–Why a dollar bill is not a dollar, and other economic craziness Monday, Jun 20 2011 

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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You may have seen your bank; you may have seen your safe deposit box. But have you ever seen your checking account?

No, you haven’t. Your checking account is not a physical reality. It is an accounting notation. You could travel to your bank, and walk into the lobby, and you would not be one inch closer to your checking account than if you had stayed home.

When you receive a printed checking account statement, you receive evidence you own the dollars in your checking account. But, you never will see those dollars. They too, are not physical realities, but rather, accounting notations. In fact, you never will see a dollar, anywhere. No one on earth ever has seen a dollar.

A dollar bill is not a dollar.

A dollar bill is a piece of paper telling the world the bearer owns a dollar. It can be compared to a title. When you own a car or a house, you have a document telling the world you own that car or house. The document is called a “title.” The title is not the car or house. You can’t drive a title; you can’t live in a title. It’s just evidence of ownership. Your dollar bill is evidence you own that invisible dollar.

A dollar has no physical existence. You can’t hold a dollar. A dollar has no more substance than does a number. You can’t hold the number “one.” You can’t carry the number “ten.” When you write a check, from your invisible checking account, that check is a set of instructions telling your bank to debit your checking account and to credit the payee’s checking account.

One account is debited and another account is credited. No dollars move. They can’t. They aren’t physical. The peso, the euro, the mark, the pound, the yuan, – none of the world’s currencies are physical. They all are accounting notations.

The U.S. federal government has been Monetarily Sovereign since we went off the gold standard in 1971. Money creation no longer is limited by the availability of gold. Our Monetarily Sovereign government can pay any bill of any size at any time, merely by sending instructions to banks to credit bank accounts.

The world’s financial structure is based on instructions to banks. When the federal government owes you $1,000, it sends you a check for $1,000, and you send the check to your bank. The check is not money. It is a written instruction to your bank to credit your account. The bank does as instructed, and your account balance is increased by $1,000. The federal government can send such checks – such instructions – endlessly. It doesn’t need to borrow or collect taxes. It merely sends instructions.

The federal government never “prints” dollars. Printing implies a physical creation. But dollars are not physical. Warren Mosler, uses the analogy of a football scoreboard. The government creates dollars by crediting bank accounts; the scoreboard creates points by posting them. The government never can run short of dollars just as the scoreboard never can run short of points.

Is paying a debt a burden to the federal government? Is posting a score a burden to the scoreboard? Does the federal government need to tax or borrow dollars? Does the scoreboard need to tax or borrow points?

Can the government run short of dollars? Can the scoreboard run short of points?

Would the posting of points be “unsustainable” as some claim the federal debt is?

The federal government pays all its bills by typing numbers into a computer – just like a scoreboard.

The dollar bill is an IOU. On its face is printed, “Federal Reserve Note.” The words “bill” and “note” describe debt instruments (as in “T-bill”and “T-note”). These instruments are held by creditors to demonstrate debt.

When you hold a dollar, who owes you what? The federal government owes you full faith and credit, which may not sound like much, but actually is powerful. It means:

1. The government will accept U.S. currency in payment of debts to the government
2. It unfailingly will pay all it’s dollar debts with U.S. dollars and will not default
3. It will force all your domestic creditors to accept U.S. dollars, if you offer it, to satisfy your debt.
4. It will not require domestic creditors to accept any other money
5. It will take action to protect the value of the dollar.
6. It will maintain a market for U.S. currency
7. It will continue to use U.S. currency and will not change to another currency.
8. All forms of U.S. currency will be reciprocal, that is five $1 bills always will equal one $5 bill and vice versa.

Every form of U.S. money is a form of debt. For many people, the word “debt” is threatening. That may be true for you and me and the states, counties and cities, and Greece and Ireland, all of which are monetarily non-sovereign, but not for our Monetarily Sovereign government, which can credit bank accounts endlessly.

Try to think of any U.S. money that is not owed by something to someone. You can’t.

Federal debt is not functionally the total of federal deficits. By law, the Treasury must issue T-securities (aka “debt”) in an amount equal to federal deficits. But that law is obsolete and could be eliminated immediately. Were it eliminated, there still could be deficits, but all federal debt would disappear.

Similarly, the Treasury could issue T-securities (debt), while the government did not run a deficit, or even ran a surplus.

Brief summary: A dollar has no physical reality. Neither does a checking account or any other bank account, debt, deficit, inflation, recession, depression, stagflation or money. All these terms are descriptive of accounting notations. The federal government can change any of these simply by typing into a computer.

Dollars do not physically move, because they don’t physically exist. When the government pays a debt, you may imagine dollars moving out of some government storage place into a creditor’s bank. But, there is no storage place; there is no movement. The government sends instructions to the creditor’s bank. That’s it. A Monetarily Sovereign government never can run out of instructions.

Given all of the above, how is there a debt crisis? How can the federal debt be a “burden” or “unsustainable” or a “ticking time bomb.” as the media love to claim?

One final thought: Debt-hawks typically confuse two questions:
1. How many dollars can the federal government create?
2. How many dollars should the federal government create?

When a debt-hawk is presented with the unassailable proof that the federal government cannot run short of dollars, and easily can pay any bill of any size, the rejoinder often is, “But that would cause inflation,” or “Why don’t we just give everyone a trillion dollars?” These responses indicate a quick switch in subjects, from question #1 to question #2.

This post describes only question #1. Question #2, which involves economic stimulus and inflation, is described in other posts. The answer to #1 is “infinite,” and that is why the federal debt is an obsolete, useless, meaningless, indeed harmful, concept.

Isn’t economics crazy?

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 teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it ruined my future.”

MONETARY SOVEREIGNTY

A Debt Parable. How ignorance and superstition destroyed our wonderful land Friday, Jun 17 2011 

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Ignoring all facts and evidence to the contrary, America’s Congress, our President, our media, and most of our old-line economists intuitively knew the earth is flat, and if an American boat sailed far enough it would fall off the edge.

So to protect our shipping from this never-seen edge, Congress installed a barrier, preventing our boats from sailing too far.

Every few years, Congress moved the barrier farther out to sea, and while no American boat ever had fallen off the edge, nor had any American even experienced an edge, many wise men predicted this would happen “eventually,” and the repeated movement of the barrier was “unsustainable.” The media termed the edge of the world a “ticking time bomb.” They derided those who wanted to end the barrier with invective and such sarcasms as: “Are you saying ships can sail forever?”

Some foreign boats that were not seaworthy – rowboats, rafts and the like – had sailed out beyond the horizon, and never seen again. Proponents of the American barrier offered this as absolute proof the barrier was needed, and the edge actually existed.

Though the barrier prevented American boats from circling the earth, which limited our trade, and hurt our nation’s economy, and though we already were in a recession, Congress decreed the barrier would be moved no more. No American boats were allowed to sail beyond it. Our economy was not allowed to grow.

Meanwhile, other nations discovered the edge of the world was a myth. They did not limit their ships. Their trade expanded and these nations grew wealthy, as America slipped steadily into a deepening depression, until we were no more.

And that is how ignorance and superstition destroyed our wonderful land.

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 teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it ruined my future.”

MONETARY SOVEREIGNTY

What is it that all 500 of America’s most powerful people don’t know? Friday, Apr 1 2011 

The debt hawks are to economics as the creationists are to biology. Those, who do not understand Monetary Sovereignty, do not understand economics. If you understand the following, simple statement, you are ahead of most economists, politicians and media writers in America: Our government, being Monetarily Sovereign, has the unlimited ability to create the dollars to pay its bills.
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The United States Senate has 100 members. The United States House of Representatives has 435 members plus six non-voting delegates.

In addition, the Committee for a Responsible Federal Budget said, “Today (3/31/11), over 64 prominent budget experts and economists wrote a letter to President Obama and Congressional leadership urging them to take action on our debt and deficits.

Add to that the President of the United States and his cabinet and advisors, and we have at least 500-600 of the most powerful people in America, not one of whom has any understanding of Monetary Sovereignty, but who direct our economy. Does that bother you? No?

Well how about the latest Tea (formerly Republican) Party chant, “Cut it or shut it,” meaning if cutting the federal budget won’t do sufficient damage to our economy , let’s just shut down the government and finish the job.

