The single most important question in economics

Economics involves many questions, of course, but is there one question that is key? Is there one question, the answer to which opens the door to the entire study of economics?

After some thought, I believe such a question exists, and I will reveal my nomination here. You may disagree with my choice, and if so, I’d be glad to know yours, or if you feel no question is that important.

First, a bit of:

BACKGROUND

In the first eleven billion years of the universe’s existence, and the first 4 billion years of the earth’s existence, there was no such thing as the United States or the U.S. dollar.

But beginning in the 1700’s AD, men created a variety of laws. The laws were completely arbitrary and created from thin air, as all laws are. And as is true for all laws, these laws had no physical existence. They merely were concepts.

The laws could be spoken, handwritten, typed, printed, mimeographed, texted, Emailed, or delivered in any number of ways, but the laws themselves had no physical existence. They merely were an amalgam of ideas, concepts, and beliefs.Measure the Magic | ifundraiser blog

Some of those laws, which were created, from thin air, produced the political entity known as “the United States of America.” and some of those laws created, also from thin air, the U.S. dollar.

Those laws arbitrarily created millions of dollars, and arbitrarily created the value of those dollars, with regard to arbitrary amounts of silver and gold.

And now for the question that I believe to be the most important question in economics:

How Many Laws Can The U.S. Federal Government Create?

I suggest that the answer to this question is: “Infinite.”

Now “infinite” is a very big number. It is bigger than the number of glasses of water in all the oceans on earth. It is bigger than the number of stars in the sky. Infinite is bigger than the number of atoms in the known universe.

How is it possible for humans to create here on earth, something that is bigger than the oceans, stars, and the universe’s atoms? The reason is that water, stars, and atoms are physical objects, but laws have no physical existence.

Like creating numbers, the ability to create laws is limitless. You cannot see, hear, feel, taste, or smell a number or a law. You can sense representations of numbers and laws, but the numbers and laws themselves merely are concepts.

Similarly, the dollars created by laws, have no physical existence. You can see representations of dollars — dollar bills, bank statements, savings account passbooks, T-bill records, etc. — but you cannot see, hear, feel, taste, or smell a dollar. It is just a number in a balance sheet.

When you go to a store to make a purchase, you pay by presenting your credit card. Invisible dollars are taken from that card and sent to the card issuer, who in turn, sends invisible dollars to the store. Soon thereafter, invisible dollars will be taken from your checking account and sent to the credit card company, which will deposit these invisible dollars into its balance sheets.

All the while, invisible dollars will flow to and from the Federal Reserve, tidying things up. And it all will be done in thin air, with nothing but the occasional atom moving.

Because the U.S. dollar was created by U.S. laws, and because the federal government has the infinite ability to create U.S. laws, and because neither laws nor dollars have any physical existence:

I. Dollars are created by laws. The U.S. federal government has the infinite ability to create laws, so it has the infinite ability to create U.S. dollars.

We’re not even talking about an infinite ability to “print” dollars. Those printed green paper things you carry in your wallet are not dollars. They are representations of, or titles to, dollars. The real dollars are just numbers in numerous records and balance sheets all over the world.

Because the U.S. government has the infinite ability to create the laws that create dollars, and so has the infinite ability to create dollars, the government never unintentionally can run short of dollars.

And because the government has the infinite ability to create U.S. dollars:

II. The U.S. government has no need to collect U.S. dollars from anyone or anywhere.

This means the government has no need to borrow or to tax. It does not need to ask you for dollars. It does not need to ask China for dollars. It does not need to ask anyone for dollars. The federal government creates from thin air all the dollars it uses.

Even if all federal tax collections fell to zero, the federal government could continue spending forever. Not only that, but:

III. All the tax dollars you send to the federal government are destroyed upon receipt.

The amount of money that exists in the United States is divided into “M”classifications such as MZM, M0, M1, M2, and M3, according to the type and size of the account in which the instrument is kept.

The money supply reflects the different types of liquidity each type of money has in the economy. It is broken up into different categories of liquidity or spendability.

