In the beginning, there was no money. Money does not exist in nature. Money is the creation of a human Issuer, who creates the laws and rules that create money.UNNECESSARY
In the millions of years preceding 1776, there were no U.S. dollars. Then in the 1780s, the U.S. federal government created laws from thin air and those laws created U.S. dollars from thin air.
The government created as many laws and dollars as it wished, and gave the dollars the value it wished. This was completely arbitrary and under the absolute control of the U.S. government.
Subsequently, the U.S. government has continued to create as many laws and dollars as it wished, from thin air, and continue to give the dollars whatever value it wished.
There are many forms of money in addition to U.S. dollars: Canadian dollars, Australian dollars, British pounds, Chinese Renminbi, Euros, Japanese Yen, Mexican Pesos, Monopoly dollars, Bitcoin, etc. — all of which are created by laws and rules.
The laws and rules are arbitrary. They are the blueprint for money. The Issuer of money has the infinite power to create laws and rules in any form he chooses. The Issuer never can run short of laws and rules.
Thus, the Issuer of money can create as much or as little money, in any value he chooses, and in any form he chooses.
Because laws and money are arbitrarily created from thin air, they have no physical presence. You cannot see, feel, smell, taste, or hear laws or money. They exist only as abstractions. Lawbooks and dollar bills only represent laws and money, but they themselves are not laws and money.
Because laws and money are merely arbitrary abstractions, the Issuer never can run short of his own laws and money. The federal government has the infinite power to issue laws and money.
Having the unlimited ability to create his own sovereign money, the Issuer of money does not need taxes or borrowing to supply him with his own money. Because the U.S. government is the Issuer of U.S. dollars, it cannot unintentionally run short of dollars and does not need taxes or borrowing to obtain spending dollars.
Gross Domestic Product (GDP) is the economic measure of an economy. The formula is: GDP = Federal government spending + Non-federal spending + Net exports.
A growing economy requires a growing supply of money. By formula, reduced federal spending or non-federal spending is recessionary, and so shrinks the size of the economy.
The federal government, having the unlimited ability to create dollars, has the unlimited ability to grow the economy.
Recessions (vertical gray bars) come when federal debt growth (red line) declines. Recessions are cured by increases in federal debt growth.
Any entity can be an Issuer of money. Any person, any nation, any business, any human organization arbitrarily can create money in any form it wishes and in any amount it wishes, and give it any value it wishes.
Coupons represent money created by businesses. Chips represent money created by casinos. Tickets represent money created by entertainment venues.
Businesses, casinos, entertainment venues, etc., have the infinite ability to create their own sovereign currency.
You too have the unlimited power to create unlimited amounts of money, call it anything you wish, and give it any value you wish.
Money is a debt of its Issuer, who owes the User of its money whatever its arbitrary laws and rules specify.
The acceptance of money is based on the perceived value of its collateral.
If you were to create, for instance, “Mybucks” as your chosen form of money, “Mybucks” will be used and accepted by those who value your full faith and credit.
You could create all the laws and rules regarding “Mybucks” and give “Mybucks” any value you choose and create them in any amount you choose.
As the Issuer of “Mybucks,” you never could run short of “Mybucks,” nor would you need to borrow or tax anyone to obtain “Mybucks.”
As the Issuer of U.S. dollars, the U.S. government does not need to levy taxes to obtain dollars. Just as the U.S. government cannot unintentionally run short of dollars, no agency of the U.S. government can unintentionally run short of dollars.
Social Security and Medicare are agencies of the U.S. federal government. As such, Social Security and Medicare, and every other federal government agency cannot run short of U.S. dollarsunless the U.S. government wishes it.
Contrary to popular myth, these agencies are not supported by taxes, but rather by the laws and rules of the U.S. government. Any time you hear or read that Social Security and Medicare are running short of money, know that is not true.
Though FICA taxes ostensibly are collected to support Social Security and Medicare, the federal government has no use for those, or any other, taxes. The dollars you send to the government are destroyed upon receipt.
Tax dollars are sent from checking accounts as part of the M1 money supply. Upon arrival at the U.S. Treasury, they cease to exist as part of any money-supply measure. Instead, the federal government pays for Social Security, Medicare, and all other initiatives by creating new dollars, ad hoc.
