When there is an unwanted effect, the solution is to kill the cause.

When you are faced with an unwanted effect, the solution is to find and then solve the cause. If you don’t understand the cause, you will be faced with the same effect again and again.

Washington Post headline:

Inflation emerges as defining economic challenge of Biden presidency, with no obvious solution at hand

America is emerging from the pandemic facing its biggest inflationary spike in decades, as startling and persistent price hikes threaten to undermine the recovery, while posing an entirely new kind of economic challenge to the Biden presidency.

Policymakers are facing the devilish and unfamiliar quandary of booming consumer demand and dramatic supply disruptions combining to push higher the cost of necessities such as food, gas and housing.

I’m not sure why this is such a mystery. All inflations are caused by the same thing: Shortages of key goods and services.

The cure for any inflation is to increase the availability of the scarce goods and services. So when the Washington Post says, “no obvious solution at hand,” they may be talking about no obvious political solution.

This inflationary burst has no single cause and no obvious solution.

The cause is a shortage of key goods and services. The cause is not federal deficit spending.

This graph shows there is no historical relationship between federal deficit spending (red) and inflation (blue). The graph also shows that reductions in deficit growth lead to recessions (vertical bars) which are cured by increases in deficit growth.

The economic solution is quite plain: Federal deficit spending to increase the supply of energy, food, computer chips, supply-chain methods, and labor.

Trillions of dollars in federal aid approved by Congress in response to the pandemic have led American consumers and companies to purchase more goods than ever before, putting new strains on global supply chains to accommodate the soaring volume.

But that higher demand has collided with shortages in workers, supplies and transportation capacity — challenges caused in part by the pandemic as well as long-standing structural deficiencies in the national economy.

It is those shortages, not federal deficits, that have caused inflation. Cure the shortages and you cure the inflation.

A record 4.4 million Americans quit their jobs in September as labor market tumult continued.

The labor shortage exists partly because people quit their jobs for a variety of reasons including:

  1. Need for child home care
  2. Low wages
  3. FICA cost
  4. Bad hours.
  5. Virus fear

There are others, but these all could be solved by federal deficit spending — a kind of “Manhattan Project” to cure the shortages that cause inflation.

  1. Federal pay for child home care
  2. Higher minimum wage together with the elimination of business taxes, to help fund the higher wages
  3. Elimination of FICA and reduction of income taxes at the low pay scales
  4. Standard 4-day week and/or shorter workday
  5. Federal support for vaccination rewards in selected industries.

The federal government also should reduce the need for human labor by funding more development of Artificial Intelligence (AI) and mechanization along with other labor-saving initiatives.

This inflationary burst has no single cause and no obvious solution.

The single cause is shortages. The obvious solution is to cure the shortages.

Trillions of dollars in federal aid approved by Congress in response to the pandemic have led American consumers and companies to purchase more goods than ever before, putting new strains on global supply chains to accommodate the soaring volume.

But that higher demand has collided with shortages in workers, supplies and transportation capacity — challenges caused in part by the pandemic as well as long-standing structural deficiencies in the national economy.

In the Eisenhower years, the federal government spent billions to improve highway traffic. Today, not only do highways need to be improved, but all other elements of the supply chain need similarly to be improved.

Our railroads are a mess. Our ports are inadequate. The quasi-privatized postal service is struggling. Shipping itself should be funded. These all are critical national needs, surely as important as weapons development.

Gas prices are at a seven-year high amid a global energy crisis, exacerbated by unusually high demand in Europe and a coal shortage in China.

Solutions: Temporarily fund increased oil drilling while funding more research and development of renewable, non-carbon fuels.

Food prices are rising at the highest level in 12 years amid severe droughts and spiking demand from families and restaurant reopenings.

Meat, fish and egg prices are up nearly 12 percent from a year ago — the highest increase since 1979 (other than the early days of the pandemic) — partly fueled by processing plants’ struggle to find workers.