The tax dollars you, and everyone else  sends to the federal government generally come from checking accounts, which are part of the money supply measure called “M1.”

When you pay taxes, you take money from your M1 checking account and send them to the Treasury where they cease to be part of any money supply measure. Effectively, your tax dollars are destroyed.

The reason is clear. Because the federal government has the unlimited ability to create dollars, it would make no sense to try to measure its money supply, which is infinite.  If, say, you send $1,000 to the federal government, $1,000 + infinity = infinity. No difference.

That is why no one ever can answer the question, “How much money does the federal government have?” The only accurate answer is “Infinite.”

The Monopoly Example
If you ever have played the board game Monopoly, you know that it usually is played with four players, plus a Bank. The function of the Bank is to distribute Monopoly dollars to, and to collect Monopoly dollars from, the players, according to the rules.

But, one rule of Monopoly is that the Bank never can run short of dollars. If you were to open the game box to discover all the printed dollar certificates were missing, what would you do in order to play the game?

How to play Monopoly without using Monopoly paper dollars. Create a table. No column for the Bank.

One approach would be to take a sheet of paper and divide it into four columns, one column for each player.

At the top of each column you would print each player’s name, and below each name, a starting amount of money.

The illustration at the right shows that each player begins with 5,000 Monopoly dollars.

Then as each player spends and receives money, the amounts below that player’s name are changed.

Many of those dollars go to, and come from, the Bank, but the bank has no column because the Bank has infinite dollars.

In the game, when you pay dollars to the “Community Chest,” the dollars are supposed to go to the Bank, and when you receive $200 for passing “GO,” the dollars are supposed to come from the Bank.

Although the rules specify that tax dollars and other dollars go to the Bank, the above example shows that they really are destroyed upon receipt. The Bank has no column. There is no way to determine how many dollars the Bank has. It has infinite dollars.

In the real world, the federal government operates just like the Monopoly Bank: It collects dollars from the public, and it distributes dollars to the public. But once dollars are received by the Treasury, they disappear.

Though the Treasury keeps internal records, there is no way to determine how many dollars the government has. It has infinite dollars.

Since the federal government has no use for tax dollars, why does the federal government collect tax dollars?

There are three reasons: One real, one mythical, and one secret.

  1. The real reason the government collects tax dollars is to control the economy. It taxes what it wishes to discourage and it gives tax breaks to what it wishes to reward or encourage. That is why there are so many tax breaks for the rich people who control the government.
  2. The mythical reason the federal government collects tax dollars — a reason espoused by many economists — is to create demand for dollars with which to pay taxes. The demand for such cryptocurrencies as Bitcoin, Ethereum, and Litecoin, which are not supported by taxes, debunks this reason.
  3. The secret reason the federal government collects taxes is to help make you believe dollars are scarce to the government. This belief keeps you from demanding more benefits like expanded Social Security, Medicare for All, poverty aids, free college for all, and an end to the FICA tax.

The rich people and rich companies are rich only because of the Gap between them and those who are not as rich. If there were no Gap, we all would be the same. No one would be rich. And the wider the Gap, the richer are the rich.

The rich always want to be richer. This is known as “Gap Psychology,” the desire to widen the income/wealth/power Gap below, and to narrow it above.

Widening the Gap below can involve either gaining more for oneself or preventing those below from gaining. Either will make one richer.

To make themselves richer, the rich bribe the key sources of your information. They bribe the politicians (via political contributions and promises of lucrative employment later). They bribe the media (via ownership and advertising dollars). They bribe the economists (via university contributions and “think tank” employment).

All these sources of information combine to tell you the Big Lie, that in order for you to receive more federal benefits, taxes must be increased.

That misinformation provides an excuse for the current battles against President Biden’s “Build Back Better” Act, which first was proposed at a $3.5 trillion level, and since has been cut in half because of the Big Lie.

The pretext was that this proposal must be “paid for” with taxes. But, as you now know, taxes do not fund federal spending.

