Dollars exist, but in what form; who created them, and how?
The uninformed may respond that dollars are pieces of green paper printed by the U.S. Treasury.
That answer would be incorrect on every level.
Those green pieces of paper are not dollars. Rather they are bearer titles to dollars. They are official recognition that the bearer owns a dollar.
These are not dollars. They are bearer titles to dollars
A house title is not a house. It is official recognition that the named person owns a particular house.
A car title is not a car, It is official recognition that the named person holds a certain car.
Dollars exist only as bookkeeping notations. They have no physical form.
You cannot see, feel, hear, touch, smell, or taste dollars.
The Treasury does not literally print dollars. It just prints titles to dollars, which exist as numbers in bank accounts.
All dollars are created from thin air by marking up accounts. Banks do it every minute of every day.
Consider the following scenario:
1. You go to a store, make a $10 purchase, and pay with your credit card.
Because you have a contract with the credit card company, you essentially have signed a loan document (the credit card receipt) saying you owe the credit card company $10.
That loan document, and all dollar-denominated loan documents, are titles to dollars.
A dollar bill is a bearer check signed by the Secretary of the Treasury.
So, your use of a credit card makes dollars.
(The green dollar bill in your wallet is a loan document. It signifies debt. It is a federal reserve note. “Bill” and “note” are words denoting debts.)
2. The credit card company sends instructions (not dollars) to the store’s bank, telling it to increase the balance in its checking account.
When the bank obeys those instructions, new dollars are created. These instructions are in the form of a check or wire transfer.
Simultaneously, the balance in the credit card company’s checking account is reduced, which destroys dollars.
At this stage, your purchase has caused the creation of ten dollars, a few cents of which go to various governments’ banks for sales taxes.
This bearer check is identical to a dollar bill, with one exception. The full faith and credit of the U.S. government backs a dollar bill. The full faith and credit of the writer backs the check.
3. Instructions among the several banks pass through the Federal Reserve, while the credit card company sends you a ten-dollar invoice.
To pay the invoice, you instruct your bankto send instructions to the credit card company’s bank, telling it to increase the balance in the credit card company’s checking account.
Those instructions are cleared through the Federal Reserve, and when your bank receives them, it reduces the balance in your checking account and destroys dollars.
Your one-time use of your credit card creates and destroys dollars.
At no time are physical dollars exchanged for there are no physical dollars.
All dollars are nothing more than numbers on financial institutions’ books.
Not being physical, dollars cannot be “sent.” Instead, instructionsin the form of checks or wires are sent to banks.
The banks are instructed to create and destroy dollars by changing the numbers in bank accounts.
What if that $10 purchase were made in cash rather than by credit card? Cash, i.e., dollar bills, are bearer titles to dollars. “Bearer” title means whoever has the title in their possession owns the dollars, which are numbers on the Treasury’s books.
All money represents a debt of the issuer, which among other things, owes the user full faith and credit.
You accept dollar bills in exchange for goods and services because you trust the full faith and credit of the federal government.
Self-evaluation corresponds with intelligence. If you are smart, being smart lets you understand that you are smart. If you are stupid, being stupid keeps you from knowing you are stupid. Thus, everyone thinks they are smart.In related issues, everyone thinks they are above-average drivers and that the federal government can run short of dollars.
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A rose by any other name may smell as sweet, but what if they called it “stinkwort”? Labels do matter. Visualize this scenario:
The boater must take more water from the ocean than he receives from the ocean. That is, the ocean must run a water deficit for the boater to survive, just as the federal government must run a dollar deficit for the economy to survive.
A man sits in a rowboat in the Pacific Ocean.
Using his desalinization kit he fills his canteen with one pint of water, which he later drinks and excretes as urine,
But, because of perspiration evaporation and breathing, he excretes only 9/10th pint of urine.
So, for boater the Pacific Ocean runs a deficitof 1/10th pint of water.
Does anyone care?
