Why do the richer grow richer and the poorer stay poorer? Wednesday, Nov 20 2019 

The November 2019 issue of Scientific American magazine included an article titled, “The Inescapable Casino,” by Bruce M. Boghosian a professor of mathematics at Tufts University, with research interests in applied dynamical systems and applied probability theory.

Professor Bruce M. Boghosian

The article purportedly reveals:

“A novel approach developed by physicists and mathematicians describing the distribution of wealth in modern economics with unprecedented accuracy.”

Economics is based mostly on psychology, which itself is a science only in the loosest application of the term. Thus, unlike most sciences, economics rarely is capable of creating reproducible tests that result in mathematical laws.

But, SA being a science magazine, Professor Boghosian’s article attempts to attach scientific credibility to economics by creating a casino-based mathematical explanation of why the rich get richer and the poor stay poorer.

His own summary of his findings is:

“1. Wealth inequality is escalating in many countries at an alarming rate, with the U.S. arguably having the highest inequality in the developed world.

“2. A remarkably simple model of wealth distribution developed by physicists and mathematicians can reproduce inequality in a range of countries with unprecedented accuracy.

“3. Surprisingly, several mathematical models of free-market economies display features of complex macroscopic physical systems such as ferromagnets, including phase transitions, symmetry breaking and duality.”

Here are a few more snippets from Professor Boghosian’s article:

Suppose you are invited to play a game. You must place some ante—say, $100—on a table, and a fair coin will be flipped. If the coin comes up heads, the casino will pay you 20 percent of what you have on the table, resulting in $120 on the table.

If the coin comes up tails, the house will take 17 percent of what you have on the table, resulting in $83 left on the table. You can keep your money on the table for as many flips of the coin as you would like.

Each time you play, you will win 20 percent of what is on the table if the coin comes up heads, and you will lose 17 percent of it if the coin comes up tails. Should you agree to play this game?

After five wins and five losses in any order, the amount of money remaining on the table will be:

1.2 x 1.2 x 1.2 x 1.2 x 1.2 x 0.83 x 0.83 x 0.83 x 0.83 x 0.83 x $100 = $98.02

so you will have lost about $2 of my original $100 ante.

The rest of the article describes the mathematics of why supposedly even exchanges between richer persons and poorer persons ultimately favor the richer persons. And mathematical examples are given of water boiling, the strength of a ferromagnet and phase transitions.

Aha. But, it’s mathematics, so it must be true — except not only does it have nothing to do with casino play, it has nothing to do with real-world economics.

First, the examples do not describe “wealth.” They seemingly describe net income, a different concept.

But far more important, although the examples are supposed to demonstrate why the richer grow richer and the poorer stay poor (or poorer), they do not.

The problem has long been known in the computer world as “GIGO,” Garbage In, Garbage Out. What is the basis for Boghosian’s 20% and 17% starting figures? There is none.  The professor arbitrarily chose numbers that “worked,” which “amazingly” multiplied to prove his point, whatever that may be.

Had he arbitrarily chosen even slightly different numbers, the results would have been vastly different. Try it yourself with ever-so-slightly different numbers.

Further, the whole concept of paying or receiving a percentage of what’s “on the table” has nothing to do with the way a casino operates, and even less to do with the way your personal finances operate.

You do not make or lose a percentage of what’s on the table. You make or lose a percentage of what you invest.

Finally, Boghosian proves his point by making predictions of the past. It’s a problem all we economists face. Unable to predict the future with any reasonable degree of accuracy, we predict the past.

We take any set of inputs and compare them to all past results, and if we can find some inputs that correspond with results, we claim to have discovered cause and effect.

It’s, for instance, the classic problem of chartists — the people who use graphs of past stock market movements to predict future stock market movements. The graphs provide perfect representations of the past — until they don’t, because the past does not perfectly create the future in psychology.

Not being an economist, Boghosian hasn’t encountered this flaw, so he is excited to have discovered this strange mathematical relationship among boiling water, ferromagnets, phase transitions, and wealth transfers.

(He also has no understanding of Monetary Sovereignty, so he speaks of taxes funding government activities, which is true only of monetarily non-sovereign governments. But that is a mere detail.)

That said, Boghosian is correct about money tending to flow upward from poorer to richer, and he is correct that it involves percentages, but not in the way he claims.

Here, in simple terms, are the three reasons why the richer grow richer and the poorer stay poorer.

  1. Richer people have higher incomes.
  2. Richer people spend a lower percentage of their higher incomes.
  3. Richer people save and invest a higher percentage of their higher incomes.

Put those three bits of mathematics together and you can see the rather obvious solution to the title question.

Consider three classic nuclear families of two parents and two children.

In nuclear family “A” the parents together earn $30,000 a year. To pay for food, housing, clothing, taxes, entertainment, school, etc. the nuclear family just scrapes by, spending $30,000 a year, and saving/investing $0. After 10 years, they have saved $0, and their children will receive nothing when the parents die.

In nuclear family “B” the parents together earn $50,000 a year. To pay for food, housing, clothing, taxes, entertainment, school, etc. the nuclear family spends $45,000 a year, and saves/invests $5,000, about 10% of their income. After 10 years, they have saved about $50,000, more or less, depending on how well they invested, and their children may, or may not, receive a minimal amount when the parents die.

In nuclear family “C” the parents together earn $1,000,000 a year. To pay for food, housing, clothing, taxes, entertainment, school, etc. this nuclear family spends $500,000 a year, and saves/invests $500,000, about 50% of their income. After ten years they have saved about $5 million, depending on how well they invested, and their children will receive millions when the parents die.

And there it is, in simplistic terms, the reason why the richer grow richer and the poorer stay poorer, and the Gap between them widens.

Choose any set of numbers you wish, and you will find that the richer are able to save and invest not just more of their incomes, but a higher percentage of their incomes, and they are able to pass down to their children substantially more.

The pseudo-mathematical formula is:

More x More = Increasingly more.

So mathematically, the Gap between the richer and the poorer not only must grow, but it must grow at an increasing rate.

But there’s even more.

The Gap is what make the rich rich and the poor poor. Without the Gap no one would be rich or poor. We all would be the same. So to feed their desire to become richer, the rich must widen the Gap, which can be accomplished by increasing their own wealth or by decreasing the wealth of the poorer.

This desire to widen the Gap is known as “Gap Psychology.”

The rich run the politics of America. To become richer, they pay politicians to provide favorable tax laws for the rich, and to resist giving benefits to the poor. They also pay the media and university economists to disseminate false statements about Social Security, Medicare, and other social benefits becoming “unsustainable” and  “insolvent.”

In summary, the Gap between the rich and the rest naturally widens, not because of a mathematical formula involving inter-class transactions, but rather because the rich are able to retain, invest, and pass to their children a higher percentage of their higher incomes.

And that is why a nation’s overall prosperity depends on such efforts as are described in the Ten Steps to Prosperity (below).

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

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

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

 

Federal Budget: Doing right by doing “wrong.” Sunday, Oct 27 2019 

His adversaries in Congress accuse him of defying the law, acting like a king, and speaking and acting in a way that was unbecoming of the presidency.

He is an outspoken, temperamental populist given to fiery speeches laden with insults, blatant racism, and suggestions that his political enemies be hanged.

He rose to political power by aligning himself with a loyal base of poor mountaineers and small farmers seeking a political champion.

He is hated for his adamant opposition to racial equality and the rule of law. Rather than root out institutional white supremacy that had fueled the American Civil War, he thwarts attempts to bring blacks equal protection under the law.

“Everyone would and must admit that the white race is superior to the black,” he said.

He suggests deporting millions of black men. He accuses [his political opponents] of plotting a coup.

He casts himself as the only thing standing between whites and “negro domination.”

As you may have guessed, the above excerpt is from an article titled, The impeachment of Andrew Johnson,” though it sounds uncannily familiar, doesn’t it?

Donald Trump is the least intelligent, most immoral, least capable, most psychopathic President I’ve seen in my 84 years, and his administration’s record collection of temporary and acting incompetents (like substitute teachers) does nothing to improve his decision-making.

Yet despite himself, Trump sometimes accidentally does something right, though he probably doesn’t realize it — nor does Eric Boehm and the editors of Reason.com, as excerpts from the following article demonstrate:

BUDGET DEFICIT
Federal Deficit Hit $984 Billion Last Year—a Nearly 50 Percent Increase Since Trump Took Office
In three years in office, Trump has added more to the national debt than President George W. Bush did in his entire two terms.
Eric Boehm | 10.25.2019

During the 2016 campaign, President Donald Trump said he’d be able to wipe out the national debt in eight years. Instead, after three years in office, he’s overseen a nearly 50 percent increase in the gap between how much the government takes in and how much it spends.

Chart by Eric Boehm. Source: U.S. Treasury data

The Treasury Department announced Friday that the official federal deficit for fiscal year 2019, which ended in September, was $984 billion—in line with what the Congressional Budget Office (CBO) estimated last month.

The announcement serves as official confirmation that the federal government’s mountain of red ink has grown dramatically during Trump’s first three years in the White House.

It is now approaching levels not seen since the early Obama years.

In order to “wipe out the national debt in 8 years,” (a 100% reduction in the debt) the Trump administration would have to run an 8-year surplus totaling about $20 trillion, i.e take $20 trillion out of the economy.

History has taught us that removing $20 trillion from the private sector — would cause, not just a recession, but a depression — and not just any old depression, but a depression the likes of which America never has experienced.

Every depression in U.S. history has been introduced with federal debt reduction, which takes dollars out of the private sector.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

The economy usually is measured by Gross Domestic Product (GDP), and the formula for GDP is:

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

To reduce federal debt one must reduce federal spending, and/or increase tax collections, both of which reduce GDP.

Federal deficit decreases cause recessions (vertical gray bars), which are cured by federal deficit increases.

By formula, federal debt reductions cut GDP.

The deficit is growing despite growth in tax revenues. The Treasury Department reported that while overall tax receipts rose by about 4 percent, federal spending grew by 8 percent.

In a statement, Treasury Secretary Steve Mnuchin said the data showed “President Trump’s economic agenda is working”; he also touted the low unemployment rate and ongoing economic growth.

One would think that deficit growth and economic growth happening simultaneously, and the fact that deficits pump growth dollars into the economy, would be sufficient to convince Trump, Mnuchin, and Eric Boehm that deficts grow the economy.

Sadly, such irrefutable evidence + mathematical logic don’t seem to be sufficient.

What’s really irresponsible is spending growth that’s outpacing revenue growth by a rate of 2-to-1.

Trump’s defenders will point out that he’s not solely responsible for setting the government’s budget.

That’s true, but he has the final say on all spending bills and he has been refusing to force the spending cuts Mnuchin says are necessary.

Why is “spending that’s outpacing revenue growth” (i.e. adding dollars to the economy) “irresponsible”?

Mnuchin never says, probably because it isn’t irresponsible; it’s necessary for economic growth.

When Congress passed a bipartisan budget plan in March 2017 that annihilated Obama-era spending caps, Trump begrudgingly signed the bill while promising that he’d never agree to another spending hike like that.

Earlier this year, when Congress passed another budget-busting spending bill, Trump signed it without so much as expressing a second thought.

Could it be that Trump intuitively understands that federal deficits spending adds growth dollars to the economy?

Perhaps nothing demonstrates Republicans’ complete abdication of fiscal conservatism as much as this: In three years in office, Trump has added more to the national debt than President George W. Bush did in his entire two terms. (Though Bush did have the advantage of starting out with a budget surplus in his first year.)

Fiscal conservatism, aka “austerity,” aka taking money from the private sector which needs the money, and giving it to the federal government, which doesn’t need the money, is the worst possible financial plan — unless one prefers recessions and depressions.

Recessions are caused by money shortages and cured by money supplements. The private sector is limited in its ability to create growth dollars; the federal government, being Monetarily Sovereign, is not limited.

Now we come to two of the most amazing sentences in Mr. Boehm’s article:

In the early Obama era, it was not uncommon to hear Republicans admit that Bush’s spendthrift ways had paved the way for worse.

Now, on an annual basis, Trump’s deficit spending is nearly as bad a Obama’s was over two terms.

During Bush’s 2nd term, the deficit averaged only about $250 Billion, at which point began the “Great Recession.”

During Obama’s 2 terms, the deficit averaged over $1 trillion, and the economy grew massively, and it continues to grow.

And yet, Mr. Boehm wants deficit reduction! It boggles.

Give Trump a few more years and I’m sure he’ll surpass Obama. That’s because the nature of the current budget deficit is fundamentally different from the peaks of the early 2010s.

Those deficits eventually tapered off for a variety of reasons. Recovery from the Great Recession boosted tax revenue.

The spending binge approved in response to the recession faded away.

And fiscally prudent Republicans imposed some modest caps on future spending growth.

But, Mr. Boehm, the deficit still averaged over $700 Billion — far more than the Bush later years — and the economy still grows, also far faster than during the Bush later years.

Coincidence, Mr. Boehm?

Now? The country is running a massive (and growing) deficit despite a decade of economic growth and a low unemployment rate.

“Higher outlays for Medicare, Social Security, Defense, and interest on the public debt” drove the deficit increase in fiscal year 2019, the Treasury Department says.

See how Boehm still doesn’t get it?

The “massive (and growing) deficit” has caused “a decade of economic growth and a low unemployment rate.”

Then Boehm goes on to exacerbate the ignorance:

The current deficit isn’t the result of temporary circumstances like World War II or a major recession.

It’s a systemic deficit, a result of poor budgeting and bad decision-making by members of Congress and the current administration.

It’s not going to resolve itself, and it’s on pace to get much worse.

We only can pray that he is correct and that the deficit will get much “worse,” i.e. pump much more growth money into the economy.

The Government Accountability Office (GAO) has called the federal government’s current fiscal situation “unsustainable,” and the CBO expects the national debt to hit “unprecedented levels” in the coming decades, well above the record highs set during World War II.

Ah, yes: “Unsustainable.” The favorite word of the economic ignorant. You probably have seen dozens of articles decrying the debt or deficit by using this word, and in not one of those articles did you ever see an explanation of why it supposedly is “unsustainable.”

The economic blowhards have been condemning the debt for longer than you have been alive, and still they have learned nothing. (See: “It is 2019, and the phony federal debt “time bomb” still is ticking.”)

“A deficit of this size following the longest span of economic growth in history shows just how reckless our leaders have become.

This is exactly the time when deficits should be contracting, not expanding,” Leon Panetta, co-chairman of the Committee for a Responsible Federal Budget, said in a statement.

No, Mr. Panetta. “The longest span of economic growth in history” was caused by deficits. Without deficits, there could have been no growth.

There is no time when deficits should be contracting unless one prefers a contracting economy.

And please don’t get me started on that Committee for a Responsible Federal Budget, which has been wrong forever about federal finances.

“But instead of getting our fiscal house in order and preparing for the next downturn, our leaders continue to binge on debt-fueled tax cuts and spending hikes rather than showing the leadership necessary to set our fiscal path.”

Clearly, Panetta believes (or more likely, is trying to make you believe) that our Monetarily Sovereign federal government can run short of its own sovereign currency, the U.S. dollar.

He also wants you to believe that federal financing is like personal financing.

You’ll notice (and this is important) that nowhere in Boehm’s diatribe is there any data showing how federal deficits have an adverse effect on the economy.

He simply spouts generalized reprimands like, “unsustainable,” “mountain of red ink,” “irresponsible,” “abdication of fiscal conservatism,” “spendthrift ways,” “spending binge,” “poor budgeting and bad decision-making,” and on and on.

But where, Mr. Boehm, are the data showing cause and effect — the data showing that large deficits cause some negative effect? They are nowhere to be found.

You will not find anywhere, a graph like the one above, showing that Federal deficit decreases cause recessions, which are cured by federal deficit increases.

The reason for the absence of such data: They do not exist.

A growing economy requires a growing supply of money, and federal deficit spending increases the money supply.

Even the ordinarily distasteful words “deficit,” and “debt,” are misleading, because they really represent surpluses for the economy.

Everything — language and the absence of data — has been gathered together to make you fear the one thing necessary to grow our economy: Federal deficit spending.

Why?

The very rich, who run America, do not want you to ask for more benefits from the federal government. This is their way making you agree to unnecessary limitations on what you receive from the government.

It’s a function of Gap Psychology, the desire of the rich to distance themselves from the rest of us. It is their way of becoming richer, for the larger the Gap the richer they are.

Democrats have abandoned all pretense of caring about the national debt, or even attempting to explain how they might pay for new federal programs.

And Republicans seem capable of offering nothing more than obviously false promises and empty rhetoric.

Mr. Boehm is right about the Democrats and Republicans duplicity, but not in the way he claims. These are the parties that have agreed on the useless — no, harmful — federal debt ceiling.

Both parties have capitulated the demands of the rich that you be misled.

Aside from that, Mr. Boehm’s article is one giant, misleading mess of false economics.

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

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

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

Economics: Faux complexity of the simple, or faux simplicity of the complex? Monday, Oct 14 2019 

One definition of “science” is: A systematic enterprise that builds and organizes knowledge in the form of testable explanations and predictions about the universe.

Economics is a “social science. One wonders whether it can be called a science at all, for it really is an accounting-based branch of psychology, which itself holds to the title, “science,” by its fingertips.

As for “testable explanations” and “testable predictions,” not so good. The psychology role in economics testing is at its best when “predicting” history, but fails repeatedly when trying to predict the future.

Economics approximates religion, which predicts that your following (or not following) certain arbitrary, often illogical and meaningless, rules will be rewarded in some vague way by an omniscient entity.

Accounting
While accounting can have complex and changing rules, it is based on simplicity: The direct relationships among income, saving, and outgo.Image result for complexity vs simplicity

Any change in one factor is balanced by a mathematically equal change in the other factors, thus the word “balance” sheet.

Based on its arbitrary rules, accounting strictly is logical and eminently predictable. Adding to the left side of a balance sheet always requires adding to the right side, yesterday and tomorrow.

Though based on arithmetic, and in one sense on algebra (the relationship to the “=” sign), accounting is not a science. Though it organizes knowledge, it doesn’t create testable explanations and predictions about the universe.  It simply is a score-keeping method for money-related valuations.

Psychology
This brings us to the other leg of economic’s extremely shaky, two-legged stool, psychology.

In its attempts to rise above religion (the pompous quest to know God’s mind) psychology does run tests and many of these tests provide results that pass for explanations that even are the basis for predictions.

But the economic results seldom are conclusive, while the explanations are subjective, and the predictions often are laughably random — just like with religion.

In real science, testing attempts to change one variable while holding all other variables stable. In psychology, and so in economics, holding all other variables stable generally proves to be impossible. So results vary wildly.

But that impossibility does not deter people known as “chartists.” From Investopedia:

A chartist is an individual who uses charts or graphs of a security’s historical prices or levels to forecast its future trends.

Chartists generally believe that price movements in a security are not random but can be predicted through a study of past trends and other technical analysis.

Generally, chartists will use a combination of indicators, personal sentiment, and trading psychology to make investment decisions.

Serious chartists can seek to obtain the Chartered Market Technician designation which is sponsored and written by the Market Technicians Association.

Even if charting could predict future prices, it still could not predict future prices. 

Future stock prices are based on demand. So if charting could predict future prices, everyone would wish to buy or sell according to what the chart indicates.

In that way, charting would affect demand, which in turn would affect charts in an endless helix of price changes, all having little to do with a security’s underlying value. 

Thus, charts destroy their own predictions, the “better” the chart, the more the destruction.

Though securities charting doesn’t work as claimed, it does have one value: It establishes a pseudo-scientific, mathematical veneer to its one area of economics.

That is why economics is obsessed with graphs. We economists wish to use mathematics, so to demonstrate our “real science” chops.

That also is why economists love complexification. Read any economics textbook, I dare you. You will discover a convoluted amalgam of graphs, charts, and equations and balance sheets, and difficult wording, all designed to give scientific credence to a non-credible forecasting ability.

How about “Externality,” “Autraky,” “Opportunity set,” “Convexity,” “Dynamic stochastic general equilibrium,” and one of my favorites that often is in the news, “quantitative easing.”)

I too am guilty of graphs and charts, though I use them mostly to disprove economic nonsense. For instance.

Blue line: Gross federal debt. Red line: Gross federal debt/GDP. Green line: GDP

The above graph disputes the “debt-clock” worriers, who falsely claim the federal debt is like personal debt and so is “unsustainable” because of the following myths:

A. The federal debt is too big (blue line) to sustain, [though it has grown massively and still is “sustained.”]
B. The federal debt is too high a percentage of GDP (red line), [though it repeatedly has passed predicted limits with no ill economic effects.]
C. The huge federal debt will slow economic growth (green line), [which has shown scant signs of slowing for 80 years.]

The faux simplicity is the false claim that federal debt is like personal debt. The public understands personal debt, so it is led to believe it understands federal debt.

The effect of complexity is to confuse either the author or the readers, and in that it has done remarkably well. The vast majority of the literate world is confused.

Once we wipe away the faux complexity, we are left with the following simplicity:

I. The U.S. federal government, unlike state, local, and euro governments is Monetarily Sovereign, which means it is sovereign over the U.S. dollar. It never unintentionally can run short of dollars. Even if all federal tax collections fell to $0, the federal government could pay any size debt denominated in dollars. Further, it has absolute control over the relative value of the dollar.

Monetary Sovereignty is fundamentally simple. Anyone who has played the board game, Monopoly, knows the Monopoly Bank is Monetarily Sovereign. By rule, it never can run short of Monopoly dollars and can create all it needs.

II. Recessions are caused by a lack of money, and they are cured by money creation, particularly by federal deficit spending.

III. Inflations are not caused by government currency printing but rather by shortages, usually shortages of food or energy. Counter-intuitively (for many), increased government spending, to reduce food or energy shortages, reduces inflation.

IV. The human side of economics is ruled by Gap Psychycholgy, the desire to distance oneself from those “below” on any social scale and to approach those “above.”

If you understand the above four simplicities, you understand the Ten Steps to Prosperity (below).

You understand why the federal government can eliminate FICA, increase Social Security and Medicare, fund advanced education for all who want it, and reduce poverty, while preventing and curing recessions, depressions, and inflations.

And you also understand why the government doesn’t do these things that would benefit the middle and lower-income/wealth/power groups.

In short, you will know more economics than your favorite politician, news source, or friend.

And you won’t even have to learn to calculate “cross elasticity of demand.”

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

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

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

Right vs. left vs. Trump: The great Gap Psychology misunderstanding. Tuesday, Oct 8 2019 

For as long as I have been alive, which now exceeds 80 years, the right-wing (conservatives) and the left-wing (progressives) have seen the same world with different eyes.

Though generalities, by definition, do not apply to all cases, one can say that conservatives wish to “conserve” and progressives wish to “progress.”

This fundamental difference manifests in several ways. Conservatives are more likely to be “originalists,” wishing to interpret the Constitution through the eyes of the original drafters, while progressives wish to interpret the Constitution through the eyes of someone living today.

Image result for opposites photo

When viewed through original eyes vs. today’s eyes, many issues can be seen quite differently.

Gun ownership, aid to the less fortunate, abortion, voting rights, female rights, religion, speech, morals, war, government power, etc. — identical facts often are interpreted in opposition — and perhaps no more so than today, by people who sincerely want a better world, but merely see different paths for getting there.

Donald Trump has exaggerated the differences so that opposing sides neither understand, nor seemingly even want to understand, the others.

The reason is that Trump, who formerly was a Democrat, then myseriously became a Republican, does not have a philosophy regarding any of the above issues, but rather employs the philosophy: “What’s best for Trump is best for the world.”

To achieve his personal goals, Trump deliberately has set the two sides in bitter opposition through the politics of hate.

In Trump’s world, the only good people are those who support him, and all the others must be destroyed. Compromise is weakness. Apology is weakness. Compassion is weakness. The truth is what he claims it is.

Why does this Trump-centric philosophy have strong appeal to a large number of people?

It begins with the fact that Trump demonstrates hatred of the same people his followers hate: The poor, the non-white, the immigrants, the non-Christians, the gay, the progressives.

Seemingly, the people Trump admires most are hate-mongering strongmen, dictators like Vladimir Putin, Kim Jong-un, Rodrigo Duterte, and Recep Tayyip Erdoğan.

And all this hatred has its basis in Gap Psychology.

The foundation of hatred is fear.

It is almost impossible to hate someone or something unless you fear them in some way. Do you hate the poor? Do you fear they will impinge on your neighborhood, alter your life in some way, take money from you?

Do you hate the non-white for the same reasons, or that they will bring criminality or unwanted changes to your life? Do you fear the non-Christians for their “alien” beliefs that will affect your own beliefs? Do you fear the gays for turning your children gay? Do you fear the progressives for their support of the people you fear?

Gap Psychology describes the fear that the upper-income/wealth/power groups have of the lower-income/wealth/power groups. Imagine the fear and loathing many people feel when a ragged panhandler approaches.

Trump exploits these often-latent fears and brings them to the surface. He tells you Mexicans are rapists and criminals. He tells you Muslims are terrorists.  He tells you immigrants will take your job.

He tells you the poor will take your money, and the progressives will take your guns and kill your babies and steal your money. He tells you only he can save you.

And this politics of fear works on those who are most susceptible to belief in conspiracy theories and undocumented allegations. The politics of fear works on those who already are afraid.

This “fear-of-the-other” is merely a subset of Gap Psychology, which has two parts:

  1. Wanting to distance oneself from those “below” you on any socio-economic measure, and
  2. Wanting to come closer to those “above” you.

The importance of Gap Psychology in our daily lives cannot be overstated. It, along with Monetary Sovereignty, describes almost everything that happens in the world of Economics.

Quoting from What is Gap Psychology? A brief explanation”

“Gap Psychology affects the clothes you wear, the house in which you live, the schools you attend, the car you drive, the stores and restaurants you frequent, the church you attend, your job, your hobbies, your vacations, your voting, the person you marry, even the name you give your child.”

Gap Psychology is both cohesive and dividing. Evolution has retained it as an integral part of higher-level social species’ interactions. It both strengthens and weakens groups.

Gap Psychology creates ambition and enthusiasm, aversion and disgust. It supports dictators and causes wars. Gap Psychology is the basis for Donald Trump’s hate-mongering power.

Economists don’t speak of or even consider Gap Psychology, and it is seldom if ever taught in economics courses,  which represents a huge hole in the science.

Teaching economics without teaching Gap Psychology is comparable to teaching mathematics without arithmetic.

Gap Psychology not only should be part of every economics course. It should be a part of every class. It is that fundamental.

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

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The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

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