Fairy tales about money.

We have three main political groups in America:

The Republicans who support rich, white, Christian, NRA men born in America, but claim too much money is given to everyone else.
The semi-Republicans (aka “Libertarians) who also claim the government spends too much helping the poor and middle-income people but support tax breaks for the rich.
The Dems who claim to love ordinary people but still yield to fairy tales about excessive federal deficits and debt.
There’s a fourth category: All those groups that claim to support a specific issue but, in reality, are designed to take votes from one of the major parties.

Veronique de Rugy | Washington Examiner — **Veronique de Rugy**

Here are some excerpts from an article that demonstrates the fairy tales they all promulgate. It was written by a semi-Republican (Libertarian).

‘Bidenomics’ Is Failing Everyday Americans The big spending has fueled higher inflation, resulted in larger-than-projected deficits, and contributed to a record level of debt.

By Veronique de Rugy, 9/21/2023

We’ve shown you data (here, here, here, here, and elsewhere) that demonstrate why even massive federal spending does not cause inflation. All inflations are caused by shortages of critical goods and services. When anything is in short supply, its price rises. When critical goods like oil and food are in short supply, prices generally increase. This general increase is called inflation. These shortages can be cured by federal spending to obtain and disseminate the scarce goods and services. The U.S. government spent massively for many years, and we experienced meager inflation. Only when COVID, the Russian/Ukraine war, immigration restrictions, and Saudi greed caused shortages of oil, food, computer chips, lumber, metals, labor, and other Gross Domestic Product necessities did we have the general increase in prices known as “inflation.” GRAPH I.

**There is no historical relationship between highs and lows of federal spending (green) and inflation (red).**

GRAPH II.

**Also, there is no historical relationship between highs and lows of federal DEFICIT spending (blue) and inflation (red).**

GRAPH III.

**There is a strong correlation between the highs and lows of oil supplies (gray) and inflation (red).**

Ordinary Americans aren’t feeling the so-called success of “Bidenomics.”

Superficially, the economy looks solid. Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the second quarter of 2023.

While August’s unemployment rate rose to 3.8 percent, that’s still considered full employment by economists.

Wages are rising, and we are often told we’re in a manufacturing boom.

But these numbers need perspective. Employment growth was inevitable because we lost millions of jobs during the pandemic.

De Rugy forgets she admitted we’re at full employment. This has nothing to do with employment growth. “Full” means “full.” She makes the strange claim that because we lost jobs during COVID, today’s full employment was a natural result. Sorry, but that right-wing naysaying won’t fly. Federal spending helped create those jobs. We have a labor shortage, partly because right-wingers falsely claim that undocumented immigrants bring crime and drugs to America.

Comparing Crime Rates Between Undocumented Immigrants, Legal Immigrants, and Native-born US Citizens in Texas

This study used uniquely comprehensive arrest data from the Texas Department of Public Safety to compare the criminality of undocumented immigrants to legal immigrants and native-born U.S. citizens between 2012 and 2018.

The study found that undocumented immigrants had substantially lower crime rates than native-born citizens and legal immigrants across a range of felony offenses. Relative to undocumented immigrants, U.S.-born citizens are over 2 times more likely to be arrested for violent crimes, 2.5 times more likely to be arrested for drug crimes, and over 4 times more likely to be arrested for property crimes.

Drugs come in via legal entry ports, not via immigrant families desperate to escape gangs and poverty.)

Cocaine seizures on U.S. borders, for instance, regularly measure in tons, making it impractical to have individual migrants ferry it across. Instead, dealers prefer to smuggle drugs into the country via legal ports of entry, which allow them to bring in high-value substances that are more easily hidden.

“The majority of the illegal drugs that enter the United States through the U.S.-Mexico border cross through formal Points of Entry,” said Joel Martinez, a Mexico research associate for the Center for American Progress

“The drugs that cross in between are very minimal and non-expensive products like marijuana. All the cocaine, fentanyl and methamphetamine — they cross through formal ports because they’re easier to hide […in] freight comp and assorted vehicles.”

So, right-wing bigotry against foreigners, especially those of color, make it almost impossible for those people to gain citizenship.

Unemployment is low, but only because the economy is drunk on spending, simultaneously closing many people out of the labor force.

De Rugy, desperate to minimize Biden’s success, unknowingly admits that federal spending reduces unemployment. Then, strangely, she declares that in some unknown way, federal spending “closes people out of the labor force.” It is not unusual for people to take both sides of an issue when they have no facts.

Moreover, inflation-adjusted median household income has declined—from $76,330 in 2021 to $74,580 in 2022. Labor tensions and strikes are also intensifying.

This problem is not caused by federal spending but rather by the greed of the rich. Plenty of profits reward shareholders via stock price growth and stock by-backs. Companies have plenty of money to reward executives with excessive pay increases, many multiples higher than average workers’. Now, we see the inevitable result: Strikes.

With all this in mind, is the average American becoming better off?

No, the average worker is not making more inflation-measured dollars, which is why Biden (but not the Libertarians and the GOP) favors the strikers. They are striking to narrow the income/wealth/power Gap between the rich and the rest. This is anathema to the Republicans and the faux Republicans (Libertarians), who always favor cutting benefits to the not-rich (while cutting taxes on the rich.)

These troubles are partly caused by inflation, which continues to take its toll. Per the Consumer Price Index (CPI), year-over-year inflation rose to 3.7 percent in August, nudging back up after peaking at 9.1 percent not long ago.

“Core” CPI (excluding food and energy) is down slightly to 4.3 percent. Although these numbers are an improvement after we experienced their highest levels since 1982, they remain disturbingly high.

