Once again, Reason Magazine promulgates the Big Lie to stifle the economy. Friday, Jul 3 2020 

The “Big Lie” comes in various forms. It is stated as:

  1. Federal spending is funded by federal taxes.
  2. The federal debt will lead to insolvency.
  3. Cuts in federal spending are financially prudent.
  4. Federal finances are like state/local government finances.
  5. Federal spending causes inflation.
  6. The federal government should live within its means.
  7. The federal debt is a ticking time bomb.
  8. China will stop lending to us.
  9. Profligate federal spending reduces our ability to deal with financial crises.
  10. Federal debt reduces economic growth
  11. The “debt”/GDP ratio is too high

All are widely believed, even by some economists and virtually all politicians and media writers — and all are absolutely untrue. They all are facets of The Big Lie.

The Next Pandemic Will Be Caused by the National Debt. It Will Crater the Economy.
Debt held by the public equals about 100 percent of GDP. That’s hurting growth and will fuel a major crisis. By Nick Gillespie,7.2.2020
Nick Gillespie is an editor at large at Reason, the libertarian magazine of “Free Minds and Free Markets.”

When President Donald Trump said on March 6 that the coronavirus “came out of nowhere,” it wasn’t quite accurate.

Actually, it was 100% wrong, since a pandemic has been anticipated by every administration in the past few decades.

The Obama administration compiled a detailed plan for dealing with a pandemic — a plan the Trump administration completely ignored, costing many thousands of lives.

So far, more than 125,000 Americans have died — most unnecessarily — and many more will follow. To say Trump’s statement was not “quite accurate” is like saying the Pacific Ocean is damp.

Now, move to another comment that is “not quite accurate,” another statement of “The Big Lie.”

There’s another totally predictable crisis that promises to be even more damaging to our way of life: The national debt—the amount of money the federal government owes—is already choking down economic growth, but in the future, it could lead to “sudden inflation,” and “a loss of confidence in the federal government’s ability or commitment to repay its debts in full.”

It must be extremely difficult to pack so much misinformation into one short paragraph, but Nick Gillespie has accomplished the seemingly impossible.

1. The misnamed “national debt” is not the amount of money the federal government owes. It is the amount of money deposited into Treasury Security Accounts at the Federal Reserve bank.

The government does not “owe” this money; the government does not even “have” this money. It is owned by, and controlled by, the depositors.

To invest in a T-security (T-bill, T-note, T-bond), you open a T-security account. Visualize a bank vault into which you put your money, jewels, deeds, etc.

The bank does not “owe” you the value of your deposits. It possess them but does not own them. It merely holds them for you, and gives them back to you upon your demand.

Similarly, the government does not owe you your deposit. The bank possesses your deposit, but does not own it. It simply keeps it for you, and whenever you want it back, the government returns your deposit to you, plus accumulated interest.

2. Your deposits (the so-called national “debt”) do not “choke down” anything. In fact quite the opposite. Until COVID-19, both the economy and the federal “debt” had been growing massively.

The federal “debt” is a reflection of federal deficit spending which stimulates economic growth. In fact, whenever the national debt has been reduced, America has suffered a depression or recession.

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.

Even when the federal debt grows insufficiently, America suffers recessions.

Recessions (vertical bars) occur after a period of reduced Federal Debt Held by the Public (red line) and are cured by increased Federal Debt.

The reason, quite simply, is that a growing economy requires a growing supply of money, so recessions are caused when the money supply does not increase sufficiently.

Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports

That also is why recessions are cured when the federal government pumps dollars into the economy via deficit spending.

3. Contrary to popular myth, federal debt does not cause inflation, much less “sudden inflation.”

All inflations in world history have been caused by shortages of vital goods or services, most often food or energy.

While Federal Debt (red) has risen massively in the past 70 years, Inflation (blue) has risen moderately.

There is no relationship between changes in Federal Debt (red) and changes in Inflation (blue).

4. There never has been, and never will be a “loss of confidence” in the federal government’s ability to pay its debts.

All federal debt either is denominated in dollars or denominated in a currency that can be exchanged for dollars.

The federal government has the unlimited ability to create dollars — every knowledgeable economist knows this — so the federal government cannot run short of dollars with which to pay its debts.

Further, there is a vast difference between what erroneously is termed “the federal ‘debt'” and the federal government’s debts.

The federal “debt” is the total of deposits into T-security accounts, which the federal government pays off simply by returning the dollars in those accounts.

Federal government “debts” are dollars owed to creditorGreenspan quote.pngs for goods and services purchased by the federal government.

These debts are paid off by the creation of new dollars.

The federal government accomplishes this by sending instructions to each creditor’s bank, telling the bank to increase the balance in the creditor’s checking account.

When the bank does as instructed, brand new dollars are created and added to the nation’s money supply. The federal government can do this endlessly

Mr. Gillespie’s scare-article continues:

“Such a crisis could spread globally” causing some “financial institutions to fail.”

