders can take to avoid a recession.

In fact, increasing economic surpluses prevent and cure recessions.

Meanwhile, the so-called “deficit” stimulates economic growth and prevents recessions.

Every day, you will read articles similar to those in THE WEEK and The Hill, broadcasting their utter ignorance of Monetary Sovereignty.

Trying to be as kind, gentle and understanding as possible, I can only say the THIS WEEK and The Hill articles are 100% bullsh*t.

This leaves the question: Do these two respected publications know they are publishing bullsh*t? If so, one only could assume they are being bribed by the very rich, via advertising dollars or ownership by the very rich.

The very rich support this sort of bullsh*t, because they want to widen the income/wealth/power Gap between the rich and the rest. It is the Gap that makes them rich (Without the Gap no one would be rich; we all would be the same), and the wider the Gap, the richer they are.

So by conning the public into believing that federal deficits, which put dollars into the pockets of  “the rest,” are unaffordable or a burden on the government or a burden on future taxpayers, the rich reduce the political pressure to widen the Gap. And that makes the rich richer.

The other question would be, if THE WEEK and The Hill don’t know they are publishing bullsh*t, is it because they are ignorant and too lazy to uncover the facts?

Because I respect the integrity of both magazines, I sadly have come to the conclusion that their publishing of bullsh*t is due to ignorance fostered by laziness.

I suspect their attitude is: “Everyone else wrings their hands about the so-called ‘debt’ and ‘deficit,’ so why even listen to opposing facts, much less actively seek them. So we’ll just go along with the herd, and wring our hands, too. No thought needed.”

If you happen to know any of the leaders at THE WEEK or The Hill, perhaps you could persuade then to at least try to understand the basics of Monetary Sovereignty.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve:

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

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

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

What THE WEEK Magazine said, and what they really meant. Monday, Nov 11 2019 

Sometimes (often), a print medium writes a set of words that imply one thing but really mean something quite different.Related image

Here, for instance, is the exact wording of a short article that appeared in the November 8, 2019 issue of THE WEEK Magazine, followed by a translation into more accurate wording:

National debt nears $1 trillion — THE WEEK
The U.S. federal budget deficit increased 26 percent over the past fiscal year and is expected to top $1 trillion in 2020 the U.S. Treasury reported last week.

That puts the deficit at its highest since 2010, following four straight years of red ink.

The deficit has jumped nearly 50 percent since President Trump took office, largely because of shrinking tax revenues.

Massive tax cuts in 2017 have not paid for themselves, as Republican backers promised, and federal spending is now rising at twice the rate of revenue.

In a decade, the national debt is projected to represent a bigger share of the economy than at any point in U.S. history, except the period immediately following the massive expenditures of World War II.

Someone reading the above article, with its use of such pejorative wording as “debt,” “deficit,” “red ink,” “shrinking tax revenues,” and “not paid for themselves,” might be led to believe that the economy and the federal government are in trouble.

But exactly the reverse is true. The article actually describes the primary reasons why the economy has continued to grow, even under the feckless leadership of Donald J. Trump.

And now for the translation. What follows are exactly the same facts, but corrected to convey the true meaning:

Investments in Treasury Securities nears $1 trillion
The U.S. federal government’s financial contribution to the economy increased 26 percent over the past fiscal year and is expected to top $1 trillion in 2020 the U.S. Treasury reported last week.

That puts the federal government’s net contribution to the private sector at its highest since 2010, following four straight years of sending increased growth dollars to the economy.

The economy’s surplus of economic growth dollars has jumped nearly 50 percent since President Trump took office, largely because of shrinking deductions from the private sector.

Massive tax cuts in 2017 have not been matched by massive tax increases, as Republican backers warned, and federal inputs to the economy are now rising at twice the rate of federal deductions from the economy.

In a decade, the total of investments in Treasury Securities is projected to represent a bigger share of the economy than at any point in U.S. history, except the period immediately following the massive expenditures of World War II — the period when the economy grew faster than at any point in U.S. history.

Rather than stressing over federal “debt” and “deficits,” neither of which is any burden whatsoever on the U.S. economy, the U.S. government, or on the U.S. taxpayers, the rewrite demonstrates that increased federal spending and reduced taxes help grow the private sector (i.e the economy) grow.

Now if only we could convince the media to write that way.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve:

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

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

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

Donald J. Trump’s inspirational border wall speech Sunday, Nov 10 2019 

Here is Donald J. Trump’s Presidential Message Commemorating the 30th Anniversary of the Fall of the Berlin Wall

Image result for trump and the wall

“Parents yearned to give their children more opportunity and purpose in life. Workers hoped to earn decent wages. Churchgoers, under the eyes of informants, longed to worship freely according to their own beliefs and conscience. . . . they risked their lives for freedom.”

“On this day in 1989, courageous men and women from both East and West Germany united to tear down a wall that stood as a symbol of oppression and failed socialism for more than a quarter of a century.

“The eyes of the world watched as a generation of East Germans reclaimed their God-given liberties with each successive swing of their hammers.

“Today, we remember those who perished at the hands of totalitarian regimes, and we recommit to ensuring a freer and more just future.

“For four decades, East German propaganda touted the existence of a thriving workers’ paradise on their side of the wall. Yet the dilapidated apartments and depleted grocery stores told a different story.

“Parents yearned to give their children more opportunity and purpose in life. Workers hoped to earn decent wages. Churchgoers, under the eyes of informants, longed to worship freely according to their own beliefs and conscience.

“Under these difficult circumstances, the citizens of East Germany took to heart the words of the influential German poet, Johann Wolfgang von Goethe: ‘He only earns his freedom and his life Who takes them every day by storm.’

“Together, united in a common and just cause, they risked their lives for freedom, and in doing so they were the catalyst that lifted the Iron Curtain that had, a generation before, fallen across Europe.

“The Cold War has long since passed, but tyrannical regimes around the world continue to employ the oppressive tactics of Soviet-style totalitarianism, which have cast a long, dark shadow over history.

“The United States and our allies and partners remain steadfast in our unwavering allegiance to advancing the principles of individual liberty and freedom that have sustained peace and spawned unparalleled prosperity.

“Let the fate of the Berlin Wall be a lesson to oppressive regimes and rulers everywhere: No Iron Curtain can ever contain the iron will of a people resolved to be free.

“On the 30th anniversary of the fall of the Berlin Wall, I congratulate the German people on the tremendous strides that have been made in reuniting their country and in rebuilding the former East Germany.

“We will continue working with Germany, one of our most treasured allies, to ensure that the flames of freedom burn as a beacon of hope and opportunity for the entire world to see.”

— DONALD J. TRUMP

View image on Twitter

 

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