How you can change the world with just two words Monday, May 20 2019 

All creation involves destruction.

This fundamental truth requires no great insight. Visualize anything that has been created — a painting, a building, a song, a poem, an idea, a theory — and you will see that what preceded it was wholly, or partly, destroyed in its making.Related image

The blank canvas, the random pile of bricks, the notes and the spaces between those notes, the meanings of words, the false beliefs, the earlier truths — all are destroyed by creation.

War is destruction and is one of the most creative of all human endeavors. No fields of the creative arts and sciences are unrelated to war.

This is not to claim that destruction, in of itself, is creative or beneficial. Rather, that beneficial creativity requires some measure of destruction.

With this as background, I suggest that the world can be changed, massively and irretrievably, by the two-word destruction: End FICA.

FICA, otherwise known as the Federal Insurance Contributions Act, supposedly funds Social Security and Medicare. Even its title, which includes the words “insurance contributions” is a lie.

Image result for high rise constructionFICA is a federal tax. Like all federal taxes, it funds nothing. (See: Does the U.S. Treasury really destroy your tax dollars?FICA has nothing to do with insurance or with contributions to insurance.

You wrongly have been told that Medicare, for instance, is funded through trust funds. But these so-called “trust funds” are not anything like private trust funds.

These “trust funds” are fictional accounts that are debited and credited arbitrarily by the federal government. The Supplementary Medical Insurance (SMI) Trust Fund, which “pays for” Medicare Parts B and D, receives whatever funds Congress authorizes. 

There are no limits on what Congress can authorize. This “trust fund” can run short of dollars only if Congress wants it to run short. This financing has nothing to do with tax collections. It all is strictly arbitrary.

You never had been told that fact.

The elimination of FICA would immediately accomplish one great thing. It would reduce the needless, harmful destruction of private sector dollars, that currently are sent to the U.S. Treasury, where they are destroyed.

Yes, every one of your federal tax dollars that you send to the U.S. Treasury is destroyed upon receipt. It is not saved somewhere for future use. It is destroyed.

By definition, large economies have more money than do small economies. Thus, a growing economy requires a growing supply of dollars. Taking dollars from the U.S. economy restricts economic growth, and even can lead to recessions an depressions.

U.S. depressions tend to come on the heels of federal surpluses, which remove dollars from the economy .

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

Unlike you and me, and unlike businesses, and state and local governments, the U.S. federal government uniquely is Monetarily Sovereign. (See: Monetary Sovereignty, the key to understanding economics.)Image result for planets colliding

As such, the federal government does not save tax dollars in order to pay bills. Instead, the federal government creates brand new dollars, ad hoc, every time it pays a creditor. (See: Have you ever played Monopoly?)

In this regard, no one can answer the question, “How much money does the federal government own?” Retaining the unlimited ability to create dollars at will, the federal government can be said to “own” infinite dollars — or no dollars at all.

Those FICA tax dollars, that are destroyed by the U.S. Treasury, were taken from the salaried class, the very people upon whom economic growth most urgently relies.

More importantly, FICA is resoundingly regressive. It is a tax that widens the income/wealth/power Gap between the rich and the rest. (See: Gap Psychology.)

All of the above-referenced benefits of FICA elimination pale in comparison to the real benefit. The destruction of FICA would open the way toward the understanding of one great economic truth: Monetary Sovereignty — the unlimited power that a money creator has over its own sovereign currency.

The very existence of FICA lends credence to “The Big Lie,” the false belief that federal taxes fund federal spending.

The Big Lie itself encompasses several sub-lies, such as:

  1. Federal debt is an unsustainable burden on the federal government and on federal taxpayers.
  2. Federal finances are similar to state and local government finances and similar to personal finances.
  3. Social Security, Medicare, and many other federal agencies are in danger of becoming insolvent.
  4. Federal wasteful spending is a burden on federal taxpayers.
  5. Federal deficit spending leads to inflations and hyperinflations.
  6. Federal social spending (incorrectly termed “socialism”) is unaffordable and unsustainable.
  7. Cuts to federal deficit spending (aka “austerity) are financially prudent.

In science, one fact begets another. Many decades after Relativity and Quantum Mechanics first were proposed, discoveries still are being made based on these two great theories. They have shown light on many dark corners of physics.

So too, does Monetary Sovereignty shine a light on the dark corners of economics.

The elimination of FICA would require the open discussion of Monetary Sovereignty, because the immediate question would emerge,  “Who will pay for it?”

Answering that question requires understanding the realities of federal economics, i.e. the realities of Monetary Sovereignty.

Every knowledgable and honest economist understands two truths:

  • The U.S. federal government created an arbitrary number of the original U.S. dollars from thin air and gave them an arbitrary value.
  • The U.S. federal government continues to create U.S. dollars from thin air and retains the power to give them an arbitrary value.

