Although economics can be mind-spinningly complex, the essence of economics is rather simple, in that it boils down to a few facts, about which there can be no argument:

Fact 1. The U.S. federal government is different from you and me. It alone has the unlimited ability to create (“print”) dollars. If it wished to do so, the government could create a billion trillion dollars tomorrow, merely by pressing a computer key. It has had that power since 1971, the end of the gold standard, and that power is called Monetary Sovereignty.

Fact 2. Given such power, the federal government has the unlimited ability to spend dollars, and does not need to tax or borrow in order to spend. Were taxes and borrowing to fall to $0 or rise to $100 trillion, neither would affect by even one penny, the federal government’s ability to create and spend dollars and to “sustain” any size debt. In federal terms, taxes and borrowing do not fund spending.

Fact 3. Therefore, the only limitation on federal spending is not taxes or borrowing, but uncontrollable inflation.

I know of no economist, no columnist, no politician who disagrees with the above. Yet virtually all of them seem to agree that the federal debt and deficits are “unsustainable,” and should be reduced, despite the fact our massive deficits have brought us nowhere near uncontrollable inflation. (Only recently, we were worried about deflation.)

Logically, that makes no sense. How can a debt or deficit be a problem, if the government can create unlimited money and inflation is not a threat? It’s as though one part of the brain was not communicating with the other part. The psychologists call it “cognitive dissonance,” and since they have a name for it, perhaps they have an explanation, too.

So if you are a psychologist, and/or understand cognitive dissonance, I ask you; Why do otherwise intelligent people hold two, mutually exclusive ideas about our economy?

Some have speculated it’s merely the confusion between personal finances (which are not Monetarily Sovereign) and federal finances. But economists should not be confused about so simple a concept. Even the dullest economist should understand the difference between a personal bank account and the federal government’s money creation. There must be something more than mere confusion.

Perhaps, we hard-wired to believe the “no-free-lunch” idea that you can’t get something for noting. But can it really be so difficult to see that the federal government can “print” dollars?

I just don’t understand it. No one debates the underlying facts, which seem obvious and straightforward. The federal government can create infinite dollars, limited only by inflation, which we are nowhere near. Everyone agrees. Yet, after that there is a huge disconnect, leading to notions about needing tax increases and debt ceilings and the deficit being unsustainable. It’s beyond logic.

So because it is beyond logic, I am asking for assistance from psychologists to explain why the logical and obvious are invisible to people, who acknowledge the facts while simultaneously being blind to them.

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

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No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetary Sovereign, , and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.

Remember that the next time you’re tempted to ask a dopey teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it screwed up my future.”

MONETARY SOVEREIGNTY

America is the greatest nation in the world, perhaps in the history of the world. Do you believe that? What does it mean for a nation to be great? There is no agreed-upon measure; it’s subjective. So I’ll give you my personal thoughts.

Is greatness military power? Perhaps. The U.S. is the greatest military power in history. But Russia has military power, and I do not consider them a great nation.

Is greatness population size? Perhaps. We have more than 300 million people. But China has even more, and I do not consider them a great nation.

Is it resources? Perhaps. We have coal, oil, many other minerals, as well as farms that grow massive amounts of food. But Saudi Arabia has resources, and I do not consider them a great nation.

It may be that greatness is measured not only by what a nation is or has, but also by what a nation does. Before we became a nation, our future citizens and their families dared to leave their homelands to travel the treacherous ocean in search of freedom. That was greatness.

We fought the most powerful nation on earth to defend our freedom. That was greatness. The most influential people in America voluntarily surrendered their powers to join together for the greater good. That was greatness.

We developed that glorious miracle, the Constitution, then amended it with another glorious miracle, the Bill of Rights, the thrust of which was to protect each of us from excessive personal and governmental power. That was greatness.

We also did things that were not greatness. We killed native Americans. We kept slaves. That was smallness. One of the many reasons for the Civil War was slavery. The South’s position was immoral and small. The North’s position on slavery was moral, and that war was greatness, as was the Emancipation Proclamation and the 13th Amendment. The Civil Rights Act of 1886 (passed over the veto of President Andrew Johnson), and the subsequent 14th Amendment, guaranteeing full citizenship to all those born in America, was greatness. The ongoing attempts by right-wing demagogs to overturn the “birthright” portion of the 14th Amendment is smallness.

