It breaks my heart to see this headline. It should break your heart, too.

[Why would any sane person take dollars from the economy and give them to a federal government that has the infinite ability to create dollars?]

It breaks my heart to see the following headline. It should break your heart, too.

Millions of vulnerable Americans likely to fall off Medicaid once the federal public health emergency ends
By Amy Goldstein

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“Pay no attention to those many trillions behind me. I’m too broke to help you (unless you’re rich.)”

Begin with two central facts: The U.S. federal government is Monetarily Sovereign, and a Monetarily Sovereign entity cannot unintentionally run short of its own sovereign currency.

The federal government has infinite dollars.

Thus, your federal tax dollars do not fund federal spending.

Even if all federal tax collections totaled $0, the federal government could continue spending, forever.

All federal taxes are destroyed upon receipt.  Your M1 money-supply tax dollars cease to be part of any money-supply measure, once they reach the Treasury. They effectively are destroyed.

The government creates new dollars, ad hoc, every time it pays a bill. That is how the federal government creates dollars. The more debts the government owes, the more money it creates.

Contrary to what you repeatedly are told, your grandchildren are not liable for the federal “debt.” Not now, not ever.

WASHINGTON — The bipartisan spending deal that Congress cleared last week provides billions of dollars in aid for Ukraine, but it cuts other humanitarian programs meant to address mounting hunger crises elsewhere in the world, including Afghanistan and West Africa.

The initial House-passed bill and one offered in the Senate, written by majority Democrats, would have largely fulfilled the White House’s humanitarian funding request.

In interviews and statements, foreign aid advocates said they were “embarrassed” and “flabbergasted” that Congress reduced funds for dealing with the worst refugee displacements since World War II and other crises caused by mounting natural disasters and manmade conflicts.

The cuts to nonemergency humanitarian spending, as well as the lack of any international COVID-19 assistance in the omnibus, are a “self-inflicted wound” to America’s ability to recover from the pandemic and to pursue its long-term national security interests, said Liz Schrayer, president of the bipartisan U.S. Global Leadership Coalition.

Independent budget analysts have pinned blame on Republicans’ insistence that any increases in nondefense spending be kept roughly equal to increases in defense spending.

“We have more people who are hungry and people who are hungrier getting hungrier and we have no grain. It is absolutely catastrophic,” Peña said. “SFOPs got the raw end of the stick.”

The Senate’s lead foreign aid appropriator issued a similar view in an uncharacteristically blunt statement for a congressional appropriations cardinal criticizing his own bill.

Everywhere you turn, the phony belief that the federal government must operate under restrictive budgets, like you and I must, is a self-inflicted wound on America.

The so-called “federal debt” is not a debt (It is deposits in T-security accounts), and it is not a burden on anyone. (The “debt” is paid off simply by returning those deposits.)

Our federal government, having unlimited resources, pretends it is limited, and the public believes the lie.

The sole purpose of the lie is to keep you from asking for the same federal benefits that the rich (who pay no taxes year after year) receive.

So long as you are kept ignorant, the rich will keep getting richer and you will keep paying.

WHAT ABOUT INFLATION?
In addition to the lie about the federal debt being a burden, there is the lie that federal deficit spending causes inflation. It is widely believed, but it is a flat-out lie backed by no facts.

There is no relationship between federal deficit spending (red line) and inflation (blue line).

Inflations are caused by shortages, most often shortages of oil.

Today’s inflation is caused not only by shortages of oil but also by scarcities of food, shipping, labor, computer chips, vital minerals, lumber, and many other COVID-induced problems.

For many, many years, the US had massive deficit spending with low inflation, but now, with the effects of COVID and the Putin war, we suddenly see inflation. Clearly, deficit spending was not the cause.

The Fed’s attempt to address inflation by raising interest rates will not succeed while the real causes, shortages of oil et al, persist. Congress can address these shortages by spending more to facilitate the supply of all scarcities.

One good step would be to eliminate the harmful FICA tax, which doesn’t fund Medicare or Social Security but does discourage hiring by increasing the cost of labor.

And this is what breaks my heart. A Congress that never has to worry about having enough to eat, or a place to sleep, or good schools for their children, has decided America “can’t afford” to provide these things to the “lazy” poor.

Of course, the “can’t afford” meme is a blatant lie. America can afford anything that costs dollars.

But the rich, who bribe and control our government, don’t want the Gap between them and the rest of us to narrow. The wider the Gap, the richer are the rich, so widening the Gap is the way our spineless Congresspeople vote.

“Spineless” is the only way to describe the 100% refusal of one party to approve spending for the poor. These subservient sheep do exactly as they are told by the rich, then collect their excessive salaries and bribes, while the less fortunate among us pay the price.

So long as you believe that your federal taxes fund federal spending and that federal spending causes inflation — so long as you believe those two lies — then the rich will have won and you will have lost.

Ignorance has its costs.

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
  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 five lies that have destroyed the American dream

America — at least, the America we like to dream exists — has been destroyed, if it ever really existed.

It is not the America of the common person, but rather it is the America of royalty, the same kind of imperial royalty we fought against during the Revolutionary war.

King George was a piker compared to our America’s rich.

Today’s America is more financially stratified, and therefore power-stratified than at any time in our history. We have kings, princes and serfs, just as surely as existed during medieval times. Worse, perhaps.

Nothing will change while Americans believe these five lies:

  1. The federal “debt” is too high (It isn’t even “debt,” and it isn’t too high.)
  2. Federal taxes fund federal spending. (Unlike state & local government taxes, federal taxes fund nothing. In fact, federal tax dollars are destroyed upon receipt by the Treasury. That is why no one can say how much money the Treasury has. It has infinite dollars.)
  3. The federal government can’t afford Medicare for all, Social Security for All, housing for all, college for all, or food for all. (The federal government can afford anything.)
  4. Federal spending causes inflation. (It doesn’t. Inflation is caused by shortages of key goods and services, i.e. food, energy, computer chips, labor, shipping. In fact, federal spending cures inflation when it facilitates obtaining the scarce items)
  5. If the government provides the necessities, the poor won’t work. (The “starve ‘em ‘til they slave” system works only for the rich. People always will work to improve their situation, whatever that situation may be.)

Lie I. The Federal Debt Is Too High

The federal “debt” is many things, but it is not “debt” and it is not “too high.

The federal debt is the total of deposits into Treasury Security accounts (i.e. T-bills, T-notes, T-bonds). The purpose of these accounts is not to provide the federal government with spending money but rather:

To provide a safe, interest-paying storage place for unused dollars.

To assist the Fed in setting interest rates.

Treasury Security accounts, which resemble safe-deposit accounts, are owned by depositors. The federal government does not need, use, or touch the dollars in the accounts.

As with safe-deposit accounts, the deposits in the T-security accounts are not a true debt of the federal government, which merely safeguards the money. Think of the federal government as the uniformed guard who stands outside the safe deposit room, and checks signatures. He doesn’t owe the money, either.

When the T-securities mature, the government pays them off simply by returning the dollars in the accounts, which is no burden at all on the federal government. The government merely debits the accounts and credits the checking accounts of the T-security owners.

No tax dollars are involved. Contrary to popular myth, your grandchildren will not owe the federal debt.

Confusion in the minds of the public arises because, by law, the total of these accounts equals the net total of all federal deficit spending through history.

Thus, the public is made to believe wrongly that federal deficits must be “paid back” by taxpayers. But, federal deficits merely are the arithmetic difference between spending and taxing, which gives the wrong appearance that federal taxes actually fund federal spending.

This, in turn, gives the wrong appearance that federal taxpayers owe the federal debt.

Federal deficits never are “paid back.” Federal taxes don’t fund federal spending. And taxpayers do not owe the federal debt.

Lie II. Federal taxes fund federal spending.

Unlike state/local governments, and unlike euro-nation governments, and unlike businesses, and unlike you, and me, the federal government is Monetarily Sovereign.

In the 1780s, the federal government created an arbitrary group of laws from thin air, that created an arbitrary number of dollars — from thin air — and they gave these dollars an arbitrary value.

Over the years, the government arbitrarily has changed the value of the U.S. dollar (aka “inflation” or “deflation.”)

The government still retains the power to create more arbitrary laws and arbitrarily more dollars — again from thin air — and again give them any value it chooses. Thus, it has the unlimited power to cure inflation at the stroke of a pen, although it prefers to use market-oriented methods (interest rate changes0.

The federal government pays all its creditors by sending instructions (not dollars) to the creditors’ banks instructing the banks to increase the balances in the creditors’ checking accounts.

When the bank obeys those instructions, new dollars instantly are created. That is how the federal government “prints” most of its dollars, not with a printing press but with a computer key.

Ben Bernanke, Former Federal Reserve Chairman: “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.”

None of this is related in any way to the tax dollars that are created and destroyed every day. Tax dollars are paid with checking account money from the M1 money supply measure, but when they reach the Treasury, they cease to be part of any money supply measure.

They effectively are destroyed. Even if the federal government collected $0 in taxes, it could continue spending and running deficits, forever.

Lie III. The federal government can’t afford Medicare for all, Social Security for All, housing for all, college for all, or food for all.

This lie often is told in conjunction with related lies such as, “The Social Security trund will run out of money on [date].” (All federal “trust funds” are fictional. Real trust funds involve a grantor, a beneficiary, and a trustee).

In a real trust fund:

  • The grantor establishes the trust fund, donates the thing of value to it, and decides the management terms.
  • The beneficiary is the person for whom the trust fund was established. The assets in the trust will be managed per the specific instructions and rules laid out by the grantor when the trust fund was created.
  • The trustee makes sure the trust fund maintains its duties as laid out in the trust documents and according to applicable law. 

The Social Security “trust fund” is nothing like the above. It merely is a bookkeeping device that may or may not pay a beneficiary an unknown amount of money at the whim of Congress and the President. 

If you collect Social Security, you are the ostensible “grantor” who pays a FICA tax that supposedly is the “thing of value,” but you do not “establish the trust fund,” and you do not decide the management terms, and FICA is just another tax that pays for nothing.

You also are the beneficiary, but the rules can change without warning. And the government is the supposed “trustee,” but it has the power to change the “trust documents” at will, a power no real trustee has.

Social Security is a federal agency. No agency of the federal government can run short of money unless that is what Congress wants.

Former Federal Reserve Chairman Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

The so-called “trust fund” is completely under the control of Congress, and it only can run short of money if Congress wants it to run short of money. Period.

Another related lie is that federal benefits must be “paid for.” We have heard this lie repeatedly from Sen. Manchin and other politicians regarding the Democrats’ “Build Back Better” proposal. It is supposed to mean that federal taxes must pay for federal spending.

Fact: All federal spending has been “paid for,” not by taxes but by money creation.

Federal taxes pay for nothing. Manchin and the other politicians know this, but their constituents don’t, so the lie is repeated for political purposes.

Lie IV: Federal spending causes inflation. You undoubtedly have seen hyperinflation photos of people forced to tote wheelbarrows filled with nearly worthless currency, or have seen pictures of such bills. These photos may have given you the false impression that it is the printing of such currency that caused the inflation.

Reading: Introduction to Inflation | Macroeconomics
The famous Zimbabwe hyperinflation was caused not by money “printing,” but rather by a shortage of food. The government took farmland from experienced farmers and gave it to people who did not know how to farm.

But that impression confuses cause and effect.

The real cause of all inflations is shortages of key goods and services. 

Today’s inflation is caused not by federal spending but rather by shortages of oil, food, labor, computer chips, and shipping.

In fact, federal spending can actually halt inflation if the spending helps create and distribute the scarce items. 

A food shortage can be cured by federal aid to farmers. An oil shortage can be cured by federal aid to drillers and processors.

A labor shortage can be cured by ending FICA deductions from pay, and providing free Medicare for All, so that employers are better able to raise payrolls. 

Lie V. If the government provides the necessities, the poor won’t work. This is the most insidious lie of all. It is eagerly believed by the richer about the poorer. Its purpose is to widen the income/wealth/power Gap between the rich and the rest.

Ironically, the poorer on balance, work harder than do the richer. The poorer must work while doing everything for themselves. The richer can afford to hire people to do for them.

The richer sneer at the poorer as “takers,” to separate themselves from those who have less. This is known as “Gap Psychology,” the human desire to widen the Gap below you and to narrow the Gap above you.

Widening the Gap is the method by which the rich make themselves richer. (If there were no Gap, no one would be rich. We all would be the same).

Virtually everyone wants to improve their lives, and this applies even to the very wealthy, who seemingly have everything but still want more.

There is no evidence that people will refuse to work when given basic benefits. People did not refuse to work when given Social Security and Medicare.

SUMMARY

Five, widely believe lies, are responsible for the decline and loss of the “American dream,” the dream that if you work hard in this “land of opportunity,” you will get ahead and your children will lead better lives. 

Note however, the word “ahead.” Ahead of what? Ahead of those near you. It is the basis for Gap Psychology.

  1. The federal “debt” is too high 
  2. Federal taxes fund federal spending.
  3. The federal government can’t afford basic benefits for all.
  4. Federal spending causes inflation.
  5. If the government provides the necessities, the poor won’t work. 

These lies are promulgated by the rich, who run America, to make themselves even richer, by widening the income/wealth/power Gap below them.

Because of Gap Psychology, even the middle classes parrot the lies, as a way to distance themselves from those below them. It’s the fastest way to “get ahead.”

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
  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

How really to stop inflation without doing damage to the economy.

The oft-revised Hippocratic oath for doctors contains variations on the phrase, “Do no harm.” If only the Fed, the President, Congress, most economists and economic writers understood and adhered to that admonision.

Sadly the above-mentioned folks claim one very big and very wrong and very harmful thing. They claim Federal deficit spending causes inflation

Inflation is not caused by federal deficits or any other type of money creation. Inflation always is caused by shortages of key goods and services.

ALWAYS.

Pick any inflation or hyperinflation in history and you will find that the cause was certain scarcities. Despite the photos of money in wheelbarrows, there never has been an inflation caused by money creation.

In fact, the reverse is true: Inflation causes money creation by those who do not understand the problem. )See: Will the “Build Back Better” bill and “too much” federal debt cause inflation? An examination of myths. – #Monetary Sovereignty – Mitchell (mythfighter.com)

Interest rates (blue) and inflation (green) have trended down, while federal debt (red) has increased.

We have had massive federal deficit spending for more than a decade, and interest rates have been near zero. But, inflation remained low.
Now suddenly, we have inflation.
What is different, today? Think: What is different today from the past 10 years of low interest rates and high federal spending?
Today’s sudden inflation is not caused by deficit spending, which has been ongoing, not sudden, for decades, but rather by sudden shortages of oil, food, computer chips, shipping, lumber, labor, etc.
None of those shortages is related to federal deficit spending; most are related more closely to COVID.
We currently have a COVID inflation, not a deficit-spending inflation.
In reality, federal deficit spending can CURE inflation if the spending is directed toward obtaining and distributing the scarce goods.
To cure inflation, we must cure the shortages that caused the inflation.
The government could cure our inflation by spending to increase oil drilling (or better yet, spending to:
1. Increase the availability and use of renewable energy)
2. Aid more efficient and more productive farming,
3. Encourage more local computer chip manufacture
4. Develop a more efficient shipping and transportation systems
5. Facilitate more lumber-growing (and substitute-for-wood products)
6. Eliminating FICA and providing Medicare for All (allowing employers room to increase salaries, thus tempting workers back to work).
The primary power to cure inflation is in the hands of Congress and the President, not the Fed.
The Fed has some power, but it is small. Raising interest rates increases the value of the U.S. dollar, thus requiring fewer dollars to purchase the same amount of goods and services.
So when the Fed raises rates, this will help somewhat to reduce inflation. But if scarcities are not cured, inflation will continue to bedevil us.
Congress and the President, as usual, want to lay the responsibility anywhere but themselves. So, they ask the Fed to grow the economy and to control inflation, while the Congress and the President . . . well, what do they do about inflation? Not much, other than point fingers at the Fed.
Maybe they’ll continue to bicker like children about which party gets the credit for this and the blame for that. So while the Dems want to grow the economy, the GOP will vote against anything that grows the economy, lest the Dems get credit.
We are being led by a group of infantile liars. I would call them “useless,” except that doesn’t describe the damage they do.
Here is how the Fed plans to handle our scarcity-fueled inflation:

Inflation is still red hot, and it’s forcing the Federal Reserve into a new game plan
Updated December 15, 2021 SCOTT HORSLEY

The Federal Reserve is paving the way for possible interest rate hikesnext year, in an effort to contain stubbornly high inflation.

If oil, food, chip manufacture, shipping, and lumber-growing remain scarce, and FICA continues to chase people out of the labor poor, we will continue to have inflation, even if interest rates are raised to 10% or more.

At the conclusion of a two-day policy meeting Wednesday, the central bank announced plans to phase out its large-scale bond-buying program faster than initially planned.

The Fed started purchasing bonds during the pandemic as a way to keep borrowing costs across the economy low and to prevent any market disruptions.

What the Fed bond-buying program actually does is to pump growth dollars into the economy.

Unfortunately, turning off that money-creation pump will bring us closer to recession.

Reductions in federal debt growth lead to inflation
When federal debt growth (blue line) declines, we have recessions (vertical gray bars) which are cured by increases in federal debt growth.

Ending the bond purchases earlier would give the Fed more flexibility to raise interest rates sooner, if necessary, to keep prices from spiraling out of control.

The central bank said previously it wanted to stop its bond purchases before considering raising interest rates.

Utter nonsense. The Fed doesn’t need more “flexibility.” It has the infinite ability to raise interest rates. It merely does so by fiat, and up the rates go.

There is a zero relationship between bond purchases and the Fed’s ability to raise interest rates.

The Fed is taking a harder line against inflation after consumer prices in November jumped 6.8% from a year ago — the largest increase in nearly four decades.

The sudden jump in prices was not caused by the federal deficit spending, which will take place over as much as ten years. It was caused by COVID-related, OPEC-related, and regulation-related scarcities.

In a statement, the Fed acknowledged the rapid runup in prices. Although the central bank still believes inflation is largely driven by factors tied to the pandemic, which should ease when the health outlook improves, policymakers are no longer taking that as a given.

Yes, correct. Today’s inflation is not just largely driven, but totally driven, by pandemic factors.

Notably missing from Wednesday’s statement was the word “transitory,” which the Fed had used in the past to describe inflationary pressures.

“The risk of higher inflation becoming entrenched has increased,” Fed chairman Jerome Powell told reporters. “It’s certainly increased. I don’t think it’s high at this moment but I think it’s increased. And I think that’s part of the reason behind our move today.”

He is clueless about the future for the same reason we all are clueless. He has no idea how much oil will be pumped, how much food will be grown (including weather considerations), or how many computer chips will be manufactured or needed.

He has no way to know how and when the shipping situation will be fixed, and what we will do about the lumber shortage.

Like all of us, he doesn’t know what the effect of the omicron variant of COVID will have, nor if there will be other variants and what their effect will be. He has no idea what effect global warming will have on shortages, and when.

I would just as soon lay tarot cards on an ouija board as rely on economic predictions by the Fed chairman, or anyone else, including me.

His problem is not just his inability to predict the future, but also his inability to judge cause and effect.

The Fed has kept interest rates near zero throughout the pandemic in an effort to prop up the economy.

And during all that time of low interest rates, we had massive federal deficits with low inflation. That alone should provide any thinking person with sufficient evidence to determine that deficits and debt do not cause inflation.

Twelve of the 18 members of the Fed’s rate-setting committee now say they expect interest rates to rise by three-quarters of a percent or more in 2022.

That underscores the evolution in the Fed’s thinking. Three months ago, no one on the committee envisioned rates climbing by that much next year.

It’s not “evolution.” It’s ignorance. From just three months ago their thinking totally has reversed. Why would anyone trust their predictions?

The Fed has repeatedly been surprised this year by both the strength and staying power of inflationary forces. While average wages have been rising at a rapid pace, prices are climbing even faster.

Really? Given all their inside information, were they really surprised by the oil shortage? The computer chip shortage?

Committee members now say they expect inflation to be 2.6% at the end of next year, up from 2.2% that was projected in September. 

Raising interest rates is the Fed’s traditional tool for keeping inflation under control, but it comes with its own price. Higher borrowing costs typically lead to slower economic growth, and the Fed has been reluctant to raise interest rates until it feels the U.S. had achieved “maximum employment.”

Do higher borrowing costs (blue) typically lead to slower growth. (red)? Not according to this map.

The popular wisdom is that low interest rates make borrowing easier, and so are stimulative, and high rates are stagnating or worse. But the above graph seems to show the popular wisdom to be incorrect, even opposite to the truth.

While low rates make borrowing easier, they also mean that the federal government will pump fewer stimulus dollars into the economy (for interest on T-bills, T-notes, and T-bonds).

If anything, there seems to be a correspondence between high interest rates and high GDP growth.

That’s the challenge facing Fed policymakers.

“This was a different kind of recession that we’ve never really been through,” said Greene, who’s also chief economist at the Kroll Institute. “So the jury’s still out on what’s going to happen with the labor force.”

Powell suggested that if inflation goes unchecked, that in itself could jeopardize a complete jobs recovery.

The inflation can be checked, but not by the Fed. Congress can check the inflation by:

  1. Using tax policy and spending policy to encourage the development and use of renewable energy.
  2. Using tax policy and spending policy to encourage the development of more and better food crops and other foods, that are able to feed more people, using less land, labor, and fertilizers, while renewing the soil.
  3. Using tax policy and spending policy to encourage the supply of lumber and other building-related materials.
  4. Using tax policy and spending policy to encourage the development of U.S. based computer chips and other computer-related hardware and software.
  5. Using tax policy and spending policy to improve both international and domestic shipping and mail. The postal service should be funded by the government and not be required to make a profit.
  6. Eliminating FICA so that employers are encouraged to raise salaries.
  7. Providing Medicare for All so that employers do not need to fund healthcare insurance, and again, are encouraged to raise salaries.

“What we need is another long expansion like the ones we’ve been having over the last 40 years,” Powell said. “And to have that happen, we need to make sure that we maintain price stability.” 

“Price stability,” i.e. low inflation, is beneficial, but it does not lead to “another long expansion. The primary factor leading to a long economic expansion is ongoing and increasing federal deficit spending.

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
  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 inflation con. How can it be any clearer than this?

The Chicago Tribune, a mighty newspaper having substantial resources for information-gathering, repeatedly promulgates the “Big Lie” in economics — the lie that because U.S. federal finances are just like state/local government finances, business finances, and personal finances, the federal deficit must be cut and/or taxes increased to “pay for” it all.

In truth, federal finances have almost nothing in common with the finances of other entities, not even the finances of Germany, France, Italy, et al.

Here are some excerpts from a Tribune editorial dated 7/19/2021:

Spend-borrow-repeat will be the ‘debt’ of us
Mark Lennihan/AP

National governments worldwide — ours in the forefront — have fought the pandemic and its side effects with borrowed money. Much of this new debt will fall not only on today’s children and grandchildren, but also on our descendants not yet born.

Wrong: “Today’s children and descendants not yet born” will not pay for any part of the so-called “debt,” just as you have not paid anything for the $25 trillion already accumulated.

It’s not debt. The misnamed “debt” is nothing more than the total of deposits into Treasury Security accounts, which resemble bank safe deposit accounts.

The government never touches those accounts, except to deposit interest, and the “debt” easily is paid off simply by sending the money back to the depositors. No tax dollars ever are involved.

So we were concerned if not surprised by a Wall Street Journal news story headlined “Governments world-wide gorge on record debt, testing new limits.” The Journal reports: “The U.S. government is on course for a budget deficit of $3 trillion for the second year in a row.”

The deficit (the difference between taxes and spending) is not a real deficit. Federal taxes have no relationship to federal spending; all federal taxes are destroyed immediately upon receipt.

When you pay your federal taxes, you take dollars from your checking account (which is part of the M1 money supply), and you send them to the federal government, where they are destroyed. That is, they cease to be part of any money measure. They cease to exist.

The federal government does not use your tax dollars to pay its bills. It creates new dollars, ad hoc.

Even if the federal government collected zero taxes, it still could continue spending forever. The main purpose of federal taxes is to control the economy.  The government taxes what it wishes to discourage, and it gives tax breaks to what it wishes to encourage.

We mention this as our government’s Internal Revenue Service delivers the first of several child tax credit payments to single parents earning up to $95,000, and to couples earning up to $170,000. Meanwhile, Senate Democrats say they intend to pass a sweeping social, educational and environmental package they price at $3.5 trillion. 

A trillion of anything befuddles many Americans, journalists included. The temptation is to toss one’s fidgety hands in the air and mutter that these debts belong not to us individual Americans but to a faceless federal government.

That last paragraph is true. The misnamed “debt” is just a notation on the federal government’s books. It is completely unrelated to individual Americans or to taxes.

No one is liable for paying off the federal “debt,” which is paid off by returning dollars already in the T-security accounts.

Ah, problem already. That government is essentially a big checking account with a standing army; it collects and spends tax dollars.

Wrong. Although the government does collect tax dollars, it does not spend tax dollars.

It has the unlimited ability to create new dollars and that is what they use when paying their bills.

No one has said it better than former Fed Chairman Alan Greenspan:

Absolutely correct.

The U.S. government uniquely is Monetarily Sovereign — it is sovereign over the U.S. dollar. It can create as many as it pleases at any time it pleases, for any purpose it pleases, and give them any value it pleases.

As our national debt rises daily toward $29 trillion, the government’s perpetual printing of new dollars threatens to cheapen the currency. In short, we — or our progeny — have to repay every dollar now being lent to Washington by China and other buyers of U.S. bonds.

Mark Lennihan, the author of the editorial, publishes two errors in one paragraph. “Cheapen the currency” refers to inflation. Lennihan is claiming that the rising national “debt” (deposits into T-security accounts) causes inflation.

He is wrong. The “debt” has risen, in the past 80 years from about $40 billion to about $25 trillion (depending on who’s counting), a gigantic increase. But in those 80 years, inflation has been modest.

The red line is federal debt growth. The green and blue lines are different measures of inflation.

Further, being Monetarily Sovereign, the federal government retains absolute control over the value of the dollar. It can change the value at will, as it has done many times in the past, the most recent being in 1971.

Maybe the accumulation of debt continues indefinitely without consequence. Or maybe critics cited by the Journal are right to warn that our spending is excessive, “risking an overheated economy and a lasting rise in inflation and interest rates.”

If federal debt caused inflation the two lines should essentially be parallel. As you can see they are nowhere near being parallel. There is no relationship between federal debt and inflation.

The accumulation of debt has continued without consequence for 80 years, despite repeated (and wrong) warnings from debt fear-mongers. Inflation has been modest — close to the Fed’s 2% annual target.

Which raises a question we hope Illinoisans will direct to their members of Congress: When does necessary spending on pandemic relief mutate into optional spending on the desirable but unaffordable?

We argue that unchecked cycles of spend-borrow-repeat eventually enfeeble any nation. That may not happen while interest rates are as low as today’s. But those rates — the relentless cost to taxpayers of carrying so much debt — now are likelier to rise than to fall.

Nothing is “unaffordable” for the federal government. It has infinite money. The author is confusing federal finances with personal finances or state/local government finances.u

Federal taxpayers have not and will not “carry” any of the federal debt. Tax dollars are destroyed upon receipt. They do not fund the debt.

Thus far in the pandemic, global securities markets happily support all of our borrowing; because of its prosperity, America is a safe haven for investors.

The federal government, having the infinite ability to create dollars, never borrows. More confusion by the author of the editorial.

But as Robert Rubin, the treasury secretary under President Bill Clinton, warned in a 2018 op-ed published in the Tribune: “The European financial crisis that began in early 2010 shows how markets can ignore unsound conditions for a long time — until they don’t. For many years,

Greeksovereign bonds traded at virtually the same yields as their German counterparts, which made no sense. Then, when the bond markets suddenly focused on the fiscal problems plaguing Greece and the other weaker countries, interest rates spiraled into crisis.”

Astoundingly, the treasury secretary did not understand the differences between a Monetarily Sovereign government (the U.S.) and monetarily non-sovereign governments (euro nations, Greece, Germany, Italy et al)

Greece, Germany and all the other euro nations do not have the ability to create their sovereign currency at will. Like you, and me, and our cities and states, they do not have a sovereign currency. They use the euro, which is the sovereign currency of the European Union, not of any individual nation. (It’s similar to the way American states are not sovereign over the dollar.)

All of us can run short of money. The U.S. government cannot. Anyone who does not understand the difference, does not understand economics.

Many Tribune readers are smarter than their government: Chastened by the Great Recession in which the inability to pay mortgage debt cost people their homes, Americans have attacked private-sector debt even as their politicians raised public-sector debt.

Again, Mr. Lennihan demonstrates a shocking ignorance of economics. He confuses personal (monetarily non-sovereign) finances with federal (Monetarily Sovereign) finances. It is amazing that he receives such a nationwide platform to spew such nonsense.

A classic example of citizens taking to heart the admonition, “Don’t try this at home.”

To reiterate arguments you’ve read here before: We write often about debt in part to counteract the popular (and in Illinois, political) tendency to see borrowed money as free manna that somebody else will worry about, someday. The truth is that, whether it’s enforced or nominally forgiven, someone always pays.

The admonition, “Don’t try this at home” is correct, because “home” is not Monetarily Sovereign.

Since it’s not real debt, but rather it’s deposits, no one pays. However, the federal government always pays its creditors — with newly created dollars.

When America’s debt inevitably grows too onerous for taxpayers to bear or global investors to tolerate, expect a furious blame game: Why did our politicians let this happen?

America’s debt is not borne by taxpayers. If it were, the debt could not have reached $25 trillion. It already would have been “borne.”

The “blame game” only will occur if we have a recession, which would be caused by too little deficit spending.

We voters didn’t demand that spending not exceed revenue, that debt not be allowed to pile up like snow atop a mountain. A long line of presidents and Congresses have talked about preventing the avalanche. But we voters have let them get by on that lip service alone.

When spending doesn’t exceed revenue, we have recessions if we are lucky, and depressions if we are not lucky.

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.

A growing economy requires a growing supply of money. If the money supply shrinks, or even grows too slowly, we have recessions or depressions.

Their greatest sin thus far is abject failure to reform the debt-manufacturing entitlement programs such as Medicare (whose hospital coverage trust fund is projected by its trustees to run dry in 2026) and the Social Security retirement fund (projected as empty in 2034).

Finally, toward the end of his editorial, Mr. Lennihan reveals the true purpose of his Big Lie: He wants to cut the benefits that would go to the masses.

Why? Because that is what the very rich, who really run America, want.

It’s called Gap Psychology, the desire to distance oneself from those below. The rich are rich only because of the Gap. If there were no Gap, no one would be rich; everyone would be the same. And the wider the Gap the richer are the rich.

To widen the Gap, the rich bribe the media (via ownership and advertising dollars). They bribe the politicians (via campaign contributions and promises of lucrative employment, later.) They bribe the economists (via university endowments and promises of employment with “think tanks.)

So as members of Congress and President Joe Biden ponder a massive expansion of social, educational and environmental spending, we have a request:
Whatever the final shape of your package, pay for it rather than borrow for it. Because given how you’ve behaved — especially since the pandemic struck — your binge of spend-borrow-repeat will be the debt of us.

Fear, not Mr. Lennihan, it all will be paid for in exactly the same manner as always. No, the federal government will not borrow its own sovereign currency. It will create new dollars, ad hoc.

Now we have a request: Stop disseminating the Big Lie, either by ignorance or intent.

If you don’t understand Monetary Sovereignty, read up on it before writing anything more.

If you do understand it, and still are spreading the Big Lies, retire immediately in ignominy. You don’t deserve to have any of your work published.

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

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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
  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