The genius of the board game, Monopoly®.

If you have, like I have, spent the most recent 25 years of your life trying to explain to your friends and strangers, something the basics of which an 8-year-old should be able to understand — and like me, you have utterly failed — try using the board game Monopoly® as your example.

First, why do I say 8-year-old? Well, this is the on-line ad:

GREAT FAMILY GAME: This Monopoly board game is fun for families and kids ages 8 and up.

So yes, and 8-year-old can understand Monopoly®.

But, why do I reference Monopoly®?

You, your friends and strangers almost surely have played Monopoly®. Behind chess, checkers, and backgammon, Monopoly® is the world’s most popular board game in history.

So, even the semi-literate universe knows how the game works.

As they will recall, it is a game about buying, improving, renting, and selling real estate. There are players — usually four, plus a Bank.

The players are analogs for the U.S. private sector (aka, “the economy”), and the Bank is an analog for the U.S. Treasury. It doles out money. It collects money that it doesn’t need.

And by law (i.e. by rule), it never can run short of money — just like the Treasury. Here are some of the Monopoly® game’s parallels to reality:

1. The real world and the game use paper “money,” which isn’t really money. The U.S. dollar bill is the title to a dollar,not in of itself a dollar. The actual dollar is merely a bookkeeping notation in the government’s accounting records.

How to play Monopoly without using Monopoly paper dollars. Create a table. THE BANK HAS NO COLUMN BECAUSE IT HAS INFINITE MONEY.

A U.S. dollar has no physical presence. It is just a number in a balance sheet.

Similarly, a Monopoly® paper dollar merely represents game points.

Years ago, I played a game of Monopoly® that did not include any paper “dollars” at all.

We simply used a record of points — a table in which each participant had a column in which his/her winnings and losings were recorded.

The Bank had no column, because the Bank (like the U.S. Treasury), had the infinite ability to create dollars.

Such a column would have made no sense.

The use of the table proves that, like U.S. dollars, Monopoly® dollars have no physical substance. They are just balance sheet numbers.

2. Like the U.S. Treasury, the Monopoly® Bank generally runs a deficit, which is an asset for the private sector.

Just as the U.S. Treasury never can run short of U.S. dollars, the Monopoly® Bank never can run short of Monopoly® dollars.

This is stated in the rules of the game.

Monopoly taxes, which are paid to the Bank, do not fund Band spending. Since the Bank had no column to show how much money it has, all taxes paid to the bank disappear upon payment.

When players pass “GO” and receive $200, no taxpayers are obligated to fund those $200 payments. No one asks, “How will the Bank pay for it?” just as no one should ask, how will the federal government pay for (anything).

3. For historical reasons, based on obsolete gold standards and silver standards, the U.S. federal government keeps track of “deficits” (i.e. the difference between tax income and spending).

In U.S. history, there have been intermittent gold and silver standards, in which the U.S. required itself to store physical gold and silver in dollar amounts equal to those deficits.

“Wait,” you say. “Gold and silver are physical metals, measured in ounces. How can ounces be equal to dollars?”

Answer: The U.S. government, being Monetarily Sovereign, has the unlimited power to fix an ounce of silver and an ounce of gold to equal any number of dollars it wishes.

The government has the unlimited power to fix the price of any commodity vs. the dollar: Iron, corn, cotton, water, oil, etc.

Ever since 1971, when President Nixon took us off the last gold standard, the value of gold vs. dollars has varied wildly.

For that reason, keeping track of deficits no longer is necessary other than to measure dollars going into the economy.

When too few dollars are pumped into the economy we have recessions, and when dollars actually are taken out of the economy we have depressions.

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.

By contrast, the game of Monopoly® does not keep track of the Bank’s deficits. There is no need to, because the deficits do not affect the Bank’s ability to pay, just as federal deficits do not affect the federal government’s ability to pay.

4. Similarly, neither the Monopoly® Bank nor the federal government ever borrows dollars. Being Monetarily Sovereign, they never need to.

The U.S. Treasury issues Treasury certificates (T-bills, T-notes, T-Bonds), which misleadingly are called “borrowing.”

In a typical borrowing situation, someone needs additional money temporarily, so they borrow it from a lender, and later, pay it back.

But, the federal government, having the unlimited ability to create dollars, never is in a  position in which it needs money.

It has the infinite ability to create money, at the touch of a computer screen. Those T-securities, which misleadingly are labeled “borrowing,” are more akin to safe-deposit boxes, into which depositors place values, and later retrieve them.

The sole differences between T-security accounts and safe deposit boxes are:

a. T-security accounts have a maturity date; safe-deposit boxes do not

b. T-security accounts receive interest; safe deposit boxes do not (although negative interest rates for T-security accounts have been discussed, which would make them even more like safe-deposit boxes.)

The federal government never touches the contents of safe-deposit boxes or of T-security accounts, and to “pay them off,” the owner simply retrieves the contents of the T-security accounts and the safe-deposit boxes.

There is no bank or government obligation to “pay off” safe-deposit boxes or T-security accounts. The sole financial purposes of T-securities are:

a. To provide a safe place to store unused dollars, which stabilizes the dollar

b. To assist the Federal Reserve to control interest rates, which helps control inflation

T-securities do not provide spending funds for the federal government. Every time you think of federal government financing ( which is nothing like state/local government financing) think of the Monopoly® Bank.

That will help you visualize why federal deficits and debt are not a burden on the government or on taxpayers. Compare that with the contents of the following article from the Committee for a Responsible Federal Deficit (CRFB):

The Nation’s Upcoming Fiscal Challenges APR 29, 2021 | BUDGETS & PROJECTIONS
Record Debt Levels: Debt held by the public will total 108 percent of Gross Domestic Product this fiscal year. After the previous record of 106 percent of GDP, set in 1946 just after World War II, policymakers ran years of balanced budgets to bring debt down to manageable levels. We now face large structural deficits and an ever-rising debt-to-GDP ratio.

The “debt” / GDP ratio is meaningless. It predicts nothing. It has nothing to do with the federal government’s ability to pay its debts. It does not say anything about the health of the economy.

The End of Discretionary Spending Caps: Since 2012, discretionary spending caps have been in place (though in practice, these caps have often been increased and in some instances violated).

“Increased” and “violated” because they serve no function.

These caps expire at the end of this fiscal year, leaving appropriators without a legal constraint on discretionary spending and thus creating the opportunity for a spending free-for-all.

Obviously, caps that are “increased” and “violated” are not caps at all, and do nothing to prevent Congress from spending as much as it wishes. Further, there are no economic reasons to restrict Congressional spending. On the contrary, federal spending stimulates economic growth.

Predictable Expirations and Fiscal Deadlines: President Biden’s agenda, like those who came before him, will be in many ways dictated by a series of expirations and deadlines.
This year alone, the country will have to deal with the return of the debt limit (August 1), the end of expanded unemployment benefits (September 6), the expiration of numerous program authorizations (September 30), and the end of the expanded Child Tax Credit and other tax breaks (December 31).

The “debt limit” is one of the least intelligent laws passed by Congress, and that is saying something. The “limit” does not limit debt. It limits payment for debt already contracted.

It’s a “stiff your creditors” law, that has no economic purpose. Zero. Zilch. None. The fact that every time it is reached, Congress raises it, should reveal something to even the least educated among us.

Policymakers must also address the statutory Pay-As-You-Go scorecard if they choose to avoid an across-the-board sequestration. 

“Pay-As-You-Go” is a system by which the federal government would add net zero dollars to the economy, thereby guaranteeing a depression. Not smart, which is why the CRFB likes it.

Major Trust Funds Are Headed Toward Insolvency: Four major trust funds are projected to deplete their reserves within the next 14 years: the Highway Trust Fund in FY 2022; The Medicare Hospital Insurance trust fund in FY 2026; Social Security’s retirement fund in calendar year 2032; and the Social Security Disability Insurance trust fund in calendar year 2035.
Given this tight timeline, all of these trust funds should ideally be secured during President Biden’s time in office.

Just as federal “debt” is not debt, federal “trust funds” are not trust funds, and they cannot “deplete their reserves” unless Congress and the President want them to.

Just as the federal government cannot run short of dollars, no agency of the federal government can run short of dollars, again, unless Congress and the President want them to.

See if you can learn when the non-existent trust funds for the military, the Supreme Court, the White House, the Senate, and the House of Representatives will face insolvency. Oh, they have no trust funds? Ask yourself, “Why not?”

IN SUMMARY The board game, Monopoly®, is similar to the U.S. economy.

The Monopoly® Bank resembles the U.S. government, and the Monopoly® players resemble the U.S. economy.

Just as the Monopoly® Bank never can run short of dollars, the U.S. government never can run short of dollars.

Just as the Bank does not borrow dollars, the U.S. government does not borrow dollars.

Federal Treasury securities, misnamed “borrowing,” actually are similar to safe deposit boxes. Just as your bank doesn’t touch what you put into your safe deposit box, the federal government doesn’t touch what you put into your T-security account.

To “pay off” that misnamed “debt,” the federal government simply allows you to take back the contents of your T-security account, in the same way as you would take back the contents of your safe deposit box. No tax payers or tax dollars are involved.

………………………………………………………………………….

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:

  • Monetary Sovereignty describes money creation and destruction.
  • 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
  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

Would you puleeeze tell Jonah Goldberg he doesn’t know WTF he is writing about?

Image result for Jonah Goldberg
Jonah Goldberg

Boston Herald
Goldberg: Culture wars a convenient distraction from spending
Jonah Goldberg

You know what you get for spending trillions of dollars you don’t have? More fights over Dr. Seuss, cancel culture and identity politics.

Puleeeze, someone tell Jonah Goldberg the federal government always spends dollars it doesn’t have, for one simple reason.  To pay for goods and services, the federal government creates brand new dollars, ad hoc.

No one knows how many dollars our Monetarily Sovereign federal government “has” because it is a nonsense concept. It’s like asking how many laws Congress can create, or how many lies Donald Trump “has.”

The answer to all such questions is “infinite.”

By any measure, the federal government has been on a spending spree for decades. Without getting bogged down in the green eyeshade stuff, suffice it to say Uncle Sam has been spending more than he takes in from tax revenues since the 1990s.

Puleeeze tell Jonah Goldberg that Uncle Sam has been spending more than he takes in for much longer than the 1990s.