That’s all according to the nonpartisan Congressional Budget Office (CBO), which has been warning Americans about the long-term consequence of the ballooning debt for years.

Yes, the CBO and other organizations have issued the same warning for at least 80 years, and we still are waiting for that “loss of confidence in the federal government’s ability to pay.”

Since 1940, the growing federal debt has been called “a ticking time bomb.”  After 80 years, it surely is the slowest “time bomb” in history.

But despite being wrong for 80+ years, the warnings continue.

Congress and presidents from both major parties have accepted Dick Cheney’s false maxim that “deficits don’t matter.”

Instead, they just keep spending more than we take in during good times and bad, even though being so deeply in hock will make us less able to deal with a future crisis.

Sadly, Mr. Gillespie does not understand the difference between the Monetarily Sovereign, U.S. government, and the monetarily non-sovereign state & local governments.

A Monetarily Sovereign government never can run short of its own sovereigBernanke quoten currency. A monetarily non-sovereign entity (like you and me) has no sovereign currency, so can become insolvent.

The amount of money the government owed to the public was 79 percent of gross domestic product at the end of 2019, up from 31 percent in 2001.

The COVID-19 lockdowns and subsequent emergency spending will push the curve above 100 percent of GDP by the end of 2020, and it’s expected to keep rising.

Emergency spending and plunging tax revenues are making a bad situation worse.

CBO forecasts that the budget deficit this year will be 17.9 percent of GDP, meaning that the government is running much larger deficits, racking up significantly more debt, than it did even at the height of the financial crisis of 2007-2008.

Also, contrary to popular myth, the “debt”/GDP ratio is meaningless.  GDP is a measure of spending in any one year. Federal “debt” measures the net amount of deposits into T-security accounts.

Two completely different measures and two completely time scales. The “debt”/GDP ratio isn’t just apples and oranges. It’s apples and adverbs — two measures that could not be more different.

Mr. Gillespie sounds the ominous warning about the ratio exceeding 100%. As of June 2019, the nation with the highest debt-to-GDP ratio is Japan with a ratio of 253%.

The next highest ratio is from Greece, which at 181.1%, lags significantly behind Japan.

Other nations with high debt-to-GDP ratios include: Cape Verde: 123.4%, Portugal: 121.5%, Congo: 117.7%, Singapore: 112.2%, Mozambique: 110.5%, Bhutan: 108.64%, United States: 105.4%, Jamaica: 103.3%, Cyprus: 102.5%, Belgium: 102%, Egypt: 101.2%

The nations with the lowest debt-to-GDP ratios include: Brunei: 2.4%, Afghanistan: 7.1%, Estonia: 8.4%, Swaziland: 9.95%, Russia: 13.5%, Burundi: 14.4%, Cayman Islands: 14.5%, Kuwait: 14.8%, Libya: 16.5%, Republic of the Congo: 17%, Kosovo: 17.12%, Palestine: 17.5%, Cuba: 18.2%, United Arab Emirates: 18.6%, Guinea: 18.66%

As you can see, there is zero relationship between the “debt”/GDP ratio and a nation’s ability to pay creditors.

It, very simply, is a meaningless ratio used by those who either wish to scare the public, or who are ignorant of economics.

Economists such as Nobel Prize-winner Paul Krugman and proponents of modern monetary theory (MMT) look at the absence of inflation and higher interest rates so far as justification for ever-more spending and borrowing.

While it’s true that the cost of paying interest on the debt is still dwarfed by other expenditures, that’s because historically low interest rates have made government borrowing cheap.

But there’s no reason to believe that interest rates won’t rise over time. According to conservative estimates from the CBO, as the total budget grows as a percentage of GDP, the cost of paying interest on the debt will increase faster until, by 2050, it accounts for about 24 cents of every dollar spent.

And these estimates don’t take into account emergency spending for COVID-19, which will make servicing the debt even more costly over time.

No, economists don’t “look at the absence of inflation and higher interest rates so far as justification for ever-more spending and borrowing.”St louis fed quote.png

The U.S. federal government does not borrow. Unlike state/local governments, the federal government has the unlimited ability to create dollars, so why would it borrow?

That is what the Fed means when it says “the government is not dependent on credit markets.”

T-securities not represent borrowing. They represent the acceptance of dollar deposits for safe-keeping.

And low interest rates are meaningless for a government that has the unlimited ability to create dollars.

High interest rates actually have a stimulative component. The higher the rate, the more interest dollars — i.e. growth dollars — the federal government pumps into the economy.

The justification for ever-more spending is quite simple: Federal spending not only grows the economy, but federal spending buys valuable goods and services for the American people.

It is federal spending that brings us roads, bridges, dams, healthcare, the military, scientific research & development, education, farming, courts, a government — the list goes on and on.

And now, Mr. Gillespie reveals either ignorance or perfidy:

Like a monthly credit card payment that eats into a household budget, federal debt means less money to buy other things.