Excluding food and energy from the measure of inflation and calling the balance “core inflation” makes no sense. It’s like excluding all home runs, triples, and doubles from a baseball player’s statistics and calling singles his “core” batting average. Scarities of energy and/or food are the most common and most important reasons for inflation. The Fed is so focused on money it has lost sight of reality. The reason: The Fed is tasked with curing inflation, and its only tool is interest rates. So, the Fed ignores the scarcity of energy and food and proclaims these products are not “core,” when that is precisely what they are. (“Move on, folks. Nothing to see here.”)

This is bad news for Americans whose standard of living has fallen since early 2021.

The Bureau of Labor Statistics (BLS) reported real average hourly earnings declining in 2021 and 2022, meaning Americans can afford less with their hard-earned dollars.

More than three-quarters of people’s income is devoted to living expenses like housing, transportation, and food—all of which have become more expensive.

The federal government can make all of the above less expensive to Americans. Consumers could receive federal benefits for housing, transportation, and food. FICA could be eliminated; being a federal tax, it pays for nothing. (The federal government pays for everything by creating new dollars ad hoc. Federal tax dollars are destroyed upon receipt.) The right-wing opposes all these solutions to the fallen standard of living.

Food prices, for instance, rose by 19.3 percent. Shelter rose by 16.5 percent since 2021. Gasoline prices are up, too.

Inflation is a tax on every American’s standard of living. It’s also a regressive tax. Low-income workers tend to experience higher-than-average levels of household inflation.

Inflation would not take its toll on Americans if the federal government increased spending to:

Provide free healthcare insurance to every man, woman, and child in America, regardless of wealth and income.
Provide Social Security benefits to every man, woman, and child in America, regardless of wealth and income.
Reduce energy prices by supporting renewable energy and oil drilling/refining.

De Rugy cries crocodile tears for the “Average American’s troubles” but refuses to consider any cure for those troubles. Instead, she worries about the non-existent “troubles” of the federal government, the one entity in America with limitless funds, and never needs to worry about bankruptcy.

Making matters worse, high-interest rates resulting from the Federal Reserve’s fight against inflation also hit lower-income Americans the hardest.

These tend to consume a higher proportion of such incomes and take money from the pockets of people who hold assets in cash or low-yielding bank deposits.

In other words, inflation creates the opposite of an equitable economy.

Both inflation and high-interest rates take money from the pockets of average Americans. But both inflation and high-interest rates are unnecessary and totally within the control of the government. High rates do not “result” from anything. They are the Fed’s primary inflation-fighting tool. Inflation can be cured by federal spending to cure the shortages that cause inflation. And interest rates are determined by the Fed. Raising interest rates not only does nothing to cure inflation but also exacerbates inflation by increasing the price of nearly everything: Real estate, cars and trucks, food, clothing, all imported goods, construction materials. The Fed feeds the patient salt tables to cure high blood pressure. Why does the Fed do it? Because the Fed focuses on money, raising interest rates increases the demand for the dollar. The Fed ignores the obvious fact that adding interest payments to the price of everything increases the purchase price of everything.

Simple example: You buy a $50,000 car and finance the purchase with a 5-year, 3% loan. The total of your 60 monthly payments is $53,852.13.

Alternatively, say you finance that $50,000 car with a 5-year 6% loan. Now, the total of your monthly payments is $57,776.95

That $50,000 car cost you an additional $3,924.82, courtesy of the Federal Reserve. That is the very definition of inflation.

By now, it’s well-known that Bidenomics’ big spending has fueled higher inflation, resulted in larger-than-projected deficits, and contributed to a record level of government debt.

It may be “well-known” that federal spending causes inflation, but what’s “well-known” often contradicts the facts. It once was “well-known” that the earth was the center of the universe, emotional stress was the primary cause of stomach ulcers, and drinking water during exercise causes cramps (Yes, really. When I was young, that was common knowledge.) As GRAPH I and GRAPH II (above) demonstrate, there is no relationship between federal spending and inflation. Nor is there a relationship between federal deficit spending and inflation. There is, however, a robust relationship between oil price increases (which are strongly related to oil scarcity) and inflation. As for de Rugy’s concern about federal debt and deficits, she displays widespread ignorance about Monetarily Sovereign governments. The U.S. federal government’s finances are nothing like those of monetarily non-sovereign governments such as state, county, city, and the euro governments. Monetarily, Sovereign government cannot run short of their own sovereign currency.

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

“Federal debt” is not a debt of the federal government. It is deposited into T-security accounts that are owned not by the government but by the depositor. The government never touches those deposits other than to add interest money, and upon maturity, the money in those accounts is returned to the depository. The two purposes of T-accounts (T-bills, T-notes, T-bonds) are to:

Provide the public with a safe storage place for unused dollars.
To assist the Fed in setting interest rates.

T-securities do not provide the federal government with spending money. To pay its bills, the federal government creates new dollars ad hoc. Federal deficits are not a burden on the federal government or on taxpayers. The government has the infinite ability to pay any obligations. Unlike state and local governments, the federal government does not need or use tax dollars to pay its bills. It always uses newly created dollars for that purpose. Ms. de Rugy’s concerns about federal “debt” and deficits are unwarranted. Federal deficits add dollars to the economy. When federal deficits are too small, the economy ceases to grow (“recessions”) or shrinks (“depressions). Graph II shows this effect. As deficit spending shrinks, the economy goes into a recession, cured by increased deficit spending. Deficit spending grows the economy and does not cause inflation or require taxes. Even if no federal taxes were collected, the federal government could continue spending forever.

The most recent estimate of the full-year deficit for 2023 is $1.5 trillion, up from $946 billion last year. Total federal debt is more than $33 trillion, an increase from $28.5 trillion in 2021. Budget tensions led the credit agency Fitch Ratings to downgrade Treasury debt based on prospects of further fiscal deterioration.