Thus, it functionally is impossible for the federal government to run short of its own sovereign currency, a power it has demonstrated for the entire 240 years of its existence.

And because the federal government cannot run short of dollars, no agency of the federal government can run short of U.S. dollars unless that is what Congress and the President want.

Social Security, Medicare, Medicaid, poverty aids, roads, bridges, education, et al — all federal agencies — cannot become insolvent unless that is what Congress and the President decide, FICA or other tax collections notwithstanding.

The question, “Who will pay for it?” answers itself.  Eliminating FICA will force the federal government to admit that the federal government will pay for goods and services the same way it always has — by creating dollars, ad hoc.

Eliminating FICA will force a rational conversation about Monetary Sovereignty, from which the public finally learns that federal taxes pay for nothing.

(This is unlike state and local governments, which are monetarily non-sovereign, and in which taxes do pay for state and local government spending.)

Further, the U.S. federal government has the unlimited power to give its sovereign currency, the U.S. dollar, any value it chooses.

It is a power the federal government has demonstrated many times with respect to silver and gold, and other currencies, most recently in 1971, when the government arbitrarily decided the value of the dollar would float freely on world currency markets.

The federal government retains the power to change that decision, and so, can control and prevent inflation, at will.

Question: What is a U.S. dollar worth? Answer: Whatever the U.S. government says it is worth. The government is sovereign over the dollar.

No doubt, you have been told that federal deficit spending will lead to a Zimbabwe-like hyper-inflation. Yet, no hyper-inflations have been caused by money “printing.”

Inflations are general increases in prices. They always are caused by shortages of goods and services (usually food), with government currency printing being an ignorant government reaction.

Even cursory logic demonstrates the facts. If the price of milk rises, what is the cause? Government money printing? No, the cause is a shortage of milk. That is true of all price increases, including general price increases.

Prices increase when there is insufficient product or services to meet demand. Inflation = shortages.

The cure for inflations, including hyperinflations, always is the same: Increase the availability of whatever products are in short supply, most often, food.

The elimination of FICA will force illuminating discussions of these basic facts.

Finally, you might ask,

“If Monetary Sovereignty is so straightforward, logical and factual, why would the politicians, the media and the economics professors not want you, the public, to know the truth?”

The fundamental reason has to do with Gap Psychology, the human desire to widen the income/wealth/power Gap below, and to narrow it above.

Image result for bernanke and greenspan

It’s our little secret. Don’t tell the people we don’t use their tax dollars.

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.”

Alan Greenspan: “Central banks can issue currency, a non-interest-bearing claim on the government, effectively without limit. A government cannot become insolvent with respect to obligations in its own currency.”

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. In this sense, the government is not dependent on credit markets to remain operational.

The very rich, who run America and the world, want to become richer. That is the heart of Gap Psychology.

“Rich” is not an absolute; it is a comparative. So there are two ways for the rich to become richer: Either acquire more for themselves or allow you to have less.

The best way to allow you to have less is to prevent the government from giving you more. The rich do not want you to understand that you can have free medical care, free education, free housing and food, free clothing, and all the other things the rich can afford but you can’t.

The rich want to widen the Gaps between themselves and you. So they bribe the sources of information to tell you these things cannot be given to you.

They bribe the politicians via campaign contributions and promises of lucrative employment, later.

They bribe the media via ownership and advertising dollars.

They bribe the university economics professors via university contributions and jobs at think tanks.

Thus all the misinformation you receive regarding Social Security “insolvency,” and federal debt “unsustainability” and the need for FICA and other federal taxes, etc. originates with the bribes from the rich.

They spend billions to convince you that federal deficits are a danger to you and your children, and the good things in life are unaffordable to the government, and there is no such thing as a free lunch, etc., etc. etc.

It’s called “brainwashing.”

And it works. You undoubtedly have been brainwashed.

Do you know a college professor, or a politician, or a media writer? Ask him or her, “Why exactly is FICA necessary?” If the answer is, “To pay for Social Security,” you will know for certain that he or she has been brainwashed or has been bribed.

Then ask, “Is federal financing the same as state and local government financing?”  and listen for the double-talk.

The federal government, being Monetarily Sovereign, has the unlimited ability to create U.S. dollars, so does not use tax dollars to pay for anything.

This is different from state and local governments, which are monetarily non-sovereign, and which do use tax dollars to pay creditors.

The rich have it all. There is no reason why you too cannot have it all. The rich don’t want that, but you can have it if you don’t fall for the brainwashing.

Think. It’s in your power to change the world.

Begin by demanding the end of FICA. Destroy this harmful tax and along with it, the Big Lies about limits to federal financing.

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

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

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

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

Ten Steps To Prosperity:

1. Eliminate FICA

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

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

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

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

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

9. Federal ownership of all banks

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

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

MONETARY SOVEREIGNTY

–The failure of common sense in economics. How the President and Congress ignore economic facts and play Russian roulette with our lives. Thursday, Jul 21 2011 

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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There is something of a rule in problem-solving that questions beginning with “How” are to be preceded by a thorough examination of questions beginning with “Should.” President Bush II failed to do that when he asked his advisors questions like, “How do we fight a war in Iraq and Afghanistan” and “How do we arrest Saddam Hussein.” The correct questions were “Should we fight a war in Iraq and Afghanistan” and “Should we arrest Saddam Hussein.”

A football coach does not begin with “How can we increase our passing yardage?” He begins with “Should we increase our passing yardage?” A company does not begin with, “How can we increase the number of our stores?” It begins with a thorough examination of “Should we increase the number of our stores?”

Sadly, President Obama, Congress, the media and the old-line economists work feverishly to answer the question, “How can we reduce the federal deficit?” They believe a thorough examination of “Should we reduce the federal deficit?” is unnecessary. They already “know” the answer, despite massive evidence to the contrary.

When you ask the wrong question, you find the wrong answer. Congress and the President can’t agree on an answer, because the question is wrong. It’s akin to asking, “How should we sail a ship without falling off the edge of the world?”

The correct question is, “Should we reduce the federal deficit?” Many people give perfunctory, knee-jerk answers, such as, “The deficit is not sustainable” or “Our children will pay for it.” But no answers have been based on the one, overriding, undeniable fact:

Federal deficits = net non-federal saving

Cut deficits and you cut saving. Cut saving and you cut economic growth. Cut economic growth and you enter recessions and depressions and the unemployment that accompanies them. The facts are that simple and undeniable. But, the President and members of Congress do not work from facts; they work from what each believes is common sense.

Common sense consists of beliefs most people consider obvious and sound, things “everyone knows.” Yet, your common sense may be different from my common sense, because it is affected by our different personal experiences, as well as by analogy, religion, social mores, history, logic, teaching, folklore, aphorisms, leaders and every form of information transfer, all of which vary from person to person.

The earth must be flat, not round, else the oceans would pour out. Nothing can be in two places at the same time – except in Quantum Mechanics. Running fast does not make your watch run slower – except in Relativity. If a roulette wheel lands on red five times in a row, it is more likely to land on black the next spin. Common sense.

Because common sense does not require research, it allows for fast decisions and is powerfully built into our genes. We have great difficulty departing from our common sense beliefs, because they are evolutionarily valuable. We experience and use common sense every day of our lives. We do not need research to tell us to avoid walking blindly into a street or reaching into a fire. Anyone who intentionally does these things is a “fool.”

So powerful is common sense, we angrily consider all those who depart from of our visions of common sense to be fools. Here are examples of common sense for most Americans:

1. Debt is a burden on the debtor; the more debt, the greater the burden. Debtors can be forced into bankruptcy by creditors.
2. A deficit is worse than a surplus. Outgo requires income. Taxes and borrowing pay for government spending.
3. Everything has a cost and a limit. Nothing can be created from nothing. Nothing goes on forever. There is no such thing as a free lunch. No pain; no gain. If it sounds too good, it is.
4. The greater the supply, the less the value. “Printing” money causes inflation. You can have too much of a good thing.
5. Dollars are real and scarce. They can be held, stored and moved.

Every one of these common sense beliefs either is always false or often false, when applied to the U.S. federal government, because:

1. Federal debt is not a burden. Unlike state and local governments, the federal government cannot be forced into bankruptcy (except by Congress). It can service any debt of any size, any time.
2. Federal deficits stimulate the economy while surpluses cause recessions and depressions. The federal government, being Monetarily Sovereign, neither needs nor uses taxes or borrowing to pay its bills.
3. The federal government creates money by marking up the bank accounts of creditors, in a cost-free, pain-free, limit-free process. To the federal government, money is a “free lunch.”
4. Increasing the supply does reduce value, unless demand increases more. Money demand is increased by interest rates. Since we went off the gold standard, there has been no relationship between federal deficit spending and inflation.
5. Dollars have no physical reality. They are nothing more than numbers in bank accounts. Even dollar bills are not dollars; they are receipts or titles for dollars. Dollars are not scarce to the federal government.

These truths are counter to intuition, counter to common sense and counter to the beliefs of most Americans, yet they are truths, nonetheless.

Very soon, Americans will face the cold reality of recession or depression, caused by Congress’s and the President’s following their “common sense,” rather than economic fact. Federal spending for Social Security, Medicare, Medicaid, and many other vital federal services will decline. We will suffer “invisible” pain from the loss of scientific and medical research, declining infrastructure, a weaker military, poorer schools, less food and drug inspection, and worse investment protections. Our standard of living will decline. Unemployment will worsen. Destitution will increase. Our children and our grandchildren will lead meaner lives. Their futures will be impoverished.