Many of us countenanced bigotry against blacks, Jews, Catholics, gays and others. That was smallness. But as a great nation, we have tried to change that.

The WPA was greatness. The war against Hitler was greatness. The march across the Pacific to defeat Japan, was greatness. Helping to rebuild a defeated Germany and Japan, rather than plundering them, was even more greatness.

The invention of atomic energy was greatness, though the bomb itself, not so much. In a controversial way, the use of the atomic bomb, not on Tokyo or Kyoto, but on Hiroshima and Nagasaki, were greatness, in that they ended the war without destroying the moral, emotional and traditional center of Japan. The Marshall Plan was greatness.

The development of the ENIAC computer and subsequent computers and programs, of which “Silicon Valley” became the leader, were signs of greatness.

Senator McCarthy was smallness, but censuring McCarthy was greatness..

The creation of Social Security, Medicare and Medicaid were signs of American greatness.

The civil rights movement and the Civil Rights Act of 1964 were profound signs of greatness. Roe v Wade, which protected not only vulnerable women, but prevented the suffering that is endured by unwanted children, was greatness. Failure to ratify the Equal Rights Amendment was smallness, though numerous court decisions may have made the Amendment unneeded

Eisenhower’s interstate highway initiative was greatness. The lack of an interstate, high speed passenger rail system is smallness.

Landing on the moon was a sign of greatness, as was the first mechanical exploration of Mars. The development of vaccines and medicines of all kinds, of which America is the leader – greatness. The Mosaic web browser, which in 1993, marked the true beginning of the World Wide Web, the mobile phone and the cordless phone were products of a great America.

Many, many more examples of greatness and smallness can be suggested, and you may disagree with, or add any, you wish. But in my eyes, there is a pattern. Though President Kennedy said, “ask not what your country can do for you – ask what you can do for your country, I believe the true measure of a nation’s greatness is what that nation’s government does for people, especially weaker, poorer, most vulnerable people. The Statue of Liberty poem expresses our greatness.

We never returned to the moon, nor have we landed people on Mars. This failure (I consider it a failure) resulted not from lack of scientific talent nor of human courage, but rather because of perceived lack of dollars.

Xenophobia has strengthened, with Arizona’s anti-immigrant laws and infamous sheriff being only the most prominent examples. These laws have their basis in money – the belief that immigrants take resources away from us – we who already have our citizenship, not by effort but by good fortune. The British expression for that is, “I’m all right, Jack.” We have become a nation of I’m all right, Jack.

I believe America’s greatness is waning, and I believe the decline began in 1981, with Ronald Reagan’s inaugural address, in which he said, “In this present crisis, government is not the solution to our problem; government is the problem. From time to time we’ve been tempted to believe that society has become too complex to be managed by self-rule, that government by an elite group is superior to government for, by, and of the people. Well, if no one among us is capable of governing himself, then who among us has the capacity to govern someone else? All of us together, in and out of government, must bear the burden.”

He may have been correct if he were talking about a small group, or perhaps even a tiny village. But the notion of 300+ million people, each “governing himself” not only is ludicrous, but
devolves to self-serving, selfish and mean-spirited, as it now has, as exemplified by the Tea (formerly Republican) Party. We, as individuals, are small and weak. But we together, as a nation, are powerful.

Yet, today, we are asked to decide how much to reduce Social Security, reduce Medicare, reduce Medicaid, reduce assistance to the arts and public radio, reduce funding for roads and bridges, reduce funding for scientific research and medical research, limit aid to states, limit aid to education, limit aid to the poor, the homeless, the helpless.

Reduce and limit; limit and reduce. These are the symptoms of a declining nation. Slip one step backward; then slip another; then another. One day, your children will look around and ask you, ‘What has become of us? What happened to our great nation?

Your answer will be: “Our greatness is lost, because we, your parents and grandparents, thought our government was the enemy, and began a process for limiting and reducing what our government could do. We didn’t understand, nor care to learn, how our government creates money, and why we need our government. We just believed all the misleading slogans. It all began with Ronald Reagan, but it accelerated in 2010, with the Tea (formerly Republican) Party. And I’m sorry children, but you must pay the price for our ignorance.”