No, the Pacific Ocean running a 1/10th pint of water deficit is meaningless, because for all intents, the ocean has infinite water.
Infinite water minus 1/10th pint still equals infinite. No change.
Now imagine the same scenario, except instead of viewing it from the ocean’s standpoint, view it from the boater’s standpoint.
The man has drunk a pint of water, 9/10th of which he has excreted as urine into the ocean, and used the rest for perspiration, and other bodily functions.
That pint of water has allowed him to live for a certain time. Without the pint of water, he would have died.
That’s important.
In both scenarios we gave you the same information, but in one case we labeled it as a water measure from the standpoint of the ocean, and in the other case we labeled it as a water measure from the standpoint of the boater.
The following graph comes from https://www.chartr.co/newsletters/2023-02-08/. It labels money flow from the standpoint of the U.S. government:This graph shows the nation’s money flow from the standpoint of the U.S. government, not from the standpoint of the economy.
Here are excerpts from the accompanying article:
State of the union’s walletLast night, President Biden held the annual State of the Union. A big theme was the economy. He threatened to veto any proposal that would cut spending on Social Security and Medicare while also imploring Congress to raise the debt ceiling.
I O U $1.4 trillion: In fiscal year 2022, the federal government collected nearly $5tn in revenue, with more than 50% of that coming from individual income taxes.
However, the US government spent even more, leading to a nearly $1.4tndeficit.
To make up for the difference the US government does what everyone who overspends their budget does — they borrow.
This then adds to its already enormous tab (AKA the national debt), which currently sits at the $31.4tn debt ceiling limit.
With a debt pile that big, the interest payments aren’t small. Indeed, last year the US government spent ~$480bn on net interest payments, just shy of Ireland, Norway or Nigeria’s annual GDP.
There are three major problems with the above scenario.
It draws a false parallel between the finances of our Monetarily Sovereign governmentand the finances of monetarily non-sovereign “everyone.” The former has infinite money and the latter does not.
It falsely states that the federal government must borrow in order to “make up the difference.” The federal government, having the infinite ability to create its sovereign currency, never borrows dollars, and never needs to “make up the difference.” To pay all its obligations, the federal government creates new dollars, ad hoc. It destroys all the tax dollars it receives.
It labels the money movement from the standpoint of the federal government rather than from the standpoint of the economy.
Think of the Pacific Ocean as analogous to the U.S. federal government, and the boater as analogous to the economy.
Like the Pacific Ocean’s water, the federal government has infinite dollars. And like the boater’s limited water supply, the economy has limited dollars.
Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”
Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
Quote from from 60 Minutes:Scott Pelley: Is that tax money that the Fed is spending?Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.
Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”
(The final sentence, above, is Fed-speak for, “The government does not borrow to pay its bills.”)
The U.S. government is not the only Monetarily Sovereign government. The European Central Bank also is Monetarily Sovereign (and like the U.S. economy, individual euro nations are monetarily non-sovereign.)
Press Conference: Mario Draghi, President of the ECB, 9 January 2014Question: I am wondering: can the ECB ever run out of money?Mario Draghi: Technically, no. We cannot run out of money.
To survive, the boater needs the Pacific Ocean to run a water deficit. Similarly, to survive, the economy needs the federal government to run a dollar deficit.
The Pacific Ocean does not need to receive any water from the boater nor does the Ocean “owe” the boater any water. Similarly, the economy should not be asked to give the federal government any money, nor does the government “owe” the economy any money.
Finally, the Pacific Ocean does not borrow water to give water to the boater.
Think of the Pacific Ocean and the boater the next time you hear about federal debt limits and taxes.
Labels matter.
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
Here is an easy way to detect economics bullshit: If someone tells you that U.S. federal government spending — any U.S. federal government spending — is “unsustainable” without explaining why, you can be sure that person is a liar or a fool. No exceptions.
“Unsustainable” long has been the word of choice for those who spread fear about federal deficits, federal debt, Social Security, Medicare, Medicaid, aid to the poor, and everything else the rich don’t like.