And most Americans will not realize what has been done to them.

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


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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.

MONETARY SOVEREIGNTY

–The single, most misunderstood fact in all of economics. It will blow your mind. Tuesday, Jul 19 2011 

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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When you ask the wrong question, you get the wrong answer. Congress and the President are asking, “How should we reduce the federal deficit?” The correct question is, “Should we reduce the federal deficit?” And the answer is “No.”
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Sometimes, something is so simple it can be hard to understand, as though “It just couldn’t be that easy.” This is one of those times.

The media don’t understand it. The columnists don’t understand it. The Tea Party, the Republicans, the Democrats and the debt hawks don’t understand it. For sure, President Obama doesn’t understand it. The old-line economics professors do understand it, but they’re afraid to admit it, because it makes them look like boobs for not telling you, all these years.

It is the single most important equation in economics. It’s so simple as to be laughable, yet it will amaze you (unless you are among the one-in-ten-thousand who already understands it). And once you understand it, you will look at the politicians in wonderment at their incredible ignorance.

Are you ready? Here it is:

Federal Deficits – Net Imports = Net Private Saving

This is not a hypothesis. It’s not a theory. It’s not my opinion or anyone else’s opinion. It is an accounting fact. In a closed economy (where money exports equal money imports), your annual savings, plus my annual savings, plus everyone else’s annual savings equals annual federal deficit spending, to the penny. In such an economy, Federal Deficits = Net Private Savings.

This means, if the federal deficit is reduced $1, our combined savings will be reduced by exactly $1 — not $.99; not $1.01 — exactly $1.00.

Today, the politicians in Washington are talking about a $4 trillion (!) deficit reduction. That means our savings will be reduced by $4 trillion. There are about 310 million people in America. A deficit reduction of $4 trillion will reduce the savings of each man, woman and child in America by an average of $12,900.

That’s $12,900 out of your pocket, another $12,900 out of the pockets of your spouse, each of your children and each of your grandchildren. A four-person family will lose $51,600 in savings. If both your parents are alive, they’ll lose another $25,800 in savings.

Why do the politicians want to reduce your savings? Sheer ignorance of Monetary Sovereignty. They think “deficit” is a bad word and want to eliminate it. But a federal deficit is money in your pocket. And a federal surplus? That’s money taken out of your pocket.

How can this be? Again, simple. When federal spending exceeds federal taxes, it’s called a “deficit.” When the federal government spends, its payments for goods and services enter the economy. When you pay taxes, the money leaves the economy. So federal deficits add money to the economy, and where does that money go? Into your pocket as savings. Similarly, federal taxes take money out of your pocket.

(If you want to see a longer, more erudite explanation, you might try Deficit = Savings, or Mosler letter to the President but I think you get the picture.)

Now tell me, how much would you like the federal deficit to be reduced? That is, how much of your savings would you like to lose? Tell your Congressperson.

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


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


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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.

MONETARY SOVEREIGNTY

–Is NPR in league with the Tea Party, or simply clueless? Monday, Jul 18 2011 

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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It was at 11:00 AM Central time, today, that I heard a discussion on National Public Radio, station WBEZ. The participants claimed the media are hamstrung by the need to present both sides of each issue.

They lamented the fact that “fairness” required them to give equal weight to opposing opinions, even when one opinion was far more persuasive than the other — and shouldn’t the media have more leeway in exercising their judgement on this?

Aside from the fact that columnists and editorials do exercise a form of censorship (aka “judgement”), there is one other aspect to the conversation that troubled me. The specific subject was the federal deficit. Both participants agreed the deficit must be reduced, so the “two sides” were: Raise taxes or don’t raise taxes.

As readers of this blog know, those are not both sides of the deficit issue. Those “two sides” are mere details in the real issue: Increase the deficit or don’t increase the deficit.

The media, including public radio, have been derelict in not presenting the “increase the deficit” side. And its not as though they don’t know or can’t find out. They easily can access such sources as this web site, Warren Mosler’s The Center of the Universe), Bill Mitchell’s Billyblog ), almost the entire faculty at the University of Missouri, Kansas City (far ahead of traditional Nobel winners like the University of Chicago and Harvard) and many,many others, to see powerful arguments, substantiated by facts, about why the federal deficit should be increased.

Why do they never broadcast these opinions and facts? It’s yet another puzzle surrounding the entire Monetary Sovereignty subject. Because “everyone” agrees the world is flat, the media don’t consider the possibility it may be round, so nothing is said.

There is only one solution. I’m following it and I urge you to follow it: Contact your local NPR station (www.mpr.org) and ask them to do as they claim to do: Broadcast both sides of the issue – the real both sides. If enough people request it, NPR finally may realize they are missing an important part of the economics debate.

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


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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.

MONETARY SOVEREIGNTY

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