The same can be said of federal “debt.” The federal government never unintentionally can fail to pay what it owes. Even if the federal debt totaled hundreds of trillions of dollars, the federal government easily could service it or pay it off today.
The misnamed federal “debt” actually is the total of all depositsinto Treasury Security accounts. When you buy a T-bill, T-note, or T-bond, you open your T-security account and deposit money into it.
The federal government never takes dollars from your T-security account, though it does deposit interest dollars into that account.
The purpose of T-security accounts is not to provide the federal government with dollars: Instead, these accounts (misnamed “borrowing” or “debt”) provide a safe, interest-paying parking place for unused dollars, and to help the Federal Reserve control interest rates.
The sole financial purpose of federal taxes is not to fund the federal government but rather to help the government control the economy. The government taxes what it wishes to discourage and gives tax breaks to what it wishes to encourage.
This leads to the question: Why does the federal government tax salaries and business profits? Does it wish to discourage salaries? Does it wish to discourage business profits?
The secret purpose of federal taxes is to discourage the public from asking for benefits, by telling the people that the Social Security and Medicare agencies cannot afford to pay benefits without a tax increase.
Why does the federal government wish to discourage the public from asking for the benefits the federal government easily can fund without levying taxes? The reason has to do with the rich, who run the government, and with “Gap Psychology.”
“Rich” is a comparative term, not an absolute term. Someone having $100 would be rich if everyone else had $1, but someone having $1,000 would be poor if everyone else had $10,000.
The differences between richer and poorer are the “Gaps.” The wider the Gaps, the richer or poorer a person is.
If you are rich and wish to be richer, you must widen the Gap between you and those who have less than you and narrow the Gap above you.
There are two ways to accomplish this: Either obtain more money for yourself or force those below you to have less money.
The desire to widen the Gap below you and to narrow the Gap above you is known as “Gap Psychology.”
Convincing the poor not to demand increases in Social Security, Medicare, and other social benefits is one way to widen the Gap below you, i.e. to make yourself richer.
This is why the rich have bribed our politicians, our media, and our economists — your primary sources of economic information — to tell you falsely that taxes are necessary to fund such federal agencies as Social Security, Medicare, and all aids to the lower-income groups.
The rich bribe politicians via political contributions and promises of lucrative employment, later.
The rich bribe the media via ownership and advertising revenue.
The rich bribe the economists via contributions to universities and promises of lucrative work for think tanks.
When shown that federal government spending is not constrained by tax collections or any other availability of money, the retort often is “But that would cause inflation.” It is an insidious half-truth that does not reflect reality.
Using January 1, 1947 as a base, in the 73 succeeding years, the federal debt has increased to 6,945 (69-fold) while inflation has increased only to 1,150 (11-fold).
While federal debt (red line) has increased massively, inflation (blue line) has increased moderately.
From the end of the “Great Depression of 2008-2009, the comparison between federal debt and inflation is even more startling:
A massive increase in federal debt has been coincident with only a modest increase in inflation — below the Fed’s target of 2% annually.
Over a multi-year time period, there is no relationship between federal deficit spending and inflation. But even on an annual basis, the lack of a relationship is clear:
The red line (changes in federal debt) does not correspond with the blue line (changes in inflation).
Yet another excuse used by the rich, to prevent the rest from receiving federal benefits is, “If given money and benefits, the middle-class and the poor will refuse to work.”
This promulgates the false belief that the lower-income groups are congenitally lazy and do not have the same desires for advancement as do the rich.
But what the rich really mean is, “If given money and benefits, the lower-income groups will refuse to work in the unpleasant jobs we offer, for the slave wages we pay.”
The rich do not want to admit that “There but for the grace of God, go I,” and how much a role luck plays in the accumulation of wealth — the luck of being born to wealthy parents, the luck of being in the right place at the right time, the luck of being sent to the right college or working in daddy’s business.
This denial is due to Gap Psychology, the overriding desire to distance oneself from those below on the social scale and to come closer to those above.
In Summary
The federal government has the unlimited ability to fund all social programs. It can do so without collecting taxes, without borrowing, and without causing excessive inflation. The rich hide this fact in order to grow richer by widening the Gap between the rich and the rest.
Thus, all the excuses for not implementing social programs are based on false propaganda promulgated by the rich and accepted as fact, by the rest.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
I’m not sure why, psychologically, it’s so satisfying to see someone hoist with their own petard.
The school bully gets bullied. The “A” student braggart is caught cheating. The terrorist gets blown up by the bomb he was making.
Then there’s the Washington Post.
Don’t get me wrong. The Washington Post is a great, investigative newspaper.
Without the Washington Post, the NY Times, et al, we wouldn’t have learned half of what we know about the crooked Trump administration; And heaven forbid, that incompetent liar still might be President.
But sadly, WP (unintentionally, I assume) helps promulgate the Big Lie in economics, that federal financing is like your personal financing.
“If we can afford to give the Pentagon $2B every day, we can afford Medicare-for-all.”
Actually, Omar is correct, in a way, because the federal government canafford to give the Pentagon $2B every day, and also can afford Medicare for All. In fact, being Monetarily Sovereign, the federal government could give double those amounts, even while cutting federal taxes.
But now, the WP introduces the Big Lie in economics:
Anyone taking an introductory macroeconomics course is quickly introduced to the “guns versus butter” model.
It is a framework for discussing how much can be spent on a nation’s military budget vs. social programs.
There’s a finite amount of money available, and so the concept illustrates the tension between defense spending and civilian spending.
No, Mr. Kessler, there is not a “finite amount of money available.” There is, in fact, an infinite amount of money available.
The federal government has the exclusive legal power to create U.S. dollars, infinitely. As former Fed Chairman, Ben Bernanke said,
“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.”
“. . . as many dollars as it wishes . . .” It couldn’t be clearer, could it? There is not just a finite amount of money available. There’s “as many dollars as the federal government wishes” available.
Omar’s tweet is a perfect distillation of this concept, as she questions why money is being spent on defense when it could instead be spent on a single-payer health-care system, popularly known as Medicare-for-all.
Why “instead.” What is the purpose of that word “instead,” when the government can produce as many dollars as it wishes?
We originally thought Omar was proposing to eliminate spending on “guns” to maximize the “butter.” But her spokesman, Jeremy Slevin, says that is not the case.
“The point, which progressives have made repeatedly, is that we prioritize spending on hundreds of military bases, ground wars and weapons contracts instead of basic needs like health care, housing and nutrition,” he said.
There’s that word “instead” again. The Washington Post believes it. Omar believes it. Slevin believes it. They all believe there only is a finite amount of money to spread around, and that is the Big Lie of economics.
Still, this tweet calls for a review of the numbers. It may be news to Omar, but the U.S. government already spends more on health care than on defense.
So what if the government spends more on health care than on defense. What does spending on one have to do with spending on the other/
Some things, by their nature, cost more than other things. A diamond ring can cost more than a house, but that doesn’t mean a diamond ring is more important than a house.
Defense outlays in 2021 are expected to be about $733 billion, according to the Congressional Budget Office. Omar’s tweet — $2 billion a day on defense — suggests the annual budget is about $730 billion, so that’s on target.
Assuming no money was spent on defense, that would give you $7.3 trillion in extra cash to spend on a single-payer system for the next 10 years.
No, no, and no. Eliminating money for defense does not give you even one extra dollar to spend on a single-payer system.
The federal government could spend the $2 trillion on defense — or $20 trillion — and still spend as much as it wishes for single-payer health care.
That sounds like a lot of money, but it’s chicken feed compared with what the nation already is projected to spend on health care.
Just in 2028, annual health-care spending is projected to be $6.2 trillion.
Right now, individuals and companies pick up a lot of that tab. A national health-care system would require the federal government to pick up more of the cost.
Wrong, again. If the WP is referring to federal taxes, then none of that money is used to “pick up the tab.”
What “tab” do individuals and companies pick up? If you count the cost of private insurance as part of the tab, that’s a cost individuals pick up.
And if you count the fundamental human and business costs of illness, those are tabs individuals and companies pick up.
But, because federal taxes do not fund federal spending, individuals and companies pay taxes, but those tax dollars do not fund Medicare.
According to the CBO, federal subsidies for health care would increase between $1.5 trillion and $3 trillion a year — far more than any annual savings for eliminating the military. The nation’s national health-care expenditures would increase slightly or decline as much as 10 percent.
(Obviously, one way to increase the size of the pie available for health-care spending is to boost taxes. Nothing in life is ever free, and neither is free health care.)
Once again the Big Lie in economics is presented to you. The WP says nothing is free, but Ben Bernanke says the government can create all the money it wishes “at essentially no cost.”
And Ben is correct.
The WP writer is just quoting the old trope about there not being any such thing as a free lunch, and claiming it’s a fact of economics. But tropes aren’t facts, no matter how clever they may seem.
The Pinocchio Test Omar appears to have been making a rhetorical point, not a mathematically sound one, so we will leave this unrated.
But in the continuing debate over guns vs. butter, it’s important to remember that butter at the moment has the upper hand.
There needn’t be any debate about guns vs. butter. The federal government easily can pay for both at the touch of a computer key.
I award the Washington Post its own new ranking, the bottomless Pinocchio, for this article and all the others like it.
The “Bottomless Pinocchio, the Washington Post’s new ranking for a false claim repeated over and over, again.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:
A “baby bust” points to “a grim economic future” for America, said Noah Smith. U.S. births fell 4 percent in 2020 to their lowest rate since World War II, the federal government reported last week.
“This puts an increasing financial and physical burden on the young,” who must pay the soaring costs of Social Security, Medicare, and caring for their own aging family members.
Contrary to what the media, the politicians, and heaven help us, even the economists have been bribed to claim, there will be no financial burden (i.e. tax burden) on future taxpayers.
The reason: Unlike state and local taxpayers, the federal taxpayers do not fund anything.
The U.S. government is Monetarily Sovereign, meaning it has the unlimited ability to create its own sovereign currency, the U.S. dollar, at the touch of a computer key.
The federal government can pay for anything simply by creating dollars, and never can run short of dollars. Even if all federal tax collections fell to $0, the federal government could continue spending forever.
Think of all those trillions the federal government now is spending for COVID relief. No new taxes were levied. In fact, the most recent tax law changed involved tax cuts.
So, if federal taxes don’t pay for anything, why are they collected? Two reasons:
To tax what Congress and the President wish to discourage, and give tax breaks to what they wish to encourage, and
To fool you into believing that federal money is scarce so you won’t ask for federal benefits.
“In 2010, the number of working-age adults per older adult was 4.8; by 2060, it’s projected to be only half that”—meaning that the tax burden on workers will need to double.
The only “tax burden on workers” is the legal requirement to pay taxes, and those tax dollars are destroyed upon receipt by the Treasury.
To pay for Social Security and Medicare, the federal government uses the same system it uses to pay for Congress and the Supreme Court, the same system it uses to pay for the White House and the FBI, the same system it uses to pay for the military — it presses computer keys and creates dollars ad hoc.
Being Monetarily Sovereign, the federal government never can run short of dollars, never needs to ask anyone for dollars, and never borrows dollars.
The graying of the population will also lead to lower productivity and economic stagnation.
We assume they mean that old people are less productive than young people. While that is a questionable proposition, it is irrelevant.
It advent of smart machines makes each worker of any age far more productive than the previous working populations. There will be no stagnation so long as the federal government continues to pump dollars into the economy.
And it will put the U.S. at a marked disadvantage in our competition with China, which has four times our population. Increased immigration would help, but it’s not enough to keep our population growing.
All the above means is that China has four times as many people to support, a vast number of whom are impoverished by U.S. standards.
“Americans need to have more children,” and surveys show they want to—but are held back by the high costs of housing, education, and child care.
This would not even be an issue for debate, if the federal government would begin to institute the Ten Steps to Prosperity (below).
America has a choice to make: to be a graying nation in decline or a great nation, “confident enough in ourselves to believe that there should be more of us.”
It’s not clear what Noah Smith is suggesting. More sex? Fewer condoms?
The “solution” to the nonproblem of a declining population is simply to stop pretending that federal finances are like state/local government finances.
Yes, future taxpayers will have serious problems. Global warming is one. The proliferation of guns and other killing machines is another. Environmental poisoning and pollution are yet another.
But lack of workers is not one of those problems. In fact, smart automation making human labor obsolete is a far more likely scenario than the low birthrate in America.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:
#Monetary Sovereignty - Mitchell 