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

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No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetary Sovereign, , and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.

Remember that the next time you’re tempted to ask a dopey teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it screwed up my future.”

I didn’t think it was possible for the editors of the Chicago Tribune, to exhibit more ignorance about our economy, but they now have outdone themselves. Consider the editorial dated May 11, 2011, and titled, “Of course it’s perilous.” Here are some amazing excerpts:

. . . the danger from continued (federal) free-spending is an America so deep in hock that it truly does look to the world as if it will be unable to pay its debts.

The “debt” to which the Tribune refers is composed of outstanding T-securities (T-bills, T-bond, T-notes, etc.), all of which are denominated in dollars. So, to service its debt, the U.S. government uses dollars, which by law, it has the unlimited ability to create.

Though the Tribune is ignorant of that fact, one assumes the rest of the world is not deluded into thinking our federal government somehow will lose its ability to create its sovereign currency.

If credit markets ever flip to that pessimistic view, the Chinese and other big holders of U.S. paper really will race for the exits.

The Tribune never explains what “race for the exits” means. We are left to guess it means nations will refuse to buy our T-securities. Ooo-ooooh how frightening. T-securities became obsolete in 1971, when we went off the gold standard. Prior to then, the federal government was not Monetarily Sovereign. It did not have the unlimited ability to create dollars, since dollar creation was limited by gold reserves, so we had to borrow dollars (i.e. create and sell T-securities).

Today, nothing limits dollar creation except inflation, which we are nowhere near, and easily is prevented/cured by the Fed’s interest rate control. Ask yourself, why would a nation having the unlimited ability to create dollars, need to borrow dollars it previously created? The Tribune editors not only offer no answer for that question, they don’t even think about it. With zero thought and zero research, they merely parrot the Tea Party’s anarchist mantra. And this is one of America’s leading newspapers? Lord help us.

The federal government could eliminate all T-securities (i.e. eliminate all federal “debt”), simply by pressing a computer key and exchanging one form of U.S. money (dollars) for another form of U.S. money (T-securities). Think of it: Tomorrow there could be no T-securities, no “debt” and nothing for the Tea Party to parade about. And all it would take is the press of a computer key.

Our guess is that finance ministers in places like Greece, Ireland, Portugal and Spain would erect statues of this guy Boehner if they magically could turn back the clock and embrace his brand of fiscal austerity. Instead they’re struggling to simultaneously stabilize their shaky economies, reduce their runaway debts and persuade global investor to trust that they’ll be able to make their interest payments in coming years. Whew.

Do you see the ignorance in this? Greece, Ireland, Portugal and Spain are monetarily non-sovereign. They do not have the unlimited ability to create euros. They can — and have — run out of the euros needed to service their debt instruments. The U.S. is Monetarily Sovereign. It does have the unlimited ability to create the dollars needed to service its debt instruments.

So the Tribune does not even understand the difference between monetary non-sovereignty and Monetary Sovereignty — the fundamental concept in modern economics. It’s like preaching about mathematics, yet not understanding arithmetic. Yet the Tribune editors have the gall, not only to preach about economics, but intentionally to avoid learning. Talk about hubris.

For once, Democrats and Republicans are seriously debating how, and by how much, this debt-riddled nation needs to reduce spending. A companion debate on cutting unsustainable entitlements also needs to combust, and the sooner the better. . . we need to slash the indebtedness that already has put this nation’s future prosperity in danger.

I’ll tell you what will put this nation’s future prosperity in danger: Cuts in Medicare, Medicaid, Social Security, infrastructure, food safety, drug safety, research of all kinds, the military, air safety, education and all the other federal programs we rely on for our lives and our children’s futures. Oh yes, there is one more thing that puts our nation’s future prosperity in danger: The Tribune editors and others of their “I-see-NOTHING; I-know-NOTHING,” Sergeant Schultz ilk.

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

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No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetary Sovereign, , and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.

Remember that the next time you’re tempted to ask a dopey teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it screwed up my future.”