The federal government pays for everything by merely sending instructions (checks and wires) to creditors’ banks, instructing the banks to increase the balances in creditors’ checking accounts.

When the banks do as instructed, this creates more M1 dollars, the same kind of dollars you send to the federal government as taxes.

Since the federal government has no need to ask anyone for dollars, why does it borrow dollars?

The U.S. federal government never borrows dollars. The acceptance of deposits into Treasury Security accounts (T-bills, T-notes, T-bills) is wrongly called “borrowing” and federal “debt.” It neither is borrowing nor debt.IBV's Billionaires-Only Bank Vault In London Is So Hollywood It's Ridiculous

The closest parallel to a T-security account is a safe deposit box.

When you put dollars into your safe deposit box, your bank never touches those dollars, and your bank doesn’t owe you those dollars.

They neither are loans to your bank nor are they debts of your bank.

The bank “pays you back” simply by allowing you to take back whatever dollars are in your box.

Similarly, when you make a deposit into your T-security account, the federal government never touches those dollars. The government “pays you back” by allowing you to take back whatever dollars are in your account.

Since the federal government has no need to ask anyone for dollars, why does it provide for deposits into T-security accounts? There are two real reasons and one secret reason:

  1. The first real reason is to help the Federal Reserve to control interest rates. These accounts pay interest, the rates for which begin with Federal Reserve decisions regarding the state of the economy.
  2. The second real reason is to provide a safe, interest-paying place for people, businesses, and nations to “park” unused dollars.
  3. The secret reason is again to help make you believe the federal government is so deeply “in debt” it cannot afford to help narrow the Gap between the rich and the rest.

The federal government has no need to ask anyone for dollars, and has the infinite power to spend. But, doesn’t too much government spending cause inflation?

Remember that way back in the 1780s, the federal government created as many dollars as it wished and gave those dollars whatever value it wished — and it did all this by passing laws.

The federal government still has the unlimited power to:

  1. Pass laws
  2. Create dollars, and
  3. Control the value of dollars.

Over the years, the government has used all three of those powers. While nos. 1 and 2 already have been explained, you may be curious about how the government controls the value of dollars. It has two primary tools:

  • When the government raises interest rates, more people will want to obtain more dollars to invest in interest-paying bonds, and this increased demand for U.S. dollars increases their value.
  • Government fiat. When the U.S. was on various silver and gold standards, the government merely would pass laws saying that a dollar could be exchanged for specific amounts of gold or silver. The U.S. Constitution gives Congress the power “To coin Money, regulate the Value thereof.” The government, by fiat, can change the exchange rate between dollars and other currencies. This is known as “devaluation” and “revaluation.”

That said, the primary driver of inflation is not interest rates, or federal fiat, or federal deficit spending, or so-called federal “debt.” The primary driver of inflation is shortages.

If the “federal deficit spending” myth were true, an increase in federal deficit spending should correspond to an increase in prices.

Changes in federal deficit spending (blue line) vs. inflation (red line). Vertical bars are recessions.

There is no historical relationship between changes in federal deficit spending (blue line) and changes in inflation (red line). Federal deficits do not cause inflations.

IV. The driver of inflation never is federal deficit spending, but rather the scarcity of key goods and services.

Like all inflations through history, today’s inflation is caused by shortages of energy, food, computer chips, supply chain resources, and labor.

Some of these are related to global warming and some are related to COVID. Many are related to inefficient government.

Contrary to popular wisdom, today’s inflation could be controlled via increased federal spending to eliminate the shortages. Federal spending to increase oil and gas drilling, renewable energy production, farmer aids, computer chip production, shipping, and the elimination of taxes that discourage employment (i.e. FICA), would reduce inflation.

Also notice in the above graph that:

V. Recessions begin with reductions in federal deficit growth and are cured by increases in federal deficit growth.

This should surprise no one because economic growth requires money growth. The most common measure of economic growth is Gross Domestic Product (GDP) a formula for which is:

GDP=Federal Spending + Non-federal Spending + Net Exports.

All three factors on the right-hand side of the equation are related to an increased dollar supply.