Does that bother you?

No, how about this story from ABC News:

Tea Party Hypocrisy? Some Lawmakers With Tea Party Ties Are on the Government Dole, by Jonathan Karl and Avery Miller, March 31, 2011

The Tea Party swept into the 112th Congress with promises of cutting government spending. But according to a report out today, at least five lawmakers with Tea Party connections have been longtime recipients of federal agricultural subsidies. “There’s nothing too surprising about hypocrisy in Washington,” Ken Cook, president of Environmental Working Group, told ABC News. “This particular group, you not only have to look at the hypocrisy but you need to watch your wallet.”

While the majority of American farmers receive no government money at all, at least 23 current members of congress or their families have received government money for their farms — combining for more than $12 million since 1995 according to a new report from the Environmental Working Group.

The biggest recipient was Rep. Stephen Fincher, a Republican from Frog Jump, Tenn.

While the self-described Tea Party patriot lists his occupation as “farmer” and “gospel singer” in the Congressional Directory, he doesn’t mention that his family has received more than $3 million in farm subsidies from 1995 to 2009, according to the Environmental Working Group.

When asked whether he would be willing to see all his subsidies go away, Fincher would not directly say he would no longer take any more subsidies.

“We need a good, better, we need a better farm program and we need to streamline it,” he said. “We need to look at many many options. And that’s a long way off.”

Frankly, it doesn’t bother me at all, that the Tea (formerly Republican) Party members are taking government money. It’s hypocritical, but it benefits the economy. What bothers me is the universal ignorance of our nation’s leaders.

I’m waiting for just one person in Congress or in the Executive Branch, to demonstrate even a rudimentary understanding of Monetary Sovereignty. Is that too much to ask?

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

No nation can tax itself into prosperity, nor grow without money growth.

MONETARY SOVEREIGNTY

–Who will be at fault for the return to recession? Wednesday, Mar 30 2011 

The debt hawks are to economics as the creationists are to biology. Those, who do not understand Monetary Sovereignty, do not understand economics. If you understand the following, simple statement, you are ahead of most economists, politicians and media writers in America: Our government, being Monetarily Sovereign, has the unlimited ability to create the dollars to pay its bills.
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The horror the politicians will visit on us, all in the name of winning:

Former Democratic National Committee chairman Howard Dean said he would be “quietly rooting for” a government shutdown. “I know who’s going to get blamed – we’ve been down this road before.”

Yes, who cares whether the nation burns down so long as we point at the Republicans as arsonists.

South Carolina Sen. Jim DeMint (R),“I just hope that we are not so afraid of a government shutdown that we are not willing to make the right decisions. That is what the tea party is for.”

Ah, so that’s what the Tea Party is for: Closing down the government.

The politicians are playing games with our lives, but don’t blame them. They’re politicians, i.e immoral, amoral, ignorant, selfish, uncaring and untruthful. You know it, so why do you listen to such people? The fault lies with you who allow yourself to believe the absolute lie that the federal deficit is unsustainable and should be reduced. The fault lies with you who refuse to heed the facts showing federal deficits are absolutely necessary for economic growth, and the federal debt easily could be eliminated tomorrow, at the click of a computer key.

The fault lies with you who stand meekly aside while the sneering, insulting, foul-mouthed debt hawks dominate the discussion to deride the people bringing you the truth. The fault lies with you who ask for no evidence to support what the liars tell you, but rather allow yourselves to be led like lambs to the slaughter, and even grow angry when you are not led more quickly.

And when the Tea Party has its way, and valuable government services are emasculated or eliminated, and the economy enters another recession, perhaps worse than the previous one, the fault will lie with you who surely will whine and complain you didn’t realize this is what less government really means. “It’s not my fault. I didn’t know. Why didn’t they warn me I would lose my hopes and my dreams and my family and my life?”

You were warned. You just refused to listen. Who gave the Tea Party its power? “They sow the wind, and reap the whirlwind.” Though the Tea Party is sowing the wind, it is you, and the rest of us, who will reap the whirlwind.

Ignorance provides its own reward.

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

No nation can tax itself into prosperity, nor grow without money growth.

MONETARY SOVEREIGNTY

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