–Can increased federal deficit spending actually prevent inflation?

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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Can increased federal deficit spending actually prevent inflation?

TIME magazine recently ran an article about inflation, which supplements what I’ve written earlier about the cause of inflation (See: The Cause of Inflation)

Think Commodity Prices Are High Now? Just Wait
Posted by ZACHARY KARABELL Monday, May 16, 2011

The just-released monthly inflation report showed that prices for most goods eased a bit. The exception of course is oil, and even though oil prices globally have declined in recent weeks, most Americans are paying ever more for gasoline even as inflation overall remains statistically tame.
[. . .]
But the real issue today is that inflation is almost entirely a product of rising raw material costs and for now, these are being born not by individuals but by companies. Many economists assume that eventually, these rising input costs will be passed on to consumers in the form of higher price tags.
[…]
The emerging world is hungry for goods, for food, cars, appliances, gadgets, homes, and clothing. And governments in Sao Paulo, Beijing, and New Delhi are authorizing vast spending on modern infrastructure. China’s is well known, but Brazil and India both have significant needs that are only now beginning to be met.

I just returned from a conference with some of the world’s leading money managers, and one theme was clear: there has been massive underinvestment in the global supply chain of industrial metals and raw materials. This is less about oil and gas than about things like copper, iron ore, palladium, titanium, zinc, rhodium, and a host of other “iums” that are the essential, irreplaceable inputs for the industrial world that we all inhabit and that billions are on their way to inhabiting. Simply put there is yawning gulf between demand and supply. . .

That means we are in for a period of rising commodity inflation, including oil and of course food as more people consumer more calories and crop yields strain to increase.
[. . .]
So unless China truly implodes or Brazil stops growing, or hundreds of millions in India and Indonesia stop believing that they have a right to the same middle class lifestyle that has characterized the West for the past century, we are at the early stages of a spike in commodity prices the likes of which we have never seen. And judging from debates in Washington over how much to spend on Planned Parenthood and how much to reduce pension of state workers, we are nowhere near prepared for this world that we are entering.

Debt-hawks endlessly cite the Weimar Republic’s hyper-inflation (which occurred 90 years ago under special economic circumstances) as an example of what growing U.S. federal deficits will cause “soon,” “some day” or “inevitably.” Factually they are wrong.

Hyper-inflation has been caused by circumstances unique to each affected nation, but always involve massive printing of money in response to existing inflation, not as the cause of, inflation. Analogy: Gasoline is necessary to make a car run, but if the car bursts into flame, you don’t keep adding gasoline. Hyperinflated nations pour gasoline on an already burning car.

Mr. Karabell writes the truth. Historically, inflation has been caused by rising production costs. In the economists’ mantra, “Inflation is too much money chasing too few goods.” The debt hawks focus on the “too much money” side, while the real cause has been too few (or really, too expensive) basic goods. Oil, whose price is manipulated, has been the main culprit, (See: INFLATION) and as a result of insufficient spending on basics, many other commodities are about to have increased involvement.

So yes, there will be inflation, “soon,” “some day” or “inevitably,” just as the debt-hawks predict, but the cause will not be federal deficit spending, as they surely will claim, but rather, oil prices and shortages of other basics.

In fact, inflation could be prevented were the U.S. to pump more money into oil exploration, other energy development, mining, plant and equipment development, R&D of all types, farming, wood and other basics. Pumping more money would include tax breaks as well as deficit spending.

To build our economy efficiently, we need increased investment in its foundations.

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

–What would happen if the U.S. sold its gold reserves?

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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A reader of this blog asked, “What would happen if the U.S. sold its gold reserves?” It was such a timely question, I’d like to share the answer with everyone:

If the government sold its gold reserves, the price of gold would decline (supply and demand), and the total supply of dollars would decline (all money sent to the government is destroyed), which would increase the value of dollars (i.e., a deflation) probably leading to a recession or a depression.

So if anyone suggests the U.S. sell its gold to “pay off the debt,” (which is ridiculous in a Monetarily Sovereign nation), you can tell them what this foolish act would cause.

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

–Poor Newt. He dared depart from Tea Nuttiness, and now he has been excommunicated.