What happens when the federal “debt” (i.e., the net total of deficits) decreases?

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.

Again, this should surprise no one. Just as a growing economy requires a growing supply of money, reducing federal “debt” (i.e. running federal surpluses) takes dollars from the economy and sends them to the Treasury, where they are destroyed..

By definition, GDP is reduced when dollars are taken from the economy.

Fortunately, the U.S. federal government has the ability to create infinite U.S. dollars and to control their value, i.e. prevent excessive inflation.

So, the federal government has the ability to fund Medicare for All, Social Security for All and college for all who want it. Further, the government has the financial ability to eliminate the grossly recessive employment taxes (FICA) and to help the states, counties, and cities to reduce their tax burdens.

Given this infinite power, the federal government is left with one final question: Is there a limit? We know the government has the power, but is there a limit as to how much of this power the government should use?

The problem has two parts: Financial and political.

Financially, is there a dollar limit, beyond which federal deficit spending actually harms the economy rather than benefitting it?

There may be, but no evidence exists for any limit. As the following graph shows, federal “debt” (blue line) has increased massively, while inflation (red line) has followed a comparatively modest, even trajectory.

If federal deficit spending caused inflations, the blue line (federal deficits) and the red line (inflation) would be parallel.

Claims that future federal deficit spending, in any given amount, will cause inflation are based on intuition and guesswork and not on historical precedent.

Politically, is there a point beyond which federal deficit spending gives the federal government “too much power”?Libertarians think so.

In fact, Libertarians can be trusted to object to any amount of federal deficit spending, or even any amount of federal spending at all. They think people should be “free” to pay for unaffordable health care, education, infrastructure, housing, schooling, sustenance, and retirement.

Others think local governments should do what the federal government does because, in their belief, local governments know what local people want, and after all, aren’t we all “local” people?

Sadly, while the federal government, being Monetarily Sovereign, has infinite funds, monetarily non-sovereign local governments do not. They must levy burdensome taxes in order to spend.

The question of “too much federal power” often is answered in a general sense, but when specifics are broached, the answers are not clear. I, for one, have no idea what “too much” federal power is, except when it impinges on what I personally view as a personal privilege.

Outlawing recreational drugs, liquor, abortions, certain marriages, and certain books fall into that category. Mandating vaccination to protect our species does not. But that’s just my view.

Power begets criminality, but on balance I suspect local government tend to be less honest than does the federal government for one reason: The media do a better job of investigating and shining light on federal government than on local governments, where media have less investigative power and less influence.

SUMMARY
The most important question in economics is: How Many Laws Can The U.S. Federal Government Create? The answer is “infinite.” Since U.S. dollars are created by laws, the U.S. government can create infinite dollars and can give these dollars any value it chooses.

Thus, the U.S. government has no need to collect U.S. dollars from anyone or anywhere. All the tax dollars you send to the federal government are destroyed upon receipt.

Economic growth requires money growth, which requires federal deficit growth. The insufficiency of federal deficit growth leads to recessions and depressions, which can be cured only by federal deficit growth.

The driver of inflation never is federal deficit spending, but rather the scarcity of key goods and services. Inflations actually can be prevented and cured by increased federal deficit spending to cure shortages. To date, despite massive federal deficits, particularly in the past decade, we never have reached the level of “too much federal spending.”

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.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Who is to blame for the endless failure of economics.

Why is the vast majority of the public so ignorant about even the most basic elements of economics?

5 Things Your College Professor Wished You Knew | Start School Now
This is what my professor was taught, and what he taught me, and what I’m teaching you. Now you teach it to others. That’s how science works.

Why do people believe the federal government, Medicare, and Social Security are running short of dollars?

Why does the harmful and financially ignorant debt ceiling persist?

Why is there poverty in America? Why is there so much street crime?

Why do the rich grow richer while the poorer fall further behind?

The wrong answers to all these questions stem from what is taught in our schools, by our so-called thought leaders.

