It’s everywhere; it’s everywhere. The debt myth touches you and everyone and everything.

Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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In the previous post, I complained that the mistaken beliefs about the federal debt, seemed to touch so many facets of our lives. I gave the example of New York Times’s article about the auction of public airwaves now used for television broadcasts, to create more wireless Internet systems. While the Times’s article should have focused on the scientific need for more airwaves, and how this auction would benefit Internet users, instead it focused on helping solve federal budget problems.

Today, my village newspaper, the Wilmette Life, published an opinion piece by Paul Sassone, titled “Changing dollar will weigh us down.”

I have nothing against the dollar bill. My only complaint is that I don’t have anywhere near enough of them. But the government doesn’t share my fondness. It wants to eliminate dollar bills.

On Jan. 31, a bipartisan bill (S 2049) was introduced in the U.S. Senate to replace the dollar bill with a dollar coin. There is complementary bill (HR 2977) in the U.S. House of Representatives. So, it could happen that the dollar bill is on the road to extinction.

Getting rid of the dollar bill is touted as a cost-saving measure. Being made of paper, dollar bills wear out a lot faster than metal coins. The General Accounting Office estimates using coins instead of dollar bills will save the government $5.6 billion over 30 years.

The thing is, we Americans have not shown a fondness for dollar coins. Remember the Susan B. Anthony dollar? First issued in 1979, it was issued for only four years. People didn’t like it, confused it with quarters, for one thing. And nobody wanted to lug around a pocketful, or pocketbook full, of coins.

The latest such attempt — the Presidential Dollars — hasn’t done so well either. The government suspended issuing these dollars last year for lack of public interest. It has in storage $1.4 billion Presidential Dollars and, it is estimated, would have had $2 billion piled up by 2016, the year there were no more presidents to commemorate.

With bipartisan bills in both houses of Congress, dollar coins may become a reality whether we citizens like them or not.

In short, Americans don’t want dollar coins, but Congress and the President, in their infinite ignorance, will foist them on us — to save money. Never mind that the federal government never needs to save money. In fact, it literally is unable to save money, because it never has any money to save. It creates dollars, ad hoc, by paying bills.

Which brings us to perhaps the most interesting sentence in Mr. Sassone’s article: “It has in storage $1.4 billion Presidential Dollars . . .”

First, keep in mind, those coins are not dollars. They are evidence for the ownership of dollars.

Think of all those sheets of $1, $2, $5, $10, $20 and $50 bills at the government printing office. They aren’t dollars either. They are nothing until the federal government sends them out, at which time they are proof the holder owns a dollar. They resemble the title to a house. The title is not a house, nor is a dollar bill a dollar. There is a company that prints form house titles. They aren’t houses, and not even evidence. They are nothing until used.

So now think about this: What would happen if the government decided to melt those 1.4 billion coins it has in storage? Would the government be any poorer? Would it suddenly be unable to pay its bills?

Or what would happen if there were a fire in the Government Printing Office, and a few trillion ones, fives, tens, etc. were destroyed? Again, would the federal government be poorer? Of course not. It simply would print up replacement pieces of paper, which would become TITLES to dollars when they are distributed to the public.

Neither coins nor paper bills are money. They merely are receipts representing money, which itself has no physical existence. And because money has no physical existence, the government never can run short. In fact, the government, contrary to popular usage, does not print money. It can’t. You can’t print something that does not exist in the physical world.

Because of the universal belief that the federal government is “broke” (Thank you Mr. Boehner), or cannot “afford” to pay for the various things Americans want, Americans must be inconvenienced (heavy coins in the pocket) or worse (lack medical care, retirement funds, etc.) I see that false belief touching every facet of our lives, just like the most restrictive religion you can imagine.

Everything you do, and everything you want to do, and everything you want, is colored by that massive superstition. It influences what you eat, what you wear, where you live, how you live. That false belief affects everything in your world.

And you think religious extremists are nuts???

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

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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports

#MONETARY SOVEREIGNTY

–The brainwashing of America: Economic debt myth pervades the entire New York Times.

You have seen how the New York Times spreads the economic debt myth in news items focused on the federal deficit. But the myth can be found lurking all over the paper, in articles covering many subjects.

Congress to Sell Public Airwaves to Pay Benefits
Luke Sharrett for The New York Times

WASHINGTON — The need for revenue to partly cover the extension of the payroll tax cut and long-term unemployment benefits has pushed Congress to embrace a generational shift in the country’s media landscape: the auction of public airwaves now used for television broadcasts to create more wireless Internet systems.

The measure would be a rare instance of the government compensating private companies with the proceeds from an auction of public property — broadcast licenses — once given free.

The news is about broadcast licenses. But the article focuses, not on the licenses, but on the federal deficit. There is scant attention to the licenses or the wisdom of awarding them, or the method by which they are awarded. Ostensibly about licenses, the article centers on the budget.

The government, being Monetarily Sovereign, never has a need for revenue. So, any article that begins with “The need for revenue. . . ,” when referring to the U.S. government, is guaranteed to be misleading. And so it is, with the item’s next paragraph.

The government may compensate private companies, but not “with the proceeds.” It may compensate in the amount of the proceeds, but federal payments are not made with federal income. If there were no proceeds, the government could compensate just as well. Proceeds are irrelevant.

The auctions, which are projected to raise more than $25 billion, would also further the Obama administration’s broadband expansion plans and create a nationwide communications network for emergency workers that would allow police, fire and other responders from different departments and jurisdictions to talk to each other directly.

The sweeping changes are even more remarkable because they resulted not from an effort to address communications policy, but from a hard-fought bipartisan compromise to extend a payroll tax holiday and jobless benefits. Republicans insisted that the extension of the unemployment insurance — a cost of roughly $30 billion — be paid for in full, and one area that both sides could agree on was spectrum sales.

Sadly, the mighty New York Times never has questioned the notion that a Monetarily Sovereign government – a government with the unlimited ability to create dollars — and unlimited ability to pay any bills of any size – nevertheless might need, or even use, income. It takes but a few seconds of thought to realize that the unlimited ability to create dollars obviates any need for financial aid.

The payroll tax exemption would be extended through the end of this year, providing a worker earning $50,000 annually with $1,000 more in take-home pay over that time. The bill would also prevent a reimbursement cut for doctors who accept Medicare.

Here was an irrelevancy to communications policy, tossed in as part of the brainwashing of America.

Not everyone agrees on the ultimate benefit of the new policies. Democrats, telecommunications companies and public safety officials have argued that the auctions of public airwaves will create thousands of jobs and billions of dollars of investment to build the systems.

But the House speaker, John A. Boehner, was more lukewarm in his enthusiasm for the measure. While saying that the compromise was “one that I support,” he added: “Let’s be honest. This is an economic relief package, not a bill that’s going to grow the economy and create jobs.”

Huh?? It’s economic relief, but it won’t grow the economy and create jobs? How does that work? Is this the same John Boehner who famously declared the U.S. is “broke”?

Some members of Mr. Boehner’s party disagreed. Representative Fred Upton of Michigan, chairman of the Energy and Commerce Committee, and Representative Greg Walden of Oregon, who leads a communications subcommittee, said in a joint statement that the bill would be “an economic game-changer.”

“With 13 million Americans still seeking employment, job creation is a driving force behind efforts to expand wireless broadband,” the congressmen said in their statement. “Spectrum auctions are not only good public policy for the communications and technology sector, they will produce meaningful job creation when we need it most.”

Do even Republicans pay attention any more to what Boehmer says? He views his job solely as being negative on anything Obama.

About $15 billion of the $30 billion extension in unemployment benefits will be paid for with the proceeds of the incentive auctions.

Wrong, again, New York Times. Can you imagine the benefits to America if the NY Times editors and writers understood Monetary Sovereignty. Is it too much to ask this great newspaper to spend a few minutes reading the facts?

And is it any wonder the American public is confused about U.S. deficits and debt. Everywhere people look, they see references appropriate to a monetarily non-sovereign America, though we have been Monetarily Sovereign since August 15, 1971.

This constant drumbeat of misinformation, found in every part of your daily newspaper, solidly has implanted the myth of American monetary non-sovereignty.

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

#MONETARY SOVEREIGNTY

–John Mauldin, one of the best paid gardeners, outdoes himself.

John Mauldin is a famous blogger, who publishes “Thoughts from the Front Line,” and books he promotes. He may be one of the best paid gardeners in the world. He never seems to understand Monetary Sovereignty, but today he may have outdone himself.

Here are a few excerpts from his blog:

Let me shock a few of my fellow Republicans and say that I think the deficit is such a deadly disease that it would be better for the country for the Democrats to be in power and forced to deal with the situation than to do nothing. I would not like their solution, and I think it would be harmful, but not as harmful as a second Depression, brought on by not dealing with the deficits and entitlement problems.

John, depending on how you define “Depression,” there have been at least six of them, not two, and all six have been brought on, not by deficits, but by surpluses:

1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

The most recent recession, and virtually every recession, has come on the heels of reduced deficit growth and has been cured with increased deficit growth.

But why bother investigating facts when repeating popular wisdom is so much easier. After all, everyone is saying it, so it must be true.

Think what happens when any country has hit that debt limit. Greece is not having fun. And either Italy is going to be unhappy with the longer-term recession it will have, or Germany is going to be unhappy with the ECB backing Italian debt at below-market rates for a long time, which means printing money and a much lower euro.

Pardon me, John, but those countries are monetarily non-sovereign. The U.S. is Monetarily Sovereign. Really, after all these years, don’t you understand the difference? And “printing money and a much lower euro” translated means “deficits cause inflation.” But hasn’t the U.S. been running huge deficits for years? So where is the inflation?

The growing debt and the deficit is a deadly cancer on the economy. It will deliver a mortal blow to the economy if not dealt with. . . . Putting off treatment will not make the cancer go away by itself, and the cancer of our debt is clearly growing and malignant.

Allow me to translate, again. What John says is: The growing money supply is a deadly cancer on the economy. It will deliver a mortal blow to the economy if not dealt with. . . . Putting off treatment will not make the cancer go away by itself, and the money supply is clearly growing and malignant.

Yes, according to John, the economy has too much money, and GDP will grow better and faster if we reduce the supply of money. How that works, I’m not sure. I’ve asked him, but get no answer.

Then he goes on with the usual blah, blah, blah about how austerity now is better than austerity later, and we should increase taxes and/or reduce spending in order to achieve that austerity as soon as possible.

Yes, John, austerity is great. Ask those nations that have experienced it.

John Mauldin has outdone himself this time. He may be one of the best paid gardeners in the world. Think of how much makes spreading manure.

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

#MONETARY SOVEREIGNTY

–With friends like these: How AARP’s misunderstanding of the facts hurts their members.

AARP’s writers don’t understand Monetary Sovereignty. They think Social Security is supported by FICA. This popular misconception hurts AARP members, because it supports three false notions about sustaining Social Security for future generations:

1. Social Security benefits must be reduced.
2. Social Security benefits should be taxed.
3. FICA must be increased.

Wrong, wrong and wrong. Those who understand Monetary Sovereignty know that in a Monetarily Sovereign nation, taxes do not pay for federal spending, and Social Security benefits could be expanded, even if FICA were zero ( which it should be ). Thus, AARP finds itself going along with popular myths, and opting for damaging “fixes,” instead of properly asking Congress to eliminate FICA, increase benefits and eliminate the tax on benefits.

AARP Home; Social Security: Fears vs. Facts
What Social Security critics keep getting wrong
by: Liz Weston | from: AARP The Magazine | July/August 2011 issue

I’ve been writing about Social Security for nearly two decades. But even I still have trouble wrapping my brain around some of the system’s complexities — from how benefits are calculated to how the trust fund works. So it’s not surprising that myths about Social Security persist, often fed by the program’s critics. With the debate about Social Security’s future once again heating up, these three myths need to be put to rest — so we can focus on the real issues.

Myth #1: By the time I retire, Social Security will be broke.

It’s true that Social Security’s finances need work, because over the long term there will not be enough money to fully cover promised benefits.

Absolutely, 100% false. The federal government, not FICA, pays for Social Security; the federal government never will run out of money. No tax supports federal spending in a Monetarily Sovereign nation (This is not true of the states, counties, cities and euro nations, all of which are monetarily non-sovereign, and do use taxes to support spending. It is vital to understand the difference.)

But radical changes aren’t needed. In 2010 a number of different proposals were put forward that, taken in combination, would put the program back on firm financial ground for the future, including changes such as raising the amount of wages subject to the payroll tax (now capped at $106,800) and benefit changes based on longer life expectancy.

Here was a perfect example of AARP acceding to Congress’s proposals, based on economic ignorance, that would harm AARP members. And this from a person who claims to have been writing about Social Security for “two decades.” Yikes!

Myth #2: The Social Security trust fund assets are worthless.

Any surplus payroll taxes not used for current benefits are used to purchase special-issue, interest-paying Treasury bonds. In other words, the surplus in the Social Security trust fund has been loaned to the federal government for its general use — the reserve of $2.6 trillion is not a heap of cash sitting in a vault.

These bonds are backed by the full faith and credit of the federal government, just as they are for other Treasury bondholders. However, Treasury will soon need to pay back these bonds. This will put pressure on the federal budget, according to Social Security’s board of trustees. Even without any changes, Social Security can continue paying full benefits through 2037. After that, the revenue from payroll taxes will still cover about 75 percent of promised benefits.

A mishmosh of partly true, almost true, once-but-no-longer-true statements. While government accounting seems to move money around, this is illusory. There may be pressure on the federal budget, but the budget is an artificial construct of pre-1971 accounting. There is no pressure on the federal government’s ability to pay.

The government has the power to credit and debit accounts at will, and none of this debiting and crediting affects one underlying truth: Payroll taxes do not pay for Social Security benefits. The government pays by instructing banks to mark up checking accounts, which it can do, endlessly.

The federal government never can run short of dollars. It never can be unable to pay its bills. It was monetarily non-sovereign when Social Security was invented, and the processes, though appropriate at the time, no longer are appropriate for a Monetarily Sovereign nation.

Myth #3: I could invest better on my own.

Maybe you could, and maybe you couldn’t. But the point of Social Security isn’t to maximize the return on the payroll taxes you’ve contributed. Social Security is designed to be the one guaranteed part of your retirement income that can’t be outlived or lost in the stock market. It’s a secure base of income throughout your working life and retirement. And for many, it’s a lifeline.

That one is correct. So two out of three isn’t bad.

As AARP The Magazine’s personal finance columnist, Liz Weston offers advice on everything from car loans to home sales.

Monetary Sovereignty is the basis for economics. Monetary Sovereignty is to economics as arithmetic is to mathematics.

AARP has a powerful voice. By going along with the popular (false) beliefs about Social Security, AARP does great damage to America. If AARP would take the minimal effort needed to understand Monetary Sovereignty, they could be an effective force for saving the American economy, and Social Security along with it.

I award AARP three dunce caps for not understanding the fundamentals of a subject about which they should be expert.

This, by the way, puts no pressure on my ability to create more dunce caps.

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

#MONETARY SOVEREIGNTY

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