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, 2020Negotiations 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.
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:
- to provide a safe parking place for unused dollars, which stabilizes the dollar and
- 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.
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.
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:
- Monetary Sovereignty describes money creation and destruction.
- Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
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
#Monetary Sovereignty - Mitchell 