        Year-by-year federal debt 

This image has an empty alt attribute; its file name is all-debt.png
Source: The Balance.com

In fact, the first dollars the federal government spent in the 1780s were dollars that didn’t exist until the government spent them.

Back in 1929, the federal debt was “only” $17 billion.

Since then, it has risen almost every year, with positive effects, until today it exceeds $28 TRILLION, an astounding 16,470-fold increase. 

In those years, the U.S. federal government has spent more than it “has” — about $26 trillion more. 

So, where is the crisis that Jonah Goldberg seems to anticipate?

The federal debt is nothing more than the total of deposits into T-Security accounts, which rightly can be considered interest-paying safe-deposit boxes.

While federal debt (red) has risen massively, inflation (blue) has risen modestly.

Just as your bank doesn’t access the money you may have stored in your safe-deposit box, the federal government doesn’t access the dollars in your T-security account.

We have documented that since 1940, pundits wrongly have referred to the federal debt as a “ticking time bomb.” Jonah seems to fall into that misbegotten group.

We’ve made up those shortfalls by borrowing money. The national debt ($28 trillion) is now considerably larger than the GDP (about $21 trillion).

Unlike state and local governments, the U.S. federal government does not borrow. Having the unlimited ability to create dollars, why would it?

What Jonah Goldberg erroneously terms “borrowing.” actually is the acceptance of deposits into the above-mentioned T-securities. Like the contents of your safe-deposit box, these deposits are not a burden on anyone, not on the government, not on today’s taxpayers, not on future taxpayers.

To service these accounts the federal government simply returns the dollars deposited in them.

The fact that the total of dollars deposited into T-security accounts is greater than the GDP is meaningless. It’s like saying that the amount deposited in a bank’s safe-deposit boxes is greater than the bank spends. It’s a silly comparison.

Reasonable people can differ on how much value we got for all that credit card debt. But that’s not relevant here.

The government has nothing like “credit card debt.” To pay what it owes, it just creates the dollars from thin air, as it always has. That is how it created, from nothing, the very first laws which created the very first dollars.

And the so-called federal “debt” is not really the federal government’s debt.

The real “debt” is the comparatively small amount the government owes suppliers between the time it orders and receives goods and services vs. the time it pays for them. That “debt” lasts a few weeks.

What’s relevant is that when both parties reach a de facto bipartisan consensus that deficit spending is fine — at least when their party is doing the spending — it makes it difficult to argue about overspending or overborrowing in a credible way.

The federal government, unlike state and local governments, cannot overspend, though it continually underspends which is why we have recessions every five years on average. (Yes, federal underspending leads to recessions, and increased spending is what cures them.)

And, unlike state and local governments, the government does not borrow.

Puleeeze tell Jonah Goldberg.
goldbergcolumn@gmail.com.

…………………………………………………………………………
<!– …………………………………………………………………………

Rodger Malcolm Mitchell Monetary SovereigntyTwitter: @rodgermitchellSearch #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:

  • Monetary Sovereignty describes money creation and destruction.
  • 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:

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

MONETARY SOVEREIGNTY

 

There you go again. The same old, wrong story about federal “debt.”

And to quote President Ronald Reagan, “There you go, again.”

Except the first time he was talking about President Jimmy Carter’s charge that Reagan opposed Medicare. This time, we reference the Libertarian ongoing, interminable, economically ignorant claim that the so-called “federal debt” is too high by once again calling it a “ticking time bomb.”

I won’t go into details about why the federal “debt” is not a debt in the usual sense; rather, it is deposits that easily are paid off simply by returning them to the depositors. You can read about that, here.

Instead, we will dive directly into an article written by Todd G. Buchholz, “a former White House director of economic policy under President George H.W. Bush and managing director of the Tiger Management hedge fund, who was awarded the Allyn Young Teaching Prize by the Harvard Department of Economics. He is the author of New Ideas from Dead Economists and The Price of Prosperity.

In  75 years, a 90-fold increase in debt (blue) vs. a 10-fold increase in inflation (red). Still no “time bomb” explosion.

America’s New Debt Bomb, Aug 20, 2020, by TODD G. BUCHHOLZ

Like in World War II, the United States is piling on debt to confront a whole-of-society crisis, raising the question of who will foot the bill in the long term.

Immediately, we come across a misstatement. There is no “bill” for the federal debt. No one ever will pay for the federal debt, not today’s taxpayers nor tomorrow’s. Federal taxes do not fund federal debt.

Federal finances are nothing like personal finances, which require income to fund outgo. The federal government requires no income. It never can run short of dollars, and it does not use taxes to fund spending.

But, unlike the post-war era, the underlying conditions for robust economic recovery today are less than favorable, placing an even greater onus on wise policymaking.

The United States today not only looks ill, but dead broke. To offset the pandemic-induced “Great Cessation,” the US Federal Reserve and Congress have marshaled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup-kitchen levels.

When someone or something is “dead broke,” they are unable to pay their bills. But the federal government never is unable to pay its bills. Being Monetarily Sovereign, it has the infinite ability to pay bills, even without collecting taxes.

The 2020 federal budget deficit will be around 18% of GDP, and the US debt-to-GDP ratio will soon hurdle over the 100% mark. Such figures have not been seen since Harry Truman sent B-29s to Japan to end World War II.

The debt/GDP ratio is completely meaningless. “Debt” is the net total of deposits into Treasury Security accounts in the 240+ years since the U.S. became a nation. GDP is one year’s total American spending — the ultimate apples/oranges comparison. There is no relationship between the debt/GDP ratio and America’s economic viability.

Assuming that America eventually defeats COVID-19 and does not devolve into a Terminator-like dystopia, how will it avoid the approaching fiscal cliff and national bankruptcy?

To answer such questions, we should reflect on the lessons of WWII, which did not bankrupt the US, even though debt soared to 119% of GDP.

The federal government cannot go bankrupt. It is a mathematical impossibility for a nation with the infinite ability to create its sovereign currency.

By the time of the Vietnam War in the 1960s, that ratio had fallen to just above 40%. WWII was financed with a combination of roughly 40% taxes and 60% debt.

Mr. Buchhotz first advises reflecting on the lessons of WWII, then promptly forgets what he has written.

WWII was not finanaced with taxes or with debt. It was financed with federal money creation. Even if the federal government had collected zero taxes and zero deposits, it easily could have paid all war bills. That is the fundamental difference between personal finance and federal finance.

These US bonds were bought predominantly by American citizens out of a sense of patriotic duty.

Fed employees also got in on the act, holding competitions to see whose office could buy more bonds. In April 1943, New York Fed employees snapped up more than $87,000 worth of paper and were told that their purchases enabled the Army to buy a 105-millimeter howitzer and a Mustang fighter-bomber.

It was a con job by the government, to make Americans feel they were part of the war effort. Similar psychological efforts included school children saving and turning in newspapers and housewives turning in used cooking oil.

Neither the newspapers, nor the cooking oil, nor the “war bonds” had any utility for the government.

Patriotism aside, many Americans purchased Treasury bonds out of a sheer lack of other good choices.

Until the deregulation of the 1980s, federal laws prevented banks from offering high rates to savers. Moreover, the thought of swapping US dollars for higher-yielding foreign assets seemed ludicrous, and doing so might have brought J. Edgar Hoover’s FBI to your door.

While US equity markets were open to investors (the Dow Jones Industrial Average actually rallied after 1942), brokers’ commissions were hefty, and only about 2% of American families owned stocks.

Investing in the stock market seemed best-suited for Park Avenue swells, or for amnesiacs who forgot the 1929 crash.

Today, bonds have two primary purposes:

  1. To provide a safe “parking place” for unused dollars (which helps stabilize the dollar) and
  2. To assist the Fed in controlling interest rates (which helps control inflation.

In no case are bonds a method for the U.S. government to obtain dollars. The federal government (unlike state and local governments) creates dollars, ad hoc, by spending dollars.

How, then, was the monumental war debt resolved? Three factors stand out.

First, the US economy grew fast. From the late 1940s to the late 1950s, annual US growth averaged around 3.75%, funneling massive revenues to the Treasury. Moreover, US manufacturers faced few international competitors. British, German, and Japanese factories had been pounded to rubble in the war, and China’s primitive foundries were far from turning out automobiles and home appliances.

Second, inflation took off after the war as the government rolled back price controls. From March 1946 to March 1947, prices jumped 20% as they returned to reflecting the true costs of doing business.

Third, the US benefited from borrowing rates being locked in for a long time. The average duration of debt in 1947 was more than ten years, which is about twice today’s average duration. Owing to these three factors, US debt had fallen to about 50% of GDP by the end of Dwight Eisenhower’s administration in 1961.

The “monumental war debt” (i.e. the total to deposits into Treasury Security Accounts) was “resolved” (reduced) when existing bonds matured and fewer people wanted to make deposits into new bond accounts.

This “resolution” neither benefited, nor was a burden on, the U.S. government. The government has total control over the number and face amount of bonds outstanding.

If it want more deposits, it either can raise interest rates or the Fed itself can create dollars and make those deposits.

So, what’s the lesson for today?

For starters, the US Treasury should give tomorrow’s children a break by issuing 50- and 100-year bonds, locking in today’s puny rates for a lifetime.

The above makes the implicit and false assumption that “tomorrow’s children” will fund federal debt. Again, this belief is based on the false assumption that Federal debt is like state/local debt and personal debt.

Finally, what about the post-war experience with inflation?

Should we try to launch prices into the stratosphere in order to shrink the debt? I advise against that. Investors are no longer the captive audience that they were in the 1940s. “Bond vigilantes” would sniff out a devaluation scheme in advance, driving interest rates higher and undercutting the value of the dollar (and Americans’ buying power with it).

Any effort to inflate away the debt would result in a boom for holders and hoarders of gold and cryptocurrencies.

Utter nonsense. Inflation does not “shrink the debt” (total deposits), and though inflation can shrink real deposits (i.e. inflation-adjusted, total deposits), there is no purpose served in trying to shrink it.

Further, inflation neither is caused nor cured by federal debt. All inflation, down through history, has been caused by shortages, usually shortages of food and/or energy. Inflation is cured by curing the shortages, which sometimes requires increased deficit spending.

The federal debt (total deposits in T-security accounts) is not a burden on the government, not a burden on taxpayers, not a burden on future generations, and not a burden on the economy.

The “debt” has increased massively, with no adverse effect on anyone. But the debt-scare-mongers are immune to learning from experience, which is why we continually add to the following list:

================================================================================================================================================================================================

September, 1940, the federal budget was a “ticking time-bomb which can eventually destroy the American system,” said Robert M. Hanes, president of the American Bankers Association.

September 26, 1940, New York Times, Column 8

By 1960: the debt was “threatening the country’s fiscal future,” said Secretary of Commerce, Frederick H. Mueller. (“The enormous cost of various Federal programs is a time-bomb threatening the country’s fiscal future, Secretary of Commerce Frederick H. Mueller warned here yesterday.”)

By 1983: “The debt probably will explode in the third quarter of 1984,” said Fred Napolitano, former president of the National Association of Home Builders.

In 1984: AFL-CIO President Lane Kirkland said. “It’s a time bomb ticking away.”

In 1985: “The federal deficit is ‘a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell. (Remember him?)

Later in 1985: Los Angeles Times: “We labeled the deficit a ‘ticking time bomb’ that threatens to permanently undermine the strength and vitality of the American economy.”

In 1987: Richmond Times–Dispatch – Richmond, VA: “100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB’”

Later in 1987: The Dallas Morning News: “A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government.”

In 1989: FORTUNE Magazine: “A TIME BOMB FOR U.S. TAXPAYERS

In 1992: The Pantagraph – Bloomington, Illinois: “I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion.

Later in 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion.”

In 1995: Kansas City Star: “Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.”

In 2003: Porter Stansberry, for the Daily Reckoning: “Generation debt is a ticking time bomb . . . with about ten years left on the clock.”

In 2004: Bradenton Herald: “A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB

In 2005: Providence Journal: “Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb.”

In 2006: NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.

In 2007: USA Today: “Like a ticking time bomb, the national debt is an explosion waiting to happen.

In 2010: Heritage Foundation: “Why the National Debt is a Ticking Time Bomb. Interest rates on government bonds are virtually guaranteed to jump over the next few years.

In 2010: Reason Alert: “. . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”

In 2011: Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode.”

June 19, 2013: Chamber of Commerce: Safety net spending is a ‘time bomb’, By Jim Tankersley: The U.S. Chamber of Commerce is worried that not enough Americans are worried about social safety net spending. The nation’s largest business lobbying group launched a renewed effort Wednesday to reduce projected federal spending on safety-net programs, labeling them a “ticking time bomb” that, left unchanged, “will bankrupt this nation.”

In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb

On Jun 18, 2015: The ticking economic time bomb that presidential candidates are ignoring: Fortune Magazine, Shawn Tully,

On February 10, 2016, The Daily Bell“Obama’s $4.1 Trillion Budget Is Latest Sign of America’s Looming Collapse”

On January 23, 2017: Trump’s ‘Debt Bomb’: Deficit May Grow, Defense Budget May Not, By Sydney J. Freedberg, Jr.

On January 27, 2017: America’s “debt bomb is going to explode.” That’s according to financial strategist Peter Schiff. Schiff said that while low interest rates had helped keep a lid on U.S. debt, it couldn’t be contained for much longer. Interest rates and inflation are rising, creditors will demand higher premiums, and the country is headed “off the edge of a cliff.”

On April 28, 2017: Debt in the U.S. Fuel for Growth or Ticking Time Bomb?, American Institute for Economic Research, by Max Gulker, PhD – Senior Research Fellow, Theodore Cangeros

Feb. 16, 2018  America’s Debt Bomb By Andrew Soergel, Senior Reporter: Conservatives and deficit hawks are hurling criticism at Washington for deepening America’s debt hole.

April 18, 2018 By Alan Greenspan and John R. Kasich: “Time is running short, and America’s debt time bomb continues to tick.”

January 10, 2019, Unfunded Govt. Liabilities — Our Ticking Time Bomb. By Myra Adams, Tick, tick, tick goes the time bomb of national doom.

January 18, 2019; 2019 Is Gold’s Year To Shine (And The Ticking US Debt Time-Bomb) By Gavin Wendt

[The following were added after the original publishing of this article]

April 10, 2019, The National Debt: America’s Ticking Time Bomb.  TIL Journal. Entire nations can go bankrupt. One prominent example was the *nation of Greece which was threatened with insolvency, a decade ago. Greece survived the economic crisis because the European Union and the IMF bailed the nation out.

July 11, 2019National debt is a ‘ticking time bomb‘: Sen. Mike Lee

SEP 12, 2019, Our national ticking time bomb, By BILL YEARGIN
SPECIAL TO THE SUN SENTINEL | At some point, investors will become concerned about lending to a debt-riddled U.S., which will result in having to offer higher interest rates to attract the money. Even with rates low today, interest expense is the federal government’s third-highest expenditure following the elderly and military. The U.S. already borrows all the money it uses to pay its interest expense, sort of like a Ponzi scheme. Lack of investor confidence will only make this problem worse.

JANUARY 06, 2020, National debt is a time bomb, BY MARK MANSPERGER, Tri City Herald | The increase in the U.S. deficit last year was about $1.1 trillion, bringing our total national debt to more than $23 trillion! This fiscal year, the deficit is forecasted to be even higher, and when the economy eventually slows down, our annual deficits could be pushing $2 trillion a year! This is financial madness.there’s not going to be a drastic cut in federal expenditures — that is, until we go broke — nor are we going to “grow our way” out of this predicament. Therefore, to gain control of this looming debt, we’re going to have to raise taxes.

February 14, 2020, OMG! It’s February 14, 2020, and the national debt is still a ticking time bomb!  The national debt: A ticking time bomb? America is “headed toward a crisis,” said Tiana Lowe in WashingonExaminer.com. The Treasury Department reported last week that the federal deficit swelled to more than $1 trillion in 2019 for the first time since 2012. Even more alarming was the report from the bipartisan Congressional Budget Office (CBO) predicting that $1 trillion deficits will continue for the next 10 years, eventually reaching $1.7 trillion in 2030

April 26, 2020, ‘Catastrophic’: Why government debt is a ticking time bomb, Stephen Koukoulas, Yahoo Finance  [Re. Monetarily Sovereign Australia’s debt.]

August 29, 2020LOS ANGELES, California: America’s mountain of debt is a ticking time bomb  The United States not only looks ill, but also dead broke. To offset the pandemic-induced “Great Cessation,” the US Federal Reserve and Congress have marshalled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup kitchen levels. Assuming that America eventually defeats COVID-19 and does not devolve into a Terminator-like dystopia, how will it avoid the approaching fiscal cliff and national bankruptcy?

================================================================================================================================================================================================

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:

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

11 experts try to trick you about the U.S. economy

Uncle Sam broke.png
100% impossible.

The following will give you a treasured opportunity to read the words of 11 experts, each demonstrating his lack of knowledge or lack of honesty about federal finances and economics.

Their hope or effect is to make you ignorant about the economy, during this time of crisis.

If your hope is to become ignorant about federal finances or economic, then do believe what they say. You will be able to cross that item off your bucket list.

But if you wish to understand the facts, and perhaps even be able to contact your political leaders with the facts, read on.

As you read, please remember that federal finances are nothing at all like your personal finances, nothing like business finances, and nothing like state/local government finances.

The federal government uniquely is Monetarily Sovereign. It never, NEVER can run short of its own sovereign currency, the U.S. dollar.

And the government, being sovereign over the dollar, has absolute control over its value.

When it comes to the U.S. dollar, the federal government is God. So don’t use your own personal financial experience as a template about federal finances.

Here are excerpts from an article written by Mike Bebernes, of Yahoo News, followed by my comments.

Coronavirus aid: Is the U.S. taking on too much debt?
Mike Bebernes, Editor,Yahoo News 360•August 4, 2020

Negotiations in Congress about the next stimulus bill aimed at countering the economic effect of the coronavirus have ground to a crawl amid debate over how big the rescue package should be.

Not only is there the expected sparring between Democrats and Republicans, the issue is also reportedly causing a rift within the GOP itself.

A vocal group of Republicans have begun to raise concerns about adding how much the next stimulus will add to the federal deficit, “We have to be careful about not piling on enormous amounts of debt,” Treasury Secretary Steve Mnuchin said.

Kentucky Sen. Rand Paul said some of his GOP colleagues are “no different than socialist Democrats when it comes to debt.”

Right off the bat, you see Mnuchin’s ignorance. The economic effect of the coronavirus is quite simple: Businesses are running short of paying customers and people are running short of income with which to pay businesses.

The effect is that businesses and people are running short of money. This lack of money causes a recession.

The solution to a recession also is quite simple: Give businesses and people money.

As for Rand Paul’s concern, deficit spending is not “socialist.” Socialism is government ownership and control of businesses. Handing out money and/or providing benefits (healthcare, education, etc.) is not socialism.

Fakers love to toss around the word “socialist,” because they know Americans will react negatively to it. Any time you hear someone accuse some federal spending as “socialist,” know you are being conned.

House Democrats passed a $3.4 trillion stimulus bill in May. The proposal under consideration by Senate Republicans carries a $1.1 trillion price tag.

Even if a significantly smaller package ends up being passed, the national debt will still be at historic levels.

The $2.2 trillion CARES Act passed in March pushed the deficit over $26 trillion and has the country on pace for the largest annual ratio of debt as a share of the economy since World War II.

Although it commonly is termed, “debt,” it isn’t the same thing as personal debt or business debt. That thing called “debt” actually is the total of deposits into Treasury Security accounts (T-Bills, T-Notes, T-Bonds) held at the Federal Reserve (The Fed).

These deposits are not a burden on anyone — not on the government, not on taxpayers, and not on future generations. If the government wished, it could pay off the deposits today, merely by returning the dollars currently residing in those T-Security accounts.

If you own a T-bill, and that T-bill matures, the government will send back to you your dollars that reside in your T-bill account.

It would just be a transfer of your dollars similar to a transfer from your savings account to your checking account.

No tax dollars involved in the repayment of federal “debt.”.

The coronavirus isn’t the only reason the U.S. has so much debt. After running a surplus in the late 1990s, the deficit has ballooned over the past two decades.

Despite promising to eliminate the federal debt — which stood at $19 trillion when he took office — President Trump is on pace to have the largest deficit of any president.

The virus is taking dollars from the private sector, which has caused a recession.

Eliminating the so-called “debt” (deposits into T-Security Accounts) would take even more dollars from the economy, causing the deepest depression in U.S. history (and world history).

For example:

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.

You can thank your god that Trump didn’t live up to his promise, for had he somehow managed to eliminate U.S. debt, you would be living naked in a cave, eating cave bats.

To many fiscal conservatives, large deficits pose a major risk to the economic stability of the country.

Taking on debt may be a quick way to solve problems in the short term, but it only pushes the burden onto future generations, they argue.

The weight of trillions of dollars in debt, plus the interest accrued, will stifle the country’s ability to recover from the recession and hinder growth once the economy improves.

Federal deficit spending adds growth dollars to the economy, which is exactly why they “solve problems in the short term.” Deficit spending also solves problems in the mid-term and the long term.

Think of all the things for which the federal government spends money. Then ask yourself, “Which of these, if eliminated, would grow the economy?”

Being Monetarily Sovereign, the federal government creates new dollars by spending. That is the government’s method of dollar-creation.

To pay a creditor, the federal government sends instructions (not dollars) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.

The instant the creditor’s bank does as instructed, new dollars are created and added to the nation’s M1 money supply.

Deficit spending is no burden whatsoever on future generations. In fact, federal deficit spending benefits future generations by providing them not only with dollars, but also with roads, bridges, health care, education, military protection, safe food, legal protections, and the myriad other things the government pays for.

As for “interest accrued,” those dollars go into the private sector, stimulating economic growth. Interest is no burden on the federal government, which being Monetarily Sovereign has infinite dollars.

(That is why there is no way to answer the question, “How much money does the federal government have?” The real answer is, “Infinite.”)

America’s ability to keep borrowing enormous amounts of money, at least in theory, could run out if oversized deficits reduce confidence in the U.S. economy.

If that happens sometime in the future, it could cause a major spike in interest rates, severe inflation or even an economic collapse that dwarfs the impact of the pandemic, deficit hawks fear.

The U.S. federal government does not borrow. Being Monetarily Sovereign, it never can run short of U.S. dollars. It has no need to borrow.

Bernanke quote
Truth from the Chairman

What wrongly is termed “borrowing” actually is the acceptance of deposits into T-security accounts.

The purpose of T-security accounts (“debt”) is not to provide spending money for the U.S. government, the one entity that has infinite dollars.

The primary purposes of T-security accounts are:

  1. to provide a safe parking place for unused dollars, which stabilizes the dollar and
  2. to assist the Fed in setting interest rates.

The federal government could stop accepting deposits into T-security accounts today if it wished. And in the event that people stopped depositing into T-security accounts, the U.S. Federal Reserve has the unlimited ability to make those deposits.

As for a “major spike in interest rates,” the Fed, not depositors, controls interest rates. The rates are exactly what the Fed wants them to be. Only if the Fed wants a “major spike,” will there be one. Otherwise, no major spike.

Greenspan II.png
Truth from another Chairman

As for “severe inflation,” it never is caused by federal debt or by federal deficit spending. In fact, deficit spending can cure inflations.

All inflations are caused by shortages of key goods and/or services, usually food or energy (oil).

Inflations are cured when the government deficit-spends to obtain the scarce goods and/or services and then distributes them to the private sector.

Consider the infamous Zimbabwe hyperinflation. The Zimbabwe government took farmland from farmers and gave it to people who didn’t know how to farm.

The predictable result: A massive food shortage that led to inflation. The Zimbabwe government could have ended the inflation by importing and distributing food (or better, by not stealing the farmland in the first place).

Instead, it merely devalued its currency, again, again, and again.

By contrast, Germany cured its infamous hyperinflation by employing businesses and people to build the greatest war machine the world had ever known. That allowed people and businesses to thrive, and eliminated shortages. (War preparation was not the best use for German money, but it did cure the hyperinflation.)

Others argue that these potential future issues pale in comparison to the very real catastrophe that will happen without a large rescue package.

Research suggests that the $600 weekly bonus added to unemployment has kept the economy from collapsing even further over the past few months.

Now that it’s expired, millions of Americans are at risk of losing their homes and countless businesses could close permanently.

True. The $3 trillion rescue package helped avoid the catastrophe that is certain unless at least $7 trillion is pumped into the private sector.

Oh, that won’t happen? Congress won’t do it?  Then assume we will have an economic catastrophe with massive unemployment, starvation, and more death — all unnecessarily.

The only way to truly save the economy, some argue, is to get the pandemic under control.

Spending money to improve testing, help people stay home and prop up struggling state budgets in the short term could prevent the need for an even bigger stimulus down the road.

Some Democrats believe that concerns about debt are insincere and motivated by politics, since the GOP enthusiastically supported tax cuts in 2017 that are expected to add trillions to the deficit.

Getting the pandemic “under control” is not the only way to save the economy, though it’s a good thing to do.

The faster way is to pump trillions of dollars into the private sector so that businesses can do business and consumers can consume.

And now what you nervously have been waiting to see: More truly ignorant comments by a few of America’s opinion leaders:

The stimulus should be limited to the most essential remedies
“Senate Republicans are right to be worried about rising federal debt. But they are wrong to artificially limit the level of spending in the latest coronavirus relief package.” — Henry Olsen, Washington Post

There are zero reasons to limit the stimulus. Note how Olsen takes both sides of the issue. That way, in retrospect, he always can lay claim to having been right. That is how one gets to be an “expert.”