While other industries have mechanized, food processing remains in the electronic dark ages. Federal funding of computerization would help, significantly, as would federal financial support for raising wages.

Droughts are being caused by climate change, which has been denied by the right wing and largely ignored by the left. Federal support for non-carbon energy sources would help solve the problem.

The longer inflation lasts, the greater the political problem for the White House and congressional Democrats.

Already news of the October inflation spike spurred new head winds for President Biden’s signature and key legislative initiative — the roughly $2 trillion Build Back Better package — exacerbating fears that other moderate Democrats may echo the concerns raised by Sen. Joe Manchin III (D-W.Va.) this past week about more spending.

Two people in California rescued by Coast Guard after boat bursts into flames | Daily Mail Online
Congress won’t use their infinite supply of water to put out our economic fire.

Meanwhile, Republicans have sharpened their attacks over inflation, seeing it as among their best arguments against the Biden’s presidency.

In other words, our boat is burning, but the politicians won’t put out the fire because they don’t want to use water.

Yet many economists say that the inflationary pressures hitting the U.S. economy were necessary to avoid the far worse scenario of a prolonged downturn and that focusing on rising prices risks obscuring the healthy facets of the current rebound such as the rapid rebound in jobs.

Most families have more financial resources than they did before covid, especially among the bottom third.

Even when accounting for inflation, disposable income has been roughly 9.5 percent higher in 2021 than it was before the coronavirus pandemic hit in 2019, according to Julia Coronado, president and founder of MacroPolicy Perspectives.

“It’s safe to say the bottom 40 percent of Americans are definitely better off in the past year from a combination of rising wages and government aid, even with inflation,” said Arindrajit Dube, economics professor at the University of Massachusetts Amherst.

The Democrats are laughably (or “cryably”) bad at telling their story. Somehow, they expect the public to see “the obvious,” but history shows that the public would rather believe the words of a personality than the facts.

The U.S. economy is growing at a very fast clip, especially compared with the rest of the world, and could recover the lost economic output from the pandemic by the end of next year, according to some projections.

Workers at the bottom of the income distribution are seeing meaningful wage increases, even factoring in inflation. Job openings are plentiful.

The stock market has continued its meteoric rise under Biden, with the S&P 500 jumping by more than 20 percent since he took office.

Inflation is up globally, not just in the United States, and the supply chain dysfunction reflects a decades-long trend of companies scattering their production sources across the globe.

All of the above is true, but who is telling the story? Certainly not Biden. And not the Vice President, whatever her name is and wherever she is hiding.

The old saw is, “If you’re defending you’re losing”, and the Dems aren’t even defending.

The approximately 50 percent rise in gasoline prices from last year — and 6 percent jump in October alone — has proved one of the most visible burdens on American families, spurred by a mixture of factors from Chinese manufacturing and an acute energy crisis in Europe.

To the average American voter, gas prices = inflation. The federal government has the financial ability to lower gas prices, although it may not have the political ability, unless someone in the government figures out how to tell the story.

Sadly, a personality like Donald Trump could do it, and he would do it, if it benefited him.

Supply chain backlogs also show little sign of easing before early 2023, said Phil Levy, chief economist at freight company Flexport.

While shipping rates from Shanghai to Los Angeles came down modestly from their September peaks and auto companies report slightly easier access to semiconductors now, a record 81 container ships were sitting off the southern California coast on Tuesday, according to the Marine Exchange.

A “Manhattan Project” for America’s supply chain could fix the problem.

Rent prices also jumped 0.4 percent from September to October, continuing an upward trend, while the sales price of a single-family home jumped by 16 percent over one year, according to the National Association of Realtors.

A red-hot housing market has been spurred on in part by low interest rates and shortages in supply caused by a freeze in construction during the pandemic.

Annual interest rates (purple) vs. annual growth of Gross Domestic Product. Rate reductions do not stimulate GDP growth.

Shortages in supply always cause price increases.

However, as with so many myths in economics, the myth that low interest rates are stimulative has no basis. In fact, there is evidence, as you can see from the above graph, that high interest rates are stimulative.

The reason: High rates cause the federal government to pour more interest dollars into the economy.

New housing construction (green) does not correlate with reductions in 30-year (brown) or 15-year (gold) mortgage rates.

New housing construction does not correlate with reduced mortgage rates. Both 30-year and 15-year mortgage rates have drifted downward since 1982, yet new housing construction (green) has changed wildly.

One reason for the lack of correlation may be that interest rates are not the deciding factor for home buyers.

Since 1980, the average sales price of a house has increased from $80,000 to $450,000. A 1% drop in mortgage rates for a $450,000 house (less 20% down) comes to $3,600 per year or $300 per month, not nearly enough to encourage or discourage the purchase of a $450,000 house.

Thus, contrary to common knowledge and Federal Reserve dogma, reducing interest rates is not stimulative, and in fact, the argument could be made that rate reductions are recessive.

Interest rates should be raised and home construction, especially the construction of modestly priced homes, should be federally aided.

Raising interest rates also would mitigate against inflation, by increasing the value of the U.S. dollar.

If price increases continue, the Federal Reserve may raise interest rates, which would not only slow the pace of inflation, but also the pace of job and economic growth.

Yes and no. Yes, it would slow the pace of inflation, and no, it would not slow economic growth, as the above graphs indicate.

SUMMARY
The single greatest asset of the U.S. federal government is its Monetary Sovereignty. Yet myths and politics both have prevented the efficient use of this asset.

The federal government has the infinite ability to create U.S. dollars, and the addition of dollars is economically stimulative. Further, there is no evidence that federal deficit spending causes inflation, and massive evidence that it does not.

In short, there scarcely is an economic problem facing America that cannot be addressed by the wise addition of federal dollars, and there are no economic problems that can be solved by reductions in federal spending.

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

……………………………………………………………………..

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

The most important problems in economics involve:

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

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

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

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

MONETARY SOVEREIGNTY

Why is Medicare the way it is?

The purpose of government is to improve and protect the lives of the governed.

Is the Medicare Advantage plan an admission that Medicare itself is unnecessarily incomplete?

Rolls-Royce Phantom Prices, Reviews and New Model Information
Free, but with strings.

A story: You receive a call from the wealthiest man on earth. He owns an infinite amount of money.

He tells you he’s in the mood to do a good deed.

He has picked your name randomly, not based on anything but the luck of the draw, and he is giving you a free, no-strings-attached, Rolls Royce automobile.

Well, actually, there are two small strings. You must choose between two Rolls.

One has no heater. The other has no air conditioning.

And you must wait until you are 65 years old before you pick your car.

This puzzles you, so you ask him, “Why would someone having infinite money decide that when does his good deed, he gifts you a car that is missing either a heater or air conditioner?”

And why must you wait until you’re 65?

What’s his purpose?

While you ponder that question, consider this: The federal government, being uniquely Monetarily Sovereign, has infinite dollars. It never can run short of its own sovereign currency.

The government provides you with Medicare, which comes in two basic “models,” Original Medicare and Medicare Advantage.

And you typically must wait until you are 65 to join (with certain exceptions).

But Medicare and Medicare Advantage have different options depending on many of your personal factors.

WHY? Why doesn’t Original Medicare simply cover all medical conditions for everyone?

The American Association of Retired People (AARP) published “8 Reasons to Change Medicare:

1. My prescription costs have jumped.
That happens usually due to one of two scenarios: You’ve been prescribed a new drug your Plan D policy doesn’t cover, or your current medicines have fallen off your Plan D’s formulary (list of covered medicines), Neuman says.

Each September, Part D prescription plans will send out a list of changes to drug coverage, giving you time to make sure your medicines are still covered.

If not, you can shop around for another plan or ask your doctor to apply for an exception in covering your favored medicine.

WHY? Why must a person pay extra for Part D, and why must that person shop around for a plan that covers all his medicines?