But what exactly is “unsustainable” about federal spending? Will the federal government, which created the very first laws out of thin air, and will the laws that created the dollar out of thin air, suddenly be unable to create more dollars out of thin air?
Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
When challenged, the liars and fools reluctantly admit, “No, the government can’t run out of dollars, but deficit spending causes inflation.”
We’ve debunked that myth so many times my typing fingers are worn down. See here, here, here, here, and here, and many other places.
The simple and obvious fact is that inflation is not caused by federal deficit spending. And inflation is not caused by interest rates that are too low. The cause of all inflations is scarcities of key goods and services, most notably oil and food.
So the cure for inflation is not to cut federal deficit spending, nor is it to raise interest rates. The treatment for inflation is to cure the scarcities of critical goods and services, most notably energy and food.
How does one cure those inflation-causing scarcities? Federal deficit spending to obtain and provide the scarce goods and services.
Sadly, the Libertarian Reason.com’s solution to all ills is to claim government spending is “unsustainable.”Libertarianism = Anarchy
Medicare? “Unsustainable.” Social Security? “Unsustainable.” Military spending? “Unsustainable.” Everything the federal government does? “Unsustainable.”
Never mind that we have been “sustaining” huge and growing federal deficit expenditures for more than 80 years, while the economy has grown massively.
When you’re a Libertarian, you hate the government. Period. You are an anarchist.
And here is an example of that, from Reason.com’s website:
For The New York Times’ Paul Krugman, the real crisis facing America’s entitlement programs is that the media isn’t working hard enough to ignore their impending collapse.
“I’ve seen numerous declarations f,rom mainst,ream media that of course Medicare and Social Security can’t be sustained in their present form,” Krugman wrote in a Times op-ed this week. “And not just in the opinion pages.”
Perhaps that’s because the unsustainable trajectories of Social Security and Medicare aren’t a matter of opinion.
They’re factual realities, supported by the most recent annual reports of the programs’ trustees and the independent analysis of the Congressional Budget Office central). Social Security’s main trust fund will hit insolvency somewhere between 2033 and 2035, according to those projeleadingns, while one of the main trust funds in Medicare will be insolvent before the end of this decade.
Have you ever wondered why you never hear worries about the “trust fund” for the military? Or the “trust fund” to support the Supreme Court?
And why no concern about “trust funds” to fund the White House, the Senate or the House of Representatives?
Federal Trust Funds Are Not Real Trust Funds
Here is what the Peter G. Peterson Foundation says about these “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 an accounting 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 and then combined with other receipts that the Treasury collects and spends.
Further, 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.
Get it? Trust funds aren’t real funds. They are just accounting mechanisms to track inflows and outflows. The federal government owns the books andcan change the books at will.
The federal government can change the purposes of the Medicare and Social Security “Trust Funds”; it can add or subtract dollars at will; it can continue to fund Medicare and Social Security in any desired way and in any desired amounts.
The government and its liars and fools wring their hands and claim the trust funds are in danger of insolvency. But no federal agency can become insolvent unless that is what the President and Congress want.
Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
The federal government literally has the power to change the account books simply by passing a law. All the bleating and worrying about a federal agency becoming insolvent is a lie.
If the federal government wished, it instantly could add a trillion dollars to the Medicare “trust fund,” and eliminate FICA altogether. Keep in mind: The government owns the books.
When insolvency hits, there will be mandatory across-the-board benefit cuts—for Social Security, that’s likely to translate into a roughly 20 percent reduction in promised benefits.
“Mandatory,” until the government decides it isn’t mandatory.
Alan Greenspan: “The United States can pay any debt it has because we can always print the money to do that.”
Nevertheless, Krugman says he’s got a solution that “need not involve benefit cuts.”
His argument boils down to three points. First, Krugman says the CBO’s projections about future costs in Social Security and Medicare might be wrong.
Second, he speculates that they might be wrong because life expectancy won’t continue to increase.
Finally, if those first two things turn out to be at least partially true, then it’s possible that cost growth will be limited to only about 3 percent of gross domestic product (GDP) ov,er the next three decades and we’ll just raise taxes to cover that.
There never is a need to raise federal taxes. There is no funding need for federal taxes at all. The federal government destroys all tax dollars it receives, and creates new spending dollars, ad hoc.
When you pay your taxes, your dollars come from the M2 money supply measure. When they reach the Treasury, they cease to be part of the M2 money supply or any other money supply measure. They literally are destroyed.
When the federal government spends, it sends instructions (not dollars) to the creditors’ banks, instructing the banks to increase the balances in the creditors’ checking accounts.
This creates the new dollars that are added to the M2 money supply.
The banks clear the instructions through the Federal Reserve preserving the tidy, double-entry bookkeeping.
If you remember just one thing from this post, remember that dollars are not physical things. They are legal, bookkeeping entries, and the federal government controls the laws and the books.
If the government wished, it could eliminate all federal trust funds, or add a trillion dollars to each of them, and it all would just be bookkeeping.
Alan Greenspan: “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”
“America has the lowest taxes of any advanced nation; given the political will, of course we could come up with 3 percent more of G.D.P. in revenue,” he writes. “We can keep these programs, which are so deeply embedded in American society, if we want to.
Killing them would be a choice.”
Federal taxes do not fund the federal government. The purpose of federal taxes is to control the economyby taxing what the government wishes to discourage and giving tax breaks to what the government wishes to encourage.
The federal government could eliminate all federal taxes, yet continue to spend forever.
It’s notable that Krugman sees benefit cuts as “a choice” but believes that implementing a massive tax increase on American employers and workers would be “of course” no big deal.
But that hardly addresses the substance of what he gets wrong. Let’s take each of his three arguments in order and show why they’re incorrect.
First, he says the CBO’s projections about future costs for the two programs might be inaccurate because the agency is assuming that health care costs will continue to grow faster than the economy as a whole.
At best, that means postponing insolvency by a few years. The structural imbalance between revenues and outlays means that depletion of the trust funds is a question of “when” and not “if,” as this chart from the Committee for a Responsible Federal Budget makes clear.
The above would be true if the federal government were monetarily non-sovereign, like the states, counties, cities, euro nations, you and me.
We monetarily non-sovereign entities do not have the unlimited ability to create our sovereign currencies. We have no sovereign currencies.
But the U.S. government is absolutely sovereign over the U.S. dollar. It can create as many or as few dollars as it wishes.
It can give those dollars any values it wishes and it can change those values (which it has done many times) at will.
The U.S. dollar is a tool of the U.S. government.
The Reason.com Libertarians seem ignorant of the difference between Monetary Sovereignty and monetary non-sovereignty, and thus ignorant of economics
Krugman even concedes that despite a decline in the expected rate of growth in future health care costs, those costs are still expected to rise faster than the economy grows.
Combined with the aging of America’s population, this is a demographic and fiscal time bomb. Ignoring that reality is certainly not a sound policy strategy.
Even if healthcare costs were to triple tomorrow, the federal government could fund Medicare while not collecting a single penny in FICA taxes.
Second, he speculates that mortality rates might continue to drop. While that might be good news from an actuarial perspective, it seems both morally horrifying and incredibly risky to base a long-term entitlement program on the assumption that more people will die at a younger age.
Even if every American retired at 50 and lived to age 200, the federal government could fund Medicare for All, and a generous Social Security for All, again while not collecting a penny if FICA taxes.
In fact, Krugman gets this point exactly backward. Instead of banking on a decline in life expectancy, Congress ought to raise the eligibility age for collecting benefits from Social Security and Medicare.
That would create the same demographic benefits on the accounting side even as people live hopefully longer, better lives.
And there you have it. The Libertarian solution for all government problems is to cut benefits, especially those benefits that aid the poor and middle classes.
The Libertarians refuse to accept this vital truth: The sole purpose of any government is to protect and improve the lives of the governed.
How cutting benefits accomplishes that purpose has yet to be explained.
Krugman would no doubt see such a change as an unacceptable benefit cut, but in reality, it would restore Social Security to its proper role as a safety net for the truly needy, not a conveyer belt to transfer wealth from the younger, working population to the older, relatively wealthier retired population.
The so-called “conveyer belt” would only be true if federal taxes funded federal spending. But they don’t.
Federal taxes fund nothing. FICA could and should be eliminated, while Social Security benefits should be increased.
When Social Security launched in 1935, the average life expectancy for Americans was 61. That’s changed, so the program’s parameters should too.
Yes, Social Security parameters should change. Benefits are too low. FICA should be eliminated.
Finally, the blitheness of Krugman’s actual solution—a massive tax increase—ignores all the knock-on effects of that idea.
Keeping Social Security and Medicare whole will require a tax increase in excess of $1 trillion, which would have massive repercussions on wages, the costs of starting a business, and economic growth in general.
It’s far from an ideal solution.
Keeping Social Security and Medicare whole will require no tax increase at all. The programs are not funded by tax dollars, which are destroyed upon receipt. The programs are funded by laws, and Congress controls the laws.
Paraphrasing Reason.com’s claim, eliminating FICA would have massive positive effects on wages, the costs of starting a business, and economic growth in general.
In all, Krugman’s column amounts to an argument that his addiction to donuts is totally sustainable as long as someone else agrees to keep buying donuts for him (and as long as he ignores the long-term costs to his health).
Maybe the doctors are wrong about the projected consequences of eating too many donuts. Maybe it will turn out that living longer just isn’t all that great anyway.
But if all else fails, at least he’s got someone else willing to pay for his habit—and making any changes would be tantamount to killing a tradition deeply embedded in the Krugman morning routine. We must take that option off the breakfast table.
The above analogy might make some sense for monetarily non-sovereign governments, but it is completely false for the federal government.
Instead of lying to their readers and constituents, America’s thought and political leaders (not just President Joe Biden and Krugman but lawmakers and media commentators on all sides) should start acknowledging that America’s entitlement programs are not sustainable in their current form.
Instead of lying to their readers and constituents, Libertarians (not just Reason.com) should acknowledge the differences between Monetary Sovereignty and monetary non-sovereignty.
Without changes, they will wreck the economy or force many retirees to deal with sudden cuts to benefits they expected to receive. Maybe both.
Waiting to deal with this problem will only make it worse. If Krugman’s column is the best argument for the long-term sustainability of America’s two major entitlement programs, it should only underline how seriously screwed they are.
No, Krugman’s column is not the best argument for long-term sustainability.
Using the facts about Monetary Sovereignty is the absolute guarantee of long-term sustainability.
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
Educating our young people is important to the future of America.
For that reason, free elementary education has been provided by every state and every town in America.
Since WWII, America’s need for college-educated young people has grown, in a more sophisticated, more competitive world. College-educated students no longer are a luxury for America; they are a necessity.
Many of America’s bright students are unable to afford a college education, especially not in better colleges.
The U.S. federal government is Monetarily Sovereign, meaning it creates dollars at will. It never can run short of dollars. The federal government has the unlimited ability to pay for anything priced in dollars.
Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
The federal government’s responsibility is to advance the interests of the United States and its people.
Putting America’s young people into debt, a debt so suffocating it cannot even be discharged in bankruptcy, does not advance the interests of the United States and its people.
Today, I saw an article that makes the case for the elimination of all student loans in favor of direct, no-repayment-necessary financial support.
Finance people will immediately recognize that outside of loan-sharking, lenders showing profits on defaulted loans is unheard of. Yet Uncle Sam is doing a very good job of kneecapping student borrowers who have trouble repaying.
As this post explains, this is predatory lending in action.
As we often have discussed, it makes no sense for the U.S. federal government ever to lend dollars and expect repayment.
Alan Greenspan: “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”
The government is Monetarily Sovereign. It has the unlimited ability to create dollars. Given that infinite ability, the government never should ask anyone to pay it dollars,whether in loan repayment, taxes, or for goods and services.
Think about it. If you had the infinite ability to create dollars at the touch of a computer key, why would you ever ask anyone to pay you dollars?
I have known Alan Collinge of Student Loan Justice for multiple years now. He has been prompting some type of relief for those who will never be able to pay back these loans or are in default.
For the over 62 tack on another $20 billion for EOY 2022. Three hundred- thousand more people are in this category. The average amount of time to pay back was 15 -17 years at $250/month.
From over 50 and above, these debts will never be paid 100%.
In 2010, we found the federal government was making a profit, not a loss, on defaulted student loans.This is a claim no other lender for any other type of loan (including governmental loans) can make.
Not only does a Monetarily Sovereign government have no need or purpose in lending, but our Monetarily Sovereign government actually collects profits on its defaulted student loans.
Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
Thus, the student loan program impoverishes the private sector but does so for no reason at all. The dollars are taken from the economy and destroyed.
Every dollar in loan principal and interest, paid by student borrowers is destroyed. None are used by the federal government to pay its bills.
“More recent White House Budget data shows that this is still true today The profitability of student loan defaults is certainly far greater today than in 2010. Making a profit on defaulted loans is a defining characteristic of a predatory lending system.
The 2010 White House Budget reported a recovery rate on defaulted FFELP (federally guaranteed) loans of 122%.
All other loans the government made or insured that year had an average recovery rate of about 34%. No other loan types exceeded a 100% recovery rate, or even came close.
At the time, the large majority of all federal student loans were of this category, where the government does not make, but rather guarantee.
There is no other lending system in existence in this country where the lender can claim to be making a profit on defaults.
A loan portfolio which accrues nearly $100 billion in annual interest, where loans in default are actually profitable and very few loans are being cancelled as is the case with the federal student loan program.
It is literally impossible to lose money on these loans. The program can only be making money from the defaults and a lot of it.
All of this profit for loans, President Lyndon Johnson said would be “free of interest” when he signed the Higher Education Act into law in 1965.
And yet, the federal government neither needs profits nor even keeps the profits it receives. Every U.S. dollar coming in to the U.S. Treasury is destroyed upon receipt.
The interest dollars paid to the Treasury come from the M2 money supply measure, which is reduced by each interest payment.
But because the federal government is Monetarily Sovereign, there is no money supply measure to tell you how much money the federal government has. It has infinite money. Thus, the dollars are destroyed.
Alan Greenspan: “The United States can pay any debt it has because we can always print the money to do that.”
Default profits depicted . . . .
“Cancelled Debt plus “Remaining Debt” represent the total dollars left in the private sector, aka “the economy.” “Interest Added per Year” represent dollars taken from the economy, sent to the Treasury, and destroyed.
What is most disturbing: The default rate for people leaving school in 2004 is estimated to be 40%, and is likely a low figure since the estimates were based on voluntary surveys.
Moreover, even before the pandemic, 85% of all federal student loan borrowers were underwater (ie not paying, or paying but with an increasing balance) on their loans, and nearly 60% weren’t making payments.
With 3 years of nearly universal non-payment due to the pandemic, this non-payment rate will escalate when repayment is again demanded from the borrowers.
It is not at all unreasonable to expect that 70% or more of these borrowers will wind up in default on their federal loans when the system is turned back on.
The student loan default is many multiples of the sub-prime home mortgage default rate of 20% in comparison.
So, by all rational metrics, this lending system is in catastrophic failure.
The Monetarily Sovereign, U.S. government never should lend. It only should give. The government neither needs, uses, or even keeps the dollars it receives from students.
When the government wishes to provide financial encouragement to any purpose, it always should give the money. It never should ask for money to be returned.
Sending dollars to the federal government impoverishes the economy but does not enrich the government.