He equates federal finances with personal finances. Either he doesn’t understand the difference, or he hopes you don’t understand the difference.

The U.S. federal government neither has nor needs anything resembling a “credit card.” It creates unlimited dollars at the touch of a computer key. The government does not borrow, and it pays creditors simply by issuing instructions to banks.

And when governments run large, persistent deficits, it also has a devastating impact on economic growth over time.

Our current debt levels could reduce GDP by about one-quarter over 23 years, according to research by Harvard economists Carmen Reinhart and Kenneth Rogoff.

It’s a case of what French economist Frédéric Bastiat referred to as “the unseen” because we’ll never get to experience how much wealthier we otherwise would have been had the federal government practiced fiscal prudence.

Anemic growth will impact the poorest Americans most of all, causing their material progress to slow considerably. It means less leisure time, smaller homes, older cars, and less health care.

Could it be that Mr. Gillespie doesn’t realize the Reinhart and Rogoff conclusions have been debunked, not only for mathematical errors, but perhaps more importantly, because Reinhardt and Rogoff did not differentiate between Monetarily Sovereign governments and monetarily non-sovereign governments.

The former do not borrow and cannot run short of money. The latter do borrow and can run short of money. Quite a difference to overlook.

Remember that equation: GDP = Federal Spending + Non-federal Spending + Net Exports. There is absolutely no mechanism by which a reduction in federal spending can increase GDP.

Mr. Gillespie may be one of the last remaining economic writers who still believes  austerity can grow an economy, though he never explains how that works.

In the short-term, there’s no question that the government can and will be able to borrow massively, and interest rates are likely to stay low for the time being as the world shifts into recession.

The federal government does not borrow. Interest rates will stay low if that is what the Federal Reserve wants. The Fed has absolute control over the interest the federal government will pay on T-security deposits.

And now we move from the merely wrong to the outright ridiculous:

But there’s also the specter of investors here and abroad refusing to buy U.S.-issued debt as our economy flattens, China flexes its economic and political might, and alternative instruments such as bitcoin and gold offer safe refuge.

The federal government doesn’t need China or anyone else to buy its “debt.” The Federal Reserve itself has the unlimited ability to buy T-securities, which it does, every day.

The government “lends” to itself in an endless circle of finance.

And, bitcoin offers “safe refuge”?? Is this a joke?

Gold, which has only minimal intrinsic value, pays no interest or dividends, costs money for storage and shipping, and the value of which is not guaranteed by anything or anyone — that is “safe refuge”?

Many nations have suffered depressions while on gold standards.

And it keeps getting worse and worse and worse:

Even the most hubristic economist or president would have to admit that there will come a time when the U.S. dollar is no longer the world’s reserve currency.

That change won’t necessarily be as dramatic as when German paper marks became worthless after World War I, but it will massively reduce purchasing power even as it increases the cost of everything.

Mr. Gillespie wrongly believes that “reserve currency” endows the U.S. dollar with some valuable status.

A “reserve currency,” of which there are many, depending on the bank, is nothing more than a currency a bank keeps in reserve to facilitate foreign exchange and trade. 

The U.S. dollar, the euro, the British pound, the Mexican peso, the Chinese yuan, the Brazilian real, all are reserve currencies for various banks.

The value of these currencies does not rely on being held in reserve by banks. It’s just a currency exchange convenience.

And then Mr. Gillespie tosses in the inevitable reference to German hyperinflation, which had nothing to do with reserve currencies or with over-spending or with anything else pertinent to the discussion.

The German hyperinflation, like all hyperinflations, was caused by shortages of life’s necessities — food, clothing, housing, energy — the result of onerous financial conditions placed on Germany by the Allies after WWI.

Germany simply ran out of money to pay for goods and services, so these items became scarce, and when a needed item is scarce, the price goes up. Period.

The German hyperinflation was cured when Germany issued a new currency and used it to purchase needed goods additionally to buying the greatest war machine the world had ever known. 

German government war spending actually cured the hyperinflation by curing the shortages.

Finally, Gillespie argues against his own proposition:

Between 1940 and 1945, federal spending increased tenfold from $10 billion to over $100 billion to pay for the war effort.

But when victory was won, the government immediately cut military spending.

That cut in federal spending led to the recession of 1945.

Our out-of-control spending has been driven by the persistent rise in the cost of entitlements like Medicare and Social Security.

Mr. Gillespie, as a stout libertarian, hates “entitlements,” (aka, benefits to the public). He would prefer a government that does not provide Medicare, Medicaid, Obamacare, Social Security, roads, bridges, dams, education, a military, courts, Congress, national parks, scientific research & development, food & drug inspection, weather reports, and the myriad of other benefits the public receives from the government.

To a libertarian, any government is bad government, and any government spending should be reduced or eliminated. 

When the debt crisis materializes and our options are severely limited because of decades of profligate spending, politicians sitting in the Oval Office and Congress will claim that it all just came out of nowhere, like that crazy virus back in 2020.

But nothing could be further from the truth: Budget wonks are already sounding the alarm. We need to heed these warnings now or suffer an economic lockdown later from which there may be no escape.

Back in 1940, the federal “debt” was about $40 billion. Today it is over $20 trillion, and our options are no more limited now than they were then. (Actually, our options are less limited, because federal money creation no longer is hampered by a gold standard.)

The “Big Lie” reflects ignorance of Monetary Sovereignty, which is the single biggest problem facing America’s and the world’s economies.

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 or a reverse income tax

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

Suddenly, I’m a genius. Wednesday, Apr 1 2020 

Suddenly, I’m a genius. How did that happen?

Answer: The COVID-19 crisis. There’s nothing like a crisis to force people to re-think the myths that helped exacerbate the crisis.

For about 25 years, I’ve been telling anyone who would listen that, contrary to popular myths:

  1. The U.S. government’s finances are unlike state and local governments’, and unlike euro governments’, and unlike businesses’, and unlike yours and mine. The federal government uniquely is Monetarily Sovereign. Two hundred forty years ago, it created from thin air an arbitrary number of the first U.S. dollars. It did this by creating laws from thin air. The U.S. dollar is a product of U.S. laws.Greenspan quote.png
  2. The U.S. government still retains the ability to create laws and its own sovereign currency, the U.S. dollar from thin air. Using its laws, the government can give its dollars any value it chooses (which it arbitrarily has changed multiple times).
  3. Even if all federal tax collections fell to $0, the U.S. government could continue spending forever. It never can run short of U.S. dollars.Bernanke quote.png
  4. The government creates dollars by spending. To pay a creditor, the government sends instructions (via check or wire), to the creditor’s bank, telling the bank to increase the balance in the creditor’s bank account. The instant the bank obeys those instructions, new dollars are created and added to the M1 money supply.
  5. The federal government destroys all its income, including all your tax payments, upon receipt. When the government receives your tax dollars, your checking account is reduced, which reduces the nation’s M1 money supply. Meanwhile, the received tax dollars cease to be part of any money supply measure, so they effectively are destroyed.St louis fed quote.png
  6. The federal government does not borrow. It accepts deposits into T-security accounts. When you buy a T-security (T-bill, T-note, T-bond), you actually deposit your dollars into your T-security account at the Federal Reserve bank. There, the dollars remain, gathering interest, until maturity, at which time the government returns the dollars to you. No tax dollars are involved at any point in the process.
  7. Neither you, nor anyone else, owes or pays for the federal “debt.” Federal debt is not typical debt. It is the total of dollars deposited into T-securities accounts. The federal government, having no need for these dollars, does not touch them. They remain in your account until the T-securities mature.
  8. The purpose of T-securities is not to provide the government with dollars, which it creates at the touch of a computer key. The purposes are: To provide a safe storage place unused dollars (which stabilizes the dollar) and to make Americans believe dollars are scarce to the government (so the people will not ask for benefits).
  9. Neither the federal debt or federal deficit are a burden on anyone. The federal deficit is the net amount of money the federal government has added to the economy. Thus the federal deficit is the economy’s surplus.warren buffet quote.png
  10. A growing economy, by definition, needs a growing supply of money. Gross Domestic Product (GDP), the prime measure of an economy = Federal Spending + Non-federal Spending + Net Exports.
  11. Mathematically it impossible for an economy to grow unless its money supply grows. That is why federal deficits grow the economy (GDP.)
  12. Federal surpluses cause recessions and depressions by shrinking the supply of dollars in the private sector. Every depression in U.S. history has come on the heels of federal surpluses. Most recessions have resulted from reduced deficit growth.
  13. The GDP/Debt ratio, so often cited, is a meaningless fraction.  The amount of national (public and private) spending vs. the total of all T-security accounts has no relevance in economics. The federal government could accept deposits in T-securities’ accounts without running a deficit, and it could run a deficit without accepting deposits into T-securities accounts. The two are not related.
  14. Federal deficit spending does not “crowd out” private spending. The opposite is true. Because federal deficit spending adds dollars to the economy, it facilitates private spending. A more complete discussion can be found here.
  15. The U.S. government should not try to increase the balance of trade. Imports are more beneficial than exports. With imports, the federal government exchanges easily created dollars for difficult-to-create goods and services.
  16. Inflations and hyperinflations are not caused by government “excessive” spending. They are caused by shortages of key goods, usually food and/or energy. Ironically, inflations and hyperinflations can be cured by increased government spending to obtain the scarce goods and tribute them to the public.
  17. The most important problems in economics involve: Monetary Sovereignty, which describes money creation and destruction, and Gap Psychology, which 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.”
  18. The rich, who run America, wish to widen the Gap, because it is the Gap that makes them rich. Without the Gap, we all would be the same, and the wider the Gap, the richer they are.
  19. The sole purpose of government is to improve and protect the lives of the people. 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.
  20. The Ten Steps to Prosperity should be implemented to grow the economy and to narrow the Gap between the rich and the rest.

That’s a great number of popular myths, debunked. For lo these 25 years, I have enjoyed receiving epithets ranging from “commie” to “stupid,” to the carnal, to “lib,” and now suddenly, I’m a genius. And being a “lib” isn’t quite so outrageous.

With the government BV (before virus) already planning to run a $1 trillion deficit, and now DV  (During Virus) planning to add about $2 trillion more to the deficit — and all without raising taxes —  it has become clearer to my intelligent friends and enemies that the above 20 statements have validity.

Now, if only we could communicate the facts to the nation’s opinion leaders — the media, the politicians, and the economics professors — we might detach ourselves from the COVID-19 depression that hovers in our future.

Sadly, America needs more trillions than the government already has allocated, to stave off a massive depression. I calculate that at least $7 trillion is needed, depending on how it is allocated.

Though I now have become, in the eyes of some, an “instant” genius (after 25 years), the myths continue to dominate popular thought — just somewhat less.

But it doesn’t take a genius to see what is plain and simple right before your eyes. It doesn’t take a genius to understand the basics of Monetary Sovereignty and Gap Psychology.

You can do your part to disseminate the truth and to diminish the lies by repeatedly — daily, hourly — contacting your Senators and Representative, and telling them about Monetary Sovereignty. Do it, if not for you, then for your children and grandchildren.

You can help save the world. You have nothing better to do.

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. 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 the rest.

MONETARY SOVEREIGNTY

Enough already, with the Debt/GDP ratio Monday, May 21 2018 

It takes only two things to keep people in chains:
The ignorance of the oppressed
And the treachery of their leaders

========================================================================
Some economists, perhaps feeling pangs of inferiority about economics as a science, try to make it seem more “scientific,” and for them, that requires mathematics.

The belief is: Include a bunch of formulas, then claim these formulas prove economics is a “real science,” like astronomy and physics.

That is why economics papers usually include so much math. It’s part of the desperate hope this pseudo-specificity will justify the WAGs (Wild-Ass Guesses) that too many economics papers include.

That desperate need for mathematical justification is one reason why the Debt/Gross Domestic Product ratio was created — that plus the efforts by the rich to “prove” that social programs are unaffordable and “unsustainable” (a favorite word for debt guerillas).

The Federal Debt/GDP ratio is absolutely meaningless, a useless, designed-to-be-misleading number that has been foisted on an innocent public.

The so-called “Federal Debt” isn’t even “debt” in the usual sense.  It is the word describing the current total of open deposits — similar to bank savings deposits — into Treasury security accounts, made for the past 30 years.

By contrast, GDP is the total of Spending and Net Exports this year. Putting these two, unrelated measures into one fraction yields a classic apples/oranges ratio, measuring nothing.

It’s akin to creating a ratio of Chicago Cubs hits in yesterdays game vs. the number of games the Cubs won last year. Meaningless.

If, instead of misnaming it “debt,” we called it “deposits in T-security accounts,” the entire misunderstanding might disappear.

Here are a few things the Debt/GDP ratio does not indicate:

    1. It does not indicate the federal government’s ability to pay its obligations

      Image result for bernanke and greenspan

      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.”
      St. Louis Federal Reserve: “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.”

    2. It does not indicate the likelihood of inflation

      There is no relationship between Debt/GDP growth (blue line) and inflation (red line).

    3. It does not indicate the health of the economy

      There is no relationship between Debt/GDP growth (blue line) and GDP growth (red line).

    Those are the facts. They are easily obtainable. Yet here is an example of the disinformation that continually has been spread, to brainwash the public:

Forget Debt As A Percent Of GDP, It’s Really Much Worse
Jeffrey Dorfman, Forbes Magazine

When central bankers, macroeconomists, and politicians talk about the national debt, they often express it as a percent of gross domestic product (GDP) which is a measure of the total value of all goods produced in a country each year.

The idea is to compare how much a country owes to how much it earns (since GDP can also be thought of as national income). The problem with this idea is that it is wrong.

The government does not have access to all the national income, only the share it collects in taxes.

The 1st paragraph is correct. The 2nd paragraph is misleading in that our Monetarily Sovereign government’s access to dollars is not taxes but rather its unlimited ability to create dollars (See the statements by Greenspan, Bernanke, and the Federal Reserve, above).

Even if all federal tax collections were zero, the federal government could not unintentionally run short of its own sovereign currency, the U.S. dollar.

Then the article goes completely off the rails:

Looked at properly, the debt problem is much worse.

I collected national debt, GDP, and tax revenue data for thirty-four OECD countries (roughly, the developed countries worldwide) for 2010.

The data are a bit old, but that is actually the last year available for government tax revenue numbers. The debt figures are for central government debt held by the public (so the debt we owe to the Social Security Trust Fund does not count) but the central government tax revenue includes any social security taxes.

Some people hate the notion of comparing a country’s financial situation to a family, but I think it is useful in many cases with this being one of them.

For a family, debt that exceeds three times your annual earnings is starting to become quite worrisome. To picture this, just take your home mortgage plus any auto, student loan, or credit card debt, then divide by how much you earn.

First, he properly reveals that “some people” (i.e. people who understand Monetary Sovereignty) hate improperly comparing federal finance to personal finances.

Then he proceeded to make that improper comparison. What he failed to recognize is:

A family can run short of dollars. A state or local government can run short of dollars.  A business can run short of dollars. You and I can run short of dollars. We all are monetarily non-sovereign.

The federal government, being Monetarily Sovereign, cannot unintentionally run short of dollars.

Economists and central bankers know this is not the same as the family debt to income concept, which is why they warn of danger at the level of 100, 90, or even 70 percent depending on which economist you talk to or exactly how you define the total amount of debt.

Yes, knowledgeable economists and central bankers (like Bernanke and Greenspan, above) know federal finances are not the same as family finances, but ignorant economists warn of “danger at 100, 90, or even 70 per cent.”

The article was written four years ago, when the ignorant economists were, in fact, delivering that warning to an innocent public. Today, the ratio is about 106% and we are entering our 9th year of economic growth, with low inflation.

Sadly, that fact has not penetrated the skulls of the debt “Henny Pennys,” who have been screaming, “The sky is falling” since 1940.

The reason for the different standard is that the government cannot claim all your income as taxes or we would all quit working (or emigrate).

No, the reason for the different standard is that Monetary Sovereignty is different from monetary non-sovereignty.

The article continues spreading disinformation:

A better comparison is to examine each country’s debt to government tax revenue, since that is the government’s income.

This also offers a better comparison because different countries have very different levels of taxation.

A country with high taxes can afford more debt than a low tax country. Debt to GDP ignores this difference. Comparing debt to tax revenue reveals a much truer picture of the burden of each country’s debt on its government’s finances.

All of the above is completely false. The federal government neither needs nor uses federal tax dollars. It creates dollars, ad hoc, each time it pays an obligation.

Tax dollars cease to be part of any money supply measure, the instant they are received. In short, tax dollars are destroyed upon receipt.

The federal government collects taxes, not to provide spending funds, but rather to exert control over the economy and over the voting public.

Federal “debt” (deposits) are not paid back with tax dollars, but rather with dollars that already exist in T-security accounts.

The article’s nonsense continues:

When I compute those figures, Japan is still #1, with a debt as a percentage of tax revenue of about 900 percent and Greece is still in second place at about 475 percent.

The big change is the U.S. jumps up to third place, with a debt to income measure of 408 percent. If the U.S. were a family, it would be deep into the financial danger zone.

Yes, if the U.S. were a family . . . but that is the whole point. The U.S. is not a family. It is the creator of the U.S. dollar by, as Bernanke said, the electronic equivalent of a printing press.

If a family created dollars with its own printing press, it too could pay all its bills, and it would have no need for, nor use of, income.

To add a bit more perspective, the countries in fourth, fifth, and sixth place are Iceland, Portugal, and Italy, all between 300 and 310 percent. In other words, these three are starting to see a flashing yellow warning light, but only three developed countries in the world are in the red zone for national debt to income.

The U.S. is one of those three.

You can see a list of nations according to their tax revenue to GDP ratio here.

Near the bottom of the list are nations with what the author considers to be the “best” ratio, among which are Lybia, Burma, Nigeria, Iran, Haiti, Panama, and similar. Consider what you know about the strength of those economies.

Take a moment to glance at the list, and you’ll see that there is zero relationship between the ratio and any measure of economic success, inflation or any other success criterion.

In short, just like the Debt/GDP ratio, the Tax Revenue/GDP ratio is completely useless, partly because it does not differentiate between Monetarily Sovereign vs. monetarily non-sovereign nations. (Nor does it differentiate between degrees of socialism, which would increase the ratio.)

This does not factor the several trillion dollars owed to Social Security, yet it includes the Social Security taxes collected. If Social Security taxes are not counted, the U.S.’s debt to income ratio rises to 688 percent (still in third place).

This tells you something about the likelihood of increasing Social Security taxes in conjunction with declining Social Security benefits.

Unfortunately, it is true that Social Security taxes will be increased, though not because tax dollars are needed or used.

Rather, FICA, the most regressive tax in America, will be increased because the rich, who control the politicians, want to foster the belief that the federal government “can’t afford” to pay Social Security benefits.

Finally, we come to the misleading summary of a misleading article:

Without quick and significant action on the federal budget, as soon as interest rates begin to rise toward normal the burden of the national debt on the federal budget will become heavy indeed. Something will have to give.

Somebody needs to drag the President and Congress to a credit counselor quick to begin repairs on the government finances. Otherwise, one day sooner than we think, the creditors will be knocking on the door.

What does that goofy phrase, “the creditors will be knocking on the door” mean? Does it mean creditors will want to be paid?

I have news for the author: Creditors always want to be paid, and the U.S. federal government never has failed to pay a creditor. And it never will fail.

The federal government “prints” all the dollars it needs, just as Bernanke, Greenspan and the Federal Reserve said.

I should mention that the article, and its dire warnings, was published back in 2014, and today, while our economy continues to grow, I had hoped the author has learned from reality, and no longer claims the sky is falling.

But, oops. He’s still at it. Here’s an article he wrote just last December, 2017: 10 Things You Need To Know About The Debt Ceiling And Potential Government Shutdown.

In this article he says,

“Spending can be cut to balance the budget, but not without cutting entitlements.”

And there you have the true purpose of the deception, to cut social programs and to widen the Gap between the rich and the rest.

Of the people who spread disinformation in the face of contrary fact, some do it out of ignorance and some are paid to do it.

I do not know which camp Mr. Jeffrey Dorfman lives in.

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

………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Guaranteed Income)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

MONETARY SOVEREIGNTY

Interest rates going up: Should you be concerned? Tuesday, Mar 27 2018 

It takes only two things to keep people in chains:

.

The ignorance of the oppressed

and the treachery of their leaders.

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Interest rates going up: Should you be concerned?

The answer: Well . . .  maybe and maybe not. Here are excerpts from an article by the anti-debt Committee for a Responsible Federal Budget (CRFB):

Rising Rates Could Further Balloon Interest Spending

Mar 21, 2018

The Federal Open Market Committee (decided) to raise the federal funds rate by 0.25 percentage points to 1.5-1.75 percent.

The federal government (is projected) to spend $6.8 trillion on interest costs over the next decade. If interest rates end up just 1 percentage point higher than projected, interest costs would increase by a further $2 trillion. If interest rates return to their pre-recession levels, costs could rise by $3.4 trillion.

Let us rephrase as follows:

The federal government (is projected) to pump $6.8 trillion interest dollars into the economy over the next decade.

Should a $6.8 trillion stimulus — which is similar in effect to a $6.8 trillion tax cut — be a cause for concern?

GDP growth parallels money supply growth

A large economy contains more money than does a smaller economy. The U.S. has a larger money supply than does California, which in turn, has a larger money supply than does Los Angeles.

This overly-simple example shows that to grow from smaller to larger, an economy usually needs an increased money supply. The projected $6.8 trillion in federal interest payments will produce an increased money supply and economic growth.

Federal deficit spending, which increases the money supply, is the method by which the federal government cures recessions:

Two views of deficit spending. The blue line is a direct fiscal year measure of deficit spending. The red line is the calendar year issuance of T-securities, the legal requirement for matching deficit spending. The vertical bars are recessions.

The above graph shows that federal deficit spending stimulates the economy to cure recessions. In the late 1990s, the federal government ran a surplus, which caused a recession. 

That being the proven case, one wonders why anyone would be anti-deficit.

Projected interest rates are notably below historic levels.

Most experts believe we will remain below these levels due to slower productivity growth, greater income inequality, higher demand for safe assets, higher foreign capital inflows, and generally observed reductions in global interest rates, but low interest rates are by no means a given.

If “reductions in global interest rates” are paired with “slower productivity growth” and “greater income inequality,” why would anyone favor low interest rates?

Under CBO’s interest rate assumptions, we recently estimated interest costs will quadruple in a decade or so. We projected interest will rise from $263 billion in 2017 to $965 billion in 2028 under current law and to $1.05 trillion in 2028 assuming various expiring policies are extended. In either of these scenarios interest costs (in percent of GDP) would represent a historic record.

To paraphrase, the CBO estimates that by 2028, our Monetarily Sovereign government will pump $965 billion – $1.08 trillion stimulus dollars annually into our economy.

The CBO implies that this must, in some unstated way, be bad for you. The CBO never says why, instead implying that large federal debt is similar to large personal debt.

It isn’t.

(We) project the debt-to-GDP ratio will rise from 77 percent of GDP today 101 percent of GDP by 2028. The historical record level of debt held by the public as a percent of GDP for the United States is 106 percent, set just after World War II.

We assume the warning about the debt-to-GDP ratio is supposed to frighten you, for some reason. But aside from the reason never being stated, there are two problems with the implied warning:

  1. The so-called federal “debt” isn’t a real debt. It is deposits onto into T-security accounts, that really are something like interest-paying safe deposit boxes.  The dollars go in, interest money is added, and at maturity, the dollars go back. Our federal government, being Monetarily Sovereign, uses those dollars.
  2. Even if the so-called “debt” were real debt that the government actually used (as with state and local government debt), the federal government, being Monetarily Sovereign, could pay it all off, simply by creating new dollars.

Here is a graph comparing GDP growth with the Debt/GDP ratio. It shows that changes in the ratio — up or down — do not affect our economic growth.

The rising Federal Debt/GDP ratio (red) you repeatedly are warned about, has no effect on GDP growth (blue). 

This is one of the reasons we say that the Debt/GDP ratio is meaningless. The ratio compares the historical total of deposits into T-security accounts that still exist, with the value of all goods and services produced in one year. It would be difficult to find two more dissimilar, unrelated measures in all of economics.

The ratio has nothing to do with the federal government’s solvency or ability to spend. The ratio has nothing to do with any need for future tax collections. The ratio has nothing to do with our economic growth or lack thereof.

In astrology, the motions of the planets are compared with future personal events.

 Debt/GDP ratio is economic astrology. It measures nothing.

Lawmakers need to reverse course to reduce the interest burden and the exposure to eventual higher interest rates.

“Interest burden”? Paying interest is no burden on our Monetarily Sovereign federal government. Even without collecting a penny in taxes, our federal government is capable of paying infinite amounts of interest.

Taxpayers do not fund the federal government’s interest payments or any other federal spending. The U.S. government created the very first dollars from thin air. It still creates dollars from thin air, merely by pressing computer keys. It cannot run short of its own sovereign currency.

So do not fret. Despite all the “Henny Penny” warnings, a high deficit, high debt, or high Debt/GDP ratio will not doom your children and grandchildren to higher taxes.

There is some debate about how interest rate increases affect the private sector. Most interest neither adds nor subtracts dollars from the total world economy. Interest just circulates, with some individuals and businesses paying more and some receiving more.

With higher interest rates, the public will pay more for loans and for products/services provided by borrowers. Meanwhile, the public will receive more from bonds, CDs, and interest-paying bank accounts.

So depending on your position in the economy, higher interest rates can help you or hurt you.

But remember, there is that one net benefit from higher interest: The federal government adds more stimulus dollars to the economy when it pays more interest.

When interest rates (red) grew from 1955-1980, GDP growth rates (blue) trended upward. When interest rates declined from the 1980s to 2018, GDP growth rates trended downward.

In Summary:

    1. Rising interest rates benefit the nation as a whole, because they force the federal government to add more stimulus dollars to the economy. Higher rates are associated with economic growth.Short term, the stock market reacts negatively to interest rate increases, because traders anticipate it will, and act accordingly. Within a few days, the market recovers, which proves the point.
    2. That said, borrowers are punished and lenders benefit from rising interest rates. If you plan to take out a new mortgage or to buy a car in the future, you will pay more interest. If you plan to put dollars into a bank savings account, a money market, a Treasury Security or a bank CD, you will benefit from an interest rate increase.
    3. To pay a creditor, the federal government sends instructions to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account. When the bank does as instructed, dollars are added to the money supply.From a bookkeeping standpoint, an account at the Federal Reserve Bank called Treasury’s General Account simultaneously is debited. Though this account is not part of the nation’s money supply, an obsolete rule disallows it from having an overdraft.

      So, the federal government, which is sovereign over the dollar, is forced to issue T-securities.These securities do not add to the federal government’s money supply (the government has no money supply) or provide the federal government with spending money, but rather they obey the rule by providing a bookkeeping credit to the Treasury’s General Account.

      If the government merely eliminated the rule, the Treasury could continue paying its bills, but there would be no requirement to issue T-securities, and there would be no worries about the so-called federal “debt.”

    4. The federal debt/GDP ratio does not reflect the federal government’s ability to pay its bills. It does not reflect the health of the economy. It does not reflect future tax increases or decreases. It is a meaningless ratio comprised of a multi-year measure (total T-securities) divided by a 1-year measure (GDP).
    5. The unfounded concerns about the federal deficit and debt are promulgated by the very rich, who based on Gap Psychology, wish to convince the rest of America that federal social benefits (Social Security, Medicare, Medicaid, aids to the poor, aids to education, etc.) are unaffordable.

    Rodger Malcolm Mitchell

    Monetary Sovereignty

    Twitter: @rodgermitchell; Search #monetarysovereignty

    Facebook: Rodger Malcolm Mitchell

    MONETARY SOVEREIGNTY

    ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

    The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

    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 (Ten Reasons to Eliminate FICA )

    Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:

    *FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and

    *The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.

    2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )

    This article addresses the questions:

    *Does the economy benefit when the rich can afford better health care than can the rest of Americans?

    *Aside from improved health care, what are the other economic effects of “Medicare for everyone?”

    *How much would it cost taxpayers?

    *Who opposes it?”

    3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.

    This article is the fifth in a series about direct financial assistance to Americans:

    Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012

    MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012

    Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012

    “You can’t fire me. I’m on JG” Saturday, Jun 2 2012

    Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.

    4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans

    Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.

    Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.

    An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.

    5. SALARY FOR ATTENDING SCHOOL

    Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.

    If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.

    6. ELIMINATE FEDERAL TAXES ON BUSINESS

    Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.

    7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.

    Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.

    8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)

    There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.

    But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.

    9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)

    Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.

    Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.

    10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.

    Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

    MONETARY SOVEREIGNTY

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