When Elon Musk bought Twitter, now “X,” his primary objective was to own a giant megaphone for his political ambitions. He immediately began to cut costs.
Twitter Layoffs: The Before and After of Elon Musk’s Staff Cuts
Massive Restructuring: Elon Musk’s $44 billion acquisition of Twitter led to layoffs of nearly 80% of its workforce, altogether redefining the company’s structure, operations, and mission.
Redistribution of Talent: Former Twitter employees have transitioned to leading tech companies like TikTok, Reddit, and Google, with many moving into senior and executive roles.
Industry Ripple Effects: Musk’s drastic cost-cutting set a precedent for widespread layoffs across the tech industry, reshaping talent dynamics and organizational strategies.
Mixed Platform Performance: X (formerly Twitter) reports growth metrics, but independent studies show contrasting metrics in user engagement and traffic since the rebranding.
Applying Organizational Philosophy: Musk is now set to apply his organizational reforms to government through his involvement in DOGE and the Trump administration.
He cut costs because X is a private enterprise, a for-profit, monetarily non-sovereignenterprise. As such, it is the opposite of the Monetarily Sovereign federal government: Different problems; different solutions. (Think of the difference between solutions for overweight and underweight, and you’ll get the idea.)
Musk claimed that the layoffs were necessary to save the company from financial ruin. Fast forward to 2024, and Musk promises to bring these draconian cuts to government bureaucracy.
Elon Musk’s takeover of San Francisco-based Twitter significantly transformed the social media platform. Musk’s acquisition, valued at $44 billion, led to drastic measures to restructure the company, starting in November 2022. This included laying off more than 6,000 Twitter employees—a reduction of nearly 80% of Twitter’s workforce.
The problem is that the federal government cannot experience “financial ruin,” Its primary task of growing the economy requires the federal government to spend more than it receives — in short, to run deficits.
Every time the federal government has spent less than it received — i.e., run a surplus, it has caused a depression, except once when it “only” caused a recession.
U.S. depressions come on the heels of federal surpluses.
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%. Recession began 2001.
The relationship between federal deficit spending and economic growth is demonstrated by the following graph:
“Debt Securities” (red) tracks federal deficit spending. Gross Domestic Product (blue) tracks economic growth
The lines are essentially parallel. A growing economy requires a growing supply of money, and federal deficits increase the money supply.
Unlike the federal government, X:
Does not have the infinite ability to create dollars.
Requires income to survive, long term.
Its primary financial goal is profits.
It reports to shareholders, in this case, Musk, and is designed to help achieve one shareholder’s personal goals.
By contrast, the U.S. federal government:
Has the infinite ability to create dollars simply by touching computer keys
Needs no income and, in fact, destroys any income it receives.
Needs no profits, and in fact, profits would be counterproductive to its mission of protecting and improving people’s lives. Federal losses are the economy’s gains.
It reports to the people of the United States and to a lesser extent, the people of the world.
Thus, when the ad hoc creation of the so-called “Department of Government Efficiency (DOGE) fires employees, it does nothing to help the government or American taxpayers. Federal savings do not fund federal spending.
On the contrary, firing federal workers to save money hurts the American economy. It hurts the workers individually and every American because the government will pump fewer growth dollars into the economy.
Gross Domestic Product (GDP) = Federal Spending + Non-federal Spending + Net Exports.
This demonstrates why great businessmen seldom make good Presidents. The entire motivation and process are different from what they know.
What a businessman does instinctively (minimize spending and maximize profits) is exactly the opposite of what a Monetarily Sovereign government leader should do (although it is perfect for leaders of monetarily non-sovereign state and local governments).
Musk may know this, but even so, he knows the public doesn’t understand it.
The public is conditioned to believe nine of the myths mentioned in Inflation: The Bugaboo That Confuses Our Leaders:
Federal finances are similar to state and local government, business, and/or personal finances
The federal government should live within its means, just as people and businesses should.
Federal deficits and debt are financial burdens on federal taxpayersand the government
The federal government levies taxes to pay for its spending.
The federal government borrows to pay for its spending.
Give me more, more, more money while I fire more, more, more people.
Wrong on all nine counts.
Having the infinite and unique ability to create dollars, the federal government has no “means,” and even “wasteful” spending is beneficial.
Taxpayers don’t pay for spending; the government spends with newly created dollars, so it never borrows.
And shortages like oil and food, not federal spending, cause inflation.
Actions that are good for a non-sovereign business often will be disastrous when applied to a Monetarily Sovereign government.
Musk’s and Trump’s combination of economic ignorance, hubris, laziness, and massive power, together with an insatiable craving for self-enrichment, will create a disaster for America and all Americans.
Finally, it’s one thing to fire employees of a disseminator of rumor and silliness like “X,” but do you really want fewer people inspecting your food for disease and poisons.
Do you want fewer people to provide family assistance, child support, childcare, Head Start, child welfare, and other programs that help children and families?
How about fewer people to help improve the quality, safety, efficiency, and effectiveness of health care for Americans?
Do you really want less effort to protect people from harmful chemical exposures? Or less effort to enforce federal criminal laws regulating the firearms and explosives industries? Or a smaller staff to preserve U.S. government records, manage the Presidential Libraries system, and publish rules, regulations, Presidential, and other public documents?
Is it your opinion that the Army Corps of Engineers and the rest of our military have too many people? Should we devote fewer resources to measuring labor market activity, working conditions, and economic price changes?
Maybe we should have fewer U.S. Capitol Police Officers to protect life and property, investigate criminal acts, and enforce traffic regulations on U.S. Capitol Grounds, while protecting members, officers of Congress, and their families. No one ever would attack the Capitol (right?), and if they did, the President would pardon them, so why have police?
And, of course, we should cut the Centers for Medicare and Medicaid Services (CMS), which provides health coverage to more than 100 million people through Medicare, Medicaid, the Children’s Health Insurance Program, and the Health Insurance Marketplace (right?)
And, what’s the good of the U.S. Courts of Appeals that hear appeals from lower courts of both civil and criminal trials to investigate whether or not the law has been fairly and correctly applied by the lower courts?
Don’t we already have too many people protecting the public from investment fraud, manipulation, and abusive practices? Then there are the useless patent and copyright offices. Shouldn’t they be cut?
And certainly, we could do without all those people whose jobs involve customs, border, immigration enforcement, emergency response to natural and manmade disasters, antiterrorism work, and cybersecurity.
There are thousands of examples of federal agency people who devote their lives to protecting you and national leaders (including the President) and visiting heads of state. I would vote right now to get rid of the group risking their lives to protect the President.
When you go through the list of federal agencies, you learn how vital these people are in improving and protecting all our lives.
Sadly, Musk’s casual, broadscale firing makes no allowance for individuals. That simply is too much work for him. His deferred resignation program already has received thousands of acceptances of his “deferred resignation” offer. Are these good employees, bad employees, vital employees, young, old, experienced, recently hired? No one knows, and no one seemingly cares.
To Musk and Trump, employees aren’t people who provide valuable services. They are job titles we can do without and without suffering losses.
Ignorance, hubris, laziness, and massive power together with an insatiable craving for self-enrichment — was there ever a better description of today’s White House?
SUMMARY
Federal deficit spending is necessary for economic growth and to fulfill the federal government’s mission to improve and protect the people’s lives. GDP = Federal Spending + Nonfederal Spending + Net Exports. Even “wasteful” federal spending grows the economy.
Federal taxes do not fund federal spending. Spending cuts do not lead to tax cuts, but they do lead to service cuts. Running a for-profit business is entirely unlike running a for-service Monetarily Sovereign federal government.
A Monetarily Sovereign government is not better when it is smaller and spending less. It is better when it is providing more services and collecting less tax, regardless of cost.
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell;MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell; https://www.academia.edu/
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
I’ve discussed all of the above in previous posts. Click the links to read why each common belief is false.
These false beliefs result in curtailing federal deficit spending, which grows the economy and prevents inflation. The so-called “debt ceiling” law is a notorious example, but many others are daily occurrences.
Occasionally, I enjoy conversing with artificial intelligence (AI) like Copilot or ChatGPT to learn the latest common beliefs on any subject. Here is a discussion about one of the false beliefs: Number 5 (Excessive federal spending causes inflation) and its close relative, 6 (Inflation is too much money chasing too few goods.)
This is what CHAT GPT said:
CHAT GPT: A crucial distinction between Monetary Sovereignty (MS) and Modern Monetary Theory (MMT):The MS model holds that inflation is not primarily caused by excessive federal spending, as some traditional economic theories might suggest. Instead, MS argues that inflation is generally driven by shortages of key resources, such as Oil, food, shipping, raw materials, andlabor.MS’s Rodger Malcolm Mitchell asserts that prices increase when key goods or resources become scarce—due to supply chain disruptions, natural disasters, geopolitical factors, or other bottlenecks—leading to inflation. The price increases are a natural response to the scarcityof goods and services rather than an overabundance of money or federal spending.Interestingly, Mitchell argues that federal spending can help cure inflation, but only when that spending alleviates resource shortages. For example:Government spending can increase the availability of scarce resources, such as investing in energy infrastructure (e.g., renewable energy sources), food production, transportation networks, or manufacturing capacity. By directing spending to increase supply, the government can reduce the constraints that cause inflation in the first place.MMT generally views inflation as the result of too much money in circulation relative to the economy’s productive capacity. According to MMT, the government must balance its spending with the available resources (labor, capital, etc.), and excessive government spending could lead to inflation if it exceeds the economy’s ability to produce.The Zimbabwean hyperinflation crisis is often misunderstood in the context of the traditional view of inflation. In fact, the case of Zimbabwe illustrates Monetary Sovereignty (MS) principles quite well and highlights how resource scarcity (not just printing money) can drive inflation.The land reform program in Zimbabwe, particularly in the early 2000s, led to the forced redistribution of land from white farmers to Black Zimbabweans. Many of the new land recipients had little experience in commercial farming, leading to a collapse in agricultural production, especially food crops.This food shortage was a key driver of the economy’s inflationary pressures. As basic food staples became scarcer, prices skyrocketed, leading to the classic symptoms of hyperinflation.The government responded to the economic crisis by printing more money to finance its expenditures, such as paying public sector workers and funding other projects. This led to the devaluation of the currency and worsening inflation, which spiraled out of control.However, traditional economic analysis often blames currency printing as the sole cause of inflation. The government’s money creation exacerbated the situation but wasn’t the root cause. The actual driver was the scarcity of food, which caused demand-pull inflation (more money chasing fewer goods) and cost-push inflation (rising production costs due to shortages).The Monetary Sovereignty approach would argue that the government should have spent money to address the food shortage by helping farmers improve production, securing food imports, or providing subsidies to reduce food prices. By resolving food scarcity, inflation could have been mitigated and controlled.If the Zimbabwean government had used its control over its currency and focused on producing or importing food rather than printing money as a catch-all solution, inflation could have been reduced, and the country could have avoided the worst hyperinflation.The Monetary Sovereignty model suggests that the government can effectively use its monetary power to respond to shortages. If Zimbabwe had directed its spending toward increasing food production and resolving supply-side constraints (such as infrastructure, farming skills, and food security), inflation could have been curbed without the need for drastic currency printing.This example illustrates how inflation is not always caused by excessive government spending or money creation but rather by the scarcity of key resources essential for economic stability. In such cases, targeted government spending to alleviate resource shortages can help resolve inflationary pressures.
While MS and MMT agree that inflation occurs when demand exceeds supply, the question of the fundamental cause remains. Does increased government spending increase demand and cause inflation? Or do certain factors — weather, disease, strikes, legislation, etc. — reduce supply to cause inflation?
In Zimbabwe, the fundamental cause was reduced supply, resulting in government currency printing.
It can be argued that America’s most recent inflation was caused by COVID-related shortages of oil, food, shipping, labor, metals, wood, computer chips, and virtually every other supply source.
GRAPH I
From 2012, federal spending (red) rose an average of 5% a year, while inflation (blue) remained mostly below the Fed’s 2% (horizontal black line) target.
The sudden rise in federal spending around 2019 can be largely attributed to the onset of the COVID-19 pandemic in early 2020.
To combat the economic fallout and public health crisis, the U.S. government implemented a series of unprecedented fiscal measures, including stimulus packages, unemployment benefits, and support for businesses.
The stimulus packages were partially effective. According to the National Bureau of Economic Research (NBER), the COVID-related recession lasted only two months, from February to April 2020. This makes it the shortest recession in U.S. history.
However, the stimuli did not directly address the COVID-related shortages,so prices suddenly rose as the stimulus fell. Without the stimuli, the recession would have lasted much longer but had the stimuli addressed the fundamental causes of the inflation—shortages—inflation could have been moderated or even avoided.