2. I’ve decided to spend my winters (or summers) in a different state.
Advantage plans typically charge more to go to doctors outside of their networks; in some cases they won’t cover any charges if it’s not an emergency.

So a Midwesterner might have to pay more to see out-of-network doctors while in Florida.

You need to read the details of your plan, or talk with a representative, to know where you stand. If you’ll be living a dual-residence existence for years to come, you might consider a switch to original Medicare, with the usual caveats.

WHY? Why the “in-network, out-of-network” rigamarole?

3. I need surgery and prefer a specific doctor.
Original Medicare allows patients to choose any doctor or hospital that accepts Medicare.

But if you’re in a Medicare Advantage plan and its surgeons don’t meet your needs, you may need a different MA plan or to switch to OM.

The people who really need to focus on whether doctors are in network are those who’ve suffered major problems like cancer and heart attack, says Joseph Antos, health care expert at the American Enterprise Institute.

“A specialist may be key to their treatment,” he says.

WHY? Why does one Medicare plan cover any doctors or hospitals that accept Medicare and the other plan doesn’t?

4. I’m super healthy and rarely need a doctor.
If you’re in original Medicare, all should be well: As a “pay-for-service” arrangement, not seeing the doctor isn’t costing you anything extra beyond your mandatory parts B and D monthly insurance premiums.

If you’re in an MA plan in which you’re paying a monthly premium on top of your standard Part B premium, that may be for a plan that offers lots of extras , such as gym memberships.

Consider switching to a lower-cost MA plan that doesn’t offer services you don’t plan to use in the coming year.

WHY? Why are there any premiums, and why does one plan not cover the “extras?

5. I’ve been diagnosed with a chronic condition.
A serious medical change should trigger a full review of your Medicare coverage. Make sure your Plan D policy pays for new prescriptions.

Consider the care you’ll need . If you want disease-specific programs, find an MA plan that offers them.

But if you will need lots of specialists, there’s an argument for OM. Making critical changes early can “really affect your pocketbook and save you money,” says Gretchen Jacobson, a vice president with the Commonwealth Fund.

WHY? Why the difference in plans? Why doesn’t one plan cover everything?

6. My income has dropped sharply.
If you are in original Medicare, your Part B monthly premium is locked in, but your Part D drug plan isn’t.

And there’s a chance you can find a lower-cost policy that covers the medicines you are on.

If you’re in an Advantage plan, consider a switch to a plan in which there is no extra payment on top of the mandatory Part B premium.

And you might qualify for help. Ask your state Medicaid office about Medicare Savings Programs. Find the state offices here or call 800-MEDICARE (800-633-4227).

WHY? Why is there a monthly premium? Why does one plan not even lock in premiums? Why the difference in costs?

7. My former employer is changing its retiree health benefits.
Some companies provide retirees with Medigap supplemental insurance, which covers many health costs not covered by OM.

If you have changes to your retiree benefit coverage, or for some reason that coverage no longer is offered, contact Medicare’s Benefits Coordination & Recovery Center (855-798-2627).

Someone can tell you whether you fall in the window in which Medigap insurers cannot deny you coverage based on preexisting conditions.

WHY? Why are some retirees not covered by Medigap supplemental? Why is there even a need for supplemental?

8. My regular doctor is no longer in network for my plan.
If you deeply want to stay with a doctor, ask directly whether he or she is moving to a different MA plan, accepting OM patients or dropping out of Medicare completely.

If you decide to make a change, make sure a short-term decision won’t affect your long-term coverage (for example, switching to original Medicare to temporarily stay with one doctor but sacrificing Medigap coveragefor the long term).

It might be safer to ask your doctor to recommend a colleague in your current plan.

I’m in need of serious dental care. Original Medicare doesn’t cover routine dental care costs, but many Medicare Advantage plans do.

If you don’t have your own dental insurance and can’t afford dentistry costs out of pocket, consider finding an MA plan that will cover a portion of the costs of your needed work.

Antos warns that figuring out what portion of your dental bills an MA plan will cover is complicated, so it helps to know what services you will use in the coming year.

WHY? Why does a person need to consult a crystal ball to guess what medical coverage will be needed at some unknown time in the future?

WHY?


HERE IS WHY: Our Monetarily Sovereign government has infinite funds. It can afford any expense, even without collecting a single dollar in taxes. It has ultimate control over the value of the dollar, i.e. inflation.

Thus, the federal government has the unlimited ability to fund comprehensive, no-deductible Medicare for every man, woman, and child in America. There is no financial reason why you, your family and everyone you know does not have free, total healthcare protection.

But . . . 

At the behest of the very rich, who run America, our information leaders promulgate the Big Lie that taxpayers fund federal spending, and that the federal government is in danger of running short of dollars if spending increases without tax increases.

You have been sold the bill of goods that “there is no such thing as a free lunch,” and that federal spending causes inflation, and that the phony Medicare “trust fund” is running short of money.

The rich do this to widen the Gap between the rich and the rest, for it is the Gap that makes them rich. The wider the Gap, the richer they are.

Better “Medicare for All” plans have been proposed, but they have been rejected supposedly because tax dollars are needed to pay for it. 

They aren’t. It’s the Big Lie, the sole purpose of which is to make the rich richer.

There is no other purpose.

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

……………………………………………………………………..

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

The most important problems in economics involve:

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

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

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

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

MONETARY SOVEREIGNTY

Yes, you can have it all. Here’s how.

The U.S. federal government has all the tools it needs to control the value of the U.S. dollar.

You can have it all. We all can have it all. Nothing prevents it other than our own ignorance.

How is your imagination? Imagine a world in which:

  1. We have no poverty
  2. We have is no violent crime
  3. We all can afford the best health care
  4. We all can afford as much, and as fine an education as we wish
  5. There is no air, water, or land pollution, nor shortages of pure water
  6. Global warming does not exist
  7. Our entire infrastructure is kept current
  8. Our government is run to benefit all of us, not just the very rich

We actually do have the power to create this paradise on earth. We can have it all.

Background: The Problem Begins With Poverty

Money is not the root of all evil. Lack of money is.

Have you noticed that street crime — robbery, burglary, assault, murder, rape, shoplifting, drug-pushing — is most prevalent in impoverished neighborhoods? Of course, you have.

Before becoming a resident of Florida this year, I lived 60+ years north of Chicago, in what locally is known as “The North Shore.” It includes mostly upscale, “bedroom” communities, one of which is Wilmette, Illinois, where I lived.

According to “Neighborhood Scout:” 

Wilmette home prices are not only among the most expensive in Illinois, but Wilmette real estate also consistently ranks among the most expensive in America.

Wilmette is a decidedly white-collar village, with fully 94.76% of the workforce employed in white-collar jobs, well above the national average. Overall, Wilmette is a village of professionals, managers, and sales and office workers.

Wilmette is home to many people who could be described as “urban sophisticates”. Urban sophisticates are people who are both educated and wealthy, and thus tend to be older, richer, and more established than young professionals.

“Urban sophisticates” is not just about being educated and well-off financially: it is a point of view and state of mind, one that you might call ‘urbaneness’. But such people can and do regularly live in small towns, suburbs and rural areas, as well as in big cities. They read, support the arts and high-end shops, and love travel.

Do you have a 4-year college degree or graduate degree? If so, you may feel right at home in Wilmette. 83.23% of adults here have a 4-year degree or graduate degree, whereas the national average for all cities and towns is just 21.84%.

The per capita income in Wilmette in 2018 was $87,576, which is wealthy relative to Illinois and the nation. This equates to an annual income of $350,304 for a family of four.

Can you visualize Wilmette?

Google “Murder in Wilmette,” and you might possibly find a half dozen references from the past 50 years. Here is what violent crime looks like in Wilmette, in Illinois, and in the whole United States.


Get the picture?

What is the fundamental difference among Wilmette, Illinois, and the U.S., which can account for the massive differences in crime rates, education rates, and home prices?

Money.

No people are born murderers, rapists, robbers, burglars, and attackers. But lacking money, people are far more likely to grow up as street criminals.

And please spare yourself the anecdotes about impoverished kids who ultimately became pillars of society. Yes, there are plenty of them, and somewhere in their lives occurred fortuitous events that led to their achievements.

Perhaps nature provided them with the necessary brains or brawn to succeed, despite the odds. Or some mentors took them under wing and provided them with the leadership to find success.

And yes, there are rich people who commit crimes, though most often of the white-collar variety. Scant exceptions do occur, but the relationship between poverty and crime, especially violent crime, cannot be denied.

I am as opposed to the proliferation of guns as anyone, but I now do not believe guns are an important cause of crime, though they are an important facilitator of crime (and an even more important facilitator of suicide).

I have come to the conclusion that America could enact the most draconian gun laws on the planet, and that would not solve our crime problems. 

We are at the stage in which gun ownership is an addiction, similar to alcohol and drug addictions. The time long has passed when we legally could prevent gun ownership and usage, any more than we were able, via laws, to prevent alcohol ownership and usage during Prohibition, or prevent drug ownership and usage during the “War on Drugs.” 

We once could have prevented the disease, but now we are too infected for a cure.

We simply cannot stop gun crime by using the brute force of prohibitive laws. That mule will not respond to the stick. At long last, we must learn to use the carrot — the federal government’s infinite ability to create dollars– and thus cure the poverty that is the root cause of violent crime.

Our primary problem is: People who are not impoverished resent the government giving to the poor. It’s a state of mind that each day is fostered by wealthy propaganda.

Additionally: 

The U.S. federal government has the financial power to provide a generous form of Social Security to every man, woman, and child in America, instantly eliminating poverty. 

The U.S government has the financial power to eliminate not only most federal taxes (including the onerous, regressive FICA tax), but importantly to reduce the need for state and local taxes — those sales and use taxes that disproportionately affect the less wealthy — by simply giving state and local governments money.

The U.S. government has the power to eliminate the financial impoverishment caused by lack of insured health care, simply by providing no-deductible, comprehensive Medicare for All.

The U.S. government has the financial power to provide schooling to all Americans who want it — grades K through advanced education, thereby not only reducing the costs of college, but by reducing the need for local K-12 school taxes.

The U.S. government has the financial power to reduce global warming by supporting not only net-zero energy use and production, but also by supporting carbon-removal technology usage, research, and development

The U.S. government has the financial power to support water recycling and desalination usage, research and development. There is plenty of water on earth, but too little is fresh, drinkable water, and we rapidly are reducing those supplies.

The U.S. government has the financial power to repair and modernize our infrastructure — our roads, bridges, dams, sewers, electric grid, telecommunication, tunnels, transportation, parks, beaches, etc.

Many of the above initiatives are being attempted by elements of local government and the private sector, all of which have limited funds,

But, for the federal government, money is unlimited and free, created at the touch of a computer key.

Will so much federal spending cause inflation? No, as we have demonstrated here, and here, and hereinflation is not caused by federal deficit spending. Inflation is caused by shortages of goods and services, and often can be cured by federal deficit spending to reduce shortages.

Will so much federal spending be a burden on future taxpayers? No, federal taxes do not fund federal spending. The Monetarily Sovereign federal government pays for its spending by creating dollars, ad hoc. The sole purpose of federal spending is to control the economy by taxing what the government wishes to discourage, and by giving tax breaks to what the government wishes to encourage.

(This is different from state and local government taxes which do fund state and local spending.)

Will so much federal spending be socialism? No, socialism is not funding; socialism is control.

Consider Social Security. It spends billions but it is not socialism. It doesn’t control. It merely funds.  Similarly, Medicare has very little control over your medical services other than the amounts it funds.

It does not tell you what doctor to see, what hospital to visit or what medicines to take. It does not control what your doctor diagnoses or treats. Medicare does not fund every procedure, but it does not control your financial ability to have the procedure.

Being Monetarily Sovereign, the American federal government has the financial ability to create paradise on earth. We lack only the knowledge and the will to do it.

The populace has been led to believe slogans like “Too good to be true,” and “No such thing as a free lunch,” which replace facts with a world of disinformation and cynicism, making us surrender before we begin.

From the standpoint of federal financing, nothing is “too good to be true,” and yes, federal spending is a “free lunch.”

As for the will, the government is blocked by the very rich, whose “Gap Psychology” goal is to widen the Gap between the rich and the rest. No matter how rich they are, the rich seem always to want to become even richer, and that requires ever-widening the income/wealth/power Gap. — and that requires pushing down those who are not rich.

In Summary:

The more you experience life’s failures, the more you tend to believe cynically, that a perfect world cannot exist, and that attempts to create perfection are fruitless, wasteful, naive, and even harmful. You have grown to expect disappointment.

So, when you are told the U.S. federal government has the infinite power to create U.S. dollars, and do it without adverse side effects, your knee-jerk response is to deride the idea. Thus, the “too good to be true,” and “no such thing as a free lunch” responses.

Yet, when you are told the U.S. government has the infinite power to create laws, and that U.S. dollars are nothing more than legal creations, not physical creations, you may pause that knee-jerk response.

Just as a federal law can say anything the federal government wishes it to say, the U.S. dollar can be anything and worth anything the law says it is, i.e. anything at all.

Throughout American history, federal law has stated that U.S. dollars were worth varying amounts of silver and gold, a process one hopes finally will have ended in the Nixon year 1971. But the U.S. government could pass a new law stating that the U.S. dollar is worth anything at all — a 1-carat diamond, or a pound of salt, or a quart of pure water. The value of the dollar, i.e. inflation, is in the hands of the government.

Beginning in 1971, the government has allowed the U.S. dollar to “float,” i.e. to allow the public to decide the exchange rate (vs. other currencies) of the dollar. 

For that reason, there now can be no real answer to the question, “What is a dollar worth?” You can express it only with regard to other currencies, whose worth is equally vague. 

Because a dollar is, in reality, a debt owed by the U.S. government, its value, like the value of all debts, is determined by its collateral, and the full faith and credit of the debtor, the U.S government. 

Without gold, (or even with gold), the real collateral for the U.S. dollar is the full faith and credit of the U.S. government — not our “spacious skies or amber waves of grain” — just our full faith and credit.

If you were to try to drill down below exchange value to find the “real” value of the U.S. dollar, you would have to determine the “real” value of the full faith and credit of the U.S. government, an impossible task.

All of the above is meant to show you the truly amorphous nature of the U.S. dollar. It is what the government says it is, and it is worth what the government says it is — and there is no limit to the number of dollars the government can create. The dollar is the offspring of the government’s laws.

In short, there is no limit to what the government can spend to purchase paradise.

Authentic Happiness | Authentic Happiness
Working together, we have all the tools we need to create our paradise.

This simple fact makes a mockery of the President’s and Congress’s “struggles” to pass spending legislation, against those who falsely claim the government cannot or should not spend so much money.

In addition to interest rate control, which affects the market demand for money, and Federal Reserve bond purchases and sales, the federal government can revalue or devalue the dollar, at will.

We created a Monetarily Sovereign federal government and gave it all the power it needs to make America a paradise on earth. It is not constrained by money. It has infinite money and infinite control over the value of its money.

Our world is constrained only by our intellect, our imagination, our will, and our honesty. Barring a meteor strike or the sun failing us, we always will have exactly the world we create for ourselves — exactly the world we deserve.

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

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

……………………………………………………………………..

