Is this good news or bad news for JPMorgan Chase? Saturday, Jan 5 2019 

Is the following press release good news or bad news for JPMorgan Chase?

JPMorgan Chase Tops Nation in Deposits
Customers add $96 billion in net deposits in last year, bringing the total to $1.3 trillion.

For the first time in 23 years, JPMorgan Chase & Co. led the nation in total deposits as consumers and businesses added $96 billion to their bank accounts in the last year.

The Firm’s U.S. deposits grew 7.9 percent to reach $1.3 trillion on June 30, 2017.

Over the last five years, customers added $447 billion in deposits, a 51 percent increase.

“Customers continue to trust us with their money as we help them bank whenever, wherever, however they want,” said Thasunda Duckett, CEO of Consumer Banking at Chase.

See how proud JPM is.

If the Committee for a Responsible Federal Budget (CRFB), the federal debt worry-warts, had written this article, it would have read like this:

JPMorgan adds $96 billion in debt in last year, bringing the total owed to customers and businesses to $1.3 trillion.

For the first time in 23 years, JPMorgan Chase & Co. led the nation in total debt as it borrowed $96 billion more in the last year.

The Firm’s U.S. debt grew 7.9 percent to reach $1.3 trillion on June 30, 2017. Over the last five years, JPM borrowed an additional $447 billion, a 51 percent increase.

Allow me to assure you, that the above two news releases are identical, except for the substitution of the word “debt” for “deposits.”  In this context, the two words mean the same thing.

Image result for political bull poop

A fresh sample of CRFB “debt” commentary.

The CRFB endlessly tells you that the federal “debt” totals so many trillions, and this is a bad thing. But they really are talking about the total of deposits into T-security (T-bills, T-notes, T-bonds) accounts.

T-security accounts are essentially identical to bank savings accounts and CDs.

When you buy a T-security, that is very much like buying a bank CD, or making a deposit into a bank account. It creates a bank “debt,” but you don’t call it “debt.” do you? You call it “deposits.”

There is are two big differences between deposits with the federal government and deposits with your bank:

  1. The federal government is Monetarily Sovereign. It never can run short of its own sovereign currency, the U.S. dollar. It never can go bankrupt. Your money is 100% safe. Your bank, by contrast, is monetarily non-sovereign. It can run short of dollars. It can go bankrupt.
  2. Because the federal government is Monetarily Sovereign, it has no need for your dollars. So it simply leaves your dollars in your account until maturity, at which time it returns them to you, plus interest. Your bank, by contrast, needs and uses your dollars. So when the time comes to return them, your bank may not have enough.

In short,  JPMorgan Chase & Co. and their CEO of Consumer Banking, bust their buttons boasting about the amount of deposits they hold, while the CRFB wrings its shaky hands about the amount of deposits the much safer federal government holds.

Ironically, the federal government is so much safer than banks that when a bank goes under, it is the federal government’s Federal Deposit Insurance Company that bails out the depositors.

No bank ever is called upon to bail out the government, but you wouldn’t know that by reading the CRFB nonsense

It’s absolute craziness, but the CRFB relies on your not understanding that your purchases of T-securities are deposits in your T-security accounts. The CRFB uses semantic confusion to make its false case, and sadly, your politicians go along with the ruse.

And as long as you keep quiet about it, or believe the “government is in debt” lie, your politicians will continue to tell you the government can’t afford benefits to you, and that you taxpayers are on the hook for federal “debt.”

Bull excrement is hard to wash off when you’ve been covered for years.

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

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

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

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

Ten Steps To Prosperity:
1. Eliminate FICA

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

 

A debt question from Quora, asked and answered Wednesday, Dec 12 2018 

Quora is a site where people ask questions, and other people answer them. Many people ask about the U.S. federal “debt,” and I’ve tried to illuminate the world, one candle at a time.

Here, for example, is a typical question and answer, with a follow up by one reader. The original question and answer were:

Why would Trump state “I Won’t Be Here” when asked about the looming debt crisis?

Answer from Rodger Malcolm Mitchell: Contrary to what others are telling you, there is no “debt crisis.”