The COVID-19 pandemic provides another important example of inflation being driven largely by supply-side shortages rather than simply an excess of money creation. The inflationary pressures seen in the wake of the pandemic were not caused by massive money creation during the pandemic but rather by a series of supply-side shocks that disrupted global supply chains and reduced the availability of key goods and services.The pandemic caused widespread disruptions to supply chains. Factories shut down, shipping routes were interrupted, and workers became unavailable due to illness or lockdowns. These disruptions made producing and distributing goods more complex, creating scarcity in many sectors.Shipping costs also skyrocketed, with container shortages and delays affecting the global movement of goods. As a result, the cost of goods increased significantly due to increased production costs and shipping costs.The pandemic caused significant labor shortages, especially in agriculture, manufacturing, retail, and healthcare industries. In many cases, workers had to stay home due to illness, quarantine measures, or childcare needs, while others left their jobs in search of better pay or conditions.These labor shortages reduced the supply of goods and services, which also contributed to higher prices as businesses struggled to maintain production and service levels.Prior to the pandemic, central banks (especially the Federal Reserve) had already undertaken massive money creation through quantitative easing and low interest rates, trying to stimulate the economy after the 2008 financial crisis. This led to a substantial increase in the money supply (in the form of bank reserves), but we didn’t see the inflationary spike that many had predicted.In fact, despite these high levels of money creation, inflation remained relatively low because the economy was still underperforming in terms of demand, and plenty of idle resources (like unemployed workers) kept inflation in check.However, COVID-19 changed the dynamics:The money supply wasn’t the primary driver of inflation during the pandemic. The money was already in the system, and inflation didn’t surge until the COVID-related supply shocks started to hit.The inflation we saw during and after the pandemic was caused by disruptions in the supply of key goods—like food, energy, and raw materials—along with labor shortages, not an excess of money.According to Rodger Malcolm Mitchell’s Monetary Sovereignty model, the inflation we saw was caused by resource shortages, not excessive government spending or money creation.Federal spending and money creation during the pandemic were responses to the economic collapse caused by the shutdowns. Governments around the world increased spending to support workers and businesses, but this spending did not directly cause inflation.If the U.S. government (or any sovereign nation) had spent its resources on addressing the supply shortages—for example, by improving manufacturing capacity, addressing supply chain issues, and incentivizing workers to return to work—this could have helped mitigate inflation.Summary:The COVID-19 inflation crisis mirrors what happened in Zimbabwe, where inflation was driven by scarcity of key resources (not just excessive money creation). In both cases, the real cause of inflation was resource shortages—whether in food, labor, or manufacturing—and not the amount of money in circulation.
The Zimbabwe and COVID inflations were not unique. Historically, they were typical of inflations because they were caused by shortages, especially oil and food shortages, not by the money supply.
Here is a comparison of America’s money supply vs. inflation.
GRAPH II
The peaks and valleys of changes in the M3 money supply (red) do not match with the peaks and valleys of inflation (blue).
A common mantra is that inflation is “too much money chasing too few goods.” Given the above graph, the “too much money” phrase would be difficult to substantiate.
Then, we look at the question, does federal deficit spending cause inflation?
GRAPH III
Deposits into Treasury Security accounts (purple) do not match up with inflation (blue).
Deposits into T-Security accounts (so-called “government borrowing”) do not match up with inflation.
Compare it to this graph:
GRAPH IV
The peaks and valleys of oil prices (green) closely match those of inflation (blue).
The above graph shows a very close relationship between changes in oil supply (as reflected in its price) and inflation, substantiating the “too few goods” part of the mantra.
This refutes the common belief that inflation is caused by “excessive” federal deficit spending. The past 50 years demonstrate otherwise.
Sadly, by acting on this false belief, the federal government repeatedly has cut federal deficit spending, which repeatedly has resulted in recessions that are cured by increased federal deficit spending, as shown in the following graph:
GRAPH V
Recessions (gray vertical bars) are preceded by periods of reduced federal debt (gold) and are cured by increased federal debt. SUMMARY
Economics is not alonein promulgating false narratives; it is undoubtedlyguilty. The facts are:
The primary cause of inflation is shortages of crucial goods and services, most commonly oil and food.
Federal deficit spending is not a significant cause of inflation.
Increased money supply is not an essential cause of inflation.
Reduced federal spending is a significant cause of recessions.
Increased federal deficit spending can cure inflations by addressing shortages of crucial goods and services.
Increased federal deficit spending cures recessions.
#Monetary Sovereignty - Mitchell 