We believe it to be not at all unreasonable to expect that 70% or more of borrowers will wind up in default on their federal loans when the lending system is turned back on.
Unprecedented, and unwarranted of both bankruptcy rights, and statutes of limitations lie at the core of the student loan problem.
No, the core of the student loan problem is ignorance of Monetary Sovereignty. The public, and perhaps most of Congress, do not understand the implications of “unlimited ability to create its own sovereign currency.”
These are not typical loans. They are Monetarily Sovereign loans.
Those who do not understand Monetary Sovereignty do not understand economics.
There is no economic purpose for the federal government to lend dollars, then impoverish borrows by demanding the dollars’ return.
In the absence of these protections, the lending side (up to and including the Department of Education) can- and does use this power to extract vast sums of wealth ruining the lives of borrowers, (one example below).
The human cost of the predatory lending system has been massive. The harm that is poised to be exacted on the citizenry is incalculable.
One example of the people who have been harmed by these loans:
This cannot and should not continue. At a minimum, constitutional bankruptcy rights must be returned to these loans.
The catastrophic proportions of this failure, however, are such that it probably would be best to simply cancel the loans, end the lending system, and replace it with a more rational, rationally priced, and fair higher education funding plan.
The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
MONETARY SOVEREIGNTY
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The following is copy for a petition Student Loan Justice asks you to send to your federal representatives”
Student Loans can be cancelled with nothing needed from the Treasury, and nothing added to the national debt. We call on President Biden to cancel all federally owned loans by executive order. We also call on both the President and Congress to return standard bankruptcy rights to ALL student loans, by executive order and through Congress by passing S.2598 and HR.9110.Since 2020, Trillions in stimulus (including PPP loans that don’t need to be repaid) required money to be drawn from the Treasury, and added to the national debt. However, the President can cancel $1.3 Trillion in federally owned student loans with $0 needed from the Treasury, and $0 added to the national debt. He can also order the Department of Education to stop opposing student loan borrowers in bankruptcy court.Before the pandemic, 45.4 million people were holding federal student loans, and 80% were either not paying (58.9%), or were paying but their balances were going up. Today, student debt in over one-third of U.S. states exceeds their total annual budgets. Older people outnumber younger people with student debt, and they owe 3 times more, despite having borrowed far less. The default rate for 2004 students is 40%, but they borrowed less than a third of what is being borrowed today. The default rate for current borrowers will likely exceed 75%. This is roughly four times higher than the default rate for sub-prime home mortgages. By all rational metrics, this is now a catastrophically failed, and nationally threatening lending system.We do not have to take this.For the national good, the federal student loan program must be ended and replaced with a more rational, less expensive & socially destructive model for educating the citizenry.
Cancelling these loans will greatly stimulate the economy. Analysts estimate that cancelling student loans will increase GDP by over $100 billion for the next ten years, but they don’t account for increased borrowing that will enable people to buy homes, start businesses, etc.
This is not a partisan problem. More than half of all student loan borrowers identify as being politically independent, or republican. “Red” states are being hurt significantly worse than “Blue” states.
Claims that cancelling loans will largely benefit people who don’t need it are wrong. 85% of all borrowers were “underwater” on their loans before the pandemic. All borrowers were determined to be “financially needy” as a condition for the loans. More than 40% never graduated. Tens of millions went to trade schools and community colleges. Most borrowers are over the age of 35, and owe far more than younger people despite having borrowed far less. The most successful student loan borrowers tend to refinance their loans out of the federal system, so they won’t benefit.
Rest assured, the taxpayers will be fine. The federal government has been profiting greatly on these loans for many years, and the Department of Education has even been making a profit on defaulted loans for decades. While it is not known how much of the $1.6 Trillion federal portfolio is unpaid principal, it is a small fraction of the total. On balance, the taxpayers will have very little- if any- net loss when these loans are cancelled.
THIS PETITION NEEDS MORE THAN JUST YOUR SIGNATURE TO SUCCEED:
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#Monetary Sovereignty - Mitchell 