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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It’s amusing and also sad to watch the Tea (formerly Republican) Party twist and turn over its nonsensical, misdirected extremism. I’m no Newt Gingrich fan, but he probably is the most intelligent right winger around, and his comments, though still not recognizing the fundamental truth of Monetary Sovereignty, are considerably less nutsy than what we hear from the Tea/Republican folks.

From Vanity Fair, by Juli Weiner May 17, 2011

Newt Gingrich is in hot water with the Republican establishment for breaking rank and criticizing Representative Paul Ryan’s budget plan.

Heaven forbid criticizing someone who wants to emasculate Medicare and destroy federal social programs.

On Sunday’s episode of Meet the Press, Gingrich said that the Ryan plan was too much of a “radical change” for his taste, taking issue with the proposed modifications of Medicare in particular. “I don’t think right-wing social engineering is any more desirable than left-wing social engineering,” Gingrich explained . . . Republicans are not happy.

I’ll give this to the Tea (formerly Republican) Party. They are consistent. No matter how incredibly stupid their heroes’ proposals are, they will stick with them until the bitter end, and they will criticize anyone who doesn’t. Hewing to the party line is more important than proposing something intelligent and beneficial for America.

House Majority Leader Eric Cantor (R-VA) said . . . in a radio interview. “There’s no question there was a misspeak here. . . I think that many have said now he’s finished. I haven’t had a chance to really dissect what in the world he’s thinking … so I probably would reserve judgment on that.”

Serves you right, Newt, for daring to try to inject a bit of commons sense into the dialog. The Tea (formerly Republican) party has no use for that.

Gingrich took a stab at damage control earlier today during an appearance on Bill Bennett’s radio show. The Washington Post’s Right Turn blog provides a devastating summary of the interview: Gingrich begins by denying he really criticized Paul Ryan. He then is forced to listen to his own words and tries to rewrite them, suggesting he wanted to improve on the Ryan plan.

Bennett will have none of that and instructs Gingrich. . . that no one could have understood him to mean that. Then Gingrich begins to backpedal furiously. He loves Ryan, loves, loves, loves him. And Ryan’s budget (which includes the Medicare plan) is swell. It is at this point that Bennett tells him his campaign is over unless he retracts and apologizes. For emphasis he shares a conversation with a Gingrich supporter who has the same take. As it wraps up, Gingrich issues a non-apology and then sheepishly admits Bennett’s advice may be wise. At least he didn’t blame his “misspeak” on his love of country?

President Obama must be smiling. He needs to do nothing except stand back and watch the Tea (formerly Republican) Party dismantle itself. The Teas injected gobs of idiocy into the Republican Party, and much to their disgrace, the Republican bought into it. And now they are stuck with it. They equally are stuck with Paul Ryan, who is economically clueless, and have discarded Newt Gingrich, the closest thing they have to wisdom.

Yes, you can fool some of the people all the time, but that “some” is getting smaller and smaller for the Tea/Republicans.

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.”

Another reminder why reducing the federal deficit is national suicide. Your health, your children’s health and your grandchildren’s health are being sacrificed.

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.
==========================================================================================================================================================================================

Another reminder about why reducing the federal deficit is national suicide: Your health, your children’s health and your grandchildren’s health is being threatened — no more than threatened, compromised. And it’s all because of the myth the federal deficit and federal debt are “unsustainable.”

While the myth is easily disproved, the politicians, media and mainstream economists refuse to learn.

By Associated Press, Updated: Tuesday, May 17, 2011
WASHINGTON — A disease standoff may be brewing: How can Alzheimer’s research receive more scarce dollars without cutting from areas like heart disease or cancer?

In one of the stark realities of the budget crisis, scientists’ chances of winning research dollars from the National Institutes of Health for any condition have dipped to a new low.

“We are clearly not able to support a lot of great science that we would like to support,” NIH Director Dr. Francis Collins told senators last week. This year, for every six grant applications that NIH receives, “five of them are going to go begging.”

That’s down from nearly 1 in 3 grants funded a decade ago, and 1 in 5 last year. And it comes before the looming fight over how much more to cut in overall government spending for next year, and where to make those cuts.

Already, a new report says one of the biggest losers is aging research, despite a rapidly graying population that promises a worsening epidemic of dementia, among other illnesses.

“Nobody wants to say Alzheimer’s is worse than diabetes or heart disease or cancer,” says Dr. Sam Gandy, a prominent neuroscientist at New York’s Mount Sinai School of Medicine.

But “part of the problem now with all the pressure to cut the budget … is that for Alzheimer’s to get more, something else has to lose,” adds Gandy. His own lab is scrambling for funds to study a potential dementia drug after losing out on an NIH aging grant.

The NIH pays for much of the nation’s leading biomedical research. Republicans and Democrats alike have long been staunch supporters. But the agency’s nearly $31 billion budget offers an example of the hard choices facing lawmakers, especially if they’re to meet House calls for a drastic scale-back of overall government spending.

So which do you fear more: Disease or the federal deficit, knowing the federal government has proved it can support any size deficit? Have you been so brainwashed by the Tea (formerly Republican) Party nuts, you are willing to lay your health, and the health of your family on the line?

Consider aging issues.

The NIH spends about $469 million on Alzheimer’s research, says a new report from the Alzheimer’s Foundation of America that criticizes overall aging research as “a minuscule and declining investment.”

About 5.4 million Americans now have Alzheimer’s disease, and studies suggest health and nursing home expenditures for it cost more than $170 billion a year, much of it paid by Medicare and Medicaid.

NIH’s Collins told a Senate appropriations subcommittee that there’s a “very frightening cost curve.” In 2050, when more than 13 million Americans are projected to have Alzheimer’s, the bill is expected to reach a staggering $1 trillion. But he said that cost could be halved merely by finding a way to delay people getting Alzheimer’s by five years.

The debt-hawks are fond of showing you graphs illustrating (falsely) how the increase in older people will cause Social Security and Medicare to run out of money. But have they ever shown you a graph illustrating how many more people will get Alzheimers, for lack of medical research?

Monday, Republican presidential contender Newt Gingrich jumped into the debate, saying that over the next four decades Alzheimer’s could cost the government a total of $20 trillion. He suggested selling U.S. bonds to raise money for research rather than have the disease compete each year for a share of the federal budget.

“We are grotesquely underfunded,” Gingrich said of health research dollars.

Yes, we are. Nice of him to notice. But creating T-securities out of thin air, then exchanging them for dollars we previously created out of thin air is foolish.

How foolish? Newt favors reducing the debt, but his bond-selling plan increases the debt. This demonstrates the idiocy of the Tea (formerly Republican) Party debt-reduction position. We wouldn’t need to struggle with complex, convoluted, nonsensical plans if we simply would end the debt-hawk control over our thinking. Stop selling bonds; fund with deficit spending.

Competition for today’s dollars is fierce, with applications up 60 percent at the aging division alone since 2003. Aging chief Dr. Richard Hodes says last year, his institute couldn’t pay for about half of what were ranked as the most outstanding applications for research projects. Still, he hopes to fund more scientists this year by limiting the number who get especially large grants.

What’s the squeeze? Congress doubled the NIH’s budget in the early 2000s, an investment that helped speed the genetic revolution and thus a host of new projects that scientists are clamoring to try. But in more recent years, economists say NIH’s budget hasn’t kept pace with medical inflation, and this year Congress cut overall NIH funding by 1 percent

The Obama administration has sought nearly $32 billion for next year, and prospects for avoiding a cut instead are far from clear. Sen. Tom Harkin, D-Iowa, who chairs the subcommittee that oversees the issue, warns that under some early-circulating House plans to curb health spending, “severe reductions to NIH research would be unavoidable.”

Still the Tea (formerly Republican) Party doesn’t get it. They don’t understand the simple premise that medical progress requires medical research.

Sen. Jerry Moran, R-Kan., pushed Collins to make the case that investments in medical research really can pay off.

Collins’ response: Four decades of NIH-led research revealed how arteries get clogged and spurred development of cholesterol-fighting statin drugs, helping lead to a 60 percent drop in heart-disease deaths. Averaged out, that research cost about $3.70 per person per year, “the cost of a latte, and not even a grande latte,” Collins told lawmakers.

Get it now, debt hawks? Probably not. But are you willing to fight for your family’s health? Contact your Washington representatives and tell them our lives are being threatened by their misguided budget-reduction nonsense.

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