Category: Uncategorized

Interest rates going up: Should you be concerned?

It takes only two things to keep people in chains:

.

The ignorance of the oppressed

and the treachery of their leaders.

——————————————————————————————————————————————————————————————————————————————————————————–

Interest rates going up: Should you be concerned?

The answer: Well . . .  maybe and maybe not. Here are excerpts from an article by the anti-debt Committee for a Responsible Federal Budget (CRFB):

Rising Rates Could Further Balloon Interest Spending

Mar 21, 2018

The Federal Open Market Committee (decided) to raise the federal funds rate by 0.25 percentage points to 1.5-1.75 percent.

The federal government (is projected) to spend $6.8 trillion on interest costs over the next decade. If interest rates end up just 1 percentage point higher than projected, interest costs would increase by a further $2 trillion. If interest rates return to their pre-recession levels, costs could rise by $3.4 trillion.

Let us rephrase as follows:

The federal government (is projected) to pump $6.8 trillion interest dollars into the economy over the next decade.

Should a $6.8 trillion stimulus — which is similar in effect to a $6.8 trillion tax cut — be a cause for concern?

GDP growth parallels money supply growth

A large economy contains more money than does a smaller economy. The U.S. has a larger money supply than does California, which in turn, has a larger money supply than does Los Angeles.

This overly-simple example shows that to grow from smaller to larger, an economy usually needs an increased money supply. The projected $6.8 trillion in federal interest payments will produce an increased money supply and economic growth.

Federal deficit spending, which increases the money supply, is the method by which the federal government cures recessions:

Two views of deficit spending. The blue line is a direct fiscal year measure of deficit spending. The red line is the calendar year issuance of T-securities, the legal requirement for matching deficit spending. The vertical bars are recessions.

The above graph shows that federal deficit spending stimulates the economy to cure recessions. In the late 1990s, the federal government ran a surplus, which caused a recession. 

That being the proven case, one wonders why anyone would be anti-deficit.

Projected interest rates are notably below historic levels.

Most experts believe we will remain below these levels due to slower productivity growth, greater income inequality, higher demand for safe assets, higher foreign capital inflows, and generally observed reductions in global interest rates, but low interest rates are by no means a given.

If “reductions in global interest rates” are paired with “slower productivity growth” and “greater income inequality,” why would anyone favor low interest rates?

Under CBO’s interest rate assumptions, we recently estimated interest costs will quadruple in a decade or so. We projected interest will rise from $263 billion in 2017 to $965 billion in 2028 under current law and to $1.05 trillion in 2028 assuming various expiring policies are extended. In either of these scenarios interest costs (in percent of GDP) would represent a historic record.

To paraphrase, the CBO estimates that by 2028, our Monetarily Sovereign government will pump $965 billion – $1.08 trillion stimulus dollars annually into our economy.

The CBO implies that this must, in some unstated way, be bad for you. The CBO never says why, instead implying that large federal debt is similar to large personal debt.

It isn’t.

(We) project the debt-to-GDP ratio will rise from 77 percent of GDP today 101 percent of GDP by 2028. The historical record level of debt held by the public as a percent of GDP for the United States is 106 percent, set just after World War II.

We assume the warning about the debt-to-GDP ratio is supposed to frighten you, for some reason. But aside from the reason never being stated, there are two problems with the implied warning:

  1. The so-called federal “debt” isn’t a real debt. It is deposits onto into T-security accounts, that really are something like interest-paying safe deposit boxes.  The dollars go in, interest money is added, and at maturity, the dollars go back. Our federal government, being Monetarily Sovereign, uses those dollars.
  2. Even if the so-called “debt” were real debt that the government actually used (as with state and local government debt), the federal government, being Monetarily Sovereign, could pay it all off, simply by creating new dollars.

Here is a graph comparing GDP growth with the Debt/GDP ratio. It shows that changes in the ratio — up or down — do not affect our economic growth.

The rising Federal Debt/GDP ratio (red) you repeatedly are warned about, has no effect on GDP growth (blue). 

This is one of the reasons we say that the Debt/GDP ratio is meaningless. The ratio compares the historical total of deposits into T-security accounts that still exist, with the value of all goods and services produced in one year. It would be difficult to find two more dissimilar, unrelated measures in all of economics.

The ratio has nothing to do with the federal government’s solvency or ability to spend. The ratio has nothing to do with any need for future tax collections. The ratio has nothing to do with our economic growth or lack thereof.

In astrology, the motions of the planets are compared with future personal events.

 Debt/GDP ratio is economic astrology. It measures nothing.

Lawmakers need to reverse course to reduce the interest burden and the exposure to eventual higher interest rates.

“Interest burden”? Paying interest is no burden on our Monetarily Sovereign federal government. Even without collecting a penny in taxes, our federal government is capable of paying infinite amounts of interest.

Taxpayers do not fund the federal government’s interest payments or any other federal spending. The U.S. government created the very first dollars from thin air. It still creates dollars from thin air, merely by pressing computer keys. It cannot run short of its own sovereign currency.

So do not fret. Despite all the “Henny Penny” warnings, a high deficit, high debt, or high Debt/GDP ratio will not doom your children and grandchildren to higher taxes.

There is some debate about how interest rate increases affect the private sector. Most interest neither adds nor subtracts dollars from the total world economy. Interest just circulates, with some individuals and businesses paying more and some receiving more.

With higher interest rates, the public will pay more for loans and for products/services provided by borrowers. Meanwhile, the public will receive more from bonds, CDs, and interest-paying bank accounts.

So depending on your position in the economy, higher interest rates can help you or hurt you.

But remember, there is that one net benefit from higher interest: The federal government adds more stimulus dollars to the economy when it pays more interest.

When interest rates (red) grew from 1955-1980, GDP growth rates (blue) trended upward. When interest rates declined from the 1980s to 2018, GDP growth rates trended downward.

In Summary:

    1. Rising interest rates benefit the nation as a whole, because they force the federal government to add more stimulus dollars to the economy. Higher rates are associated with economic growth.Short term, the stock market reacts negatively to interest rate increases, because traders anticipate it will, and act accordingly. Within a few days, the market recovers, which proves the point.
    2. That said, borrowers are punished and lenders benefit from rising interest rates. If you plan to take out a new mortgage or to buy a car in the future, you will pay more interest. If you plan to put dollars into a bank savings account, a money market, a Treasury Security or a bank CD, you will benefit from an interest rate increase.
    3. To pay a creditor, the federal government sends instructions to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account. When the bank does as instructed, dollars are added to the money supply.From a bookkeeping standpoint, an account at the Federal Reserve Bank called Treasury’s General Account simultaneously is debited. Though this account is not part of the nation’s money supply, an obsolete rule disallows it from having an overdraft.

      So, the federal government, which is sovereign over the dollar, is forced to issue T-securities.These securities do not add to the federal government’s money supply (the government has no money supply) or provide the federal government with spending money, but rather they obey the rule by providing a bookkeeping credit to the Treasury’s General Account.

      If the government merely eliminated the rule, the Treasury could continue paying its bills, but there would be no requirement to issue T-securities, and there would be no worries about the so-called federal “debt.”

    4. The federal debt/GDP ratio does not reflect the federal government’s ability to pay its bills. It does not reflect the health of the economy. It does not reflect future tax increases or decreases. It is a meaningless ratio comprised of a multi-year measure (total T-securities) divided by a 1-year measure (GDP).
    5. The unfounded concerns about the federal deficit and debt are promulgated by the very rich, who based on Gap Psychology, wish to convince the rest of America that federal social benefits (Social Security, Medicare, Medicaid, aids to the poor, aids to education, etc.) are unaffordable.

    Rodger Malcolm Mitchell

    Monetary Sovereignty

    Twitter: @rodgermitchell; Search #monetarysovereignty

    Facebook: Rodger Malcolm Mitchell

    MONETARY SOVEREIGNTY

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

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

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

    Implementation of The Ten Steps To Prosperity can narrow the Gaps:

    Ten Steps To Prosperity:

    1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )

    Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:

    *FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and

    *The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.

    2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )

    This article addresses the questions:

    *Does the economy benefit when the rich can afford better health care than can the rest of Americans?

    *Aside from improved health care, what are the other economic effects of “Medicare for everyone?”

    *How much would it cost taxpayers?

    *Who opposes it?”

    3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.

    This article is the fifth in a series about direct financial assistance to Americans:

    Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012

    MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012

    Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012

    “You can’t fire me. I’m on JG” Saturday, Jun 2 2012

    Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.

    4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans

    Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.

    Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.

    An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.

    5. SALARY FOR ATTENDING SCHOOL

    Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.

    If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.

    6. ELIMINATE FEDERAL TAXES ON BUSINESS

    Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.

    7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.

    Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.

    8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)

    There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.

    But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.

    9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)

    Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.

    Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.

    10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.

    Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

    MONETARY SOVEREIGNTY

Credentials: The perfect excuse for a bad hiring decision.

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

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

——————————————————————————————————————————————————————————————————————————————————————————–

Credentials are the “perfect” excuse for a bad hiring decision.

In my long life, I have been an owner of several companies, and personally have hired thousands of people — and I have made mistakes.

Some of those hires turned out badly. The fault may have been with the person; the fault may have been with my company. In any event, the fit was wrong, and ultimately the fault was with me who did the hiring.

Early on, I was too ready to give myself a ready, though poor, excuse: “Their credentials were good.”

Yet credentials are only as good as the person who weighs them.  When you believe what a writer tells you, in effect, you have “hired” that writer to be one of your advisors on the specific subject.

You essentially have said to yourself, “I believe what he/she writes, not only because it sounds correct, but because I respect this writer’s credentials.”

Credentials have value, but I suspect they too often are overvalued. Here is a set of credentials that illustrate the point.

Kimberly Amadeo is president of WorldMoneyWatch.com. She has 20 years senior-level experience in economic analysis and business strategy working for major international corporations. Kimberly is the U.S. economy expert for About.com, the 15th most visited site on the web.

She speaks on the global economy, how it affects you and what you can do about it. Kimberly consults on how to use global economic trends to find profitable market niches.

With those credentials, I understand why people believe what she has to say, particularly about economics. And yet . . .

Here are excerpts  from an article she wrote for a site called “thebalance.com,” with each excerpt followed by my own comments:

“An expansionary fiscal policy is usually impossible for state and local government. That’s because they are mandated to keep a balanced budget.”

It’s not exactly a mandate. The federal government is Monetarily Sovereign. It cannot run short of its own sovereign currency, because it creates its currency at will. That ability is what makes it Monetarily Sovereign.

State and local governments are monetarily non-sovereign. They do not have a sovereign currency — they use the federal government’s sovereign currency — and they, therefore, can run short of dollars after they reach their borrowing limit.

“As a result, the critical debt-to-GDP ratio has exceeded 100 percent.”

There is nothing critical about a debt/GDP ratio of 100 percent or any other ratio. In fact, the debt/GDP ratio essentially is meaningless.

A Monetarily Sovereign government does not pay its debts with GDP. The so-called federal “debt” is merely the total of deposits in T-security accounts.

Those deposits never are touched. They remain in the accounts until maturity, at which time the “debt” is paid off simply transferring those same dollars back into the checking accounts of  T-security holders.

Further, the federal government creates dollars, ad hoc, every time it pays a creditor. So what erroneously is termed “borrowing,” is logically unnecessary. (If you owned a legal, dollar-creating machine, would you ever have the need or desire to borrow?)

The U.S. easily could support a debt/GDP ratio of 150%, 200% or 1,000%. Japan’s ratio is about 250%, and they could support a far higher percentage.

The debt/GDP ratio says absolutely nothing about the health of the economy, or the federal government’s ability to pay its bills, or future taxpayers’ liabilities. Nothing.

” . . . the contractionary monetary policy (Cutting federal spending and/or increasing taxes) is effective in preventing inflation.”

The opposite of inflation is deflation. Cutting federal spending and increasing taxes (aka “austerity”) would be effective in causing stagnation or a recession, which is quite different from deflation.

Reducing the money supply is a poor way to fight inflation. Spending cuts and tax increases are too slow, too political, and too uncertain in effect, because of three questions:

  1. Which taxes should be increased?
  2. Which spending should be cut?
  3. By how much?

Inflation generally is not caused by insufficient taxation or by excessive federal spending, but rather by shortages of key goods (food, oil, etc.)

Because inflation is the loss in value of the dollar, the Fed fights inflation by increasing the value of the dollar. It does this by raising interest rates. Higher rates increase the demand for dollars (aka “strengthen”) the dollar, and importantly they can be administered apolitically, quickly and in small increments.

“Taxes provide the income that funds the government.”

Though this is widely believed by the lay public, is an extremely shocking comment coming from an economist. The federal government is Monetarily Sovereign; it never can run short of dollars.

Taxes do provide income and funding for monetarily non-sovereign state and local governments, but federal taxes do not fund the federal government’s spending.

Being Monetarily Sovereign, the federal government has no need for income — no need to levy taxes (though it unnecessarily does) and no need to borrow (which it does not).

Most federal taxation is a remnant from gold standard days (which ended in 1971), when the federal government’s money creation was limited by its gold supply. Today, nothing limits federal money creation other than the will of Congress and the President.

To pay its bills for goods and services, the federal government sends instructions (not dollars) to its creditors’ banks, telling the banks to increase the numbers in each creditor’s checking account. At the moment the bank does as instructed, brand new dollars are created and added to the money supply (termed “M1”).

Even if all federal tax collections and all federal (misnamed) “borrowing” were $0, the federal government could continue spending forever.

“The federal government is losing its ability to use discretionary fiscal policy.”

The federal government, being Monetarily Sovereign, has the unlimited ability to spend any amount it wishes on anything it wishes.  It cannot “lose its ability to use discretionary fiscal policy.”

“When interest rates are high, the money supply contracts.”

This is not correct. Higher interest rates increase the amount of interest the government must pay on its T-securities, thus increasing the nation’s money supply.

High interest rates (blue line) do not reduce the money supply (red line). The opposite seems to be true.

There also is a common myth that high interest rates reduce borrowing, but again, there is no historical evidence for this.

Increases in interest rates (blue line) do not cause decreases in borrowing (red line).

“The current fiscal policy has created the massive U.S. debt level.”

The federal (misnamed) “debt” is the result of all past policies, not just the current policy, and the word “massive” is a misleading pejorative. “Massive” compared to what?

So-called federal “debt” or “borrowing” is merely the total of deposits into T-security accounts. These accounts are not a burden on the federal government or on taxpayers.

They are paid off at maturity simply by transferring the dollars that currently exist in these accounts back to the checking accounts of T-security holders. No tax dollars are used.

At this point, despite Ms. Amadeo’s impressive credentials, I am not quite ready to accept her economics expertise.

It happens that in economics, and perhaps many other sciences, credentials should be looked upon with a wary eye. They may tell you what the person has done, but not whether their opinions have proved to be correct, or are likely to be correct in the future.

And if ever you are in the position of hiring people, remember that resumes may be a beginning point, but they cannot be relied upon. I have come to believe that a simple face-to-face will provide far better information.

If the person is to work for you, do your own interviewing. Don’t rely on subordinates or Human Services.

To my mind, Ms. Amadeo’s credentials said one thing, but her own words said something far different.

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

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

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

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

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

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

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

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

MONETARY SOVEREIGNTY

 

What is Gap Psychology? A brief explanation.

It takes only two things to keep people in chains:

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

——————————————————————————————————————————————————————————————————————————————————————————–

In brief:

Monetary Sovereignty describes money creation and destruction.

Gap Psychology describes the common desire to distance yourself from those “below” you in any socio-economic (income/wealth/power) ranking, and to come nearer those “above” you. The socio-economic distance is referred to as “The Gap.”

Gap Psychology manifests in infinite ways. It is everywhere in your life:

Bigotry
Image result for high fashion vs ragsBigotry is the dislike and/or demeaning of any group that is in some way different from your own or admired group.

Bigotry can be based on race, religion, age, weight, height, wealth, geography, political beliefs, or on any other attributes.

We tend to distance ourselves from groups we consider to be lower and to try to associate ourselves with groups we consider to be higher.

In compassionate or charitable people, this desire is repressed. In bigots, this desire is overwhelming.

Members of upper-income groups often feel disdain, even fear, about those in a lower income group, and wish to widen the socio-economic Gap between themselves and the lower group.

Widening the Gap is not limited to increasing one’s own income, power or wealth. It also can include reducing the income, power or wealth of those below.

It is the Gap width that matters, not the absolute income, power or wealth.

If you own $100 and everyone else owns $1, you are rich. But if you own $1 million, and everyone else owns $200 million, you are poor.

The Gap is what makes you rich or poor. Without the Gap, no one would be rich (We all would be the same.) The wider the Gap, the richer the rich are.

Bullying
Few acts more clearly exemplify Gap Psychology than harassing the weak, or seemingly weak.

The object of the bully is to lift himself by stepping on others.

Bullies live in fear of being found wanting or of being associated with those below. Typical of bullies is bluster, the attempt to lift oneself by making self-association with some superiority, i/e claiming “I’m the greatest [individual]” to appear close to those above.

Celebrity Endorsement
If basketball star Michael Jordan endorses a certain brand of basketball sneaker, buyers might assume he has special knowledge about what makes for the “best” basketball shoe. But what if Jordan endorses a brand of Tee-shirt? Why would that be convincing?

That sort of advertising is effective when buyers have a psychological belief that in some vague way, buying the shirt will make them more “like Mike.”

Fashion
The fundamental purpose of clothing is to protect your body. This can be accomplished in many simple, inexpensive ways. So why do you pay more to wear designer clothing?

A woman’s purse can accomplish its “bag” mission for just a few dollars. Yet some designer purses cost thousands of dollars.

Women pay these outlandish prices to close the distance between them and those financially above them.

The fundamental purpose of a car is transportation. A functional car, especially a used model, can be had for a few thousand dollars. Why then do you own (i.e. want to be seen in) a BMW, Lexus, Mercedes, Ferrari, or Rolls?

And then there are mansions, diamonds indistinguishable from “paste”), charitable contributions made public, personally named buildings, etc.

All are part of Gap Psychology.

Group and Team Support
As social animals, humans rely on groups, or at the very least, partners. Evolutionary survival has meant being part of a strong group or having a strong partner to watch your back.

With no thought necessary, people will support all sorts of groups — religious, sports, business, neighborhood, political. To be a “fan,” i.e. a fanatic, comes naturally.

It scarcely is possible to watch a sporting event between two unknown teams, without mentally aligning yourself with one of the teams.

All of the above merely demonstrate that Gap Psychology is in our genes, and there are innumerable Gaps. But there is one Gap that is most important of all:

The Power Gap
The power Gap, or more specifically, the income/wealth/power Gap, is the Gap that truly rules our lives. Like all Gaps, the power Gaps are bifurcated into the Gaps below you vs. the Gaps above you.

Lord Acton’s famous phrase, “Power tends to corrupt, and absolute power corrupts absolutely,“ applies here.

The certainty of the relationship between power and moral corruption is why the U.S. Constitution was created, especially its Amendments, the first ten of which commonly are known as the “Bill of Rights.”

The greater the power Gap between you and others who are “above” you, the greater will be their tendency to treat you badly and to demand your servility, especially if they are insecure about their own power.

American slavery, for instance, was evil, not only because the slaves were . . .  well, enslaved . . .  but just as importantly, because of the evil, corrupting effect it had on the slave owners.

Slavery cost America its moral compass, the loss from which many of us still have not recovered.

Sadly, some in America’s South still consider slavery to be a proud part of their heritage, and in the entire nation, the remnants of slavery exist as bigotry.

Tax Codes
Our tax codes are a collection of laws, and our laws are ruled by the richest and most powerful. That is why the most important financial laws in America are regressive:

  1. Sales taxes are regressive in that they most affect the lower-income groups, who use a greater proportion of their income on taxable purchases. (The upper-income groups use a greater proportion of their income on investments.)
  2. FICA taxes are regressive because they are levied only on salaries, not on investment income, and are limited to the $100M range.
  3. Income taxes, though ostensibly progressive, actually are regressive in that special rules allow the rich to avoid paying the stated percentage (aka “loopholes”).
  4. Student loans (which amazingly are the single largest asset class owned by the federal government) are regressive in that the rich don’t need them, while the poor can be held down with them for many of their otherwise most productive years.

Kick Them When They’re Down
That old phrase, “Kick them when they’re down” succinctly describes Gap Psychology. When we join in the “kicking,” we separate and lift ourselves from those being kicked.

A nation is a collection of rules and traditions, which often are manifested in laws. The laws have power over the people of the nation, and the nation’s leaders have power over the laws.

An immutable, or nearly so, Constitution was necessary to prevent each succeeding leader from redesigning the laws to favor his own passions.

Sadly, the corrupting power the Constitution was designed to prevent, still remains as the corrupting power that interprets the Constitution.

American history is replete with examples of a corrupted President, Congress, and Supreme Court twisting the words of the Constitution.

For example, the overly admired Franklin Roosevelt interned American people of Japanese descent, aided and abetted by our Constitutionally protected institutions.

The people, being a small minority, had little voting power, and whatever power of national empathy and compassion they had, dissipated with Pearl Harbor.

Being powerless, the people were set upon by those in power, using the traditional excuse of dictators: “National security.”

The fundamental meaning of the 4th Amendment (unreasonable searches and seizures) routinely is violated by police, with the full acceptance of the Supreme Court. People, who only are suspected of a crime, have seen all their assets stolen by the police, and not returned even after being declared innocent.

Public outcry about this clearly unconstitutional action has been muted. The British have a phrase for that sort of Gap Psychology: “I’m all right Jack, pull up the ladder”.

By “pulling up the ladder,” one separates from the unfortunates who remain below.

Law and Punishment
All law answers two fundamental questions:

  1. What is unlawful?
  2. What is the punishment for violating the law?

The mores of any civilization form the basis for answering both questions. But in society, the rich and powerful are treated more favorably by lawmakers and judges, who themselves are powerful.

Consider bail and bail bonds (bail handled by a bondsman), one of the more regressive aspects of American law.

The implicit purpose of bail is to guarantee the defendant will show up for trial.

Bail is not supposed to be a punishment. Usually, bail is set before a trial, meaning before the accused is known to be guilty, so punishment would be inappropriate.  Yet in its use, bail functions as a pre-judgment punishment.

Judges decide the amount of bail on the basis of:

  • the risk of the defendant fleeing,
  • the type of crime alleged,
  • the “dangerousness” of defendants, and
  • the safety of the community.

An impoverished defendant might remain imprisoned by a $100 bail, while a wealthy defendant might go free and flee the country, even after putting up a million bail dollars.

But, the real risk of a defendant fleeing has nothing whatsoever to do with the defendant’s wealth. 

If a judge is concerned that a defendant will flee, what then is the purpose of bail?

  1. A rich guilty person very well could decide that fleeing and losing the bail money, is preferable to spending years in jail.
  2. Lost bail money does not compensate the victims of the crime.
  3. An innocent poor person is punished by the bail system.

The entire bail system is designed to allow the accused rich to separate themselves from the accused poor. It is a product of Gap Psychology.

In Summary:
Gap Psychology is everywhere, affecting our beliefs, our customs, and our laws. It is the proverbial “800 lb. gorilla” in every room of our lives.

Gap Psychology separates not only the rich from the poor, but it separates the poor from the very poor and the not-so-poor, the very rich from the almost-rich and the upward-middle, hoping-to-be-rich. It separates the powerful from the powerless.

Gap Psychology affects the clothes you wear, the house in which you live, the schools you attend, the car you drive, the stores and restaurants you frequent, the church you attend, your job, your hobbies, your vacations, your voting, the person you marry, even the name you give your child.

Visualize that you have built a wall around yourself to separate you from the “other.” The height and thickness of that wall, and the existence of any entrances all are based on Gap Psychology.

Gap Psychology guides our society. It should not be overlooked when we search for answers to any social question beginning with, “Why?”

This brief post leaves us with three truths:

  1. Monetary Sovereignty is fundamental to questions about federal government and non-federal finances.
  2. Gap Psychology is fundamental to questions about social interactions
  3. Monetary Sovereignty and Gap Psychology are fundamental to Economics. All questions in Economics ultimately lead to Monetary Sovereignty and Gap Psychology.

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

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

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

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

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

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

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

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

MONETARY SOVEREIGNTY

In the World of President Bullfrog

History may remember President Bullfrog for his morals, modesty, mentality, mendacity, and money. Here are some of his most noteworthy dicta.

Image result for bullfrog
“Part of the beauty of me is that I am very rich.”

“I moved on her like a bitch. But I couldn’t get there. And she was married.”

“If Ivanka weren’t my daughter, perhaps I would be dating her.”

“You know, it doesn’t really matter what they write as long as you’ve got a young and beautiful piece of ass.”

“When you’re a star, you can grab ’em by the pussy. You can do anything.”

“I have tremendous respect for women.”

“President Xi Jinping and I had a great chemistry — not good but great.”

Kim Jong Un and I “were going back and forth, and then we fell in love, OK. No, really. He wrote me beautiful letters, and they’re great letters. And then we fell in love.”

“Every time Putin sees me, he says, ‘I didn’t do that,’ ” And I believe, I really believe, that when he tells me that, he means it.”

“You are a good man (Duterte). What a great job you are doing, and I just wanted to call and tell you that.”

“Kim Jong Un is a pretty smart cookie.”

“I dealt with Qaddafi. I don’t want to use the word ‘screwed’, but I screwed him. That’s what we should be doing.”

“An extremely credible source has called my office and told me that Barack Obama’s birth certificate is a fraud.”

The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive. It’s a hoax.

“Good people don’t go into government.”

Image result for bullfrog

“I will build a great wall — and nobody builds walls better than me, believe me –and I will make Mexico pay for that wall. Mark my words.”

“When Mexico sends its people, they’re not sending the best. They’re bringing drugs, they’re bringing crime. They’re rapists.”

“I’ve been treated very unfairly by this judge. Now, this judge is of Mexican heritage.” 

“I will absolutely apologize, sometime in the hopefully distant future, if I’m ever wrong.”

“I think there is blame on both sides.” (KKK / white supremacists vs. protesters)

“My I.Q. is one of the highest -and you all know it! Please don’t feel so stupid or insecure, it’s not your fault.”

“My fingers are long and beautiful, as, it has been well documented, are various other parts of my body.”

“He was a war hero because he was captured. I like people who weren’t captured.”

“. . . my ‘heel spurs’ . . .”

“I really believe I’d run in there (to fight a mass shooter) even if I didn’t have a weapon.”

Image result for bullfrog

“I love the poorly educated.”

“I never mocked a disabled reporter.”

“I have so many fabulous friends who happen to be gay, but I am a traditionalist.”

“When was the last time anybody saw us beating, let’s say China, in a trade deal? I beat China all the time. All the time.”

“Trade wars are good and easy to win.”

“I think the only difference between me and the other candidates is that I’m more honest and my women are more beautiful.”

“If I decide to run for office, I’ll produce my tax returns, absolutely.”

“Between 3 million and 5 million illegal votes caused me to lose the popular vote.”

“My (inauguration) audience was the biggest ever.”

“Any negative polls are fake news.”

“I was down there, and I watched our police and our firemen, down on 7-Eleven, down at the World Trade Center, right after it came down.”

Image result for bullfrog

“Why can’t we use nuclear weapons?”

(The New York Times) “don’t write good. They don’t know how to write good.”

“It’s the biggest tax cut in U.S. history.”

“Russia, if you’re listening, I hope you’re able to find the 30,000 [Hillary Clinton] emails that are missing. I think you will probably be rewarded mightily by our press.”

“I know more about ISIS than the generals do. Believe me.”

“Most politicians would have gone to a meeting like the one Don jr attended in order to get info on an opponent. That’s politics.”

“We’re the highest taxed nation in the world.”

“You are changing history, you are changing culture” (by taking down statues of past fighters for slavery).

“The Russia story is a total fabrication.”

“I think Islam hates us.”

China stopped manipulating its currency “from the time I took office” (“during the election”) (“as soon as I got elected”) (“since I started running”) (“since I’ve been talking about currency manipulation”)

“I have spoken to others in intelligence. And they are big believers in waterboarding. … because they say torture does work. It does work.”

“Lyin’ Ted Cruz denied that he had anything to do with the G.Q. model photo post of Melania. That’s why we call him Lyin’ Ted!”

“The Trump winery is the largest winery on the East Coast.” [not even close]

“We (Trump University) have an ‘A’ from the Better Business Bureau.”

“81 percent of murdered white people are killed by black people.”  [not even close]

“I don’t know anything about David Duke.”

“I got to know (Putin) very well because we were both on 60 Minutes … We were stablemates, and we did very well that night.” [The two men were interviewed separately, in different countries thousands of miles apart.]

“Despite the constant negative press covfefe.”

==========================================================================================

Feel free to add to the list.

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

MONETARY SOVEREIGNTY