Just as religious leaders teach from never-changing bibles, too many economics professors teach from never-changing assumptions.

But, what may be acceptable for religion is unacceptable for science.

Surprisingly few economics professors are willing to learn, understand, or teach the following facts.

  1. Financial debt is money, and money is debt. They are two sides of the same debt/money “coin.”
  2. Eliminating debt means eliminating money, which always is a recessionary/depressionary economic plan. GDP growth (by formula) requires debt/money growth. (GDP=Federal Spending + Non-federal Spending + Net Exports.)
  3. Gap Psychology dictates that the rich get richer (widen the Gap) not only by increasing their ownership of debt/money, but by reducing the not-rich’s ownership of debt/money.
  4. Federal “debt” is not debt, but rather it is deposits into privately-owned T-security accounts. The Treasury does not use those dollars. The accounts are paid off simply by returning their balances to the account owners. No tax dollars are involved. Thus misnamed federal “debt” is not a burden on the government or on future taxpayers.
  5. The federal government is Monetarily Sovereign. It has the infinite ability to create dollars. Thus, it does not borrow dollars. It accepts deposits into T-security accounts, the purposes of which are not to provide spending funds, but rather to stabilize the dollar and to help the Fed control interest rates.
  6. For the same reasons, federal taxes do not fund federal spending. Even if all federal tax collections totaled $0, the federal government could continue spending, forever. Federal taxes are destroyed (i.e. cease to be part of M1 or any other money supply measure) the instant they are received by the Treasury. That is why no one can answer the question, “How much money does the Treasury have?” The best answer is, “Infinite,” which remains “infinite” whether or not tax dollars are received.
  7. The purpose of federal taxes is not to provide spending funds, but rather to control the economy by discouraging what the government doesn’t like and encouraging what it does like.
  8. The income/wealth/power Gap is what makes the rich rich. Without the Gap no one would be rich; we all would be the same. The wider the Gap, the richer are the rich. The best way to narrow the Gap between the rich and the rest is for the federal government to provide benefits to the rest, which the federal government has the infinite ability to do.
  9. Street crime is a function of poverty. The best way to reduce street crime is not via increased policing, but rather by reducing poverty.
  10. There is no public benefit to private ownership of banks. All banks should be nationalized.
  11. Federal spending is not socialismFederal ownership (as with, for instance, VA hospitals and national highways is socialism.)
  12. No inflation in history has been caused by “excessive” federal spendingAll inflations are caused by shortages of key goods and services, most notably shortages of food, energy, and labor. Federal spending actually can eliminate inflation by increasing the availability of the scarce goods and services.

Where does all the misinformation come from? It begins with, and is promulgated by, the “experts,” the economists.

Blame the incurious, intellectually lazy economics professors, who do not question what they were taught in college, but rather parrot it to their students, who continue the endless circle. Add to those pejoratives the word “greedy,” since this all is financed by the rich as a way to widen the Gap.

Thus today, we continue to see the same old misguided, disproven worries about federal “debt” and federal deficits, federal government “insolvency,” benefit “unaffordability,” government spending as a cause of inflation and “socialism,” and the false need for federal taxes to finance federal spending.

Remember all of the above as today, you hear the specious arguments about the “debt ceiling,” exacerbated by the stubborn partisanship that could crash the American economy and the economies of the world.

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.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

The end of poverty in America

Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

Poverty in America | The Economist

The poor you will always have with you, and you can help them any time you want. (Mark 14:7)

For there will never cease to be poor in the land; that is why I am commanding you to open wide your hand to your brother and to the poor and needy in your land. (Deuteronomy 15:11)

Is it true that there always will be poor people? Should it be true? Must it be true?

Yes, the poor have been with us in most societies, but it should not be true, and it need not be true.

Mathematically, in any scale of wealth, income, or power, some must be closer to the bottom. If “having less” is your definition of “poor” then yes, the poor always must be with us.

But what if your definition of “poor” referenced “insufficiency” rather than “less” — insufficiency of food, healthcare, education, housing — then perhaps the poor need not all ways be with us.

