11 experts try to trick you about the U.S. economy Wednesday, Aug 5 2020 

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

The Big Lie exhibited in all its glory Wednesday, May 13 2020 

If you want a lovely picture of the economics version of  The Big Lie, in all its glory, here it is:

Michael Pramirez, the cartoonist, either doesn’t understand economics, or he doesn’t want you to understand.

The Big Lie in economics is: “Federal taxpayers fund federal spending.” It is 100% false.

Now, when the U.S. economy is in great danger of falling into a depression, the GOP and such cartoonists as Michael Pramirez, try to convince you that deficit spending to prevent a depression should not happen.

What Michael Pramirez and other GOP cartoonists don’t understand, or don’t want you to understand, is that you federal taxpayers do not fund federal spending.

State taxpayers do fund state spending. County taxpayers do fund county spending. City taxpayers do fund city spending.

States, counties, and cities are monetarily non-sovereign, meaning that they do not spend their own sovereign currency.

Image result for bernanke and greenspan

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
Ben Bernanke: Right, “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.”

They spend dollars, which are the sovereign currency of the United States federal government, a Monetarily Sovereign entity.

Monetarily non-sovereign entities require some form of income in order to spend.

This income can come in the form of earnings, taxes, and/or borrowing.

That is why states et al, spend taxpayer money.

Monetary Sovereign entities, like the U.S., Japanese, Canadian, and Australian governments have the unlimited ability to create their own sovereign currencies.

They never can run short of their sovereign currencies.

Even if the U.S. government collected $0 taxes, it could keep spending, forever.

Rep. Pelosi asks for an additional $3 trillion to prevent an oncoming depression. These funds will cost you nothing. They will cost your children and your grandchildren nothing.

They merely will be part of what erroneously is termed, “the federal debt,” which never needs to be paid down. Never.

Today’s federal “debt” (actually just deposits into Treasury Security accounts) is above $20 trillion. It has grown almost every year for 80 years.

It has had no adverse effect on the economy, nor will it ever have. It is just a number on a balance sheet, a number that the federal government could erase tomorrow if it chose.

By contrast, the depression Pelosi is trying to prevent, will cost you and your descendants greatly

In summary, pay no attention to those who claim that you and other taxpayers will have to pay for federal spending. It is nothing more than The Big Lie in economics.

Federal deficit spending is necessary to grow the economy and to prevent recessions and depressions.

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.

It’s time to learn from history and from mathematical fact: By formula, adding dollars to the private economy increases GDP.

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. 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 the rest.

MONETARY SOVEREIGNTY

The text of a speech I never will give to my friends at our country club, because they probably won’t believe me, and who needs the aggravation? Wednesday, Jan 22 2020 

Our country club invites speakers to give presentations about various, interesting subjects.

I could volunteer to present my friends and neighbors with information they don’t have, and should have, and would find interesting.

Sadly, I’ve found that most people want to hear what they already believe, and they tend to become angry at anyone who tells them otherwise.

What follows is the text of a speech I never will give to my friends at the club because they probably won’t believe me, and at my age, who needs the aggravation?

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

TEN THINGS YOU ABSOLUTELY DON’T KNOW ABOUT OUR ECONOMY — BUT YOU SHOULD

I’m going to tell you some things about our economy, and specifically about money — a subject which you already understand quite well because you have lots of it. Image result for money sign

But I’m going to tell you ten things you didn’t know.

The vast majority of you own more than a million U.S. dollars, which used to be a much-respected sum, but no longer is.

Because you own so many dollars, let me ask you this: What does a U.S. dollar look like? For instance, what is the color of the U.S. dollar?

Green, right?

And what is a dollar made of? How big is it?

Paper and about 6 inches?Image result for dollars

And what is the purpose of dollars?

They are a medium of exchange and a measure of value or wealth. OK?

And, if the purpose of dollars is, for example, to act as a medium of exchange, that means you exchange dollars for the goods and services you want, right?

.

