Tag: exploding deficits

–We never will find a solution, because we’re discussing the wrong problem.

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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Here are five headlines and the first lines of their articles, from the May 26th Washington Post. What do these five articles have in common? What is their fundamental premise?

Senate rejects GOP budget plan that would overhaul Medicare
The Senate voted 57 to 40 against GOP Rep. Paul Ryan’s 2012 budget proposal, with all but five Republicans supporting the spending plan.

Plum Line: Senate Dems up pressure on GOP over Ryancare
Senate Democrats are going to hold a vote today on the GOP budget plan that includes the proposal to end Medicare as we know it, in an effort to put Senate Republicans on the spot and keep up momentum after the big Dem victory in NY-26.

2chambers: Ryan says Democrats have ‘lied to’ voters about his budget plan
One day after his party — as well as his 2012 budget blueprint — was dealt a stinging defeat in a New York special election, House Budget Committee Chairman Paul Ryan (R-Wis.) said Wednesday that the election was not a referendum on Republicans’ proposed changes to Medicare, and he argued that Democrats had distorted the issue for political gain.

The California researcher who could save health-care reform — and the budget
Joe Selby has been named director of the Patient-Centered Outcomes Research Institute

Ezra Klein: When ex-budget directors stop being polite and start getting real
Peter Orszag, concluding a column on why Paul Ryan’s Medicare reforms won’t work to control costs.

The fundamental premise is that the federal deficit should be reduced, and not one of these articles even questions it, much less discusses it. Imagine a group of people discussing the best way to sail from Europe to India, without falling off the edge of the world. Many ideas are debated fervently, but the fundamental premise – that one can fall off the edge of the world — never is discussed. When the fundamental premise is wrong, all solutions will be wrong. And that is why there never can be a good solution to our economic problems, no matter how long, passionately and cleverly we debate.

In a Monetarily Sovereign nation, deficits are what supply money to the economy. Without deficits, America would have no money and no economy. Because a large economy has more money than does a small economy, a growing economy requires a growing money supply. So growing deficits are necessary for economic growth. Further, a Monetarily Sovereign nation has the unlimited ability to pay any bills of any size, instantly.

All efforts to reduce the deficit, i.e. reduce the money supply, by necessity must result in recessions and depressions, and that is exactly what history has shown us. (See: Facts about Monetary Sovereignty )

Our economic problems cannot be solved so long as the discussions are based on a faulty premise. Only when we acknowledge the basic truth of Monetary Sovereignty – federal deficit spending is necessary and sustainable — will we create a solid foundation for economic progress.

We can’t find our way home if we take the wrong path.

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

–Does unemployment actually stimulate the economy?

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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Those who understand Monetary Sovereignty know the federal deficit/debt issue is phony, created by the Tea (formerly Republican) Party as an election ploy and/or out of sheer economic ignorance. It’s an issue I predicted would come back to bite the Tea Republicans as specifics about what’s to be cut became understood. Hello Medicare, Social Security, the military, and on and on and on.

So, I anticipate the right wing will begin to focus on a better issue, and that issue will be: unemployment. We all can empathize with those who want income but can’t find a job. Presumably this issue will make more sense than cutting the money supply to stimulate the economy, Rep. Boehner’s latest bit of desperation nonsense.

One problem is definitional. What exactly is unemployment? Is it:
–people who don’t have jobs?
–working age (whatever that is) people who don’t have jobs?
–people seeking employment?
–people seeking employment, and whose separation/unemployment benefits have run out?

Other factors include:
–length of unemployment
–age of those unemployed
–relationship to population size
–definition of a “job” (This one can be especially complex. For instance, do home workers have jobs? Do part-time workers have jobs?)
–Cash workers who don’t pay taxes and are “invisible” to the government statisticians

All these thoughts came to me when I looked at this graph.

graph 1

It shows the total number of unemployed (blue line) and the Civilian Employment / Population Ratio (red line).

The number of unemployed remains near its all-time high, which is an important election issue. But population too is at its all-time high. So, the red line is more revealing, simply because it takes population into consideration.

And it shows something rather interesting. The ratio of employment to population, while relatively high is nowhere near its all-time high, which occurred in 2000. In fact, the Civilian Employment-Population Ratio is higher than it was during all the years from WWII through 1983.

Even more interesting: Unemployment has tended to fall during the years preceding recessions, then climb during recessions, only to fall again when recessions ended. This could indicate that unemployment does not precipitate recessions, but rather is a result of recessions.

Neither curing unemployment nor increasing employment, seems to prevent recessions. On the contrary, based solely on these data, one could make the case that employment efforts are economically counter-productive.

I don’t have good evidence to explain this counter-intuitive result, but as a businessman, I have a hunch: When business improves, companies hire too many people. They create excessive employment. Then, because payrolls become excessive, companies pare down. And this, along with reduced federal deficit growth, leads to a recession.

I am not saying the federal government should encourage unemployment or even neglect it. Rather, I believe reduced unemployment works in parallel with reduced federal deficit spending to cause recessions.

graph 2

Rather than trying to attack unemployment directly, the federal government should increase deficit spending on many fronts, which will stimulate the overall economy and thereby, counteract the negative economic effects of what seem to be periods of excessive employment.

As I said, I don’t have proof for this conjecture, other than the data shown above. Perhaps you have a different explanation.

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

–How the media, the politicians and the mainstream economists perpetuate ignorance among the populace

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

Here is a classic example of the ignorance spread by our media, our politicians and the mainstream economists:

Washington Post: By Lori Montgomery and Peyton M. Craighill, Updated: Tuesday, May 24, 2011

Poll: More Americans fear higher national debt than default

The debate over whether to raise the legal limit on government borrowing has riveted Americans, with a large majority worried about the potential consequences regardless of whether Congress votes to allow the national debt to keep increasing.

But when pressed to name their biggest concern, nearly half of respondents say they are alarmed by the prospect that the debt could grow beyond its current limit of $14.3 trillion, according to a new Washington Post-Pew Research Center poll. Only 35 percent say they are more worried about the risk of default and economic destabilization if Congress does not raise the debt limit.

While federal default would cause a world-wide depression, deficit growth is necessary to prevent a nation-wide recession or depression. The people have been so brainwashed by ignorance, they can’t tell the difference between looming disaster and what’s needed for success.

Economic ignorance prevents Monetary Sovereignty from being taught in our most prestigious schools, and Nobel Prizes are awarded to teachers still stuck in gold-standard economics.

And we laugh and shake our heads in wonderment at the anti-evolutionists.

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

—Paul Ryan defends his Medicare cuts to Money Magazine — oops, they’re not “cuts;” they’re “reform”

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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Paul Ryan, the Tea (formerly Republican) Party hero, was interviewed in the May, 2011 Money Magazine. Here are a few excerpts (Money Magazine comments in red) :

Ryan is as free market as it gets – he’s cited Ayn Rand as an influence

For those of you not familiar with Ayn Rand, she believed in Objectivism. It could be known as the Gordon Gekko, “Greed is good” school of thought, in which the powerful receive all and the weak receive nothing. One of her followers was Alan Greenspan. Need I say more?

Should we be focused on the deficit when we’re still recovering from recession? Yes. There’s a neo-Keynesian school of thought that says to run deficts when you have a bad economy. But chronic, deficit spending, plus the huge debt, adds to more uncertainty to the economy and means higher taxes around the corner.

“Around the corner” is one of many debt-hawk phrases, along with “ticking time bomb” and “unsustainable,” in which no specifics are given, thus avoiding the Harold Camping, “world-is-ending” embarrassment. Ryan fails to mention there is no historical relationship between federal taxes and federal deficits.

Think about it: Without actually committing to anything specific, he seems to support deficits to grow the economy, when the economy is bad. So why wouldn’t one wish to grow the economy, when it’s good?

Businesses are holding back from hiring and investing because of uncertainty created by government.

No, businesses are holding back because profits don’t warrant expansion. Why? Insufficient federal spending has prevented recovery from the recession.

You’ve said the deficits could “crash” the economy. How so? The Congressional Budget Office (CBO) has a long-term forecasting model, and their computers can’t conceive of the economy continuing with the ongoing deficit. Their projection is, we are on an unsustainable path. We see this crisis coming. We can’t duck the responsibility of tackling it now.

It was a great question, which he never answered. No surprise there. No debt-hawk ever has answered that question. Federal money creation won’t crash the economy; lack of money creation will. And oh yes, there’s that weasel word “unsustainable,” again.

Are tax hikes one part of the answer? No. Raising revenue just takes pressure off the real cause of our problem, which is spending.

Double talk. Financially, cutting spending = raising taxes. Either way, less money enters the economy. To say that raising taxes is economically bad but cutting spending is economically good, makes no sense. Classic gobbledegook.

Does that mean future retirees would be spending more of their savings on health care? Yes, you have to do that. Medicare spending will grow at a slower rate under my plan. That’s how you keep Medicare solvent.

That also is how you make older Americans insolvent. His plan cuts spendable income each year. The way to keep Medicare solvent is the same way we keep Congress, the Supreme Court, the White House, the military, and the thousand other federal departments solvent. Our Monetarily Sovereign nation funds them.

Do you think Republicans have an stomach for cutting Medicare? We’re not cutting Medicare . . . we’re going to reform Medicare for future generations.

Translation: “Yes, we are cutting Medicare for people under 55, but we’re going to call it ‘reform,’ and in that way you won’t notice. Everyone loves reform, don’t they?”

For all you folks who hate big government (but really don’t know why), and are concerned about your children and grandchildren (but not concerned enough to make sure their health care is a good as yours), the Tea (formerly Republican) Party / Ryan proposal is perfect. Of course, not understanding Monetary Sovereignty is the first step.

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