I suggest that it is not necessary for some people in America to be starving, sick, uneducated, and/or homeless.

Poverty fell overall in 2020 due to massive stimulus checks and unemployment aid, U.S. Census says
By Heather Long and Amy Goldstein
U.S. poverty fell overall in 2020, a surprising decline that is largely a result of the swift and large federal aidthat Congress enacted at the start of the pandemic to try to prevent widespread financial hardship as the nation experienced the worst economic crisis since the Great Depression.

Federal deficit spending for benefits to the poor “surprisingly” helped reduce the percentage of poor people. Who possibly could have expected that?

After accounting for all the federal relief payments, the so-called supplemental poverty measure declined to 9.1 percent in 2020 — the lowest on record and a significant decline from 11.8 percent in 2019.

The decline in the poverty rate means that millions of Americans were lifted out of severe financial hardship last year, the U.S. Census said. Poverty is defined as having an income of less than $26,250 a year for a family of four.

If you happen to believe that poverty is bad for America, and that honestly religious people wish to help the impoverished, then all that deficit spending opposed by debt-scare peddlers was good for this country.

If, however, you believe that the poor are lazy, good-for-nothing, takers, who deserve their poverty, then you will be saddened at learning the poverty rate declined.

And if you have been told that federal taxes fund federal spending, you will be flummoxed by all that spending with federal taxes staying the same.

And if you believe it’s better for the public to run a deficit with the federal government than for the federal government to run a deficit with the public, then you may be surprised to learn that federal deficit spending has allowed fewer people to be thrust into poverty.

Extensive federal relief assistance passed during the coronavirus pandemic is widely credited by economists and policy experts for preventing another Great Depression.

The stimulus payments provided $1,200 cash payments to most low-income and middle-class Americans last year, moving 11.7 million people out of poverty, the Census said.

Another 5.5 million people were prevented from falling into povertyby the enhanced unemployment insurance aid.

“This really highlights the importance of our social safety net,” said Liana Fox, chief of the U.S. Census Bureau’s Poverty Statistics Branch.

Try to remember the fight against deficit spending, put up mostly by the right wing (with just a couple faux Democrats dissenting). If they had had their way, we would have had a depression.

The annual findings also showed that median income declined by 2.9 percent in 2020 to $67,500. Still, after accounting for the government aid, every age group, racial and ethnic group and educational level saw a decline in poverty.

Some of the largest declines in poverty were reported for families headed by single moms, African Americans, Hispanic Americans and adults without a high school degree.

“The federal government responded quickly and significantly. And it’s very clear that those efforts prevented a sharp rise in poverty,” said James Sullivan, an economics professor at the University of Notre Dame.

“The concern is that we will see poverty rise again because we’ve now seen these relief packages expire.”

Remember also that the Monetarily Sovereign U.S. government has the infinite ability to create its own sovereign currency, U.S. dollars. It never can run short of dollars, and neither needs nor uses tax dollars for spending.

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

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.”

Despite current debates about “how will it be paid for,” the fact is that all federal spending is paid for the same way: The federal government, creates from thin air, its spending dollars. It can do so endlessly.

President Biden is urging Congress to enact more programs to help the poor and working class as part of a $3.5 trillion package that would make significant investments in many parts of the economy.

Top White House aides point to the success of the pandemic aid as an example of how additional resources can make a dramatic difference in lowering poverty and hardship.

You can be certain that 100% of the GOP will oppose any aid to the poor, though the same politicians will approve of aid to the rich.

All any insurance does is provide money, which the federal government is far more able to do. There is no advantage to your paying for health insurance, when the federal government is able to pay for health insurance.

The census data shows that the rate of uninsured was especially high in a dozen states that have chosen not to expand Medicaid eligibility under the ACA.

Unlike his predecessor, President Biden has been pressing to expand Medicaid in the dozen holdout states, and Congressional Democrats are considering proposals that would allow people frozen out of the program by their state governments to buy private ACA health plans inexpensively.

Here are the states whose political majority is Republican, and who do not consider poverty and lack of medical care to be a problem.

FROM KAISER FAMILY FOUNDATION

What happens next to family incomes and poverty will depend largely on how many Americans are able to return to work in the coming months and whether the U.S. government extends some aid to low-income Americans.

Contrary to popular wisdom, federal deficit spending does not cause inflation. All inflations have been caused by shortages of key goods and services, most often food and oil. Today’s inflation results from shortages of labor, food, and oil.

Sadly, some voters have so little regard for humanity that they vote against the federal financing to ease poverty — financing that costs them nothing, but that will lift their neighbors from agonizing poverty and free children from starvation, homelessness, illness, and lack of education.

SUMMARY

  1. The U.S. federal government has demonstrated how federal deficit spending can reduce poverty in America.
  2. The federal government, being Monetarily Sovereign, has the unlimited ability to deficit spend, without collecting taxes. It cannot unintentionally run short of dollars
  3. Federal deficit spending never has caused inflation; shortages of key goods and services are the sole cause of inflation.
  4. People who are homeless, uneducated, ill, and hungry are a drag on the economy. They are less able to produce and to consume.
  5. Poverty in America could be cured by the adoption of the Ten Steps to Prosperity (below).

The U.S. federal government has all the tools it needs to end poverty in America. All it needs is the will.

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.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

How we can prevent recessions and depressions

How we can prevent recessions and depressions.

In order to prevent something, it is helpful to know what causes that thing. If we wish to prevent recessions and depressions, we need to know what causes them. Then, if we can prevent the causes, we can prevent the effect.

The word “recession” is defined as two consecutive quarters of reduced economic growth. It’s an arbitrary definition, that could just as easily be “three or more” – or fewer – quarters of reduced growth.

“Depression” has an even less specific definition. Investopedia says, “A depression is a severe and prolonged downturn in economic activity. In economics, a depression is commonly defined as an extreme recession that lasts two or more years.”

Ask any mainstream economist what causes recessions and depressions, and he’ll tell you pretty much what 24/7 Wall Street says in its 2010 article, “The 13 Worst Recessions, Depressions, and Panics In American History”  by Michael B. Sauter, Douglas A. McIntyre, and Charles B. Stockdale.

They list as causes:

” . . . sharp rises in unemployment, disruption of the banking and financial system, steep fall-offs in business and consumer spending, stagflation, rising bankruptcies, and an increase in the number of companies which have to weather periods of financial distress, asset speculation bubbles (rapidly rising values of gold, land, real estate), trade restrictions, bank failures, unchecked lending,” and just about anything else you can imagine.

Thus, to the mainstream economists, preventing recessions and depressions merely requires preventing all of the above — in short, they have no idea what to do.

There is, however, one common denominator for the vast majority of recessions and for virtually all depressions, and if we prevent that one common denominator, we will prevent recessions and depressions.

Here is some data that illustrates the common denominator: Image result for shoveling money

1796-1799: U.S. Federal Debt reduced 6%. Depression began 1797
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.

Historical Debt Outstanding 

1796-1799: U.S. Federal Debt reduced 6%. Depression began 1797.
01/01/1799 78,408,669.77
01/01/1798 79,228,529.12
01/01/1797 82,064,479.33
01/01/1796 83,762,172.07

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
01/01/1812 45,209,737.90
01/01/1811 48,005,587.76
01/01/1810 53,173,217.52
01/01/1809 57,023,192.09
01/01/1808 65,196,317.97
01/01/1807 69,218,398.64
01/01/1806 75,723,270.66
01/01/1805 82,312,150.50
01/01/1804 86,427,120.88

1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
01/01/1822 93,546,676.98
01/01/1821 89,987,427.66
01/01/1820 91,015,566.15
01/01/1819 95,529,648.28
01/01/1818 103,466,633.83
01/01/1817 123,491,965.16
01/01/1816 127,334,933.74

1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
01/01/1836 37,513.05
01/01/1835 33,733.05
01/01/1834 4,760,082.08
01/01/1833 7,001,698.83
01/01/1832 24,322,235.18
01/01/1831 39,123,191.68
01/01/1830 48,565,406.50
01/01/1829 58,421,413.67
01/01/1828 67,475,043.87
01/01/1827 73,987,357.20
01/01/1826 81,054,059.99
01/01/1825 83,788,432.71
01/01/1824 90,269,777.77
01/01/1823 90,875,877.28

1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
07/01/1858 44,911,881.03
07/01/1857 28,699,831.85
07/01/1856 31,972,537.90
07/01/1855 35,586,956.56
07/01/1854 42,242,222.42
07/01/1853 59,803,117.701

1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
07/01/1873 2,234,482,993.20
07/01/1872 2,253,251,328.78
07/01/1871 2,353,211,332.32
07/01/1870 2,480,672,427.81
07/01/1869 2,588,452,213.94
07/01/1868 2,611,687,851.19

1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
07/01/1893 1,545,985,686.13
07/01/1892 1,588,464,144.63
07/01/1891 1,545,996,591.61
07/01/1890 1,552,140,204.73
07/01/1889 1,619,052,922.23
07/01/1888 1,692,858,984.58
07/01/1887 1,657,602,592.63
07/01/1886 1,775,063,013.78
07/01/1885 1,863,964,873.14
07/01/1884 1,830,528,923.57
07/01/1883 1,884,171,728.07
07/01/1882 1,918,312,994.03
07/01/1881 2,069,013,569.58
07/01/1880 2,120,415,370.63

1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
06/30/1930 16,185,309,831.43
06/29/1929 16,931,088,484.10
06/30/1928 17,604,293,201.43
06/30/1927 18,511,906,931.85
06/30/1926 19,643,216,315.19
06/30/1925 20,516,193,887.90
06/30/1924 21,250,812,989.49
06/30/1923 22,349,707,365.36
06/30/1922 22,963,381,708.31
06/30/1921 23,977,450,552.54
07/01/1920 25,952,456,406.16

It’s pretty clear isn’t it. The common denominator among all U.S. depressions is reduced federal deficit spending (reduced debt). A growing economy requires a growing supply of money, and federal deficit spending provides that money.

Ask anyone what caused the “Great Depression of 1929, and they will tell you exactly the same thing as Messrs. Sauter, McIntyre, and Stockdale:

“A period of rampant speculation in the 20’s led to a market crash of epic proportions. Over the course of two days, beginning with the infamous ‘Black Tuesday,’ the stock market lost more than a quarter of its value.”

Utter nonsense: The stock market IS rampant speculation. That’s all it is and all it ever has been. That’s its purpose. What do you think those guys behind computers, and those other guys on the floor waving their arms and screaming are doing: Rampantly speculating.

No, the Great Recession was due to lack of money.

And here is another hint:

Federal debt growth

Recessions (vertical gray bars) tend to begin following a period of reduced federal debt growth, and recessions and depressions are cured by increased federal debt growth.

Reduced growth in the money supply does tend to cause the ” . . . sharp rises in unemployment, disruption of the banking and financial system, steep fall-offs in business and consumer spending, stagflation, rising bankruptcies, and an increase in the number of companies which have to weather periods of financial distress, etc., etc. mentioned above, but they all are results, not the fundamental cause.

Economic growth requires money growth, which should be obvious, because the primary measure of the economy is GDP, which is a money measure. 

GDP = Federal Spending + Non-federal Spending + Net Exports.

All three terms — Federal Spending, Non-federal Spending, and Net Exports — are associated with increased supplies of money.

Since the federal government cannot run short of its own sovereign currency, the U.S. dollar, and has the unlimited ability to prevent inflation (which, in any event, is not caused by federal deficit spending, but rather by shortages), what is the reason to reduce federal deficits and debt?

I can think of only one: Ignorance of facts.

The one good thing Donald Trump has done (though he is clueless about what it is) is to run a trillion-dollar deficit. That will grow the economy, further, just as Barack Obama’s deficits did.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

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The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY