Tag: all money is debt

–A personal musing. What is the future of jobs? Do jobs matter?

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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A personal musing. What is the future of jobs? Are we wrong to focus on job creation? Here is an excerpt from an article that ran last year:

CBS Reports; WALLINGFORD, CT., Jan. 5, 2009
The Future of Jobs in America; Innovation, R&D, and Education are Keys to Job Creation, By Anthony Mason

For 23 straight months now, the U.S. economy has been hemorrhaging jobs. . . One in six Americans, 17 percent, is underemployed. That’s nearly 25 million people who are out of work, have given up looking, or been forced to take a part time job. The recession has wiped out 15 percent of our manufacturing workforce. That’s more than 2 million jobs that will likely never come back.

Here is an excerpt from a recent article:

Jobs in China, By ANDREW JACOBS, The New York Times, 12/12/2010
In 1998 . . . Chinese colleges produced 830,000 graduates. . . . Last May, that number was more than six million and rising. . . The economy, despite its robust growth, does not generate enough good professional jobs to absorb the influx of highly educated young adults. And many of them bear the inflated expectations of their parents, who emptied their bank accounts to buy them the good life that a higher education is presumed to guarantee.

It widely is believed America suffers from a shortage of jobs. I suggest that may not be true. Rather, America suffers from a shortage of money.

It began with the Industrial Revolution. Since then, machines have done more work that people once did. Machines chased people off labor-intensive farms to manufacturing and white collar work. Then, machines run by people, chased people off those jobs. Soon, machines run by computers began to take over. But someone had to build and program the computers, so jobs in electronics industries expanded. Now computers have begun to build and program computers.

So from where will the next jobs come? And does it matter?

Most people really don’t want a job; they want money. Yes, some jobs may offer personal satisfaction, and may occupy otherwise dull hours, but for most people seeking jobs, money is the primary goal.

Wait, Rodger. People do not want money. They want what money will buy. They want more security, better shelter, food, clothing, health care, education. They want admiration. They want envy. They want accomplishment. They want to win.

O.K.., money can’t buy everything, but it can buy much of what people want. A jobs is a means to obtain money, which in turn is a means to obtain the things we want. And that Rube Goldbergian “means-to-a-means-to-a-means” connection is being superseded by machines.

Those who have seen the “Star Trek, The Next Generation” TV series are familiar with the “replicator.” It can synthesize any non-living product, seemingly out of thin air. If such a device existed today, our money and job needs would decline radically. Yes, we might continue to work for satisfaction, for creativity, or to fill otherwise-empty hours – but not so much for money, since there would be little need for money other than perhaps to pay for some services. The replicator could supply our product needs.

Replicators may seem far off, but we are evolving in that direction, where machines supply more and more of our product needs. And as that happens we butt up against what will be increasingly difficult questions: Why must we work to obtain money – and why must people struggle to find jobs to obtain money – especially since money is free?

That’s right. Money is free. The U.S. federal government has the infinite ability to create money out of thin air. In essence, the U.S. government is a “money replicator.” At the touch of a button, the government could supply each of us with unlimited money. Want $1 trillion? No problem. Here, take $2 trillion. There is no physical money; it’s all just data, and data is infinite.

Extreme amounts of money creation would reduce the value of money (aka “inflation”), but the point is this: There is no fundamental reason why anyone in America should lack food, clothing, shelter, education, health care simply for lack of a job. There is no job-related reason for poverty in America. Our “money-replicator” government has the power to lift everyone from poverty and supply all their basic needs.

This brings us to an important difference between why people want to work and why the economy wants people to work. While people work to obtain goods and services, the economy wants people to work to create goods and services. If we all owned replicators, and if no one worked, eventually we would have no progress and no services, and the economy would collapse.

There may be a compromise, between where we are today and an economy with no jobs at all. I’m not sure exactly where that compromise is, and surely it would change over time, but here are a couple of “what-ifs.” What if:

–The government’s “money replicator” gave every man, woman and child enough to pay for food, clothing, home, health care, entertainment and education through college — i.e. ended poverty?
–Those who wanted more than basics could work, but the standard, legal work days were lowered from 8 hours to 6 hours to 4 hours or less, providing more jobs for all who wanted them?
–Federal taxes, being unnecessary, were phased out?

Of course, the devil is in the details. What about Inflation? Motivation? Progress? International relations? I have some thoughts on these, which I plan to provide in later posts. I believe we eventually will loosen the connection between jobs to money to goods and services. It won’t be “if” but “when,” and it will be an improvement over our current situation of too much joblessness, poverty, illiteracy, homelessness, sickness and struggle.

Time and energy devoted to the creation of jobs may take us down the wrong path. Perhaps we should focus on the creation and distribution of money.

What are your thoughts?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–Democrats eagerly embrace suicide mentality

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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Question: What can save the Democrats in the 2012 elections?
Answer: Economic growth.

Question: What will stimulate economic growth?
Answer: Tax benefits, better unemployment benefits, business benefits.

Question: What will provide tax benefits, more unemployment benefits, business benefits?
Answer: The deal President Obama worked out with GOP leaders. It has lots of tax benefits for everyone. The Bush tax reductions remain. Capital gains and dividend taxes remain at 15%. FICA is reduced. The “death tax” didn’t go as high as people feared. Unemployment benefits were lengthened.

Question: What has the Democrats angry?
Answer: The deal President Obama worked out with GOP leaders.

Question: Why are the Democrats angry at the one bill that can get them re-elected in 2012?
Answer: They campaigned on the pledge to stick it to the wealthy. This bill doesn’t stick it to the wealthy — at least not enough. This bill moderately benefits the entire country. The Democrats now are in the “Cut-my-nose-to-spite-my-face” mode, except they also are willing to spite all of America. There was a time when we all could laugh at ignorant politicians. Today, when they actively aim to harm America, they aren’t quite as funny.

By the way, did you notice how they slid in that reduction in FICA, which we recommended 15 months ago (Ten Reasons to Eliminate FICA ) and which my book, FREE MONEY, recommended 12 years ago. But hey, better late than never. As usual, they did only a partial job, but what can you expect?

Anyway, soon you’ll see all the misguided debt-hawk columnists prattle on about how this FICA reduction will make Social Security go bankrupt sooner. Tell me, who understands economics less, the columnists or the politicians?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–Initial results from the survey

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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Here are a few results from a survey I ran, recently. The results demonstrate the confusion even educated people have about our economy:

All respondents agreed “the U.S. government has the power to print all the money it wants to” and half thought the federal deficit was too low. But, only half thought high taxes were a big problem. There was a logical disconnect between the government’s unlimited ability to spend money and the need for taxes.

Nearly everyone thought a “continuation or resumption of the recession” was a big problem, and only a handful thought the federal deficit was a big problem.

The majority wanted more spending on Retirement, Medical care, Education, Infrastructure, The environment and Unemployment. I was surprised that the majority wanted less spending on The military and Homeland security.

Perhaps the most interesting parts of the survey were the answers to “If I were President of the United States, this is what I would do to improve the economy.”
One person wanted to “cut the budget by 1% across all departments each year for 3 years and eliminate earmarks.” But that same person wanted more spending on medical care, education and the environment, with no change in spending on retirement, housing, business, infrastructure and unemployment.

One person wanted to end all federal taxing and borrowing, and to cut the size of the federal government to 20% of the size it is today. That person wanted less spending in all listed categories, while feeling the following problems were big: recession, state deficits, unemployment, mortgages, medical costs.

Several people wanted to end FICA along with other taxes, but some felt the federal deficit was too high.

Obviously, the results are skewed by the fact that most respondents read this blog. I was encouraged by the unanimous knowledge that the federal government has the unlimited ability to create money. So I was surprised by the common belief that taxes are necessary, especially since very few people felt inflation was a problem. (If the government can create money, and inflation is no problem, why the need for taxes?)

As I read through the comments, I was struck by one theme: Even those, who generally understand federal financing, tend to have some elements of anthropomorphic economics disease – the intuition that the federal government is like you and me. There was some“Tea Partyism” – wanting more federal spending on most projects, while wanting less government.

The debt hawks have a simple, highly intuitive model: Our own personal experience. Those who understand monetary sovereignty haven’t found such a model. So even among readers of this blog, whom one might expect to understand monetary sovereignty, the intuitive pull of personal experience is quite strong.

You can see it best while watching Congress try to stimulate the economy while limiting the only thing that can stimulate the economy: money creation.
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Response Summary

Chart1. I believe the federal deficit is:

Too low 57.7%
Too high 15.4%
About right 26.9%

Chart2. My belief about the size of the federal deficit is based on: (Indicate all that apply)

My own research 66.7%
What I learned in school 11.1%
What I hear and read in the media 33.3%
What the experts say 37.0%
What my friends say 7.4%
Other 14.8%

Chart3. Do you believe the U.S. government has the power to print all the money it wants to?

Yes, it has that power 100.0%

Chart4. How big are these problems facing the American economy.
Extremely big—–Fairly big—–Moderate or Not sure—–Not very big—–Not at all big

Continuation or resumption of the recession
63.0% 29.6% 7.4%

Federal deficit too high
7.4% 7.4% 14.8% 14.8% 51.9%

State deficits too high
37.0% 37.0% 18.5% 0.0% 7.4%

Unemployment
85.2% 14.8%

The economy has too little money
30.8% 26.9% 34.6%

Federal taxes are too high
26.9% 26.9% 15.4% 3.8% 26.9%

Too little support for the poor
38.5% 30.8% 23.1% 3.8% 3.8%

The gap between rich and poor
63.0% 14.8% 11.1% 7.4% 3.7%

Mortgages
26.9% 53.8% 15.4% 3.8%

Bank lending
15.4% 30.8% 42.3% 11.5%

Medical costs
51.9% 29.6% 11.1% 7.4%

Inflation
0.0% 7.7% 19.2% 11.5% 61.5%

Chart5. The federal government should spend on:

More than it currently spends—–About what it currently spends—– Less than it currently spends

The military
7.7% 26.9% 65.4%

Homeland security
15.4% 34.6% 50.0%

Retirement
63.0% 29.6% 7.4%

Medical care
53.8% 26.9% 19.2%

Housing
38.5% 46.2% 15.4%

Business support
30.8% 42.3% 26.9%

Education
74.1% 22.2% 3.7%

Infrastructure
85.2% 11.1% 3.7%

The environment
53.8% 30.8% 15.4%

Unemployment
74.1% 18.5% 7.4%

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If I were President of the United States, this is what I would do to improve the economy. [Selected responses]

1. suspend FICA collection
2. put people to work on infrastructure projects.
bring our troops home from all over the world.
build an network of wind-power projects, and feed them into a much upgraded national electrical grid.
facilitate a truly high-speed internet.
build a very high-speed maglev train network.
enable a national network of college-level courses that anyone could take over the internet.
3. Hugely increase spending in job creation, infrastructure, education, health care, energy R&D, heath care R&D, health and safety regulations and environmental clean up and protection.
4. First, I would institute a full payroll tax holiday, a per capita disbursement to the states, and an ELR program. Then hopefully we can begin to turn our economy around and start to reap the benifits of our real terms of trade.
5. Cut the budget by 1% across all departments each year for 3 years. Eliminate earmarks.
6. remove/eliminate payroll/FICA/medicare taxes & fund them from the general fund like everything else (great idea you have)… spend/hire billions more on DARPA, National Insitutte of Health, Medical Corps, QUADRUPLE medical schools/nursing schools/PA schools, etc to increase supply of medical personnel for increased medical demand of baby boomers & lower prices by increasing supply of medical services
and $1 TRILLION (like China is doing) on 250mph bullet trains between L.A. & Vegas, Chicago & Detroit, DC & NY, etc
7. Eliminate the payroll tax.
8. FICA holiday forever, Per capital state support, Work program.
9. End the Income Tax, Social Security Tax, and Medicare Tax. Stop borrowing our own currency. And cut the size of government to 20% of the size it is today.
10. Not too sure. Support green jobs and green infrastructure – this reduces unemployment, strengthens our infrastructure, and increases national security (moreso than a war in the Middle East would anyway). I would reduce some of the corporate welfare and unnecessary defense projects (and probably pay our soldiers more). Spend more overall, however, until the private sector picks back up.
11. Cut taxes for everyone. Fix health care, dump the current law
12. go back to the barter system.
13. Eliminate the payroll taxes
14. No taxes (including FICA) on 1st 100K of income (all sources), graduated marginal rates going up to 90% on all else. Guarantee job to anyone wanting one. Raise social security payouts by 50%. Really regulate financial sector and introduce transaction taxes
15. Cut military spending, eliminate tax cuts for rich, and dedicate more resources to meaningful stimulus packages.
16. cut taxes, increase the stimulus packages because I believe that the current stimulus is barely helping people pay off their debt and willing not increase their spending. I would seek reform of the IRS tax code(So it is not so complicated and the average American can do their own taxes), Audit and Tax the federal reserve on their income. Eliminate congressional spending to what they bring in only.
17. I would aim to catch up and overtake the Chinese in infrastructure and education. The US has to spend and tax the rich whatever it takes to achieve this. I would tell the American people that the US is in an economic war with China and is currently losing and is going to lose unless it changes course.
18. Dismantle the Tax code, make it a simple structure, a % of earnings at 4 or 5 stages (say 0% for under 30,000; 8% over 30K and under 50K; 15% over 50K and 150K; 25% over 150K and 250K & 32% over 250K. No loopholes, no deductions, no credits on anything.
19. Learn about how the govt’s role in providing money to the economy. They dont’ know how things work.
20. Tax all offshore tax haven corporate sales in USA at a higher rate than sales from US based corps and corps based in countries we have trade agreements with.
– Bring taxes on top 3% into line with Reagan or Clinton rates.
– Pass a War Tax which would go into effect automatically whenever US troops enter a foreign country for military engagement. Progressive tax, no exceptions. Exempt special ops from this tax.
– Pass a 1 trillion dollar stimulus bill.
– Disengage as quickly as possible from Afghanistan.
– Withdraw as many troops as possible from Muslim countries.
– Emphasize special ops in any future engagement, avoid ground troops. Retire most generals. keep number of generals to a smaller number.
– Increase veteran benefits, cut back on military budget by 30%.
– Fully support Head Start programs.
– Encourage savings by giving 10-20 year US bonds to all families below a certain income, add 50% on every dollar in savings accounts first year for low income people, 20% afterwards, 10% after 5 years.
– Create a federally funded, independent bond and equities rating agency. Prosecute executives and CEOs at any financial company who provides this agency with deceptive information.
21. Direct hiring program, single-payer health-care, increased taxes on rich.
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Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–An “investigative” newspaper comments on the new tax agreement

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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For reasons I cannot even begin to imagine, the Chicago Tribune, which prides itself on being an investigative newspaper, refuses to investigate facts before or even after, writing about the economy. I have contacted them often, and they never have displayed even a modicum of interest in learning anything about how the economy works. Instead, they rely solely on popular myth.

Here is a verbatum copy of an Email I sent to editors and others at the Tribune:

“Today’s (12/7/10) Chicago Tribune editorial titled, “Tax Dealing” contains a mixture of truth and myths.

1. Truth: “ . . .raising marginal (tax) rates, especially with the tax year ending an a matter of weeks, would hurt an economic recover still on life support. Obama knows he needs all the growth he can get.” Translation: Yes, taxes hurt the economy because they remove money from the economy. A growing economy requires a growing supply of money.

2. Myth: ” . . . nobody is reducing the cost of government to make up the lost revenue.” Fact: Federal spending is not constrained by taxes, nor do taxes pay for federal spending. Tax money is destroyed (i.e. “lost”) upon receipt and is not stored anywhere.

3. Truth: “The (commission on debt reduction) work can be a catalyst for historic change.” Yes, if we follow the commission’s debt reduction advice, we will have a depression of historic proportions. See item #1, above.

4. Truth: “The panel’s plan involves cutting everything from defense to Social Security . . . Everyone from senior citizens to post-office customers have complained about the pain involved if the plan were enacted.” Yes, it’s a plan that hurts everyone and benefits no one. It’s all pain and no gain.

5. Myth: “That’s unavoidable. Everyone is going to feel some pain when the nation makes its government live within its means.” Fact: Causing economic pain neither is unavoidable nor praiseworthy. As for the government “living within its means,” the Tribune demonstrates it does not know the difference between monetarily sovereign finances (U.S. Government) and monetarily non-sovereign finances (everyone else). You and I have “means.” We must have a source of money before we spend. We are limited in how much we can spend. The federal government is not limited. It creates money by spending. It alone has the unlimited ability to pay any bills of any size. It has no “means.”

6. Myth: You repeated Sen. Durbin’s comment, “Borrowing 40 cents out of every dollar we spend for missiles or food stamps is unsustainable.” Fact: The federal government does not need to borrow even one cent. Borrowing the money the federal government originally created, and can continue to create endlessly, makes no economic sense. It is a relic of the gold standard days, when federal borrowing was necessary. The government does not spend borrowed money. As for federal spending being “unsustainable,” this myth has been bandied about since 1980 (See: Unsustainable) It is no more true today than it was 30 years ago.

7. Myth: “It’s irresponsible for our nation to go on accumulating unaffordable debts that will force even more painful cuts down the line.” What makes the debt “unaffordable”? The Tribune has no idea. In fact, “federal debt” merely is a synonym for “federal money created.” Without federal debt there would be no money and no economy. The Tribune makes the nonsensical complaint that money is unaffordable.

8. Myth: “The coming agreement on tax cuts will avoid an unwelcome shock to the U.S. economy. It will buy time. But it has to lead to an agreement on long-term deficit reduction.” The Tribune editors do not realize that the first part of this paragraph contradicts the second part. If increasing deficits will help the economy, why do the Tribune editors want to decrease deficits? Ever?

In summary, the Tribune editors continue to parrot the myths of the day. Not once do they even make an attempt to provide evidence supporting their beliefs. So I’ll leave you with a couple of questions, you may or may not wish to answer:

–Exactly what do you mean by “make up for lost revenue.” Do you mean that without this “lost revenue” the federal government will be unable to pay its bills?
–Why do you feel economic pain is beneficial. Has the economic pain we already have felt proved beneficial?
–Why do you feel cutting defense will benefit the economy and American security?
–Why do you feel cutting Social Security benefits will benefit the economy?
–Why do you feel reducing postal service will benefit the economy?
–What is the definition of “means,” when you say the government must live within its means. What has happened because the government has not lived within its “means.”
–What do you mean by ‘unaffordable debts.” Do you think a government with the unlimited power to create money, cannot afford to pay for the T-securities it creates out of thin air? Similarly, what do you mean by “unsustainable”?
–Does the Tribune feel any concern about spreading false information that could damage your readers and the entire American economy?
–Is the Tribune interested in learning the facts?

If any of you are readers of the Chicago Tribune, you may wish to write to them. Perhaps mutiple voices would help. I write to:
Zoll, Yerak, Dold, Japsen, Page, Greising, Letters, Ponpei, Delama, Kern, , Oliphant, Hirt, Business, Knowles, Kass, Lythcott, McHolt, O’Brien, Epodmolik, Lev, Doneal
Hughlett, Nicholas, Widder, Jones, Hunter, Wong

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”