The myths of “Crowding out”

Reader “CharlesD” bemoaned the difficulty he has had explaining Monetary Sovereignty to Congresspeople. (I feel your pain, Charles.)

He mentioned the “non-partisan” Congressional Budget Offices use of “crowding out” hypothesis,as one of the arguments against the increased federal deficit spending that is inherent in Monetary Sovereignty and the Ten Steps to Prosperity (below).

So far as the CBO being “non-partisan,” the Speaker of the House of Representatives and the president pro tempore of the Senate jointly appoint the CBO Director. The rest of CBO’s staff, including the Deputy Director, are appointed by the Director.

Is it possible to be more partisan than that?

Anyway, partisanship makes little difference, because both political parties and all political directions — right, center, and left — subscribe to the same “crowding out” myths, of which there are several:

Myth I. Federal debt supposedly “crowds out” private debt

From Investopedia: “Because large governments have the power to borrow large sums of money, doing so can actually have a substantial impact on the real interest rate, raising it by a significant degree.

This has the effect of absorbing the economy’s lending capacity and of discouraging businesses from engaging in capital projects.

A. The U.S. government does not borrow, nor does it need to.  What erroneously is termed “federal borrowing” actually is the issuance of T-securities.  Federal “debt” is the total of T-security accounts at the Federal Reserve Bank — similar to bank savings accounts.

In essence, “crowding out” hypothesis proposes that these bank account deposits crowd out lending, a strange idea, indeed.

B. The federal government pays its bills by creating new dollars, ad hoc.  To pay a creditor, each federal agency sends instructions (not dollars) 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 created and added to the economy.

C. Interest rates are determined by the Fed, and evolve from the federal funds target rate, which the Fed arbitrarily sets.

D. Issuing T-securities does not “absorb the economy’s lending capacity.” The federal government does not borrow from banks. The federal government issues T-securities, having no effect on any bank’s lending capacity (which is determined by bank capital).

Myth II. Social welfare programs supposedly “crowd out” private spending.

From Investopedia: Crowding out may also take place because of social welfare, unlikely as this may seem, though indirectly.

This happens when governments raise taxes in order to fund the introduction of new welfare programs or the expansion of existing ones.

With higher taxes, individuals and businesses are left with less discretionary income to spend, specifically on charitable donations toward social welfare or other causes that the government is also funding.

A. Federal spending adds dollars to the economy, thereby increasing the private sector’s discretionary income.

B. A Monetarily Sovereign government’s taxes do not fund the government’s spending. Even if all U.S. federal tax collections fell to $0, the federal government could continue spending, forever.

C. For monetarily non-sovereign (state and local) governments, taxes do fund spending, but that spending goes back into the economy. Local taxing does not create a net change in individuals’ and businesses’ discretionary income.

Ironically, the “crowding out” false claim is that federal spending on social programs crowds out private spending — on social programs.

Myth III. Government-funded infrastructure development projects can discourage privately funded infrastructure programs.

From Investopedia: Another form of crowding out can occur because of government-funded infrastructure development projects, which can discourage private enterprise from taking place in the same area of the market by making it undesirable or even unprofitable.

This often occurs with bridges and other roads, as government-funded development discourages companies from building toll roads or from engaging in other similar projects.

For example, if Build-It Infrastructure Corp. is thinking about building a bridge across the San Francisco Bay and has structured the project’s profit model around charging tolls for cars crossing the bridge, the announcement of a government-funded bridge project in the area will likely prevent Build-It’s project from taking place, as their toll bridge will likely not be able to compete with a free, publicly funded one.

A. Whatever the government does, it can “crowd out” a private company from doing the same thing. Instead, the government may hire a different private company to do the work.

In the “Build-It” example given above, the government usually will hire Build-It or one of its competitors to build the bridge. The government itself does very little of its own work, but generally finances private industry to do the work.

For example, the entire defense industry is built on federal financing. No “crowding out” there.

B. When the government does the work, it usually is because of control and risk. A classic example is NASA, which was funded and controlled by the government, for important political reasons.

Even here, however, the majority of NASA’s work is done by private contractors, who were relieved of the risk inherent in rocketry. Now, many years after the moon missions, private industry has learned enough from NASA’s experiences, the current risk seems acceptable.

Rather than “crowding out” private industry, NASA supported private industry and created an information base which private industry now is using.

Further, NASA pays the private sector (i.e. individual employees) to do the work, and these employees spend their money with private industry.

We have quoted the myths from Investopedia, but in all fairness, Investopedia does mention (at the end of its article) the other side of the story:

On the other hand, macroeconoic theories like Chartalism and Post-Keynesianism hold that in a modern economy operating significantly below capacity, government borrowing can actually increase demand by improving employment, thereby stimulating private spending as well.

This process is often referred to as “crowding in,” (which) has gained some currency among economists in recent years after it was noted that during the Great Recession of 2008 enormous spending on the part of the United States federal government on bonds and other securities actually had the effect of reducing interest rates.

Almost, but not quite.

Enormous spending by the federal government on products and services pumped dollars into the economy, which stimulated the economy.

Simultaneously, the Fed lower interest rates, by fiat, which in fact, did not stimulate the economy, and may have had a recessive effect. (See: The Low Interest Rate / GDP Growth Fallacy.)

Low rates cause the Federal Government to pay less interest on T-securities. Thus fewer dollars are pumped into the economy, an economic recessive.

Summary: The “crowding out” hypothesis demonstrates ignorance of economic reality and particularly of Monetary Sovereignty.

Save this article for the next time someone mentions the “crowding out” myth.

=Rodger Malcolm Mitchell
Monetary Sovereignty
===================================================================================
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 afford better health care than 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 AN ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) 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 EVERYONEFive 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 benefiting 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 CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-tranferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from 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 corporate taxes would be an 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.
=================================================================================================================================================================================================================================

A letter to our good friends, the British

Dear friends,

Congratulations on ridding yourselves of the unelected, wealthy bankers who have been running your country without your say so.

We discussed this at “What will Brexit mean”? and at “Brexit: How Obama bailed, then failed”

Be assured that your newfound freedom of self-determination has angered and frightened the above-mentioned wealthy bankers. They will not relinquish you, their cash cow, lightly.

During the weeks and months to come, you will be subject to repeated pressures to reverse your vote.

For example:

(LONDON)— Standard & Poor’s has stripped the United Kingdom of its top credit grade in the wake of the vote to leave the European Union.

The rating agency downgraded the country’s sovereign rating by two notches, from AAA to AA, saying the vote is a “seminal event” that “will lead to a less predictable, stable and effective policy framework in the U.K.”

It is also keeping a negative outlook on the rating, which means it could downgrade the country further.

It added in a report published Monday that the outlook reflects the risk to the economy and public finances, as well as the pound’s role as an international reserve currency.

It also cited “risks to the constitutional and economic integrity of the U.K.” as Scotland’s strong vote to remain in the EU could raise the prospect of another referendum on Scottish independence.

Do you see what is happening here?  S&P, which is owned by the rich, has begun the drumbeat for a reversal of Brexit.

And everything it says is lies.

  1. There is not a “less predictable, stable policy framework.” Quite the opposite, without the EU ruling for itself rather than for the people of Britain, policy should be more predictable.There will be no contradictions of motive. All decisions can be for the people, and the profitability of the ECB will not be an divisive issue.
  2. And here comes the threat: “It could downgrade the country further.” (Come back under our thumb, or else we’ll cut your credit rating — OR ELSE.)
  3. “The pound’s role as an international reserve currency” is a truly ironic concern. Where was this concern when the EU wanted Britain to leave the pound and join those tragic unfortunates who surrendered the single most valuable asset any nations have — their Monetary Sovereignty?In any event, leaving the EU will not affect the pound’s role as an international reserve currency. It actually will boost the pound’s role by strengthening the British economy.
  4. Then even more irony: ” . . . risks to the constitutional and economic integrity of the U.K.” Where in the constitution does it say that unelected, wealthy bankers and their compliant clerks should rule and overrule your constitutionally elected government?What is the “economic integrity” of having foreigners run your government?

S&P supposedly measures creditworthiness, i.e. the ability and willingness to service one’s debts. How has leaving the grasp of the EU bankers reduced Britain’s ability and willingness to service its debts?

(S&P is one of the rating organizations that reduced America’s credit rating below that of corporations domiciled in America! Think of what would befall the credit rating of those corporations should America ever fail to pay its debts.)

S&P relies on the goodwill of the rich for its business.

The S&P action is a fraud, funded by the rich. Any politician, economists or media who claim otherwise, also are frauds.

(As in America, the rich bribe your politicians with campaign contributions; the rich bribe the media via ownership; and the rich bribe the university economists with contributions to schools.)

The rich are afraid that if there are any future exits from the EU, there will begin an exit stampede of cash cows. The bankers will say anything and do anything to continue the milking.

Then, there is this article:

How Brexit Threatens to Turn the UK Into “Borisland”

Brexit is about much more than frustration about the E.U. and immigration.

It is about a shortage of decent and secure jobs; an impossibly precarious labour market; inexplicable inequalities in incomes and wealth; closed access to affordable education, and a terrible deficiency of affordable housing.

And it is about British Chancellor of the Exchequer Osborne’s single-minded austerity economics and the rule-free and tax-free space created for big banks and corporations.

Decision-making in the European Union symbolizes a largely unaccountable, elitist and undemocratic system, which is why Labour Party leader Jeremy Corbyn was half-hearted in his support for a Remain vote.

The recent examples of Greece, Spain and other southern European countries, all in a Brussels-induced economic lockdown, speak volumes against the political feasibility of “reforming the European Union from within.”

The sovereignty regained at the cost of deeply dividing the nation is unlikely to produce the more socially just and economically inclusive Britain that many voters sought.

The hopes of progressives are likely to be betrayed as Britain is turned into “Borisland” – a deindustrializing nation suffering from sluggish productivity growth, growing in-work poverty and rising inequalities, and with government in permanent austerity mode.

At long last, Britain has regained its Monetary Sovereignty.. Your leaders have the ability to benefit only you.

They do not need to cowtow to the greedy, foreign bankers, who care nothing for the people, but only for their own purses.

Sadly, your leaders have lied to you that austerity is necessary for economic growth, when exactly the opposite is true.

A growing economy requires a growing money supply. Austerity is like applying leeches to cure anemia.

To accomplish economic growth and citizen wellbeing, the national government of a Monetarily Sovereign government must add to the money supply. That is, your government always must run deficits, and larger the deficits the greater will be your Gross Domestic Product.  

GDP =  Government Spending + Non-government Spending + Net Exports

You will be told falsely that deficits are “unsustainable” and will cause inflation. But for a Monetarily Sovereign nation, no deficit of any size is “unsustainable,” and inflation is contained via interest rate control.

You have won the first battle, but the war remains in jeopardy. You will have to fight those outsiders, who wish to subjugate you, and to resume bleeding your economy.

And you will have to fight those insiders,  who will try to impose austerity.

The outsiders and the insiders are directed by the rich, whose sole motive is to brainwash you into allowing them to line their pockets with British gold.

Don’t allow it to happen.

Good luck to you.

=Rodger Malcolm Mitchell
Monetary Sovereignty

===================================================================================
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 afford better health care than 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 AN ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) 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 EVERYONEFive 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 benefiting 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 CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-tranferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from 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 corporate taxes would be an 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

Brexit: How Obama “bailed then failed”

I received this letter written by someone named “Mike,” whom I do not know, other than he lives in the UK

Hi everyone.

Thoughts on this subject have been asked for, so here goes!

Brexit – where do I start? Some background first….

When the UK joined in the early 70s and voted to remain in 1975, we joined what was then called the European Economic Community (EEC) or Common Market. There were no political connotations, it was simply a free trade area.

Over the years since then, the EEC morphed into the European Union (EU) which created a European Parliament, a European Court, a European Currency (the Euro) with a European Central Bank, a European Foreign Service and many other institutions and trappings of a sovereign state.

On the stocks at the moment is a proposal to create a European Armed Force in ‘opposition’ to NATO.

Many of us (52% as it turns out) were deeply disturbed by this as we found that our laws, passed by Parliament, were being overturned by the EU; that the decisions of our courts were being overruled by the European Court and by the European Court of Human Rights; and that we were powerless to prevent anybody with “European Citizenship” from travelling to the UK and, if they could not find work, from drawing our Welfare Benefits.

In fact, because Britain is more prosperous than any other country in the EU (yes, even Germany), many hundreds of thousands did come here from Poland, Romania, Bulgaria, Italy, Portugal, Greece and, amazingly, France – there were a net 300,000 last year alone – causing great strain on our housing stock, schools and hospitals.

While we attempted to negotiate with the other EU countries a deal which would alleviate our difficulties, concessions were derisory and we could see further problems arising if the flood of refugees from the Middle East and Africa were eventually granted EU citizenship as Germany, in particular, was suggesting.

There was also on the table a proposal that Turkey would join the EU which would eventually add a further large population entitled to travel here.

These issues have been a festering problem in British politics ever since the premiership of Margaret Thatcher but they came to prominence when the financial crash provoked problems within the Euro Zone.

The weakest economies – mainly in the south of Europe and, principally, Greece – collapsed and became reliant on the strongest economy, Germany.  The EU economy within the Euro Zone faltered and stagnated and calls to free the UK from all this became louder.

In an attempt to stifle these calls, David Cameron said that he would make a further effort to negotiate a deal and, once these negotiations were over, we would have an In/Out Referendum. We’ve had it and you know the result – we want out.

It’s a result that Pam and I voted for – principally on the constitutional issue. We didn’t vote for a European Union in 1975 and we don’t like what the Common Market has turned into. The nearest analogy that I can think of in US terms is States’ Rights and we didn’t like our rights being surreptitiously removed.

Incidentally, and I hate to have to say this, but President Obama did the Remain in Europe campaign, himself and the US no favours by saying that we would have to go to the end of the line for a trade deal with the USA if we left the EU.

Were we back of the line after Pearl Harbor; in Korea; during the Cuban Missile Crisis; with President Reagan in facing down Gorbachov; during Operation Desert Storm; or after 9/11?

We don’t expect favours or thanks but a little consideration would be welcome.

Of course, we recognise that there is going to be a downside: the financial institutions, having lost their bets on Britain staying in are screaming but they’ll get over it; the eurocrats and their masters in the EU are furious but if they want to go on trading with us, they’ll have to calm down and come to a sensible deal.

I suspect that a short-term slimming down of our economy is a price worth paying to get back control of the country.

Mike

Here is my response:

You are correct.

The EU was invented by the rich, insatiable bankers who always want to grab more and more money and power.

At least the UK was smart enough to keep their own currency (i.e. remained “Monetarily Sovereign”).

Greece, France, Italy, et al surrendered the single most valuable asset any nation can have — their Monetary Sovereignty — and so have been at the mercy of the rapacious bankers, who have been bleeding them ever since.

Way back in 2005, I spoke at the University of Missouri, Kansas City, where I said, “Because of the Euro, no euro nation can control its own money supply. The Euro is the worst economic idea since the recession-era, Smoot-Hawley Tariff. The economies of European nations are doomed by the euro.”

That goes for the EU.  Nations can have free trade without giving up their Monetary Sovereignty. But the bankers feel that doesn’t allow them to steal enough.

As for Obama, he is a pseudo-liberal, a right-winger in disguise. He opted for cutting Social Security and Medicare, begged for a “Grand Bargain” that would have widened the gap between the rich and the rest, and brought into existence the Simpson/Bowles Committee designed to cut all social spending.”

Now, he backs the EU, because it is a feeding trough for bankers.

(Obama always has been a flunkie for the bankers. Presumably, they will return the favor and support him and his family in luxury, for the rest of their lives.)

In his role as bank stooge, he bailed out the banks, then failed to prosecute a single lawbreaking bankster. He long will be remembered as the “bailed and failed” President.

The UK people made a great move, and if they get a wise Prime Minister, they will prosper well beyond any of the EU nations, which will continue to be bled by the banksters.

Congratulations and Godspeed to the UK.

The EU is nothing more than a direct money transfer system from the people to the bankers. The people are impoverished while the bankers grow richer.

The Brexit allows the UK to regain its Monetary Sovereignty. It has the power to do whatever is best to grow its economy and to benefit its people (and that, after all, is the fundamental purpose of government).

Britain will not need to adhere to any ridiculous “debt” limits or unlimited immigration, or the negation of its laws, as it creates the money to pay for jobs, food, housing, education, infrastructure and all other aids for its people. It will be able, if it wishes, to end poverty in the UK.

The greedy bankers will scream at the loss of a cash cow. Surrogates for the rich, like Obama, will tell the English they would be better off as slaves to the EU. The bankers will do everything possible to punish the populace for refusing to be Greece.

But if England stands firm against these criminals, that nation will become a shining beacon of economic freedom and human success.

We only can pray the next U.S. president will be as smart in his/her dealings with the bankers. America does not need another “bail and fail” President.

Rodger Malcolm Mitchell
Monetary Sovereignty

================================================================================================================================================================================
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 afford better health care than 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 AN ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) 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 EVERYONEFive 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 benefiting 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 CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-tranferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from 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 corporate taxes would be an 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

Why I am so tired of “doing the Semmelweis”

Does the name Ignaz Semmelweis sound familiar? I empathize with him and the memory of him exhausts me.

Here is a bit of history:

The year was 1846, and our would-be hero was a Hungarian doctor named Ignaz Semmelweis.

It was a time when physicians were expected to have scientific training.

So doctors like Semmelweis were no longer thinking of illness as an imbalance caused by bad air or evil spirits. They looked instead to anatomy. Autopsies became more common, and doctors got interested in numbers and collecting data.

Semmelweis wanted to figure out why so many women in maternity wards were dying from puerperal fever — commonly known as childbed fever.

When Semmelweis crunched the numbers, he discovered that women in the clinic staffed by doctors and medical students died at a rate nearly five times higher than women in the midwives’ clinic.

(After much research), Semmelweis hypothesized that there were cadaverous particles, little pieces of corpse, that students were getting on their hands from the cadavers they dissected.

And when they delivered the babies, these particles would get inside the women who would develop the disease and die.

So he ordered his medical staff to start cleaning their hands and instruments not just with soap but with a chlorine solution.

Semmelweis didn’t know anything about germs. He chose the chlorine because he thought it would be the best way to get rid of any smell left behind by those little bits of corpse.

And when he imposed this, the rate of childbed fever fell dramatically.

What Semmelweis had discovered is something that still holds true today: Hand-washing is one of the most important tools in public health. It can keep kids from getting the flu, prevent the spread of disease and keep infections at bay.

You’d think everyone would be thrilled. Semmelweis had solved the problem! But they weren’t thrilled.

For one thing, doctors were upset because Semmelweis’ hypothesis made it look like they were the ones giving childbed fever to the women.

Eventually, the doctors gave up the chlorine hand-washing.

Semmelweis kept trying to convince doctors in other parts of Europe to wash with chlorine, but no one would listen to him.

Even today, the Centers for Disease Control and Prevention says hand hygiene is one of the most important ways to prevent these infections.

Semmelweis failed because the establishment did not want to know the truth, and definitely did not want the public to know the truth.

Semmelweis ultimately died in an asylum. Women continued to die of childbed fever.

Now, 170 years later, people die of hospital-caused infections. Yet, you still have to remind careless nurses and doctors to use hand cleaner each time they visit your room.

When it comes to human belief, facts are far less important than emotion. Despite the absolute fact that hand cleaning prevented childbed fever, doctors didn’t want to believe it and didn’t want the public to believe it.

And that is why I empathize with Semmelweis.

It is an absolute fact that the U.S. government originally created the U.S. dollar from thin air, simply by creating laws from thin air. The laws made the dollar everything it is, and subsequent laws will make the U.S. dollar everything it will be.

The dollar is wholly the creation of U.S. laws, nothing more.

And just as laws have no physical existence, so too the dollar has no physical existence. You cannot see, feel, taste, smell, or hear a law. Similarly, you cannot see, feel, taste, smell, or hear a dollar. It is nothing more than a legal entity.

As the creator of the legal entity named a “dollar,” the U.S. government was, and is, sovereign over that legal entity. It created as many dollars as it wished by the stroke of a pen, and gave these dollars the value it wished, also by the stroke of a pen.

Still today, the government creates as many dollars as it wishes, this time by the press of a computer key. And still today it gives those dollars the value it wishes, also with a computer key.

The U.S. government has the power of Monetary Sovereignty, though it often has not used that power to help the populace.

It is an absolute fact that the U.S., a Monetarily Sovereign nation, cannot unintentionally run short of its own sovereign currency.

And it is an absolute fact that today’s establishment, like the doctors of Semmelweis’s day, do not want you to understand Monetary Sovereignty.

Because the public believed the doctors, who had authority, women did not understand the need for hand washing. So they died in agony.

And because today’s public believes the media, the politicians and the university economists, people do not understand Monetary Sovereignty, so we die the agony of economic deprivation.

We have poverty. We have sickness and unaffordable health care. We have hunger and homelessness. We have a corroded infrastructure. We have a corroded educational system. We have federal taxes.

And all are unnecessary and could be cured or at least ameliorated if people only understood Monetary Sovereignty.

Every day I see articles about the “unsustainable” federal debt. They are wrong.

The so-called “federal debt,” is nothing but the total of deposits in T-security accounts at the Federal Reserve Bank. It is utterly sustainable. It could be paid off tomorrow, simply by transferring the dollars that exist in those accounts back to the owners’ checking accounts, from whence they came. No new dollars required.

That is an absolute fact.

Every day, I see articles about “unaffordable” social programs like Social Security, Medicare, Medicaid, aids to the poor and aids to education. They are wrong.

Because the U.S. federal government is Monetarily Sovereign, and never can run short of its own sovereign currency, the dollar, it can afford anything that costs dollars.

Unlike states, counties, cities, businesses, you and me, all of which are monetarily NON-sovereign, the federal government doesn’t need or even use income. It pays its creditors by creating dollars ad hoc, from thin air.

Even if every federal tax — FICA, income taxes, luxury taxes, inheritance taxes et al — fell to $0, the federal government could continue spending, forever.

That is an absolute fact.

And every day, I see articles claiming that if the federal government taxed too little, or spent too much, we would have a Zimbabwean or Argentinian hyper-inflation. They are wrong.

Being Monetarily Sovereign, the U.S. government controls the value of its own sovereign currency, the dollar.

Originally, it exercised this control by ruling that each dollar was worth a certain weight of silver or gold, a ruling the government arbitrarily changed many times over the years. The more silver or gold backed each dollar, the more the dollar was worth.

Today, silver and gold no longer back the value of the dollar. That function now is fulfilled by interest rates.

The higher the interest rates, the more in demand are dollar-denominated bonds, notes, and bills, and the more in demand are the dollars with which to buy these bonds, notes, and bills. The increased demand for dollars increases the value of dollars, which is counter to inflation.

When the U.S. Federal Reserve senses inflation, it raises interest rates, and when it deems inflation too low, it lowers rates. By controlling interest rates, the Fed controls inflation.

These are absolute facts, just as true as Semmelweiss’s assertion that hand-washing helps prevent disease — and just as disbelieved by the public.

And as Semmelweis’s peers did not want the public to understand the truth about hand-washing, todays politicians, media and university economists do not want the public to understand the truth about Monetary Sovereignty.

Potential loss of prestige and power motivated Semmelweis’s peers to tell their big lie; potential loss of prestige and power is what motivates today’s BIG LIE in economics.

It begins with the rich. What makes them rich? The power and prestige Gap between them and the rest of us. If there were no Gap, no one would be rich and no one would be poor. We all would be the same.

So the rich want to widen the Gap. That is their primary motivation.

And to widen the Gap they bribe the politicians (via campaign contributions), bribe the media (via ownership of the media), and bribe the economists (via contributions to universities).

They bribe these people to tell THE BIG LIE, so all you read and hear is based on THE BIG LIE, and as a result, you believe THE BIG LIE.

What is THE BIG LIE? Here it is in just 5 words: FEDERAL TAXES FUND FEDERAL SPENDING.

Unlike state taxes, unlike county taxes, and unlike city taxes, federal taxes do nothing but remove dollars from the economy. They do not fund anything. Once received they disappear from the money supply. They are a net loss for the economy and for taxpayers.

Belief in THE BIG LIE has caused more economic damage than all the wars, all the floods, all the droughts, all the volcanic eruptions and all the crime in world history.

The absolute fact is: Federal taxes are too high and federal spending is too low.

My friend Stephanie Kelton, the chair of the economics department at the University of Missouri, Kansas City, understands Monetary Sovereignty well. She was hired by Bernie Sanders to be his chief economics advisor.

Yet, Bernie’s proposals are filled with commentary about how certain federal taxes would support his suggested federal programs.

Bernie knows this is a lie, because Stephanie knows it is a lie. They know federal taxes do not fund federal spending. They know the federal government cannot run short of the currency it invented. They know our social programs are not financially “unsustainable.”

They know the federal deficit, far from being an economic problem is an economic necessity for growth. They know every depression in U.S. history has been introduced with federal surpluses, and nearly all recessions have been introduced with deficit reduction.

But in our climate of economic ignorance, Bernie and Stephanie are afraid to tell the truth to the public. It would be Galileo arguing with Pope Urban VIII.

Like poor, old Semmelweis, I’ve spent 20 years trying to help the public see what would benefit them, and the public has used those 20 years to respond with invective.

The facts are:
–The Gap between the rich and the rest is too wide and it’s widening. The middle class is decimated and the poor are in worse shape than they were 20 years ago.
–The Gap could be reduced greatly, and the economy could prosper, by recognition of Monetary Sovereignty and by the implementation of the Ten Steps to Prosperity (below).

Imagine you are a doctor with morbidly obese patients, who also smoke. You try to show them how and why to lose weight and to stop smoking. But they tell you you’re not only wrong, but angrily tell you’re stupidly wrong. And your patients keep eating, keep smoking, and keep sickening and dying too soon.

At what point do you grow tired? At what point do you ask, “Why should I care, if they don’t.” At what point do you surrender? After all, my wife and I already have Social Security and Medicare and belong to country clubs and enough money to last us.

But then I think of my children and grandchildren and the world they will occupy, all because of national ignorance and the refusal to learn — not just refusal, but angry, insulting refusal.

So I write yet one more article hoping that somehow this will be the one that causes the truth to prevail, but knowing it probably won’t — like the sucker hoping his lottery number will come through.

It’s not that I have nothing else to do. I can write fiction and poetry. I can paint. I can keep playing tennis and schmoozing with my friends.

I tell myself, this is more important.

But, I really, really am growing weary of telling my obese, smoking, refusing-to-learn “patients” how they can live better, longer lives, when they don’t seem to care about themselves.

I really, really am tired of “doing the Semmelweis.”

Rodger Malcolm Mitchell
Monetary Sovereignty

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

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 afford better health care than 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 AN ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) 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 EVERYONEFive 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 benefiting 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 CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-tranferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from 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 corporate taxes would be an 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