Fitch Ratings did not downgrade Treasury debt because of the size of the debt or deficits. It downgraded the debt because of the uncertainty regarding one of the most ignorance-based laws in American history: The debt ceiling. This harmful law is based on the false premise that federal debt and deficits burden the government and taxpayers. The law threatens to force the federal government to renege on its promise to return the money in T-security accounts to depositors or to fail to pay past obligations to creditors.

This is not great; federal borrowing is projected to be $120 trillion in the next 30 years.

The federal government never borrows dollars. It creates all the dollars it needs and uses ad hoc.

Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”

The prospect of gigantic, never-ending deficits during good times makes investors nervous.

Knowledgeable investors are aware that the size of federal deficits does not, in any way, affect the federal government’s ability to pay its bills.

Borrowing costs like mortgage and car loan rates are rising, as are yields on benchmark 10-year treasury notes. They’re above 4.3 percent, their highest level since 2007—weighty burdens on lower-income Americans.

Here, Ms. de Rugy mixes two errors.

Mortgage rates are whatever the Fed wishes them to be. Sadly, the Fed believes raising rates is the way to fight inflation, while it causes more inflation.

Finally, while America may be experiencing a hike in real construction spending, that’s a far cry from a manufacturing boom.

According to the Institute for Supply Management Report on Business, economic activity in the manufacturing sector in August contracted for the tenth consecutive month following 28 months of growth.

Moreover, manufacturing only accounts for 11 percent of GDP. Even if this sector grew, the benefits wouldn’t be widely shared.

**After the COVID recession, GDP grew faster than at any time since WWII.**

Manufacturing will continue to contract as we transition to a computer-based society. One day, we all will have 3-D printers that allow us to create what we want without buying manufactured goods. Ms. de Rugy is stretching to find fault with economic growth. She is a member of the “semi-GOP” Libertarians whose sole contribution to the economic discussion is to criticize Democrats.

Nor will Bidenomics’ manufacturing subsidies help workers with college degrees. These handouts, often extensive and rich, benefit companies for projects they would have likely taken on anyway.

It’s not clear why Ms. de Rugy believes manufacturing subsidies won’t help workers with college degrees. And as for projects that “likely” would be taken on without benefits, one wonders where she came up with that bit of fakery.

Take the Inflation Reduction Act, for example. About half of all projects included in the Act were announced before it was passed.

Meaning that half were announced after it was passed. That’s an excellent result.

The private green market was booming even before the subsidies. The remainder of those subsidies overwhelmingly benefit affluent consumers of electric cars and other Biden-favored products.

Ms. de Rugy’s complaint seems ever more desperate. The private green market may or may not have been “booming,” but is that a reason not to invest in green? She objects to government aid for anti-global warming electric vehicles because rich people own them (though average workers build them).

Taken together, these facts can help explain the president’s low approval ratings and the American people’s overall pessimism about the economy’s direction.

With so many working people feeling pinched, who can blame them?

The president’s low approval rates are not related to reality but more to the relentless naysaying from extreme right-wingers like Ms. de Rugy. When you keep pounding people with the message that things are awful, they tend to believe it.

JUST SOME OF BIDEN’S ACCOMPLISHMENTS DESPITE THE EFFORTS OF THE GOP

1) $1.2 trillion infrastructure package 2) $1.9 trillion COVID relief deal 3) Highest appointment of federal judges since Reagan 4) Halt on federal executions 5) Rejoined the international Paris Climate Accord 6) Mandated converting the federal fleet to zero-emission vehicles. 7) Support for transgender service members. 8) Reduced unemployment. 9) Strengthened QUAD alliance with the U.S., India, Australia, and Japan. 10) Student loan debt relief 11) Used the Russia/Ukraine war to strengthen NATO, which Trump tried to weaken. 12) Imposed crippling sanctions on Russia 13) Fought Saudi’s oil price increases by releasing 180 million barrels of oil from the country’s Strategic Oil Reserves. 14) Pardoned people convicted of a federal marijuana charge 15) Respect for Marriage Act 16) Prevented the rail strike and gave workers a significant raise. 17) Passed Government Funding Bill 18) Got us out of Afghanistan, ending years of American deaths. 19) Expanded healthcare. 20) Defended Obamacare 21) Negotiated lifting the debt limit to prevent an economic disaster 22) Rejoined UNESCO 23) Lowest unemployment in years 24) Massive job creation 25) COVID-caused inflation dropping

Considering that unemployment is at historic lows and GDP is at historic highs, consumers’ biggest problem is the COVID-caused shortages causing in inflation. Without the obstinacy of the right-wing, Biden could have passed even more consumer benefit programs to “unpinch” working people. And yes, that would have increased federal spending, a good thing. It would have grown GDP further.

Federal Spending + Nonfederal Spending + Net Exports = GDP

Unfortunately, Republicans and faux Republicans are not the only parties guilty of misstating federal finances. Here are excerpts from a Senator Dick Dubin (D-IL) letter I recently received:

September 22, 2023, Dear Mr. Mitchell,

Thank you for contacting me about the Fiscal Responsibility Act (P.L. 118-5). I appreciate hearing from you.
The debt limit is a statutory limit on the amount of debt the federal government may incur. When government expenditures outpace revenues, the Treasury may issue debt to cover the shortfall.

Those T-securities don’t cover anything. The government never touches the dollars that purchase T-bills, T-notes, and T-bonds. Though Sen. Durbin has been in Congress for over 26 years, he still does not comprehend the difference between federal and personal finance.

Government spending and revenues vary by month, and even if the government has a surplus for the year, it may need to borrow money to cover a shortfall at some point during the year.