The federal government, unlike you and me, is Monetarily Sovereign. And unlike you and me, it never can run short of dollars with which to pay its debt. In fact, paying debts is the method by which the federal government creates new dollar.

In fact, the so-called “federal debt” isn’t even debt. It is the total of deposits into Treasury Security accounts, similar to savings accounts.

To “lend” to the federal government, you instruct your bank to send your dollars to your Treasury Security account.

There your dollars remain – they are not used by the federal government. Then when your account matures, your dollars, plus interest are returned to you.

Image result for federal reserve

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
Ben Bernanke: “The U.S. government has a technology that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
St. Louis Federal Reserve: “The government is not dependent on credit markets to remain operational.”

It is not a burden on our Monetarily Sovereign government, nor is it a burden on federal taxpayers.

Federal taxing does not fund federal “debt.”

People who worry about the federal debt do not understand Monetary Sovereignty.

The so-called “debt” has increased an astounding 40,000% since 1940, and here we are, with the economy healthy and growing, and inflation near the Federal Reserve target.

Pay no attention to the debt Henny Pennys who have been calling it a crisis for 78 years. These people don’t learn from reality.

Then came the follow-up question and its answer:

Chamchadik
You’re right- being fiat, the us federal reserve can just print as much currency as it wants and settle all debt: I would like to hear your reasoning on why they haven’t done this already?

————————–Reply——————————————-

Rodger Malcolm Mitchell
The so-called federal “debt” is merely the total of outstanding Treasury securities (T-bills, T-notes, T-bonds). It isn’t “debt.” It is “deposits.”

The government does not issue T-securities to obtain dollars. It creates all the dollars it needs.

Issuing T-securities has two primary purposes:

1. To provide a safe, interest-paying, storage place for holders of dollars. This helps stabilize the dollar.

2. To assist the Fed in controlling interest rates. This helps control inflation.

Yes, the government could eliminate all federal “debt” tomorrow, if it wished, simply by returning the dollars in the T-security accounts, back to the owners.

But, there is no reason why the government would want to reduce the “debt.” These T-securities serve valuable functions, and the “debt” is no burden whatsoever on the government, on taxpayers or on anyone else.

The word “debt” confuses people. If instead, it was properly called “deposits,” no one would want it reduced.

Perhaps, the next time someone tells you the federal “debt” should be reduced, you might answer, “Why would the government want fewer deposits into Treasury security accounts? These deposit accounts are valuable to the government and are no burden on anyone.”

Just a thought.

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

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

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

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

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

Ten Steps To Prosperity:
1. Eliminate FICA

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 “myth” of Monetary Sovereignty Friday, Nov 16 2018 

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.”

Image result for bernanke and greenspan

Would someone please tell her the US doesn’t need to borrow dollars.

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.

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Reader Koen Hoefgeest kindly called my attention to this article: The myth of monetary sovereignty
By Frances Coppola – November 02, 2018

Here are some excerpts from an article that “proves” Monetary Sovereignty (MS) is a myth:

How many countries can really claim to have full monetary sovereignty?

The simplistic answer is “any country which issues its own currency, has free movement of capital and a floating exchange rate.”

I have seen this trotted out MANY times, particularly by non-economists of the MMT persuasion. It is, unfortunately, wrong.

“Trotted out” is a pejorative, that immediately displays a supercilious contempt for the many economists who each day provide ample proof of Monetary Sovereignty’s existence.

In any event (spoiler alert), at no time will Ms. Coppola prove the above-mentioned “simplistic answer” is wrong.

Instead, she will attack another “more complex” definition, from a “prominent MMT economist.”

This is a more complex definition from a prominent MMT economist:

1. Issues its own currency exclusively
2. Requires all taxes and related obligations to be extinguished in that currency
3. Can purchase anything that is for sale in that currency at any time it chooses, without financial constraints. That includes all idle labour
4. Its central bank sets the interest rate
5. The currency floats
6. The Government does not borrow in any currency other than its own.

This appears solid. But in fact, it too is wrong.

The big hole in this is the external borrowing constraint – item 6 in the list. If a government genuinely could purchase everything the country needed in its own currency, then it would indeed be monetarily sovereign.

But no country is self-sufficient. All countries need imports. So item 3 on the list is a red herring.

Hmmm . . . The “big hole” is #6, but #3 is a “red herring”?

Actually, #6 is not a requirement for Monetary Sovereignty, partly because MS nations do not borrow their own currency. They have no need to, because they have the unlimited ability to create their own currency.

(See the Bernanke, Greenspan, Federal Reserve comments above.

And #3, the “without financial constraint” definition, is absolutely, 100% correct.  An MS nation cannot unintentionally run short of its own sovereign currency.

A government may be able to buy anything that is for sale in its own currency, but that doesn’t include oil, or gas, or raw materials for industrial production, or basic foodstuffs.

To buy those, you need US dollars. Indeed, these days, you need dollars for most imports. Most global trade is conducted in US dollars.

Here, Ms. Coppola displays ignorance of foreign exchange, which is the device all nations use for imports.

Even the mighty U.S. cannot purchase all its goods and services using U.S. dollars. It exchanges its sovereign currency for the exporting nation’s currency.

Perhaps this would be clearer to her if #3 read, “Can purchase anything that is for sale in exchange for its sovereign currency at any time it chooses, without financial constraints.” 

The only country in the world that can always buy everything the country needs in its own currency, and therefore never needs to borrow in another currency, is the United States, because it is the sole issuer of the US dollar.

Completely wrong. Again she ignores the FX issue. Perhaps she never has traveled abroad, but what is the first thing many Americans do, when landing on foreign soil? Right. They exchange their dollars for the local currency.

Contrary to popular opinion, the United States government does not borrow, not dollars and not any other currency.

What erroneously is termed “borrowing,” actually is the acceptance of deposits into T-security accounts. The purpose of these accounts is not to provide the federal government with the dollars it can produce at essentially no cost (See Bernanke, above), but rather to:

  1. Provide a safe depository for dollars, which stabilizes the dollar, and
  2. Assist the Fed’s interest rate control, which helps it control inflation

The dollars deposited into those T-security accounts remain there — they are not used by the federal government — until the accounts mature, at which time the dollars are returned to the account owners.

Having the unlimited ability to create dollars, the U.S. has no need to borrow. It creates dollars ad hoc, by paying creditors.

The dollar creation system is this:

  1. In paying creditors, each federal agency sends instructions (not dollars) to each creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account. The instructions can be in the form of a check or wire (“Pay to the order of . . .”)
  2. At the instant the bank obeys those instructions, and not before, brand new dollars are created and added to the nation’s M1 money supply.
  3. The instructions then are cleared through the Fed.

This, by the way, is identical with how you pay your bills. You send instructions (checks) to creditors’ banks, and at the moment the bank obeys your instructions, new dollars are created.

Then, when your check clears, your bank deducts them from your checking account, and M1 dollars are destroyed.

The difference is the no dollars are destroyed when the Fed clears federal government checks, which is why federal paying of bills creates net dollars.

However, the dark side of this is that the US is obliged to run wide current account and fiscal deficits, because global demand for the dollar far exceeds US production.

When it attempts to close these deficits, global trade and investment shrinks, causing market crashes and triggering recessions around the world.

Sometimes, there is even a recession in the US itself. The US’s last attempt to run a fiscal surplus ended in the 2001 market crash and recession:

Not understanding the differences between federal financing and personal financing, Ms. Coppola believes the U.S. federal government needs to “close those deficits.”

But why would a nation, having the unlimited ability to create dollars, need to “close deficits”? What is wrong with deficits? America’s deficits already have accumulated to $15 Trillion in debt, and despite hand-wringing from debt hawks, the U.S. economy has not suffered.

For individuals and others in the private sector, deficits and debt are burdens. For the U.S. government, they are no burden on the government or on taxpayers.

As stated, that thing erroneously termed U.S. “debt,” actually is the total of deposits into T-security accounts, somewhat similar to bank savings accounts.

To pay off the so-called “debt,” the federal government merely returns the dollars in those accounts. It does this every day. No tax dollars are involved in paying off U.S. “debt” (deposits).

MMT adherents like to cite this as evidence that eliminating the government deficit in any country will result in a recession. But this is stretching things considerably.

FRED shows us that even in the U.S., only one recession in the last century has been preceded by a government surplus.

Ms. Coppola is confused again, this time between reducing deficits (while still increasing debt) and reducing debt (i.e running surpluses).

Here is what happens when the federal government runs a surplus:

U.S. depressions tend to come on the heels of federal surpluses.

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.

While reducing federal debt tends to cause depressions, reducing deficit growth tends to cause recessions.

Reduced deficit growth leads to recessions (vertical gray bars), while increased deficit growth cures recessions.

The reason is rather simple. An economy either grows or shrinks. A growing economy requires a growing supply of money.

By definition: GDP = Federal Spending + Non-federal Spending + Net Exports. Thus, a growing GDP involves a growing money supply.

Federal deficit spending grows the money supply, which increases both Federal Spending and Non-federal Spending, thus increasing GDP.

Of course, many developed countries do in practice pay for imports in their own currencies. Governments, banks and corporations meet dollar  funding requirements by borrowing in their own currency and swapping into dollars in the financial markets.

This diminishes the need for dollar-denominated borrowing, either by government or the private sector. These countries therefore have a considerable degree of monetary sovereignty. But it is not absolute as it is in the United States.

Whether or not nations pay for imports in their own currencies is irrelevant to the question of Monetary Sovereignty. Of real importance is whether they have their own currencies, which they produce at will.

The euro nations do not. Cities, counties, and states do not. Businesses do not. You, and I, and Ms. Coppela do not. We all are monetarily non-sovereign.

We monetarily non-sovereign entities can run short of currency. Monetarily Sovereign entities cannot.

Sadly, Ms. Coppola does not seem to understand this fundamental difference.

It crucially depends on the stability of their currencies and the creditworthiness of their borrowers, both of which are a matter of market confidence.

For most countries, the need for external borrowing crucially depends on the external balance. If the current account is balanced or in surplus, then they will earn the dollars they need to pay for essential imports. But any country that runs a current account deficit inevitably borrows dollars.

Wrong. A Monetarily Sovereign nation creates its own currency, which if it chooses, it can exchange for dollars or other currencies. Stability and creditworthiness, merely influence exchange rates, not the fact of Monetary Sovereignty.

If the local currency depreciates significantly (see item 5 in the list), local banks and corporations can find themselves unable to service dollar debts, because dollars become far more expensive.

No. “Local banks and corporations” are monetarily non-sovereign. A Monetarily Sovereign nation can service any amount of dollar debts, merely by exchanging their unlimited sovereign currency for dollars.

If banks stop lending cross-border, as they did in 2008, local banks and corporations can find themselves unable to refinance dollar debts.

. . . because “local banks and corporations” are monetarily non-sovereign entities. They can run short of money. A Monetarily Sovereign nation cannot.

During the “Great Recession” of 2008, monetarily non-sovereign Greece, France, and Portugal ran short of euros. But MS Canada, China, and Australia never ran short of their own sovereign currencies.

The world is littered with examples of countries that have had to run down public sector FX reserves to provide dollar liquidity to local banks and corporations after they are effectively shut out of global markets by local currency depreciation.

A Monetarily Sovereign nation cannot unintentionally “run down” public sector FX reserves. It has the unlimited ability to create its sovereign currency. It can create all the reserves it wishes.

If the public sector doesn’t have sufficient dollar reserves, it must borrow them, or face financial crisis, widespread debt defaults and economic recession.

In an FX crisis, private sector external debt becomes public sector external debt.

Nonsense. The entire world running short of dollar reserves?? (Where would those dollars be???) In any event, the Bernanke “printing press” would immediately solve the problem.

Thus, when currencies are allowed to float freely (item 5), no government that runs a current account deficit can possibly guarantee that it will never borrow in any currency other than its own (item 6).

The list therefore contains an internal contradiction.

Again, she is confusing between a Monetarily Sovereign nation, which never needs to borrow its own currency, and a monetarily non-sovereign entity, which never can borrow its own currency (It doesn’t have one.)

Monetary sovereignty is perhaps best regarded as a spectrum.

No country on earth is completely monetarily sovereign: the closest is the US, because of its “exorbitant privilege”, but even the US cannot completely ignore the effect of its government’s policies on international demand for its currency and its debt.

She is correct that Monetary Sovereignty is a spectrum, but not because of the demand for dollars. Instead, the spectrum has to do with the nation’s own laws.

For instance, even the U.S. is not absolutely Monetarily Sovereign. We are hamstrung by our own ridiculous “debt limit” laws, which have the potential of reducing our ability to create dollars.

In general, the major reserve currency issuers tend to have more monetary sovereignty than other countries, because there is international demand for their currencies and their debt.

The primary reserve currency issuer is the US, but the Eurozone (for which Germany is the primary safe asset issuer), the UK, Japan, Switzerland, Canada, and – now – China, all fall into this category.

However, there is a hierarchy even among reserve currency issuers. High on the list comes Japan, because its debt is held almost exclusively by its own citizens (and its central bank), and investors regard it as a “safe haven” in troubled times.
There is a heirarchy, but it has nothing to do with Japan’s citizens. It has to do with usage. The U.S. economy is the largest in the world, so all international banks must hold dollars in reserve, to facilitate international trade.
That is why the U.S. dollar is the world’s premier reserve currency, though other currencies also are reserve currencies.
But the ostensibly similar Switzerland has less monetary sovereignty than Japan, because it has extensive trade and financial ties to its much larger neighbour the Eurozone.
The above borders on the silly. “Trade and financial ties” have nothing to do with Monetary Sovereignty.
The Eurozone countries have relinquished their monetary sovereignty in the interests of developing ever-closer links. However, the Eurozone as a bloc has a high degree of monetary sovereignty, because its currency is the second most widely used currency for trade after the dollar.
The European Union is MS because it, not its member nations, has the unlimited ability to create euros.

Ms. Coppola confuses Monetary Sovereignty with credit rating and currency demand. 

The fact that Japan’s yen may or may not have a better credit rating than China’s yuan has absolutely nothing to do with the degree to which either nation is Monetarily Sovereign.

Both are sovereign over their own currencies, subject to their own laws regarding the creation of those currencies.

The rest of her article drifts into further musing about “more or less Monetary Sovereignty” when she really means better or worse credit.

Bottom line: Monetary Sovereignty means exactly what it says: Being sovereign over a currency. The U.S., Australia, Canada, China, the UK et al are sovereign over their currencies. Germany, France, and Italy are not.

And by the way, a very good example of Monetary Sovereignty is the Bank in the game of Monopoly. By rule, it too cannot run short of Monopoly dollars, and never needs to borrow dollars or to obtain dollars from any source.

Contrary to the title of Ms. Coppola’s paper, Monetary Sovereignty not only is not a myth, but it is the foundation of economics.

If one does not understand Monetary Sovereignty, one simply cannot understand economics.

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

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

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

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

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

Ten Steps To Prosperity:
1. Eliminate FICA

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 doofus science Tuesday, Aug 21 2018 

Image result for bernanke and greenspan

It’s our little secret. Don’t tell the people we don’t need 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: “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.

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What is there about economics that every doofus sitting on a bar stool, thinks he is an expert, and entitled to voice loudly his doofus opinions about federal financing?

And why does every said doofus, whose interest in economics has not progressed beyond buying the daily Lotto scratch-off, think he understands the effects of federal trade deficits and federal budget deficits. (Attention all doofusi: They are different.)

And why does an equally uninformed columnist, whose professed forte is political philosophy and baseball (yes baseball), and definitely not the science of economics, continue to confound himself and his readers, by conflating federal finances with personal finances?

Here, for instance, are excerpts from an article by the above-described George Will:Image result for george will

Do economic expansions die of old age (the current one began in June 2009), or are they slain by big events or bad policies?

What is known is that all expansions end. God, a wit has warned, is going to come down and pull civilization over for speeding.

When He, or something, decides that today’s expansion, in its 111th month (approaching twice the 58-month average length of post-1945 expansions), has gone on long enough, the contraction probably will begin with the annual budget deficit exceeding $1 trillion.

How prescient. “All expansions end, and “God or something” will do it. Did you know that? Are you stunned by these brilliant words?

And when the expansion ends, what does that have to do with the deficit exceeding $1 trillion? Nothing.

Equally meaningless: The expansion also will end with a U.S. population above 330 million and with the rich even richer than they are now. So?

The president’s Office of Management and Budget projects that the deficit for fiscal 2019, which begins in six weeks, will be $1.085 trillion. This is while the economy is, according to the economic historian in the Oval Office, “as good as it’s ever been, ever.”

Wow, the deficit will be $1,085 trillion, and the economy is “as good as it’s ever been, ever.” What does that tell us about the deficit?

The deficit (red line) has gone up and up, especially to cure recessions (vertical bars), while the economy (GDP) has grown and grown, too.

What is the connection between federal deficit spending and the economy? Doofuses don’t realize that federal deficit spending adds growth dollars to the economy, which is why the government increases deficit spending to get us out of recessions.

Federal deficit spending is stimulative.

Doofuses also don’t know this formula: GDP = Federal Spending + Non-federal Spending + Net Exports. Federal deficit spending increases the first two of the three right-side terms of the equation.

Continuing with George Will’s article:

Another hardy perennial among economic debates concerns the point at which the ratio of debt to GDP suppresses growth: Within a decade, the national debt probably will be 100 percent of GDP and rising.

As Irwin Stelzer of the Hudson Institute says, “If unlimited borrowing, financed by printing money, were a path to prosperity, then Venezuela and Zimbabwe would be top of the growth tables.”

Here’s the scary part:

“Irwin Stelzer is a Senior Fellow and Director of Hudson Institute’s John LeeEconomic Policy Studies Group. Prior to joining Hudson Institute in 1998, Stelzer was Resident Scholar and Director of Regulatory Policy Studies at the American Enterprise Institute.

He also is the U.S. economic and political columnist for The Sunday Times (London), a contributing editor of The Weekly Standard, and a member of the Advisory Board of The American Antitrust Institute.”

This guy, with all his background, is hopelessly clueless about how a Monetarily Sovereign nation, with a functioning government, operates.

He thinks the U.S. borrows (it doesn’t), and that the federal government finances this non-existent borrowing by printing money (it doesn’t), and finally that the U.S. is in any way similar to Venezuela and Zimbabwe (it isn’t).

The word “borrow” refers to obtaining money in order to spend or save. When you borrow, you do that to spend or save the money you borrow.

But, the U.S. creates money, ad hoc, by spending.  And it does not save money.  Having the unlimited ability to create dollars, it has no need to save dollars.

The misnamed federal “debt” isn’t money the Monetarily Sovereign federal government needs or uses. It is dollars that are deposited by investors (and never touched) into T-security accounts. To pay off those accounts, the government merely sends those dollars back to the account owners.

And, when Seltzer mentions Venezuela and Zimbabwe, he is talking about hyperinflation,  which is not caused by money “printing.”

All hyperinflations are caused by extreme shortages, usually shortages of food, and only after the hyperinflations have begun do countries respond with money creation. That is what happened to Venezuela and Zimbabwe, et al.

In all our history, through wars, recessions, depressions, a multitude of  Presidents, and economic misrepresentations about deficits and debt, the U.S. never has had a hyperinflation. But still, the doofuses compare us with Zimbabwe.

Our federal “debt” went from $40 billion in 1940 to $16 trillion today — a 40,000% increase — and inflation remains near the Fed’s annual goal of 2.5%.

Blue line: Federal “debt.” Red line: Consumer price index. Where’s the hyperinflation?

Having learned nothing from history or economics, the Henny Pennys continue running in circles, shouting, “Unsustainable.”

In short, a columnist who doesn’t understand economics quotes someone else who doesn’t understand economics. The result: A steamy brown pile of bull excrement.

Jay Powell, chairman of the Federal Reserve, says fiscal policy is on an “unsustainable path.”

And there it is, the old “unsustainable” debt BS, again. It also is The fake ‘debt time-bomb,’ still ticking after 78 years.” 

Click the link and you’ll read the 78 years of false claims that our federal deficit and debt will destroy the U.S. as we know it.

Wrong for 78 years; wrong today; wrong tomorrow. But the Henny Pennys, having no shame, still are at it.

A recent International Monetary Fund analysis noted that among advanced economies “only the United States expects an increase in the debt-to-GDP ratio over the next five years.”

The IMF seems to be telling us that the U.S. will have the worst economy among advanced economies, over the next five years. Do you believe that?

The debt/GDP ratio is absolutely, positively, 100% meaningless. Zero, zip, zilch. The size of my underwear has more economic meaning than does that ratio.

  1. The debt/GDP ratio does not indicate the federal government’s (unlimited) ability to pay its bills.
  2. The debt/GDP ratio does not indicate future recessions, depressions or stagflations.
  3. The debt/GDP ratio does not indicate future inflations or deflations.
  4. The debt/GDP ratio does not indicate stock market advances or regressions.
  5. The debt/GDP ratio does not indicate a damn thing. Period.

The federal government could pay off all its T-bills, T-notes, and T-bonds tomorrow, if it chose, simply by returning the dollars that then currently exist in those T-bill, T-note, and T-bond accounts.

Oh, did I mention that, contrary to Will’s article, the U.S. ratio already is above 100%.

Seemingly, George Will didn’t realize that.  He also didn’t realize Japan’s ratio is above 250%. By Mr. Will’s reckoning, Japan should have become Venezuela and Zimbabwe, long ago.

One would hope that a nationally published columnist and a professional economist, would at least look at the facts, rather than just writing intuitive nonsense.

Publicly held U.S. government debt has tripled in a decade.

From left to right, (the politicians have)  had a permanent incentive to run enormous deficits — to charge, through taxation, current voters significantly less than the cost of the government goods and services they consume, and saddling future voters with the cost of servicing the resulting debt after the current crop of politicians have left the scene.

The line, “charge, through taxation, current voters significantly less than the cost of the government goods and services they consume” is a demonstration of consummate ignorance.

Unlike state and local taxation, federal taxation does not fund government goods and services. The federal government funds government goods and services by creating its sovereign currency, ad hoc — a currency of which it never can run short.

Even if the federal government didn’t collect a single penny in taxes, it has the power to continue spending, forever.

Compare the U.S.’s Monetarily Sovereign situation with that of monetarily non-sovereign Greece:

The next steps for Greece now that its bailout is ending 

Greece’s exit from eight years of international bailout programmes on August 20 will be a defining moment in its emergence from the depths of austerity. But government and business acknowledge that this is just a milestone.

The end of the bailout does not end Greece’s commitments to its international creditors.

One of the most significant is that, in exchange for a major debt relief deal in June, the country needs to sustain a primary surplus — a measure of its budget balance that excludes debt payments — of 3.5 per cent of gross domestic product a year until 2022.

Failure would bring the risk that some debt relief could be withdrawn.

When the government runs a surplus, guess who runs a deficit. Right. The public. This is just another way of describing the austerity that already has destroyed Greece’s economy.

Government surpluses lead to depressions and recessions, by taking money out of the private sector:

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.

The above article contained this graph:

Euro nations’ citizens are excessively taxed because the euro nations are monetarily non-sovereign. They do not have a sovereign currency. They cannot stimulate economic growth except by going deeper and deeper into debt. Debt is a burden on monetarily non-sovereign governments and their citizens.

Not only are euro citizens overly-taxed but:

The government is speeding up foreclosures and auctions of repossessed property.

Bankers still expect the process to take as much as a decade. One said: “We are hitting our current targets on reducing non-performing loans but there is still a long way to go.”

Excessive taxation. Austerity. Foreclosures. Repossessed property. For as much as a decade. This is what the people of the euro can look foreward to, and this is exactly what our American economics doofuses wish you to suffer.

The crooked bankers get rich, while the taxpayers suffer.

There are penalties for ignorance, and those who do not wish to understand Monetary Sovereignty will pay those penalties, just as the euro nation people are.

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

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

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

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

Ten Steps To Prosperity:
1. ELIMINATE FICA

(Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.

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

This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”

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

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

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

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

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

Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.

5. SALARY FOR ATTENDING SCHOOL
Salary for attending school. Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.

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

7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.

8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME.
(TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.

9. FEDERAL OWNERSHIP OF ALL BANKS
(Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.

10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

MONETARY SOVEREIGNTY

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