At a certain point, U.S. credit may run out
“America’s borrowing capacity is large, but we may discover that it is not unlimited.” — Brian Riedel, National Review

The U.S. doesn’t borrow, so it doesn’t need “credit” and doesn’t have a “borrowing capacity. Being Monetarily Sovereign, it has absolute control over the value of its money and its credit, and never can run short.

Spend money now, but aggressively tackle the deficit once the pandemic ends
“When the pandemic passes, authorities need to shift out of rescue mode and start weaning capitalism off easy money and bailouts.” — Ruchir Sharma, Wall Street Journal

Sharma’s formula is to “spend money now ” to feed our starving economy, but when the pandemic ends, begin to starve the economy? Wow! Great idea, Ruchir: Starve future generations.

Better to spend money now, and spend money later, to continue to grow the economy.

The previous stimulus proved you can’t spend your way out of a crisis
“Having wasted the opportunity to cool off the spending binge and put the country in a better position to deal with a crisis, Congress now appears ready to do the only thing it knows how: spend even more.” — Eric Boehm, Reason

Remember that Boehm is a Libertarian for whom any amount of federal spending is too much.

Let me correct Boehm’s comment: “The previous stimulus proved that when the economy is in full starvation mode, insufficient stimulus will help some, but way, way more is needed.”

Way back in April I wrote that at least $7 trillion was needed. But, Congress voted for $3 trillion.

Of course, it wasn’t enough, so we now are in a serious recession. Yet, Boehm wants to cut back on all spending.

Future generations will suffer from reckless spending today
“Long after an effective vaccination has been discovered, the events of 2020 could figure in another disaster: a forced reduction in Medicare and Social Security benefits, as well as unprecedented tax hikes, to deal with massive national debt.” — Chris Reed, San Diego Union-Tribune

Apparently, Reed is clueless about Monetary Sovereignty. The federal government cannot ever run short of dollars.

So why would there have to be “a forced reduction in Medicare and Social Security benefits, as well as unprecedented tax hikes”? There is nothing that could force the federal government to do anything it doesn’t want to do.

And again, taxes do not fund the federal “debt.” The government could pay for Medicare and Social Security, and pay off the entire debt, without collecting a single penny in taxes.

Don’t worry about the deficit
Risk of large deficits pales in comparison to the harm insufficient stimulus will cause
“Deficits do matter in a sense, but not in the apocalyptic, over-the-cliff and straight-to-hell manner Republicans like to invoke when they’re feeling stingy.

‘A high-enough deficit under the right circumstances could theoretically bring about inflation. But inflation is not some mystical, unsolvable force.

The government has all kinds of tools at its disposal to deal with inflation.” — Zach Carter, HuffPost

Close, Zach, but no cigar. Deficits do matter because they are absolutely necessary for economic growth. A growing economy requires a growing supply of money, and deficits increase the supply of money.

But you are correct when you wrote this: “The government has all kinds of tools at its disposal to deal with inflation.”

More accurately, the federal government has absolute control over inflation.

Republican concerns about debt are purely political
“If there’s one thing we’ve learned over the past decade, it is that there are no Republican deficit hawks — only poseurs who claim to care about deficits in order to block spending they don’t like.” — New York Times columnist Paul Krugman

Right you are, Paul. Now if only you could unequivocally state: “The Federal Government is Monetarily Sovereign. It never can run short of dollars. No one should worry about deficits or “debt.”

Just do it, Paul.

A large rescue package can jump-start the economy’s recovery
“Congress should use this opportunity to support the American people and the American economy. If we get the economy growing, we will be able to pay off the debt.” — Minneapolis Federal Reserve Bank president Neel Kashkari to “Face the Nation”

Neel, you’re a Fed bank president, so you, of all people, should know that getting the economy “going” has absolutely nothing to do with the government’s ability to pay off the debt.

C’mon, man.

It’s better to overspend now and avoid a collapse
“We should be trying different things: stimulus payments, unemployment benefits, aid to state and local governments, aid to small businesses. Some of these things will be more effective than others, but it’s much better to err on the side of excess.” — Economist Gus Faucher to the Washington Post

Of all the “expert” comments, the comment by Gus Faucher comes closest to the truth.

My only quibble is with his use of the word, “excess.” We are so far from “excess” (whatever “excess” success may be), that even to mention it is misleading.

Historically low interest rates make borrowing money a smart strategy
“Interest rates on federal debt are currently lower than the expected rate of inflation, so there’s no good reason for restraint in the total size of the package.” — Vox correspondent Matthew Yglesias

Oh, Matthew, you know full well that interest rates are set by the government. The government has the unlimited power to pay as much or as little interest as it wishes.

You are correct that “there’s no good reason for restraint in the total size of the package,” but not because of interest rates. It’s because there never is a good reason to restrain federal deficit spending. Never.

So there it is folks, all those experts giving you contradictory advice, and not one of them demonstrates any understanding of federal financing.

Latest on the Spread of the Coronavirus Around the World | World ...
Foodbank line. Broke in America.

Feel free to contact them, tell them to learn Monetary Sovereignty, and say I said so.

Meanwhile, be ready for more poverty, starvation, homelessness, sickness, and death, thanks to Congress, the President, and the people who preach The Big Lie.

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