Why would an entity having the infinite ability to create dollars ever “need to borrow money?” It doesn’t.

On May 26, 2023, Treasury Secretary Janet Yellen projected that without action from Congress, the federal government would be unable to meet its obligations and subsequently default on June 5, 2023.

Default would have crashed the economy and impeded the government’s ability to make payments to Social Security and Medicare recipients, military personnel, veterans, federal employees, defense contractors, state governments, and our bondholders.

The federal government never needs to default. Only foolish actions by Congress and the President can force the government to default.

On May 27, 2023, President Biden and Speaker Kevin McCarthy reached an agreement. The Fiscal Responsibility Act avoids default by raising the debt limit through January 1, 2025.

Notice that Congress can raise the meaningless debt limit merely by deciding to do so.

Alan Greenspan: “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”

This agreement was a good-faith compromise between President Biden and Speaker McCarthy, and it included some provisions that alter several important federal programs, which includes clawing back unspent pandemic relief funding and expanding work requirements for some beneficiaries of the Supplemental Nutrition Assistance Program (SNAP). On June 5, 2023, President Biden signed the Bipartisan Budget Agreement into law.

There is no reason for the U.S. government to “claw back” anything or to expand work requirements. The government has infinite money. There is no reason, but there is a purpose: To make the rich richer by widening the income/wealth/power Gap between the rich and the rich. The wider the Gap, the richer and more powerful are the rich.

This agreement did not include everything I wanted. I am incredibly disappointed in any reallocation of funding to medical research or the National Institutes of Health. However, this agreement is what was required to avoid default.

And, of course, there was no economic reason for the reallocation.

I also have joined Representative Brendan Boyle of Pennsylvania to introduce the Debt Ceiling Reform Act (S. 1882), which would take the threat of default off of the table in the future. This bill would permanently end the weaponization of the debt ceiling by giving the Treasury Department the authority to continue paying the nation’s bills unless Congress submits a resolution of disapproval, which would need to be signed by the president.

The full faith and credit of the United States is not a bargaining chip, and it should not be used to enact any party’s extreme agenda. The Debt Ceiling Reform Act has been referred to the Senate Committee on Finance.

The whole thing is an exercise in stupidity. If, for some strange reason, Congress and the President wished to reduce spending (a reduction that mathematically would force a recession or depression), Congress and the President merely could stop spending. Period.

Now that we have avoided the default crisis, we must look to passing our twelve regular spending bills through regular order. I will be sure to keep your views in mind as we develop these spending priorities, and I will continue working to protect and enhance the federal programs on which American families rely.

If he wants to “protect and enhance federal programs, he should learn Monetary Sovereignty. After 26 years, it’s about time he learned at least this fundamental truth: The federal government cannot unintentionally run short of U.S. dollars. It has infinite dollars.

Thank you again for contacting me. Please feel free to stay in touch.

That didn’t work for Stephanie Kelton; I wonder whether it would work for me. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

……………………………………………………………………..

The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

GDP=FEDERAL SPENDING + NON-FEDERAL SPENDING – NET IMPORTS

People, this is not rocket science. It is so simple, even Donald Trump understands it.

GDP = FEDERAL SPENDING + NONFEDERAL SPENDING – NET IMPORTS

I. GDP = Gross Domestic Product. It is the most common measure of the U.S. economy. When people say the economy has grown, they mean GDP has grown.

A recession is usually characterized by a fall in GDP for two successive quarters. A depression may be defined as an extreme recession that lasts three or more years or which leads to a decline in real gross domestic product (GDP) of at least 10% in a given year.

II. Federal Spending is all the spending the federal government does. It includes every dollar the government spends.

III. Nonfederal spending includes all the dollars spent in the economy by every individual, every business, and every state/local government.

IV. Net Imports is the difference between dollars spent on imports vs. dollars received for exports. Usually, we spend more on imports than we receive for exports, so just to break even, either Federal Spending or Non-federal spending must take up the slack.

However, if we break even, the economy will shrink because of inflation. So — and this is very important– for the economy to grow, government spending must grow. There is no way for the economy to grow when government spending does not grow. That is basic algebra. Now someone might say, what if federal spending doesn’t grow but nonfederal spending grows enough to overcome both Net Imports and Inflation. The problem with that hypothetical scenario is that when Federal Spending doesn’t grow, there is no way for the Non-federal sector to obtain the spending dollars that would grow the economy. In fact, not only do we have recessions and depressions when Federal Spending doesn’t grow, we even have recessions and depressions when Federal Spending grows, but too little to overcome inflation and Net Imports.

U.S. depressions come on the heels of federal surpluses.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807. 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. 1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

**When the money supply decreases, or even increases, but not enough, we have recessions.**

Federal Spending increases the money supply. When the money supply increases, GDP increases. When the money supply decreases, we have recessions and depressions. The above graph shows the parallel paths taken by the money supply and GDP.

Again, GDP is the measure of two things. It is the measure of the economy, and it is the measure of spending. This is just simple algebra. You don’t need a degree in economics to understand it. And yet, Congress, the President, the Republican, Democratic, and especially the Libertarian Parties pretend it’s all a mystery to them because they say they don’t want Federal Spending to grow. In essence, they don’t want the economy to grow; more accurately, they want us to have recessions and depressions that affect the rich much less than they affect the rest of us. Congress, the media, and the economists all parrot the same line. They claim federal spending is “unsustainable” and should be reduced. But what makes federal spending “unsustainable”? The federal government is Monetarily Sovereign, meaning it cannot run short of U.S. dollars. The Federal government can pay any bill of any size if it’s denominated in dollars. Send the government an invoice for a trillion dollars; it could pay it tomorrow by pressing computer keys. This is not just my opinion. It is a well-known fact:

Former Federal Reserve Chairman, Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

Alan Greenspan: “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”

Alan Greenspan: “The United States can pay any debt it has because we can always print the money to do that.”

Former Fed Chairman, Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

Quote from Ben Bernanke when he was on 60 Minutes: Scott Pelley: Is that tax money that the Fed is spending? Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.

Despite what you’ve read and heard, not only can the government create all the dollars it needs by pressing computer keys, but it never needs to borrow dollars.

Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”

The words “not dependent on credit markets” means the federal government does not borrow. Those T-bills, T-notes, and T-bonds that wrongly are called “borrowing” are nothing of the sort. A borrower borrows because it needs money. The federal government doesn’t. The government merely accepts deposits into T-security accounts. It never touches those dollars. Why would it, given its infinite ability to create dollars? The purposes of T-securities are not to provide the government with spending dollars, but rather to:

To provide a safe storage place for unused dollars. This helps stabilize the dollar
To help the Fed control interest rates.

And then there is the false “inflation” claim. The mantra is that we will have inflation if the federal government prints money. Historically, that simply is not true:

**If federal spending caused inflation the red spending line and the green inflation line would essentially be parallel. They are not. They move randomly with respect to one another.**

The thing that always causes prices to rise is scarcity. You know this from experience. When weather causes a shortage of oranges or apples, the price of oranges and apples goes up. When COVID creates shortages of oil, steel, lumber, computer chips, labor, etc., the price of everything goes up. We have inflation. The single most common scarcity that has caused inflation for the past few decades is the scarcity of oil:

**Oil scarcity causes oil prices to rise, and because the price of oil affects the prices of almost every other product, oil scarcity causes inflation.**

While federal spending does not parallel inflation, the scarcity of oil does parallel inflation. Again, none of this is rocket science, and none of it is secret. Politicians, the media, and economists all have these data. So why do they conduct these mock battles about a useless, meaningless, misleading debt ceiling? Why all the lies? Because the politicians, media, and economists have been bribed by the rich, who run America. The politicians are bribed by campaign contributions and promises of lucrative employment at think tanks. The media are bribed by advertising dollars and by straight-out ownership of the media. The economists are bribed by contributions to their universities and promises of employment in think tanks and controlled corporations. And why do the rich want the politicians, media, and economists to pretend that federal spending should be reduced? It’s because of something called “Gap Psychology.” The word “rich” is comparative, not absolute. Someone with a million dollars is poor if everyone else has ten million. Someone who has a hundred dollars is rich if everyone has one dollar. Getting richer requires acquiring more compared to everyone else. You can do this in either or both of two ways:

Acquiring more for yourself and/or
Making sure everyone else has less.

Gap Psychology is the human desire to distance oneself from those below you and/or to come closer to those above you on any scale of income, wealth, or power. Most people wish to become richer. This is especially true of the rich, who are driven by their insatiable desire to become even richer, i.e., distancing themselves from those below and coming closer to those above. They hate your receiving government-funded healthcare insurance. They hate food stamps, unemployment benefits, government-funded college — anything that even slightly narrows the Gap between them and those below. To distance themselves from the middle and lower quadrants, the rich do all they can to make you believe the federal government cannot afford to give you benefits. They draw false comparisons between your personal financing and federal government financing. They talk about federal “borrowing” though the government, unlike you, does not borrow dollars. They talk about the federal “credit card,” though the government uses nothing that resembles a credit card. They talk about “out-of-control” spending, though unlike you, the federal government has the infinite ability to spend. They claim federal deficit spending is “unsustainable” though the government has “sustained” deficit spending for more than 80 years — deficit spending that grew the economy from several billion dollars to thirty trillion. Here is another graph that shows the essentially parallel paths of federal spending and GDP.

Naturally, the lines essentially are parallel. Federal Spending is an integral part of GDP. It would be like a graph comparing total touchdowns with total points. The lines essentially would be parallel.

To say that federal spending is too high, unsustainable, or out-of-control — i.e., to say that federal spending should be reduced — is to say that economic growth is too high, unsustainable, out of control, and should be cut. No one believes that, not even the rich. They just want to cut the benefits you receive, not the benefits they receive. They bribe Congress to give them tax loopholes so that they, like Donald Trump, pay at a far lower rate than the average salaried person. And they spread the myth that giving the Internal Revenue Service more money will send investigators after you when the money was meant to investigate the rich. Everywhere you turn, the rich have bribed your sources of information to indoctrinate you with the belief that federal spending should be cut and taxes increased, especially the spending and taxes related to benefits for you who are not rich. The purpose of federal taxes is different from the purpose of state/local government taxes. Federal taxes do not provide spending money to the federal government, which already has infinite spending money. Federal taxes have two financial purposes plus a third purpose that should anger you:

To control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to encourage
To assure demand for the U.S. dollar by requiring taxes to be paid in dollars. And here is the one you’ll really hate:
To help widen the income/wealth/power Gap by giving tax loopholes to the rich.

And now we have the phony “debt-limit” struggle. The Republicans (the party of the rich) demand cuts to Medicare, Medicaid, food stamps, etc., and the Democrats (pretending to be the party of the poor) fight weakly against too many cuts (just a few). And neither of them tells you the truth. The entire charade is a professional wrestling exhibition held in the halls of Congress. The bottom line is: You have been brainwashed into ignorance. Federal deficit spending is not unsustainable, nor does it cause inflation. The federal government easily could fund no-deductible, comprehensive, generous Medicare and Social Security benefits for every man, woman, and child in America, a college education for everyone who wanted it, food so that no child in America ever would need to go hungry, and decent housing for even the poorest among us. The federal government could do all that while funding the military, medical research and development, the physical sciences, renewable energy, and all the other things that would improve your life and the lives of those you love. It can be done, and it will be done, but first, you must understand the lies you are being fed and then demand, en masse, that the government does what it was formed to do. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

AI discusses the cause of inflation. Here’s an addictive example you can enjoy yourself.

Want to have a discussion about anything — ANYTHING —with an intelligent person? How about a discussion with a seemingly intelligent, seeming person?

Here’s a discussion I had with a pretty good facsimile, an exercise you can enjoy yourself by clicking the link.

We discussed the cause of inflation. Warning, it’s addictive. Unlike the humans I try to reason with, the computer never gets angry or even impolite. It always acknowledges points made. And its opinions are not its own.

Sadly, it doesn’t learn from arguments. It just keeps repeating what it already has been told by its references.

Rodger Mitchell: It widely is believed that “excessive federal spending causes inflation,” yet when I try to find an example of excessive federal spending causing inflation, I receive the explanation that, “It’s really a combination of factors of which excessive federal spending is one factor and not even an immediate factor.

“It could be a delayed part.”

Sadly, that could be said of anything. I could make the same statement about phases of the moon or children born with red hair — as being only one factor and not even an immediate factor in inflation.

**A computer-generated illustration of: A computer on a stage, talking into a microphone.”**

In short, federal spending is no more a demonstrable factor than is a sign of the zodiac.

Chat GPF: The relationship between federal spending and inflation is a complex and debated topic among economists.

While some people hold the belief that excessive federal spending directly causes inflation, the reality is more nuanced and not as straightforward as a simple cause-and-effect relationship.

Inflation is a general increase in prices over time, and it can be influenced by a variety of factors, including monetary policy, fiscal policy, supply and demand dynamics, international trade, productivity levels, and more.

Excessive federal spending can potentially contribute to inflation, but it is not the sole or immediate factor responsible for it.

When economists explain that excessive federal spending is only one factor and not an immediate one in inflation, they are acknowledging the multifaceted nature of inflation.

They are suggesting that while federal spending can have an impact on inflation, it needs to be considered alongside other variables that influence price levels.

Simply blaming federal spending without considering other factors would oversimplify the issue.

It is important to note that economic phenomena, such as inflation, are typically the result of multiple interacting factors. This complexity makes it challenging to isolate and definitively prove the direct causal relationship between any single factor and inflation.

Therefore, it is not accurate to compare federal spending’s role in inflation to unrelated factors like phases of the moon or hair color, as the former is subject to economic analysis and empirical research.

**Computer-generated image of: “A computer pondering a question in economics.”**

Economists continue to study the relationship between federal spending and inflation, and there are differing views within the field.

Some argue that excessive government spending, particularly when not matched by increased productivity or accompanied by monetary expansion, can contribute to inflationary pressures.

Others argue that other factors, such as changes in private sector spending, global economic conditions, or shifts in supply and demand, have a more significant influence on inflation.

In summary, while excessive federal spending can potentially contribute to inflation, it is just one factor among many.

The complexity of economic systems and the multitude of factors influencing inflation make it difficult to attribute it solely to federal spending. Economic analysis and research are ongoing to better understand these dynamics and their interrelationships.

Rodger Mitchell: It’s not terribly “challenging to isolate and definitively prove the direct causal relationship between any single factor and inflation.” Inflations historically are caused by shortages, usually shortages of oil or food. I see many parallels through history between oil or food shortages and inflation.

I do not see the same parallels between federal spending and inflation. Can you provide an example of an inflation that did not result from an oil or food shortage, but instead resulted from excessive federal spending?

ChatGPT: While it is true that supply shocks, such as oil or food shortages, have historically played a role in triggering inflationary episodes, it would be incorrect to assert that inflation is exclusively caused by these factors. Inflation can also arise due to other factors, including excessive government spending.

One example often cited as an instance where excessive federal spending contributed to inflation is the case of Zimbabwe in the late 2000s. The Zimbabwean government embarked on a policy of significant fiscal expansion, primarily through extensive money creation, to finance its expenditures.

This resulted in a substantial increase in the money supply, leading to hyperinflation.

During this period, Zimbabwe experienced a severe economic crisis, with skyrocketing prices, rapid depreciation of the currency, and a loss of confidence in the monetary system.

Your Creation — **Four computer generated images of: “A computer laughing at a joke”**

While there were other factors at play, such as economic mismanagement and a decline in agricultural productivity, excessive government spending and the consequent increase in the money supply were key drivers of inflation in Zimbabwe.

It’s important to note that this example is just one case among many, and the relationship between federal spending and inflation is not always straightforward.

The impact of government spending on inflation can vary depending on several factors, including the overall state of the economy, fiscal and monetary policies, and the credibility of the government in managing its finances.

In many instances, inflation may result from a combination of factors rather than being solely attributable to a single cause.

It is also worth noting that the effects of excessive government spending on inflation may not be immediate but can manifest over time as the economy adjusts to the increased money supply and the potential distortionary effects of government interventions.

In summary, while oil or food shortages have historically been associated with inflation, excessive federal spending can also contribute to inflationary pressures under certain circumstances.

The example of Zimbabwe illustrates how a combination of factors, including excessive government spending and monetary mismanagement, can lead to inflation.

However, it is important to recognize that the relationship between federal spending and inflation is complex, and various factors can interact to influence price levels in an economy.

Rodger Mitchell: The Zimbabwe inflation was caused by a food shortage. Farmland was taken from farmers and given to non-farmers. The result: Food shortage and inflation.

The money “printing” was a response to, not a cause of, inflation.

ChatGPT: While it is true that Zimbabwe’s land redistribution policies and subsequent disruptions in agricultural productivity were significant contributors to the country’s hyperinflation, it is essential to note that excessive money creation by the central bank played a crucial role as well.

The Zimbabwean government resorted to financing its budget deficit by effectively printing money, leading to a significant expansion of the money supply.

This, combined with the loss of agricultural output, created a situation of excess money chasing limited goods, fueling hyperinflation.

The land redistribution policy disrupted agricultural production by displacing experienced farmers and replacing them with individuals who lacked the necessary skills, resources, and incentives to maintain productive farms. This resulted in a decline in food production, contributing to shortages and price increases.

However, it is important to understand the sequence of events. The initial cause of the inflationary spiral in Zimbabwe was the disruption in agricultural productivity due to the land redistribution policy.

As the economy faced shortages of food and other goods, the government responded by printing money to finance its spending obligations, exacerbating the inflationary pressures.

Inflation is a complex phenomenon, and it rarely has a single cause. In the case of Zimbabwe, both the land redistribution policy and the subsequent monetary expansion played significant roles in the hyperinflationary episode. It is crucial to recognize the interplay between these factors rather than attributing the entire inflationary outcome to a single cause.

This example underscores the importance of considering multiple factors and their interactions when analyzing the relationship between excessive federal spending and inflation. While it is true that supply shocks like food shortages can trigger inflation, the subsequent monetary and fiscal responses to those shocks can amplify and prolong the inflationary effects.

Rodger Mitchell:

(At this point I decided not to get into the fact that Zimbabwe was not Monetarily Sovereign, so though it could print currency, it’s money was tied to the dollar, and important inflationary consideration.)

It would be helpful if you could point to a single inflation in history that was precipitated by government spending rather than being precipitated by a shortage of oil, food or some other critical factor.

I suspect all inflations really are caused by shortages.

ChatGPT: There have been cases in history where excessive government spending has contributed to inflation, even in the absence of shortages in critical factors like oil or food. One notable example is the hyperinflation experienced by Germany in the early 1920s.

After World War I, Germany faced significant war reparations and a massive budget deficit. The German government resorted to financing its spending by issuing large amounts of debt and, eventually, by printing money.

The excessive money creation, combined with a lack of corresponding increase in production and output, led to a rapid devaluation of the German mark and hyperinflation.

During this period, there were no significant shortages of oil or food in Germany. Instead, the excessive government spending and the resulting increase in the money supply caused a loss of confidence in the currency, leading to skyrocketing prices.

People’s wages and savings quickly became worthless as the value of the mark rapidly declined.

This example illustrates how excessive government spending and the subsequent expansion of the money supply, without corresponding increases in productivity or output, can lead to inflation.

It demonstrates that inflation can occur even in the absence of shortages in critical factors.

While supply shortages can certainly contribute to inflation, it is not accurate to claim that all inflations are solely caused by shortages. Economic phenomena such as inflation are influenced by a multitude of factors, including both demand and supply-side dynamics, monetary policy, fiscal policy, and other macroeconomic conditions.

It is crucial to recognize that inflation is a complex phenomenon with multiple potential causes, and it can arise from different combinations of factors in different historical contexts.

Rodger Mitchell: So, prices of food and oil went up even though there was no shortage of these products? And it was all due to government spending? Then the inflation was cured by even more government spending to create the greatest military force the world had ever known? Does any of this make sense to you?

ChatGPT: I apologize if my previous responses were not clear. Allow me to clarify.

In the case of Germany’s hyperinflation in the early 1920s, it is important to note that the excessive government spending and subsequent increase in the money supply were contributing factors to inflation.

However, it would be inaccurate to say that the inflation was solely caused by government spending without considering other factors at play.

During that period, Germany faced a complex set of circumstances, including war reparations, economic disruptions from World War I, and political instability.

The excessive government spending and the resulting expansion of the money supply added to these challenges, leading to hyperinflation.

Inflation is a multifaceted phenomenon influenced by various factors, including monetary policy, fiscal policy, supply and demand dynamics, productivity, external factors, and more. It is rarely driven by a single cause.

Regarding your statement about inflation being “cured by even more government spending to create the greatest military force the world had ever known,” it is important to differentiate between the context of post-World War I Germany and the broader discussion about the relationship between government spending and inflation.

Government spending, particularly in the context of wartime mobilization or rebuilding efforts, can have stimulative effects on the economy.

However, the impact on inflation depends on various factors, including the state of the economy, fiscal management, and monetary policies implemented.

It is crucial to approach the analysis of inflation and government spending with nuance, considering the specific historical context and the multitude of factors involved. There is no one-size-fits-all explanation, and each situation requires careful examination of the unique circumstances at hand.

Rodger Mitchell: There is a widespread fear that government spending causes inflation. It is the foundation of the “debt-limit” laws. Because the federal government cannot run short of dollars, the only ostensible purpose of the debt limit is to prevent inflation.

But, government spending alone doesn’t cause inflation. There needs to be, as you said, “war reparations, economic disruptions, and political instability.”

Absent these factors, which cause shortages of key goods and services, government spending does not cause inflation. Thus, the excuse for a debt limit disappears.

ChatGPT: You raise an important point about the relationship between government spending and inflation. While it is a common belief that government spending alone leads to inflation, the reality is more nuanced.

As you mentioned, inflation typically occurs when there are shortages in key goods and services or when there is excessive money creation that outpaces the productive capacity of an economy.

Government spending can potentially contribute to inflation if it is not matched by increased productivity or accompanied by appropriate fiscal and monetary policies.

The purpose of debt limits, including the ones imposed on governments, can indeed be aimed at controlling inflationary pressures. By limiting the amount of debt the government can accumulate, policymakers aim to prevent excessive money creation and potential inflation.

However, it is important to note that debt limits are just one of many tools governments use to manage their fiscal policies, and their effectiveness in curbing inflation can vary.

In practice, the relationship between government spending, debt limits, and inflation is complex and dependent on various factors. These factors include the overall state of the economy, fiscal management, monetary policies, external economic conditions, and more. Each situation requires careful analysis of the specific context to understand the potential impacts on inflation.

While shortages of goods and services can exacerbate inflationary pressures, it is not accurate to dismiss government spending as irrelevant to inflation in the absence of such shortages. The impact of government spending on inflation is influenced by a range of economic factors, and it is subject to ongoing debate and analysis among economists.

In summary, the relationship between government spending and inflation is multifaceted. While shortages of key goods and services can contribute to inflation, government spending can also have inflationary effects if not appropriately managed. The role of debt limits in preventing inflation depends on various factors and can differ from one economic context to another.

Note the repeated use of the “This, but on the other hand, that” argument.

Also, while the public believes excessive” “federal spending causes inflation, ChatGPT says other factors must be present. (It is these “other factors” that are the cause of inflation. Increased money creation is a response to inflation, not a cause.)

While the complaint often is made that https://chat.openai.com/ is not a reliable source of information, that same complaint can be made about every other source of information — books, newspapers, encyclopedias, and certainly the government, the Internet and television (perhaps except for FOX and Breitbart, which are reliably wrong).

For example, you’ll notice that https://chat.openai.com/ never does provide any data to demonstrate that federal spending causes inflation. It dances around that central point by making the “various factors” claim.

Unfortunately, it cannot yet receive pictures or graphs, else I would have provided it with graphs demonstrating the lack of a historical relationship between inflation and federal spending along with the profound historical relationship between oil shortages and inflation.

I suspect that by the time this year ends, we will be able to show the AI pictures, graphs, videos, and music.

It might even admit that debt limits are a lie foisted on the innocent public by the rich, the purpose being to widen the Gap between the rich and the rest.

Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

#1. Inflation or #2. Sickness, Recession, Poverty. Choose #1 or #2. Yes, seriously.

It’s a real question. If you had to choose between #1. Inflation or #2. Sickness, A Recession, A Depression, Poverty, Illiteracy, Starvation, Homelessness, Crime and some other bad stuff I could mention, would you chose #1 or #2?

It may sound like a no-brainer, and perhaps it is in the literal sense of “no brain,” because the vast majority of Americans claim they would rather experience #2 rather than #1.

Do you agree that you would prefer to experience sickness, a recession, a depression, poverty, illiteracy, Starvation, Homelessness, Crime, etc. than to experience inflation?

Let’s begin with the generally uncontested fact that the federal government created the laws that created the U.S. dollar. Because the federal government can create any laws it wishes, it can create as many dollars as it wishes, and cannot unintentionally run short of dollars. The experts agree:

Former Fed Chairman, Alan Greenspan: “The United States can pay any debt it has because we can always print the money to do that.”

Former Fed Chairman, Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

We could add to the discussion the fact that federal deficit spending does not cause inflation, which we have proved here and here and dozens of other places on this blog.

We could insist that shortages cause inflations, and those shortages can be cured by federal deficit spending. Thus, we can show that rather than causing inflations, federal deficit spending can cure inflations.

What Does Drowning Look Like? — **Sorry, but spending money on lifeguards and floatation devices would have caused inflation.**

But, wait. Why struggle against a tide of misinformation? Let’s assume, for the sake of argument, that federal deficit spending does indeed, cause inflation.

It’s what most Americans believe.

Because the federal government can’t run short of its own sovereign currency, it could risk inflation by using that currency to pay for:

Comprehensive, generous Medicare insurance for every man, woman, and child in America
Generous Social Security benefits for every man, woman, and child in America, regardless of age, income, or wealth
All costs of education from K-12 and beyond, including advanced degrees from top universities
Rent and other housing subsidies, for all.
A healthful diet for all Americans
Subsidies for all states, counties, cities, and villages, so that none of them would have to levy taxes.
Ending the FICA deduction from salaries
Expanded research in all the sciences: Mathematics, Biology, Botany, Social Sciences, Philosophy, Geology, Physics, Chemistry, Astronomy, and all the other sciences not mentioned.

The purpose of such spending would be to improve and extend the lives of humans and the other living creatures with whom we share the earth.

The government has the ability to fund all of #1 through #8. But many people wrongly object, “But that would cause inflation.”

If those people were correct, and that spending would cause inflation, it only would mean they have chosen a lesser life rather than experience inflation.

They have chosen sickness rather than health, poverty instead of affluence, taxation rather than being tax-free, homelessness rather than sheltered, stagnancy rather than advancement, and ignorance rather than knowledge, all for the fear of inflation.

Would you rather suffer from incurable, painful disease than suffer from inflation? Would you rather risk being impoverished and homeless than to risk inflation? Would you prefer that your children be unable to attend the best colleges having the best resources money can buy, just so you don’t see prices rise?

Would you rather the type of research that amazed you with the Internet, cell phones, artificial intelligence, moon landings, etc. be discontinued for lack of funds, just so inflation can be avoided?

Would you prefer that America default on its debts by enforcing a debt ceiling? Would you rather that the federal government cease to improve our military?

Would you rather see the government do nothing to prevent or cure recessions and depressions, just because the cure – federal deficit spending – might cause inflation?

In summary, even if we admit the belief, just for the sake of argument, that federal spending causes inflation, we are left with very unsavory alternatives.

Think about it. Do you really believe that the possibility, or even the false probability, that federal deficit spending could cause inflation is more important than all of the things federal money could buy?

Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

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