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

The most important problems in economics involve:

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

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

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

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

MONETARY SOVEREIGNTY

 

 

And still the money supply = inflation myth survives

You see it all the time. Even my friends at Modern Monetary Theory (MMT) believe it: Inflation is caused by too much money in the economy. It must be correct intuitively, because the myth persists. For instance:
Business Insider
Inflation could spike to 20% in the next few years as the US money supply explodes, says Wharton professor Jeremy Siegel 5/15/2021
wdaniel@businessinsider.com (Will Daniel)
Wharton professor Jeremy Siegel said inflation could spike to 20% in the next two or three years due to “unprecedented” fiscal and monetary stimulus and an explosion of the US money supply.
“I’m predicting here that over the next two, three years, we could easily have 20% inflation with this increase in the money supply,” Siegel said in a recent interview with CNBC. Siegel went on to criticize Fed chair Jerome Powell for not acting to quell inflation in the near term. The Wharton professor called Powell the “most dovish chairman” that he’s ever seen and said that the Fed chair’s stance could “be a problem down the road.”
Fiscal stimulus adds growth dollars to the economy via increased government spending and/or lowering of taxes. In short, it’s increased deficit spending. The purpose is to increase economic growth and employment via increases in the money supply. Fiscal stimulus is done by Congress and the President. It has nothing to do with the Fed. Monetary stimulus is done by the Fed. It also adds growth dollars to the economy, along with reduced interest rates. Professor Siegel does not criticize the federal government for its fiscal stimulus (deficit spending) that has added much-needed dollars to the economy and has pulled us out of the COVID recession. He criticizes the Fed for adding much-needed dollars to the economy, while keeping interest rates low, which he believes will increase economic growth and employment. Siegel likes the government putting its foot on the gas, but wants the Fed to undo what the government does by putting its foot on the brakes. Only in the “science” of economics does that make sense.
In the meantime, Siegel said he is bullish on stocks because fiscal and monetary support is going to keep flowing in.
Being “bullish on stocks” means he believes businesses will be more profitable and the economy will grow, because of the increased money supply.
Siegel noted that the total money supply in the US has gone up almost 30% since the start of the year alone.
But at the same time, he equates growth with inflation.
“That money is not going to disappear. That money is going to find its way into spending and higher prices,” Siegel said.
“The unprecedented monetary expansion, the unprecedented fiscal support, you know, I think excessive, was first going to flow into the financial markets, into the stock market, and then once we’re reopening, and we’re right at that cusp, it was going to explode into inflation,” he added.
Though Siegel claims the fiscal support is “excessive,” he doesn’t say what level of support would not be excessive. And he expects the Fed to cure the excessiveness by undoing what Congress and the President are doing. His use of the term “explode” reminds us of the claim that the growth of the federal debt is a “ticking time bomb,” a claim that has been made by thousands of “experts” for more than 80 years. That bomb has yet to explode. In Summary Siegel agrees that adding dollars to the economy grows the economy at a time when the economy suffers from recession. But he predicts that growth will come at a cost: Inflation. And though inflation currently is low, Siegel believes the Fed immediately should begin to fight inflation by undoing what the Congress and the President are doing. He wants the Fed to cut the flow of dollars to the economy and to raise interest rates. Professor Siegel is wrong on all counts. Inflation is not caused by “excessive” money supply.
While federal debt growth (red line) has been massive, inflation (blue line) has been moderate.
.
There is no relationship between changes in federal debt and changes in inflation.
Inflation is caused by shortages of key goods, most often food and/or energy. Inflation actually can be cured by increased government spending to acquire the scarce goods and to distribute them to the populace. ………………………………………………………………………… Rodger Malcolm Mitchell [ Monetary Sovereignty, Twitter: @rodgermitchell, Search: #monetarysovereignty Facebook: Rodger Malcolm Mitchell ] THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE. The most important problems in economics involve:
  • Monetary Sovereignty describes money creation and destruction.
  • Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:
  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually.
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 
  The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY