Explaining: “Which of these myths do you believe? A test of your knowledge.” Friday, Oct 30 2020 

Way back on May 12, 2011, we published, “Which of these myths do you believe? A test of your knowledge.”

It is a list of common myths and bits of popular false wisdom. All have been foisted on you by the ignorance or the intent of the media, the economists, and the politicians.

Mostly, these misleading statements have been made at the behest of the very rich who don’t want you to understand the realities of finance.

Example: Groups like the Committee for a Responsible Federal Budget  (CRFB) are paid by the very rich to dissuade you from demanding social benefits like Medicare and Social Security. The pretext is that the federal deficit and debt are large and “unsustainable.” It is all a lie.

14 people revealed their most brutal rejection stories - Insider

Gap Psychology: The common desire to distance oneself from those below and to approach those above.

The ultimate purpose of the lie: To widen the financial/wealth/power Gap between the rich and you.

The effort to widen the Gap is described in Gap Psychology, which is the common desire to distance oneself from those below in any socio-economic measure, and to approach those above.

Subsequent to the May, 2011 post, in literally thousands of posts, we have discussed the myths it listed, and we explained why they are myths.

Today, more than nine years later, the public still believes the myths. Those nine years of posts educated some, but overall, were to little avail.

Failure can be discouraging or encouraging, depending on one’s attitude. For me, it is both. Only semi-daunted, I now will try once again to explain the truths of economics in a way that even the “experts” can understand.

You don’t need to read a complex economics text. You can understand certain basics in order to realize what your government really is doing to you. In any science, it is the basics that light the way to clarity.

Fundamentally, economics is about money. Yes, it also has to do with things like production, consumption, demand and supply, imports and exports, and wealth and value, and psychology. Ultimately, they all are described in terms of money.

Few people understand money. Unless you (objective “you,” not you personally) understand what money actually is, you will find understanding economics impossible.

WHAT IS MONEY?
All money is a form of debt. All debt has collateral. The issuer of money is the debtor who owes the user of money “full faith and credit,” which is the collateral for the debt.

“Full faith and credit” may sound nebulous to some, but it actually involves certain, specific, and valuable guarantees, among which are:
A. –The government will accept only U.S. currency in payment of debts to the government
B. –It unfailingly will pay all it’s dollar debts with U.S. dollars and will not default
C. –It will force all your domestic creditors to accept U.S. dollars, if you offer them, to satisfy your debt.
D. –It will not require domestic creditors to accept any other money
E. –It will take action to protect the value of the dollar.
F. –It will maintain a market for U.S. currency
G. –It will continue to use U.S. currency and will not change to another currency.
H. –All forms of U.S. currency will be reciprocal, that is five $1 bills always will equal one $5 bill and vice versa.

Debt has no physical existence. You cannot see, hear, taste, smell, or feel debt. Thus money has no physical existence.

A physical dollar bill is not a dollar. A dollar bill is an evidence that the bearer owns a dollar. Just as a car title is not a car — it is evidence — and a house title is not a house, a dollar bill is not a dollar; it represents a dollar.

A U.S. dollar is nothing more than a legal number on a balance sheet. As a number, it has no physical existence. You cannot see, hear, taste, smell, or feel a number or a dollar. They both are mere concepts.

In one of its earliest steps, the U.S. government created laws from thin air, which also have no physical existence. These laws created dollars from thin air. As there is no limit to the number or form of the laws the U.S. government creates, there is no limit to the number or form of the dollars these laws can create.

Just as the U.S. never can run short of laws, the U.S. never can run short of dollars. The U.S. never needs to borrow laws; similarly, it never needs to borrow dollars. It can create infinite laws and infinite dollars, forever.

The U.S., as the issuer of the dollar, is Monetarily Sovereign. It is sovereign over its laws and its dollar. It can create dollars at will and give those dollars any value it wishes.

Ben Bernanke, Former Chair of the U.S. Federal Reserve: “The U.S. government . . . can produce as many U.S. dollars as it wishes at essentially no cost.”

Alan Greenspan, Former Chair of the U.S. Federal Reserve:  “There is nothing to prevent the Federal Government from creating as much money as it wants and paying it to somebody.”

Neither this coin nor the gold in it are money.

That is why gold, for instance, is not money and never has been money. It is a mineral, a fairly useless mineral, that some people like to own because it is pretty.

Here is pictured a $50 gold coin. It, in itself, is not money. It represents $50 in money, and if you turn it in to the United States Treasury, you will receive a $50 credit to your checking account. (BTW, your checking account also has no physical existence.)

The coin is made with 1/4 ounce of gold, so if you sold it to a private party, you would receive something in excess of $500, because that is the selling price of gold as a mineral.

The federal government can create a coin from whatever mineral it wishes and give that coin any face value.

A $50 coin made from tin would be worth $50 in money, as is a $50 coin made from gold.

A $50 coin made from platinum also would be worth $50 in money, but more than gold and far more than tin on the open market.

Thus gold, platinum, tin, and paper are not money. Money had no physical existence.

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

The instant the bank obeys those instructions, new dollars are created and added to a money measure called “M1.” Though the creditor’s bank technically creates the dollars, it is the instructions from the government that make it possible.

We have stressed money’s lack of physical existence to demonstrate the federal government’s infinite ability to create money. Money is just a number on a balance sheet, controlled by the federal government.

THE FEDERAL DEBT
The so-called federal debt, so often claimed to be “unsustainable,” is not even debt in the classic sense, and definitely is not unsustainable.

Because the federal government has the infinite ability to create dollars, it never borrows dollars. What erroneously is termed “borrowing” merely is the acceptance of deposits into Treasury Security accounts, the total of which is called “debt.”

To pay off this “debt” the government merely returns the dollars in those accounts to the account holders. The government never uses those dollars. It creates new dollars, ad hoc, every time it pays a creditor.

The deposits in T-security accounts remain there, accumulating interest, until the deposit matures, at which time the dollars are returned to the owner of the account.

Those who think the “debt” is a burden on the government or on future taxpayers, do not understand federal finance. Those deposits are a burden on no one.

The federal debt sometimes and erroneously is called “a ticking time bomb,” but having ticked for more than 80 years, that “bomb” is a dud.

The federal government already has the legal power to produce platinum coins in any amount and of any value. It could, if it chose, create a $100 trillion coin, and deposit it with the Federal Reserve, thus eliminating all federal “debt.”

The annually debated debt ceiling does not put a ceiling on debt. It puts a ceiling on paying what already is legitimately owed. There is no reason for a debt ceiling, and the proof is that it is raised, by the passage of laws, every time that “ceiling” is reached.

Those who opt for a debt ceiling demonstrate ignorance of money.

Another common bit of misinformation is the claim that federal “borrowing” reduces the availability of bank lending funds. This is wrong for several reasons:

  1. The federal government does not borrow. It has no need to. It has infinite money.
  2. The claim probably refers to accepting deposits into T-security accounts, which erroneously is termed, “borrowing.”
  3. Federal deficit spending, rather than reducing borrowing funds, adds dollars to the economy, making more dollars available for private lending.
  4. Banks create lending funds merely by writing contracts. The only legal limit to bank lending is bank capital.

Often, you will hear or read some variation of, “Rather than being a net borrower, the federal government should be a net lender.” As discussed, the federal government does not borrow, but it does lend, and that is a problem.

For example, the government lends to students, in a misguided effort to encourage college attendance. Lending involves payback, but there is no reason why the federal government should require payback. The government doesn’t need or use the money paid back (It is destroyed), and those paid-back dollars are subtracted from the private sector, which has a recessive effect.

The primary effect of the student loan program is needlessly to impoverish millions of students at just the time of their lives when they should invest in businesses rather than pay back loans.

The federal government should give, not lend, whenever it wishes to encourage any activity.

Speaking of lending, there is a myth about something erroneously termed, “fractional reserve lending.” The myth is that banks keep a fraction of deposits (i.e. reserves) and lend the rest. So, as the myth goes, if a bank has a million dollars on deposit, it could lent say $900 thousand, and keep $100 thousand on reserve. You can read the myth here.

The reality is that bank lending is not constrained by reserves, because banks can obtain all the reserves they need from the federal government. Bank lending is constrained by bank capital. The correct terminology should be “fractional capital lending.”

FEDERAL TAXES
Contrary to popular wisdom, federal taxes do not fund federal spending. You, as a federal taxpayer, do not pay for anything. You just pay whatever taxes the federal government arbitrarily decides to collect from you.

Those FICA dollars deducted from your paycheck, do not fund Medicare of Social Security. The federal government could fund Medicare and Social Security out of the General Fund, without collecting a penny in taxes. (That is mostly how Medicare Part B already is funded.)

All those hard-earned tax dollars you send to the federal government are destroyed upon receipt. As soon as they are received by the federal government they cease to exist in any measure of any money-supply definition. They simply disappear.

That is why no one can answer the question, “How much money does the federal government have?” The sole answer: “Infinite.” That answer does not change, whether or not you send the government your tax dollars. (Infinite + your taxes = Infinite.)

Both before and after you send your tax dollars to the government, the government has exactly the same infinite dollars. You could send the federal government $1 in taxes, or you could send the government $1 billion in taxes, and either way, the government would have exactly the same amount of money: Infinite.

The misnamed federal “trust funds” (of which there are several) are not real “trust funds.”

They deceptively are called “trust funds” to make you believe they hold your taxes in trust. The “trust funds” are just numbers, totally controlled by the federal government, which can and has changed those numbers at will.

  • Real trust funds include a grantor, beneficiary, and trustee.
  • The grantor of a real trust fund can set terms for the way assets are to be held, gathered, or distributed.
  • A trustee manages a real trust fund’s assets and executes its directives, while the beneficiary receives the assets or other benefits from the fund.

(Your 1040 income tax form includes a little box asking whether you would like to contribute $3 to the Presidential Election Campaign fund. Don’t do it. If you check that box, you will be $3 poorer and the federal government will be precisely $0 richer. Your $3 will be destroyed.)

If the Medicare trust fund were a real trust fund, the grantor would be the FICA payer (you and your employer). But neither you nor your employer sets terms. The government sets terms.

Further, the Medicare trust fund doesn’t manage or distribute anything. Congress does that. The “trust fund simply is a balance sheet, showing “IN” and “OUT” like the old time desk boxes.

The federal government could take dollars from it any time it wishes (It already has done that), change the terms, or add dollars at will — all by the press of a computer key.

Our children and grandchildren will not pay for today’s federal deficit spending. Contrary to popular wisdom, you and your family are not liable for servicing federal debt. The federal debt has no relationship to tax rates.

The purpose of federal taxation is not to provide spending funds to the federal government. The federal government could end all taxation and still continue spending, forever.

If the federal government has no need for taxes, why does it levy taxes?

  1. To control the economy by taxing things it wishes to discourage, and to give tax breaks to things it wishes to encourage.
  2. To add to the demand for U.S. dollars.
  3. To convince you, the public, that benefits are unaffordable or “unsustainable,” so you will refrain from demanding benefits. (An example of how the rich, who control the government, are motivated by Gap Psychology.)

Contrary to popular wisdom, your Medicare and Social Security will not go bankrupt if their “trust funds” run short of dollars. Do not believe the scare stories. The federal government can change the balance in its trust funds, simply by pressing a computer key.

Medicare and Social Security will go bankrupt only if Congress and the President want them to go bankrupt. All the fake handwringing about the need to cut benefits or to increase taxes is meant to fool you.

The federal government could fund Medicare and Social Security for every man, woman, and child in America, forever. No taxes needed.

Bernie Sanders repeatedly was asked, “How will you pay for Medicare for All,” his honest answer should have been: “The government can pay for anything.”  Sadly he was deterred by the myths of debt “unsustainability” and cries of “socialism.”

The federal government could fund the Ten Steps to Prosperity (below), without collecting a dime in taxes.

The pernicious misinformation about America’s impending financial doom is designed to widen the Gap between you and the very rich, who run America.

Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

Populists, particularly progressives, often suggest taxing the rich in order to “pay for” certain beneficial projects.

The “soak the rich” notion is a mixed bag.

The federal government doesn’t need the tax dollars.

Taxing anyone, rich or poor, is recessionary because it removes dollars from the private sector.

But taxing the rich can narrow the Gap between the rich and the rest, which benefits society.

So this is a question without an absolute answer.

Step #8 of the Ten Steps to Prosperity, advocates taxing the rich more, not to raise funds for any specific function, but to narrow the Gap.

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MONETARY SOVEREIGNTY AND NON-SOVEREIGNTY
We have discussed the fact that the federal government is Monetarily Sovereign over the U.S. dollar. Other nations — i.e. Japan, Canada, Australia, Mexico, China — are sovereign over their currencies. They too are Monetarily Sovereign.

Many governments, however, are monetarily non-sovereign. Examples are state, county, city, and village governments. To the degree they use the U.S. dollar, they are non-sovereign.

Contrary to popular myth, they are not legally precluded from creating their own sovereign currency. Detroit,, MI has created “Cheers.” Ithaca, NY has issued “Ithaca Hours.” “Berkshares” were issued by a part of Massachusetts. In each case, the issuer is sovereign over its currency, and can do whatever it wishes regarding that currency — issue more, revalue it, or give it any usage terms.

The University of Missouri, Kansas City (UMKC), the home of Modern Monetary Theory (MMT), is in partnership to issue a currency called “RooBucks,” a perfectly legal currency.

Notably, the euro-using nations are monetarily non-sovereign. France, Greece, Germany, Italy, et al, use the euro, but they are not the issuers. Unlike Monetarily Sovereign nations, they can run short of the currency they use.

The euro nations surrendered their Monetary Sovereignty in exchange for ease of trade. It was a bad move because it left them with no control over their money supply, and no way to fight recessions. Greece, France, Italy, et al, financially troubled euro nations, are forced to exercise spending restraint (aka “austerity“), which is recessive, and the resultant recessions are a feedback mechanism that leads to more recessions.

The euro nations constantly struggle against recession, and when recession hits, have very little power to reverse it.

The issuer of the euro is the European Union (EU), via the European Central Bank. It is the European Union that is sovereign over the euro. The EU (like the U.S. federal government with respect to the U.S. states) that has the power to reverse recessions.

In that regard, state governments often are criticized for being profligate and not living within their means. But many states pay more money to the federal government than they receive from the government, so they constantly are being drained of money that only can come from taxpayers. This constant drain impoverishes the residents of the state, as it requires ever-higher taxes, with no end in sight.

Incidentally, if you wish, you can create your own currency, and be Monetarily Sovereign over it. Your biggest problem would be to gain acceptance of your currency, which would depend largely on your full faith and credit.

Being monetarily non-sovereign like you are, U.S. states, counties, and cities can and often do, run short of dollars. Unlike the federal government, they often are forced to borrow dollars in order to pay their creditors.  The federal government never borrows.

In summary, your finances, and state and local government finances, are nothing like federal finances.

Years ago, President Obama gave one of the most money-ignorant speeches, ever:

President Obama: Washington Has to Live within its Means
September 19, 2011 by Colleen Curtis

President Obama today unveiled a plan for economic growth and deficit reduction that details how to pay for the American Jobs Act while also paying down our debt over time. The President’s plan lays out a blueprint that will enable Washington to live within its means.

“It comes down to this: We have to prioritize. Both parties agree that we need to reduce the deficit by the same amount — by $4 trillion. So what choices are we going to make to reach that goal? Either we ask the wealthiest Americans to pay their fair share in taxes, or we’re going to have to ask seniors to pay more for Medicare. We can’t afford to do both.  

“Either we gut education and medical research, or we’ve got to reform the tax code so that the most profitable corporations have to give up tax loopholes that other companies don’t get. We can’t afford to do both.  

“This is not class warfare. It’s math. The money is going to have to come from someplace. And if we’re not willing to ask those who’ve done extraordinarily well to help America close the deficit and we are trying to reach that same target of $4 trillion, then the logic, the math says everybody else has to do a whole lot more: We’ve got to put the entire burden on the middle class and the poor. We’ve got to scale back on the investments that have always helped our economy grow. We’ve got to settle for second-rate roads and second-rate bridges and second-rate airports, and schools that are crumbling. 

“That’s unacceptable to me. That’s unacceptable to the American people. And it will not happen on my watch. I will not support — I will not support — any plan that puts all the burden for closing our deficit on ordinary Americans. And I will veto any bill that changes benefits for those who rely on Medicare but does not raise serious revenues by asking the wealthiest Americans or biggest corporations to pay their fair share. We are not going to have a one-sided deal that hurts the folks who are most vulnerable.”

Whew! That entire speech was a lie. It was the Big Lie.

The federal government never should reduce the deficit; seniors should not have to pay for Medicare; we never need to gut education and medical research; the money doesn’t need to “come from somewhere.” It can come from the federal government.

It is foolish to tax corporations. Such a tax merely takes dollars from the private sector and gives it to the government, where it is destroyed. Taking dollars from the private sector causes recessions and depressions, that are cured by adding money to the private sector (which the government now is doing to cure the COVID-caused recession.

Every paragraph in the above speech demonstrates abject ignorance about money and federal finances.

Politicians often shovel praise onto the concept of a balanced federal budget. They claim it is prudent. But, in fact, a balanced budget always leads to a recession or a depression. A “balanced budget” means the federal government takes as much money from the private sector as it adds in.

But a growing economy requires a growing supply of money.

It is mathematically impossible for the economy to grow when the money supply remains static or declines. The common measure of the economy is Gross Domestic Product (GDP). The formula for GDP is:

GDP = (Federal Spending) + (Non-federal Spending) + (Net Exports).

Each of those three terms is related to the supply of money in our economy. Federal deficit spending increases the supply of money in the economy. That is why federal deficit spending is used to stimulate the economy during recessions and depressions.

Similarly, federal surpluses take dollars from the private sector (i.e. the economy), which is why federal surpluses cause recessions and depressions.

Some media writers, and even some economists, scream when the federal debt/GDP ratio rises. Recently you may have read that the federal debt exceeded GDP, and this was a terrible thing.

Actually, the federal debt, which is a bookkeeping number that evolves from federal deficit spending, always stimulates economic growth. The aforenamed ratio is, if anything, a positive, certainly not a negative.

Contrary to popular myth, the federal debt/GDP ratio does not measure the federal government’s ability to service its financial obligations. That ability is infinite. The government never can run short of the dollars with which to pay its obligations.

Nor does the federal debt/GDP ratio measure the health of the economy. Depending on how one measures “health,” the best measure might be GDP percentage growth.

The oft-heard screaming about the debt/GDP ratio often is paired to the misguided screaming about federal waste. You surely have experienced one or more of your federal representatives criticizing federal earmarks, pork-barrel spending, and wasteful projects.

That all is done for show. There are no federal wasteful projects. All federal spending, no matter the ostensible purpose, benefits the economy by adding dollars to the private sector.

Clearly, some spending is more beneficial than other spending, but because the government creates dollars at the touch of a computer key, no spending is wasteful.

Even spending on foreign projects is beneficial, because it enriches the world, a world of which we are part.

So, you can save your outrage for state and local government spending, which because it is monetarily non-sovereign spending, can be and often is, wasteful.

Not understanding the differences between state/local government finances vs. federal finances leads to the mistaken belief that America would benefit if it exported more and imported less, to achieve a positive balance of payments.

Why would the government want to receive dollars in exchange for goods and services? The U.S. government can create unlimited dollars at no cost. Dollars are free to us. But goods and services are expensive. We create those by sacrificing some of our physical assets along with expending valuable labor.

If we can create all the dollars we want, at no cost to us, why would we prefer to sacrifice valuable goods and services in exchange for dollars?

INFLATION
Popular wisdom claims that federal deficit spending or too much money causes inflation. This is not true, has never happened, in history,  and in fact, federal deficit spending might be the best cure for inflation.

The illusion that deficits cause inflation comes from the experience of hyperinflation leading to extreme paper currency printing.  Consider, for example, the Zimbabwe hyperinflation,  in which massive amounts of currency were printed.

That inflation began when the Zimbabwean government stole farmland from white farmers and gave the land to blacks who didn’t know how to farm. The inevitable result was food shortages, and shortages always cause prices to rise. In response to those rising prices, the government printed more currency, which did nothing to eliminate the fundamental problem: Shortages.

All inflations are due to shortages, usually shortages of food and/or energy, never to deficit spending.

Inflations can be cured by increased deficit spending if the spending alleviates the shortages. Because Zimbabwe’s inflation was caused by food shortages, the government should have deficit spent to bring more food to the people, via imports and/or educating the black farmers and/or giving these farmers modern equipment, fertilizer, weed-killer, and/or improving roads and warehouses, etc.

The least intelligent way to cure inflation is to reduce the amount of money in the economy, either by raising taxes or by reducing deficit spending. Both of those efforts will lead to recessions or depressions, and inflation is not the opposite of recession or depression. It is quite possible to have inflation along with recession. (See: “Stagflation.”)

The Federal Reserve modulates inflation slightly by making dollars more valuable. It accomplishes this by increasing the demand for dollars, which in turn is accomplished by raising interest rates.

Another common myth: Reducing interest rates is economically stimulative. The hypothesis is based on the belief that more people will borrow when rates are low, and this borrowing adds stimulus dollars to the economy.

Historically however, the volume of borrowing is not determined by interest rates. It is based on expectations of profit, of which interest is a minuscule factor. More importantly, low interest rates reduce the number of interest dollars the federal government pumps into the economy for T-securities. Reducing federal dollar input is recessionary, not stimulative.

SOCIALISM
We have seen that the government has infinite money and can spend infinite money, without collecting taxes.

Debt-fear mongers, as a last resort, like to call federal spending, “Socialism.” It is a proven scare word among Americans who have on idea what socialism is, but think it is bad, somehow.

Social Security is socialism, but Medicare is not. The Veterans Administration hospitals are socialism, but your local hospital is not. Most highways and streets are socialism. The nations sewage systems are socialism, as are most drinking water systems. Most dams are socialism. NASA is socialism, as is the FBI, CIA and the military.

Socialism is not government spending. Socialism is governmental ownership and administration of the means of production and distribution of goods and services. That is why, for instance, a program like Medicare for All is not socialism. The means of production (hospitals, doctors, equipment, etc.) are not owned and administered by the government.

It is doubtful whether the “socialism” scare mongers really would like to eliminate Social Security, the VA hospitals, highways, streets, sewage systems, drinking water, dams, police, NASA, FBI, CIA, and the military.

The phony cries of “socialism” are designed to restrict you from receiving federal benefits. Period.

IN SUMMARY
Money is scarce to you, to me, to state/local governments, euro governments, and to businesses. We all are monetarily non-sovereign.

But money is free to the U.S. government, which is Monetarily Sovereign. In fact, when the U.S. government receives money, it destroys that money, and instead creates new money for spending purposes.

Whenever you hear of a plan that involves sending money to the U.S. government, or saving money for the U.S. government, be very skeptical. The U.S. government neither needs nor uses financial income.

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

While deficit spending is stimulative, and it cures recessions, it never causes inflation. That general increases in prices always is caused by shortages, usually shortages of food or energy.

Rodger Malcolm Mitchell

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

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

(Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.)

MONETARY SOVEREIGNTY

The two surprising reasons why the Dems say “More,” and the GOP says, “Less.” Saturday, Oct 3 2020 

From a humanitarian standpoint, you would expect both parties to want to pump vast amounts of money into the economy. Paying for businesses to stay open, paying for medical services, paying the unemployed, and the newly impoverished — this is exactly what Americans need now.

And from a political standpoint, a huge stimulus check would help grow the economy and prevent a depression, which the GOP, being the party in power, should welcome. Similarly, the Dems, who would benefit in the next election from a weak economy, should oppose stimulus.

But in the byzantine world of Washington, things seldom are as they may seem. The Dems say, “More,” and the GOP says, “Less.” Why?

Let’s look at some background:

1. In the past 50 years, the federal debt (blue) has grown massively, from $280 Billion to $21 Trillion.
2. In the same period, inflation (red) has grown relatively modestly.

Monster increase in federal debt; moderate increase in inflation. And still sustainable.

3. The debt still is sustainable, has not replaced private debt, is not running short of lenders, and is not a “ticking time bomb.” None of the warnings from the debt fear-mongers have come true.
4. Because of Covid, we now suffer from a terrible recession. Many millions of Americans have run short of money, or soon will. They can’t afford even the basics: Food, rent, clothing, transportation, schooling.
5. The federal government has unlimited money. Even without collecting a single penny in taxes, it never can run short of dollars. At the touch of a computer key, the federal government could pump trillions more dollars into the economy. It could give every man, woman, and child survival money.

The U.S. government has the power to ease the fear and suffering of its people, at no cost to anyone. And yet, we see articles like this:

Second stimulus check updates: House Democrats pass partisan $2.2 trillion COVID-19 relief bill as talks on smaller measure drag on

WASHINGTON — Democrats controlling the House narrowly passed a $2.2 trillion COVID-19 relief bill Thursday night, a move that came as top-level talks on a smaller, potentially bipartisan measure dragged on toward an uncertain finish. An air of pessimism has largely taken over the Capitol.

The Democratic bill passed after a partisan debate by a 214-207 vote without any Republicans in support.

The move puts lawmakers no closer to actually delivering aid such as more generous weekly unemployment payments, extended help for small businesses and especially troubled economic sectors such as restaurants and airlines, and another round of $1,200 direct payments to most Americans.

Passage of the $2.2 trillion plan came after a burst of negotiations this week between Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi, D-Calif. The Trump administration delivered concessions Wednesday, including a $400 per week pandemic jobless benefit and a markedly higher overall price tag of $1.6 trillion, but that failed to win over Pelosi.

“This isn’t half a loaf, this is the heel of the loaf,” Pelosi said in a televised interview Thursday. Pelosi spoke after the White House attacked her as “not being serious.”

White House Chief of Staff Mark Meadows has drawn a line in the sand and warns that Trump won’t approve legislation that approaches a $2 trillion threshold.

So, why do the Dems want to stimulate the economy, while the GOP is dragging its feet? Two reasons:

1. The GOP is the “party of the rich.” Gap Psychology shows why the primary goal of the rich is to become richer. The only way to do that is to widen the income/wealth/power Gap between the rich and the rest.

The Gap is what makes them rich; the wider the Gap, the richer they are.

There are two ways for the rich to widen the Gap: Either get more for themselves or force the “non-rich” to settle for less. The COVID recession is forcing the “non-rich” into desperate poverty.

Desperate workers, willing to accept any job at a low wage, are exactly what the rich want. A generous stimulus package would narrow the Gap.

Desperate workers, wider economic Gap: Sounds like heaven to the party of the rich.

2. A stimulus package passed today would primarily affect the post-election economy — much too late to improve the GOP’s political chances this year.

So from the Republican standpoint, why do anything that might help a possibly Democrat administration, especially since the GOP has been locked into the false narrative that deficits are bad?

They would rather wait until they see this year’s election results. Then if they win, they always can ride in heroically to stimulate economic growth before the mid-term elections.

As for the starving, jobless Americans, who cares about them? To the right-wing, they merely are what Modern Monetary Theory refers to as “buffer stock.”

Cynicism is the number one product in Washington.

Rodger Malcolm Mitchell

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

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

A letter that every politician and every voter should read Sunday, Sep 27 2020 

I just received the following letter from a woman, Elizabeth Estrada Lopez, who read the recent post, Affordable housing laws are not a solution. They are a symptom.

I was so impressed by her situation and by her wisdom, I wanted to share her letter, and my response, with you. She wrote:

Lack of money or low wages is a valid point.

Affordable housing is not fair housing.

Many below & poverty level wage people, like myself, who work very hard and need affordable housing, are placed in impoverished areas or areas where there is no public transportation and end up paying more in gasoline to travel back and forth to work & grocery shopping that is it a lose-lose proposition.

People fail to thrive grouped in impoverished communities.

The environment is a daily discouragement creating more stress and low self-esteem. This is my experience and is not a blanket statement that covers the world.

I responded, “Thank you, Ms. Lopez. I hope you don’t mind that I intend to quote you in a future post. You make several good points that I would like to write about. Be well, Rodger Malcolm Mitchell.

She, in turn, wrote, “Yes Sir. I want to help society in any way I can.”

Oh, if only our politicians had the same attitude as Ms. Lopez.

As the article stated, the widespread, false belief that the federal deficit and debt are too high, “unaffordable.” and “sustainable” is fostered and disseminated by the rich to keep down those “below & poverty level” people like you.

The reason is “Gap Psychology, the desire to distance oneself from those below, on any comparative measure.

“Rich” is a comparative, not an absolute, term.  A man having $1,000 is rich if everyone else has $1,000, but he is poor if everyone else has $1 million. So, there are two ways to become richer: Obtain more for yourself, or force others to have less.

Poverty is not a lack of work. Poverty is not a lack of effort. Poverty is not a lack of intelligence. Poverty is a lack of money, and the solution to a lack of money is to give impoverished people money.

Period.

The federal government has infinite money. The federal government could and should give people money. Doing so, would eliminate, or at least dramatically reduce, poverty.

There is another, widespread, false belief, and that is, if the government gives people money, they won’t work.

The rich like to portray the poor as lazy and deserving of their poverty. So in the minds of the rich (and many in the middle-income groups) giving people money is immoral, in that is encourages sloth.

Utter nonsense.

The fact is that by any standard, the poor on average work harder than those above them, economically. No one labors less than the rich except for the very rich.

Sadly, even Modern Monetary Theory (MMT), an economic philosophy that understands the federal government’s unlimited money supply, offers as a solution, something they call a “Jobs Guarantee” (JG). It is a process by which the federal government finds or creates minimum-wage jobs for the unemployed.

The only thing the “Jobs Guarantee” guarantees is that the poor will work hard, stay poor, and live in the impoverished areas you described, and never escape.

Question for economists and politicians: If the poor need money, why give them minimum wage jobs? Why not give them the money they need?

Answer: Because of some deeply ingrained belief that “if given money, the poor won’t work. They need the moral pride that comes with having a job.”

Again, utter, puritanical and paternalistic nonsense. A minimum wage job does not provide morality or pride. It only provides insufficient money, together with the “daily discouragement creating more stress and low self-esteem” you, Ms. Lopez, described.

If a person loses her job, has she suddenly become lazy or immoral? Of course not, but it is a myth the rich like to spread.

Today’s America reminds me of a billionaire uncle who won’t help his impoverished nieces and nephews because of self-proclaimed “moral reasons.”

My heart goes out to you, Ms. Lopez. You write like an intelligent and decent woman, whose poverty is not due to any character flaw, but rather to fate.

When I read a letter such as yours, all I can think is, “There but for the grace of God, go I.

I will send a copy of your letter to a few Senators and Representatives. Perhaps they will think more seriously about how to help the impoverished, and not merely disparage them.

Meanwhile, you and your family, friends, and neighbors, please be sure to vote for the politicians most likely to empathize with your plight, and offer real solutions.

One day, Americans will understand the needs of the poor, the power of our government, and the solutions for the less fortunate. Some may say, “yes, but not now.” I say, “If not now, when?”

Much good fortune to you,

Rodger Malcolm Mitchell

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

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

Joe Biden’s big mistake Monday, Aug 24 2020 

  1. Monetary Sovereignty: This term describes the unlimited ability to issue and control a currency.  Even without collecting taxes, a Monetarily Sovereign can spend forever.
  2. Gap Psychology: This term refers to the desire to distance oneself from those below, in any social ranking, and to come nearer to those above.
  3. The Big Lie: This term describes the false claim that a Monetarily Sovereign entity needs or uses income.

Joe Biden made a big mistake. He revealed, in an interview with ABC’s David Muir, that he doesn’t understand federal financing.

Joe Biden releases plan to reopen schools amid coronavirus ...

“Everyone should pay their fair share” of a useless and regressiv tax.

Here are some excerpts:

Biden to ABC’s David Muir on raising taxes: ‘No new taxes’ for anyone making less than $400,000
Everybody should pay “their fair share,” Biden said.
By Arielle Mitropoulos, August 23, 2020, 7:09 PM

Joe Biden and his running mate Sen. Kamala Harris, the former vice president (said) everybody should pay “their fair share.”

“I will raise taxes for anybody making over $400,000,” Biden told Muir, adding, “no new taxes” would be raised for anyone making under $400,000.

Presumably, Biden and Harris believe that making “soak-the-rich” statements will endear them to the working populace, who gleefully enjoy any punishment of the rich.

They may be right about those emotions, but they are at least partly wrong about the economics.

They are right that raising taxes on the rich would narrow the Gap between the rich and the rest, which would benefit the economy in myriad ways.

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.

But, the federal government neither needs nor uses tax income. The federal tax dollars you send to the U.S. Treasury leave the economy and cease to exist. So, rather than holding taxes steady, the Democrats should cut taxes for everyone who is not rich.

Tax policy is taking on additional significance for the 2020 presidential election, with the economic crisis inextricably tied to the pandemic, and more than 30 million Americans currently on unemployment.

Although Biden has been leading in the polls, polls also have shown that voters have greater confidence in President Donald Trump when it comes to the economy.

Voters may have greater confidence in Trump regarding the economy, because Trump has taken credit for the ongoing effect of President Obama’s increased deficit spending.

Trump, with his tax cuts for the rich and his increased import duties — which effectively are tax increases on the “not-rich,” has widened the Gap between the rich and the rest.

“Is it smart to tax businesses while you’re trying to recover?” Muir asked.

“It’s smart to tax businesses that are in fact making excessive amounts of money and paying no taxes,” Biden told Muir.

“It’s how we did it last time,” he said, in reference to the 2008 recession, adding that his work, at the time, with then-President Barack Obama, led to economic recovery, “with the largest, the most consecutive number of months of growth in jobs of any time in history. We did it the right way.”

No, it is not smart to tax business when you’re trying to recover, or any other time. What they actually did was pump money into the economy with increased federal deficit spending:

Federal debt growth declines in advance of recessions (vertical gray bars). Then, to cure recessions, the federal government increases deficit spending.

A growing economy requires a growing supply of money. Increased federal deficit spending (which increases the federal debt) grows the economy. When federal deficit spending does not increase sufficiently, recessions result. These recessions are cure by increases in federal deficit spending.

Increased taxation reduces federal debt growth and therefore is recessionary. 

Taxing the rich more, while holding taxes level for the “not-rich” would be recessionary. While taxing the rich would help narrow the Gap, the recessionary effect must be overcome by taxing the not-rich less.

“Look [at] what he’s doing,” Biden continued, criticizing the president. “The money was supposed to go to help small businesses. You have one in six small businesses that have already closed. You’re finding a situation that over 60% of the money — only 40% of money for small businesses went to small businesses.”

When Muir pressed him on whether taxes would be raised on small businesses, Biden emphatically said, “No.”

“There will be no raising taxes” on the “90% of the businesses out there are mom and pop businesses — that employ less than 50 people,” Biden responded.

“We have to provide them with the ability to reopen. We have to provide more help for them, not less help,” he said.

Biden is correct that small businesses need help, but this will not be accomplished by taxing large businesses, however one defines “large” and “small.”

That a business employing more than 50 people should be considered “large” and taxed more, is ludicrous. The number of employees is not relevant to “making excessive amounts of money and paying no taxes.” What is relevant? Profits and taxes.

Why penalize businesses for hiring? It makes no sense to penalize businesses at all, because businesses provide goods, services, and money to the economy.

To narrow the Gap between the rich and the rest, the highest personal incomes should be taxed, not businesses.

In Summary, Biden doesn’t understand Monetary Sovereignty, Gap Psychology, and this misunderstanding leads him to tell The Big Lie.

Assuming he wishes to help the underclasses, narrow the Gap, and stimulate the economy he should begin by eliminating FICA, while leaving the funding of Medicare and Social Security to the federal government.

Contrary to popular wisdom, FICA does not fund Social Security or Medicare. Like all federal taxes (but unlike state/local taxes) FICA funds nothing. The federal government could fund unlimited spending with no taxes.

FICA is the most regressive tax in America. Eliminating FICA would benefit workers and businesses. It would decrease unemployment by making employment cheaper. It has been suggested seriously by just one politician, none other than Donald J.Trump. But, in perhaps the only time the GOP toadies have stood up to Trump, they said “No.”

Ironically, this may have been the only good idea Trump has had during his term.

Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #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

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