Image result for pallet of dollars

So, for instance, let’s say you walk into a car dealership to buy a car.

After proper negotiation, you give the dealer a giant stack, let’s say 75,000, of those green, 6-inch pieces of paper, and he gives you the car keys.

That’s the way it works, right? You schlep big stacks of paper around?

No?? It doesn’t work that way??

Actually, to buy that car, you sign some papers that probably are not green and don’t measure 6 inches.Image result for signing car dealer's documents

And in fact, I venture to guess, that while the vast majority of your life’s purchases do involve dollars, they do not involve green pieces of paper.

You gave that car dealer $75,000. So, let me ask you again, What did those dollars — the dollars you gave the dealer — look like?

The answer is: Those dollars didn’t look like anything. They are bookkeeping entries.

The U.S. dollar is not a physical entity. The dollar is a legal entity. It is a group of laws. You can’t see, smell, taste, feel, or hear a dollar any more than you can see, smell, taste, feel, or hear a law.

Image result for car, house titles

Titles

That green piece of paper is not a dollar; it is a dollar bill. It represents the ownership of a dollar. Just as a car title is not a car, and a house title is not a house, a dollar bill is not a dollar.

A dollar bill is a bearer title to a dollar.

A dollar is a legal entity that exists only in law books. And if there is one thing you know about governments and laws it’s this: A government can make as many laws as it wishes. A government cannot run short of laws.Image result for how many laws are there

Before the year 1780, there were no U.S. dollars. Then, as if by magic, the U.S government created from thin air, a bunch of laws, and among them were laws that created from thin air, millions of dollars.

And not only did the government laws and dollars from thin air, but it created other laws from thin air that gave those dollars a value relative to ounces of silver.

In 1792 the US Congress passed the Coinage Act, which states that the U.S. dollar coin must contain four hundred and sixteen grains of standard silver.Image result for 416 grains of silver

And ever since, the U.S. government has continued to create more and more laws, and more and more dollars from thin air, and has continued to pass laws changing the value of U.S. dollars.

All of this was arbitrary, and arbitrarily changed many times, and it demonstrated the unique sovereign power of the federal government over the U.S. dollar.

The American government proved what so many other governments had proved and continue to prove to this day:Image result for monetary sovereignty

The U.S. federal government has the unlimited ability to pass laws, which means it has the unlimited ability to create its sovereign currency, the U.S. dollar and the unlimited ability to give the dollar any value it wishes. 

The term for that is Monetary Sovereignty.

You now know more than 90% of the people — make that 99% of the people — in America.

You know more than most of the media. You know more than most of the politicians. You even know more than most of the economists.

Why do I say that? Because every day, the media, the politicians and the economists tell you the U.S. federal debt is too high. It’s “unsustainable.”Related image

What does “unsustainable” mean? It means the U.S. government will not have enough dollars to pay off its debt.

It even may mean the U.S. government won’t be able to make payments against its debt or even to cover the interest payments.

And it might mean that the government will have to raise taxes on you and your children to obtain dollars to pay its debt.

And as you now have learned, that is all nonsense.

Think about it, and answer for yourself these two questions:Image result for infinite dollars

  1. How can a government that has the unlimited ability to create dollars from thin air, run short of dollars to pay its debts? (It can’t.)
  2. Does a government having the unlimited dollars to pay its debts, need to ask you or your children for tax dollars? (No.)

What? The federal government doesn’t need your tax dollars?

That’s right folks, those tax dollars you sweat and strain to obtain, and then send to the government — the U.S. government does not need those tax dollars.Related image

In fact, the federal government destroys your tax dollars upon receipt.

Really.

Think of it this way. Have you ever played the board game, Monopoly?

It usually is played with four players, one of whom also serves as the Bank.

Think of the Bank as the federal government and the players as the U.S. economy.

Image result for monopoly dollars

Monopoly money

According to the game rules, or laws, the Bank starts the game by distributing a certain amount of Monopoly money to each player.

One time, my friends and I wished to play Monopoly, but when we opened the box we discover the board, some game tokens, and some instruction cards, but no Monopoly dollars inside.

What would you have done?

No problem. The Bank simply took a sheet of paper and drew four columns, one for each player.

Like the U.S. federal government, the Bank created dollars out of thin air, simply by writing numbers into each player’s column.Image result for four-columned sheet

The Bank has no source of dollars other than the rules or laws of the game.

Obviously, the Bank could have written any starting number at the top of each column.

Like the federal government, the Monopoly Bank has the unlimited power to create Monopoly dollars.

Then, as the game progressed, the Bank kept paying out and receiving dollars.

When the Bank paid out more dollars than it received, this was a deficit for the Bank and a surplus for the players — that is, a surplus for the economy — just like in the real world.

Now here comes the interesting part: At various points in the game, the rules require players to pay money to the Bank, either for properties, for fines, or for taxes.

Let’s say a player must pay a $100 tax to the Bank. In that case, 100 was deducted from that player’s column.

But where did the $100 go? The Bank had no column. The $100 simply disappeared. Those tax dollars were destroyed, just like in the real world.

That is why, if you ask someone, “How much money does the federal government have,” you will not get an answer.  The federal government has infinite money.

If the federal government doesn’t need or use tax dollars, why does it collect them? Two reasons:

  1. To control the economy. It taxes what it wishes to limit and it gives tax breaks to what and whom it wishes to reward.
  2. To control the middle- and lower-income groups. Taxes provide a handy excuse for limiting benefits and preventing the non-rich from asking for benefits.

Why does the federal government wish to limit benefits to the non-rich?

Image result for poor man with a cow

A rich man

The rich run America.

Indeed the rich run the world.

“Rich” is a comparative word. You are rich if you have $100 and everyone else has $1, but you are poor if you have $1 million and everyone else has $10 million.

The rich wish to be richer which requires widening the gap between them and the non-rich.

The gap can be widened not only by giving more to the rich, but also by giving less to the non-rich.Image result for boss, behind big desk, employee

The desire to widen the gap between those below, on any economic measure, and to narrow the gap above, is called Gap Psychology

The rich are motivated by Gap Psychology.

The rich want the gap between you and them to widen.

That is why you are told falsely that Medicare for All, and Social Security for All, and the growing debt all are unsustainable.

And as for that so-called “debt,” it isn’t even a debt — at least not in the way you usually think about debt.Image result for lending officer and poor borrower

Loans are made to those who need money.

But the federal government has no need to borrow money. The U.S. federal government already has infinite money.

Those so-called “loans” to the federal government actually are deposits into T-bill, T-note, and T-bond accounts held at the Federal Reserve Bank.

They are deposits, similar to your bank savings account deposit.

When China “lends” to the U.S government, it actually opens T-bill accounts and directs dollars from its checking account at the Federal Reserve Bank to be deposited into its T-bill accounts, also at the Federal Reserve Bank.

There China’s dollars stay, in its T-bill accounts, accumulating interest until the T-bills mature.

Then, how does the government pay off its Chinese loans? It merely sends the dollars that are sitting in China’s T-bill accounts, back to China’s checking account.

It’s a simple dollar transfer. It does this every day.

No tax dollars involved. No burden on the government or future generations.

If the government doesn’t use the dollars in Treasury accounts, why then does the government issue T-bills, notes, and bonds? Two primary reasons:

  1. To provide a safe parking place for unused dollars, which stabilizes the dollar, and
  2. To assist the Federal Reserve in controlling interest rates

In summary, and contrary to what you have been told, the federal debt is not a burden on anyone, not on you, not on your grandchildren and not on the government.

Why is this important?Related image

Well, for one thing, you repeatedly have been told that the Social Security Trust Fund is running out of money, and to save Social Security, we must either increase FICA taxes or reduce benefits.

In fact, benefits already have been reduced by increasing the qualifying ages.

But the U.S. government has the unlimited ability to create dollars. It cannot go broke, And because the U.S. government cannot go broke, no agency of the government can go broke, unless that is what the politicians want.

The Supreme Court, Congress, and the Presidency all are agencies of the government. Have you ever heard concerns about any of them going broke? No, and you never will.

The idea that Social Security can run short of dollars is false. Even if all FICA collections were zero, the federal government could continue paying benefits, forever.Image result for medicare for all

And then we come to the newly famous “Medicare-for-All.”

In its best case, Medicare for All would lower the entrance age to zero, eliminate deductibles, cover long-term care completely, and pay for all drugs.

Who wouldn’t want all health costs to be free? People want it. Companies — except for insurance companies — want it. The benefits to America would be enormous.Image result for federal government handing out money

And yet, Medicare-for-All  is controversial, primarily because of one question: Who would pay for it?”

And the answer, very simply is, the federal government could pay for the whole thing, without levying even a dollar in taxes. It simply would do what it always has done, to fund every federal expense: Create dollars from thin air.

Oh,” you say. “Sure the government can print money.

“But, remember what happened to Weimar Germany. Remember what happened to Zimbabwe. We’re talking about hyperinflation. People carrying wheelbarrows full of money.”Related image

I’ll let you in on a well-kept secret: Every hyperinflation and nearly every inflation in history has been caused not by deficit spending, but rather by shortages — usually shortages of food and/or energy.

Think of the Zimbabwe hyperinflation. The government took farmland from farmers and gave it to non-farmers.

Predictably, that caused a food shortage, which caused the hyperinflation.

Rather than importing more food, and training people to farm, which would have cured the shortage and the hyperinflation, the Zimbabwe government simply printed currency of higher denominations.

When you hear that the price of potatoes has gone up, do you immediately think it’s because the federal government is spending too much? No, the price of potatoes goes up when there is a shortage of potatoes.

In fact, the best way for a government to end an inflation is to increase deficit spending to cure the shortage.

Potato prices gone up? The solution: More deficit spending to import more potatoes, and/or to pay more farmers to grow more potatoes, and/or

That is the irony of inflations. They can be cured by deficit spending to eliminate the shortages.

The government has other means of ending inflations: It can raise interest rates which strengthen the dollar by creating more demand for dollars.

And it can simply revalue the dollar vs. other currencies, which it has done often in its 240-year history. Being sovereign over the dollar, the government can do anything it wishes with the dollar.

The U.S. government is Monetarily Sovereign.

Your city is not Monetarily Sovereign. Nor is your county. Nor is your state. Nor is your business. Nor are the euro nations. Nor are you, nor am I. But the federal government is. It has unlimited sovereign power over the U.S. dollar, which is nothing more than a creation of federal law.

And that makes all the difference.

And remember that statement at the beginning of this post: “The U.S. dollar is not a physical entity. The dollar is a legal entity. It is a group of laws. You can’t see, smell, taste, feel, or hear a dollar any more than you can see, smell, taste, feel, or hear a law.”

If you don’t believe it, the kindly describe the dollars we Monopoly players used when the game didn’t have any paper certificates. What color were those dollars? What did they smell and feel like?

In summary:

  1. The federal government created the very first dollar, and subsequent dollars, out of thin air, simply by writing federal laws, also out of thin air.
  2. Dollars are not physical entities; they are legal entities, and so to the federal government, they are in unlimited supply.
  3. Even if all federal tax collections fell to $0, the federal government easily could continue spending, and paying all its bills, forever.
  4. Unlike state and local governments, the federal government is Monetarily Sovereign, so it cannot run short of its own sovereign currency, the U.S. dollar.
  5. No agency of the federal government can run short of dollars unless Congress and the President want it to.
  6. Social Security and Medicare are federal agencies. They cannot run short of dollars unless Congress and the President want them to.
  7. Because the federal government is Monetarily Sovereign, it does not borrow its own sovereign currency. The primary purposes of federal debt are to stabilize the dollar and to help control interest rates.
  8. The federal government, being sovereign over the dollar, has absolute control over the value of the dollar, also known as inflation. The government can give the dollar any value it chooses.
  9. Inflations are caused by shortages, most often shortages of food or energy,  and seldom if ever,  by federal deficit spending, which actually can control inflation.
  10. Being Monetarily Sovereign, the federal government has absolute control over inflation, either by raising interest rates, and/or by using deficit spending to eliminate shortages.

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

And that is the speech I’d like to give to my wealthy country-club friends.

But have you ever heard the biblical line, “A prophet is not without honor except in his own country, among his own relatives, and in his own house”?

This prophet doesn’t wish to duck thrown tomatoes, and anyway, who needs the aggravation?

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

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

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. 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 the rest.

MONETARY SOVEREIGNTY

Do you believe fortune tellers, Nigerian princes, and people who say the federal debt is a “ticking time bomb”? Thursday, Dec 12 2019 

Do you believe fortune-tellers, Nigerian princes, and assorted other snake oil salesmen? Do you accept phone calls from strangers offering you free time-shares and cruise vacations?Image result for crystal ball

No, fortunately, you are too smart to fall for those scams perpetrated by liars and fools.

But somebody must be deceived because those frauds have been around for a long time. If they didn’t work they would have died out by now.

In this world where presumably we have graduated from the dark ages, actual facts are easy to obtain from legitimate sources. But, many of us still accept the words of Tarot card readers, crystal ball gazers,  and other mass deceivers. Trump University is one proof of that.

Even today, you continue to be barraged with sad phone calls from non-existent grandchildren and claims by fake IRS employees, telling you urgently to send money, now, now, now.

It never ends.

And that is why you continue to experience the “federal-debt-is-a-ticking-time-bomb” scam, one of the most subtle, yet long-lived scams in history.

It is subtle and long-lived for three reasons:

  1. The speaker (or writer) does not directly ask you for money. No, he/she asks for something even more valuable: Your vote. He wants you to vote against your own best interests.
  2. It sounds so logical, so every-day reasonable, so innocent, so prudent — far more logical, reasonable, innocent, and prudent than that $5 million you will receive from Nigeria.
  3. It isn’t immediately clear to you who exactly benefits from the scam, but there are beneficiaries, big beneficiaries, and later in this article, I’ll tell you who they are.

As recently as August of this year, we added yet another example to the list of ticking-time-bomb scams that goes back to 1940, when the federal debt was only $40 billion. (It’s above $20 trillion today, and that ole time-bomb still’s a’tickin’.)

And here’s yet another one: Same wording to the same lies.  It even includes that same ridiculous “debt clock” currently parked in a Manhatten alleyway.Image result for debt clock

Our national ticking time bomb
By Bill Yeargin, SPECIAL TO THE SUN SENTINEL |
SEP 12, 2019

The U.S. has a big problem that, if not corrected soon, will have a significant negative impact on our country, including Florida.

Our growing national debt has resulted in a debt-to-GDP ratio that is over 100 percent, one of the world’s worst.

See the scam language. Something has to be done “soon”. (Even though the federal debt has grown more than 50,000% over the past 70 years, and the U.S. economy is the strongest in the world, something must be done, SOON. Don’t think. Just act, soon!)

And that meaningless debt-to-GDP ratio, which is one of the world’s “worst.” For the U.S., it’s a bit above 100%.  Don’t you wish it was more like Russia’s (14%) or Zimbabwe’s (21%)? Or does Mr. Yeargin prefer Guatemala’s ratio of 25% or Nigeria’s ratio of 30%?

Or how about Japan’s ratio of 238%? Which economy and which inflation would you prefer, Japan’s or Zimbabwe’s?

Here is a list of national debt/GDP ratios for countries. See if you can see a relationship between that useless ratio and the strength of a nation’s economy. Save your effort. There is no relationship. As we said, it is a useless ratio.

Mr. Yeargin’s article continues:

In retrospect, it is hard to believe in the late 90s, the U.S. was running budget surpluses and on track to have no national debt by 2006.

Uh, excuse me, Mr. Yeargin, but the Clinton surpluses of 1998-2001 led directly to the recession of 2001. We actually were lucky then, because surpluses, which remove dollars from the economy, often have a worse result than a recession:

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.

Ah, those pesky facts.

And the ignorance becomes laughable:

Now, we have a national debt approaching $23 trillion dollars — about $68,000 per citizen — and it’s still growing fast.

The past two years the federal deficit has exploded to over a trillion dollars a year (yep, a trillion.) It is endangering our country and state’s future. We need our leaders to deal with this problem now.

The “per citizen” line is supposed to make you think you owe the federal debt, or your taxes will be taken to pay it off. Neither is true.

The so-called federal debt is not like your debt or my debt. The federal debt is nothing more than the total of deposits into Treasury security accounts, which are paid off every day simply by returning the dollars in those accounts to the account holders. Neither you nor your taxes are involved.

The federal government does not use those dollars. They remain in the T-security accounts until maturity, at which time they are returned.

Even if the federal government did not collect a single penny in taxes, it could pay off the entire federal debt today, simply by closing all those accounts and sending the dollars back.

And then there’s the line that includes the words, “and states.” The false implications seem to be either that state financing is like federal financing, or that somehow states are liable for federal debt.  Mr. Yeargin isn’t clear about what he means, but either meaning is wrong.

And now we come to the really, really ignorant part (Yes, amazingly even less knowledgeable than the preceding).

So, how did we get here?

After World War 2, the U.S. had a huge national debt, but a growing economy and fiscal discipline (at least more than we have now) reduced it to manageable levels.

Here is the “fiscal discipline” Mr. Yeargin claims we had, but no longer have: Beginning in 1945, we had 5 recessions in only 15 years. That is his version of “fiscal discipline.”

By contrast, our “undisciplined,” debt-based economy has not had a single recession in 11 years, and is not even close to one now.

But it gets even worse:

By the late 90s, the president and Congress had worked to generate national surpluses and were heading toward a debt-free U.S.

If the federal debt is, as Mr. Yeargin warns, “approaching $23 trillion,” to have a “debt-free U.S.” would require us to have a combination of spending cuts and tax increases totaling $23 trillion!

Can you imagine what taking $23 trillion out of the U.S. economy would do? It would be a financial disaster unparalleled in U.S. history.

The Great Depression was caused by a removal of only 36% of the debt; Mr. Yeargin wants to remove 100%. It boggles.

And it continues:

Then, in the early 2000s, the combination of tax cuts, increased Medicare benefits for the elderly, and waging two wars on a credit card resulted in the return of national deficits and we lost our opportunity to be debt-free.

The financial crisis in 2008 resulted in huge government spending to avert a depression.

Mr. Yeargin manages to confuse even his own confusion. He claims correctly that huge government spending averted a recession, but he already has claimed that huge government spending is a danger, a “ticking time-bomb.”

Federal spending pumps dollars into the economy, which grows the economy. Federal surpluses take dollars from the economy, which causes depressions and recessions.

So which is it Mr. Yeargin? Did huge spending endanger us or save us? You can’t have it both ways. Or, if you know nothing about economics, perhaps you can have it both ways — in your imagination.

After we got through the Great Recession, our deficit was high but dropping. The past three years has seen increased spending and tax cuts, which have exploded the annual deficit to over $1 trillion.

(Meaning that the federal government, which never can run short of dollars, will add $1 trillion to the economy, which needs dollars to grow. And this is a bad thing?)

And then, just when you hope it could not possibly be dumber, yes, it gets even dumber.

So, why is it a problem?

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.

Because the U.S. federal government has the unlimited ability to create its own sovereign currency the U.S. dollar, it has no need to borrow dollars from anyone.

And indeed, despite the misleading use of the words “debt” and “borrow,” the U.S. government does not borrow. It provides T-security accounts, into which investors can deposit dollars.

Why does it provide these accounts if it doesn’t touch the dollars in them? Two primary reasons:

  1. To provide a safe “parking place” for unused dollars, which helps stabilize the dollar, and
  2. To assist the Federal Reserve in setting interest rates.

No, Mr. Yeargin, the federal government is not like state and local governments; it is not like businesses; it is not like you and me. It doesn’t borrow. It doesn’t need or use borrowed money.

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e.,unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.

The federal government uniquely is Monetarily Sovereign, a term Mr. Yeagin clearly does not understand. The government creates dollars by passing laws, at the press of a computer key.

The article drones on, sliding ever downhill from a low beginning:

Additionally, we have lost two of our most powerful tools to pull out of a future recession.

From Economics 101, recall that deficit spending and low interest rates are tools used to end a recession. But we are now using them in a good economy, which is sort of like eating your seed corn.

Except that the federal government has the unlimited ability to deficit spend, and contrary to popular perception, low interest rates are not stimulative. They help control inflation, but do not add growth dollars to the economy.

So, why do we accept this?

It feels good to spend. Just like anyone who borrows to buy something they cannot afford, the U.S. finds it to easy to use its credit card (deficit spending).

In the short run, this spending makes politicians look like geniuses because it fuels the economy and drives votes.

In the long run, the politicians will be out of office when the problems occur. When the economy is doing well — even when artificially propped up with huge deficit spending — people feel like things are going well and don’t worry about those huge credit card bills (national debt) piling up.

Well, golly, the so-called “credit card bills (national debt)” has been “piling up” for 70 years, and here we are, stronger than ever. Again, those pesky facts.

So, what’s the solution?

We need leaders who have the will, character and courage to tackle this problem like any business leader would for their organization.

More ignorance. He still doesn’t understand the differences between federal (Monetarily Sovereign) financing and business (monetarily non-sovereign) financing.

If we want low taxes, then we must decide how to cut expenses. The challenge with federal expenses is that most of the money goes to the elderly, through Social Security and Medicare, and the military.

Unlike state and local governments, which being monetarily non-sovereign and so use tax dollars to pay for spending, the Monetarily Sovereign federal government does not use tax dollars.

So why does the federal government collect taxes?

  1. To control the economy by taxing things it wishes to discourage and by giving tax breaks to things it wishes to encourage
  2. To help the rich, who run America, widen the Gap by giving them tax breaks not available to the non-rich.
  3. To convince the public that benefits must be rationed or taxes increased. The rich, who run America, fear that if you, the public, knew the truth, you would demand more benefits, thereby narrowing the Gap. (Think of Medicare for All and Social Security for all, etc.)

And finally, we get to the heart of it. Mr. Yeargin suggests the need to cut Social Security and Medicare which mostly benefit the middle-classes and the poor.

Gap Psychology tells us that the rich promulgate lies about federal financing, in order to widen the Gap between the rich and the rest.

It is the Gap that makes them rich (Without the Gap no one would be rich; we all would be the same.) And the wider the Gap, the richer they are.

One easy way to widen the Gap is to cut benefits to the non-rich.

The “federal-debt-is-a-ticking-time-bomb” scam benefits the rich because it widens the Gap between the rich and the rest.

I apologize if I seem to pick on Mr. Yeargin this way. He may be a very nice, honest gentleman, but clearly, he is not an economist. Perhaps, all the errors in his article are innocent and without any malicious intent.

But he writes about economics, which is typical of what you read, day after day: Writings by people who do not understand that federal finances are nothing like personal finances, though you are led to believe they are alike.

Your intuition and incorrect information combine to fool you.

I don’t know Mr. Yeargin, but according to his web site:

“Bill Yeargin is CEO of Correct Craft, a boat-building business based in Orlando. He’s also on the board of the University of Central Florida.”

Someone please, please assure me that Mr. Yeargin has nothing to do with the teaching of economics at the University of Central Florida.  Please.

Next Page »

%d bloggers like this: