Every month, millions of people are told the earth is flat

The Balance, according to their website:

“The Balance makes personal finance easy to understand. It is home to experts who provide clear, practical advice on managing your money.

“With more than 24 million monthly visitors, The Balance is among the top-10 largest finance properties. Our more than 50 expert writers have extensive qualifications and expertise in their topics, including MBAs, PhDs, CFPs, other advanced degrees and professional certifications.

“The Balance family of sites have been honored by multiple awards in the last year, including The Telly Awards, The Communicator Awards, and Eppy Awards.”

That is truly impressive — 24 million people every month, 50 expert writers, multiple awards, college degrees. They are a major source of information for the public.

Specifically, let us consider their U.S. economy expert, Kimberly Amadeo:

KIMBERLY AMADEO
US Economy Expert
Kimberly is the author of The Obamacare Handbook and Beyond the Great Recession, and has been quoted as an economic expert by Fox Business, US News and World Report, and The Huffington Post.

She has authored hundreds of articles on economic topics ranging from health care reform to monetary policy to global trade. Kimberly has been the U.S. Economy Expert for The Balance, and prior to that, About.com, since 2006.

In addition, Kimberly has more than 20 years of senior-level corporate experience in economic analysis and business strategy, and received an M.S. in Management from the Sloan School of Business at M.I.T.

With that introduction, let us see what Ms. Amadeo has to say. Here are a few excerpts from one of this year’s articles:

US Federal Government Tax Revenue
Who Really Pays Uncle Sam’s Bills?
BY KIMBERLY AMADEO Updated May 18, 2019
The U.S. government’s total revenue is estimated to be $3.643 trillion for Fiscal Year 2020.

That’s the most recent budget forecast from the Office of Management and Budget for October 1, 2019, through September 30, 2020.

We pause to remind you that the federal government, which uniquely being Monetarily Sovereign and having the unlimited ability to create U.S. dollars, neither needs nor uses your tax dollars.

The federal government, unlike state and local governments, never unintentionally can run short of dollars. Related image

Taking more than $3.6 trillion from the economy every year represents a giant economic loss.

Visualize the effect of dumping more than $3.6 trillion down the toilet, every year. That is what your federal taxes accomplish.

Continuing with excerpts from Ms. Amadeo’s article, I’ll comment directly to her:

So where does the federal government’s revenue come from? Individual taxpayers like you provide most of it. Income taxes contribute $1.822 trillion, over half of the total. Another third, $1.295 trillion, comes from your payroll taxes.

Corporate taxes add $256 billion, only 7%. The Tax Cut and Jobs Act cut taxes for corporations much more than it did for individuals. In 2015, corporations paid 11% and income taxpayers paid 47%.

The best way to reduce the individual tax burden is to reduce government spending, not shift the burden to corporations.

No, Ms. Amadeo, the best way to reduce the federal individual tax burden is to reduce federal individual taxes.

**Recessions (vertical gray bars) begin with *declines* in federal deficit growth (red line) and are cured by *increases* in federal deficit spending.**

Federal spending benefits Americans. Reducing federal spending would reduce those benefits, and lead to recessions and depressions.

The government’s annual income only pays for 77% of spending. It creates a $1.1 trillion billion budget deficit.

The $1.1 trillion budget deficit inserts $1.1 trillion growth dollars into the economy. It more properly should be called an economic surplus.

And, Ms. Amadeo, the federal government’s annual income pays for nothing. The government creates brand new dollars, ad hoc, every time it pays a creditor.

When the federal government pays a creditor, it sends instructions to the creditor’s bank, instruction the bank to increase the balance in the creditor’s checking account.

The instant the bank does as instructed, new dollars are created and added to the nation’s money supply. Deficit spending is the federal government’s primary method for creating economic growth dollars.

Shouldn’t Congress only spend what it earns, just like you and me?

Here, Ms. Amadeo, you had the perfect opportunity to explain the difference between a Monetarily Sovereign federal government’s finances, and a monetarily non-sovereign individual’s finances.

While a Monetarily Sovereign entity never can run short of its own sovereign currency, I have no sovereign currency. So my income is less than my spending, I can run out of money. The federal government can’t.

Since the federal government neither needs nor uses income, and can create unlimited amounts of money, there is absolutely no reason for Congress to spend what it earns.

By failing to explain this difference, Ms. Amadeo, you help perpetuate the Big Lie of federal – personal finance equivalence. Unfortunately, you expound upon the Big Lie, and write the single, most wrong-headed, completely false paragraphs in the entire article:

It depends on where the economy is in the business cycle. Congress should use deficit spending to boost economic growth in a recession. It uses stimulus spending to create jobs.

Once the recession is over, the government should live within its means and spend less. It should raise taxes, if needed, to reduce the deficit and the debt. That will keep the economy from overheating and forming dangerous bubbles. Congress should switch from expansionary to contractionary fiscal policy.

Think about it, Ms. Amadeo. Why would Congress want to “boost economic growth” only “in a recession”? It makes no sense at all. And later in your article, you contradict yourself on this point.

Today, as I write this comment, we are not in a recession. Why would I not want to “boost economic growth, today?

And stimulus spending creates jobs by growing the economy and by providing the goods and services the populace desires. Why is this a bad thing?

After missing the opportunity to educate, Ms. Amadeo, you execute a confused turnaround and write:

The revenue collected equals 16.3% of gross domestic product. That’s the nation’s measurement of economic output.

If that much production is going to the federal government, then you want to make sure it’s reinvested into the economy to support future growth.

Let’s examine that last phrase. “It” (federal tax revenue”) is not reinvested in anything. It is destroyed upon receipt.

Then, Ms. Amadeo, you admit that federal investment “into the economy to supports future growth,” but you previously opposed federal investment into the economy, unless there is a recession.

Revenues would be much higher without the Trump tax plan. It was also lowered by the extension of the Bush tax cuts and the Obama tax cuts. They were meant to fight the 2001 recession and the 2008 recession.

They were supposed to spur the consumer spending that drives almost 70% of economic growth.

But most people didn’t even realize this happened since the tax cut showed up as reduced withholding instead of a check.

Instead of spending the cuts, people used some of it to pay off debt. The recession scared people into saving more and using credit cards less. So, the budget didn’t expand enough to spur economic growth.

The above is mystifying. Do you, Ms. Amadeo, not realize that the deficit spending you decry — the deficit spending that began in 2008 — caused the recovery and 11-year massive growth that continues even today?

Now that the recession is over, those tax cuts should be reversed. Taxes should be increased, not cut.

An economic expansion is the time to pay off the debt, not add to it.

Uh, Ms. Amadeo, news flash: The recession has been “over” for 11 years. It ended because of federal deficit spending. Now you want to create another deficit by taking more dollars out of the economy?

And exactly why do you want to pay off the federal debt?

First, the federal government never can run short of dollars, so why does the “debt” trouble you?

Second, the so-called “debt” isn’t really debt in the classic sense. The federal debt is the total of deposits into Treasury Security (T-bill, T-note, T-bond) accounts, which are paid off every day, simply by returning the dollars in those accounts.

Thus, the so-called federal “debt” (unlike state and local government debts) is not a burden on the federal government, nor is it a burden on taxpayers.

What is a burden on taxpayers? Taxes.

IN SUMMARY
Kimberly Amadeo and THE BALANCE claim to reach more than 24 million readers each month. This platform would give them an excellent opportunity to educate the populace and to dismiss pernicious and damaging myths about the American economy.

Instead, out of ignorance or intent, they have chosen to perpetuate the Big Lie that federal finances are like personal finances, and that stimulative federal deficit spending should be reduced and limited to times of recession.

The Big Lie has led to many trillions of dollars unnecessarily being taken from the economy, a depletion that has resulted in repeated recessions and even depressions through the years.

Millions of people every month, rather than being enlightened, are told the world is flat.

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

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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. 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

10 questions about America’s trade deficit. Oh woe, the trade deficit is (too high?, too low?, too just right?)

Oh woe, the trade deficit is (too high?, too low?, too just right?)

Here are excerpts from an article in “the balance.com,” that will help you come to a conclusion.

US Trade Deficit With China and Why It’s So High
The Real Reason American Jobs Are Going to China
BY KIMBERLY AMADEO

The U.S. trade deficit with China was $419 billion in 2018. The trade deficit exists because U.S. exports to China were only $120 billion while imports from China were $540 billion.

The biggest categories of U.S. imports from China were computers and accessories, cell phones, and apparel and footwear.

A lot of these imports are from U.S. manufacturers that send raw materials to China for low-cost assembly. Once shipped back to the United States, they are considered imports.

Let’s say you market cell phones under your brand name.

You buy the phones from a Chinese manufacturer for $200 each. You apply your brand name and wholesale the phones for $300 each, after which they retail for $500 each.

This process involves a $200 per phone, U.S. trade deficit with China

If the phones had been 100% American made, they would have cost you $300, and you would have had to wholesale them in America for $450 each, after which they would have cost American consumers $750 each.

We’ll lead off with the ten questions. At the end of the article, we’ll discuss the answers.

Question #1: Is this trade deficit a good thing or a bad thing for America as a nation and for Americans as consumers?

Here is more from the article:

China’s biggest imports from America are commercial aircraft, soybeans, and autos. In 2018, China canceled its soybean imports after President Trump started a trade war. He imposed tariffs on Chinese steel exports and other goods.

Questions #2 & #3: Who pays for the tariffs on Chinese steel and other goods? Who pays for the cancelation of China’s soybean imports?

Since 2012, the U.S. trade deficit with China has increased. It was $315 billion in 2012, rose to $367.3 billion in 2015, then fell to $346.9 billion in 2015. In just two years, it’s increased to $419.2 billion.

Question #4: Who pays for a trade deficit?

China can produce many consumer goods at lower costs than other countries can. Americans, of course, want these goods for the lowest prices.

How does China keep prices so low? Most economists agree that China’s competitive pricing is a result of two factors:

–A lower standard of living, which allows companies in China to pay lower wages to workers.

–An exchange rate that is partially fixed to the dollar.

Question #5: Who pays for a lower standard of living?

China pegs its currency to the dollar using a modified fixed exchange rate. When the dollar loses value, China buys dollars through U.S. Treasurys to support it.

Question #6: Who pays for a stronger (higher value) dollar?

China must buy so many U.S. Treasury notes that it is the largest lender to the U.S. government. Japan is the second largest.

As of April 2019, the U.S. debt to China was $1.1 trillion. That’s 27% of the total public debt owned by foreign countries.

Question #7: Why does lending to the U.S. strengthen the U.S. dollar?

Many are concerned that this gives China political leverage over U.S. fiscal policy. They worry about what would happen if China started selling its Treasury holdings.

It would also be disastrous if China merely cut back on its Treasury purchases.

Why are they so worried? By buying Treasurys, China helped keep U.S. interest rates low. If China were to stop buying Treasurys, interest rates would rise.

That could throw the United States into a recession. But this wouldn’t be in China’s best interests, as U.S. shoppers would buy fewer Chinese exports. In fact, China is buying almost as many Treasurys as ever.

Question #8: Why does China’s purchase of Treasury securities reduce interest rates?

U.S. companies that can’t compete with cheap Chinese goods must either lower their costs or go out of business.

Many businesses reduce their costs by outsourcing jobs to China or India. Outsourcing adds to U.S. unemployment. Other industries have just dried up.

U.S. manufacturing, as measured by the number of jobs, declined 34% between 1998 and 2010. As these industries declined, so has U.S. competitiveness in the global marketplace.

Question #9: Why is a decline in manufacturing a concern?

President Trump promised to lower the trade deficit with China.

On March 1, 2018, he announced he would impose a 25% tariff on steel imports and a 10% tariff on aluminum. On July 6, 2018, Trump’s tariffs went into effect for $34 billion of Chinese imports. China canceled all import contracts for soybeans.

Trump’s tariffs have raised the costs of imported steel, most of which is from China. Trump’s move comes a month after he imposed tariffs and quotas on imported solar panels and washing machines.

China has become a global leader in solar panel production. The tariffs depressed the stock market when they were announced.

Trump also asked China to do more to raise its currency. He claims that China artificially undervalues the yuan by 15% to 40%.

That was true in 2000. But former Treasury Secretary Hank Paulson initiated the U.S.-China Strategic Economic Dialogue in 2006. He convinced the People’s Bank of China to strengthen the yuan’s value against the dollar.

It increased by 2% to 3% annually between 2000 and 2013. Former U.S. Treasury Secretary Jack Lew continued the dialogue during the Obama administration. The Trump administration continued the talks until they stalled in July 2017.

The dollar strengthened 25% between 2013 and 2015. It took the Chinese yuan up with it. China had to lower costs even more to compete with Southeast Asian companies.

The PBOC tried unpegging the yuan from the dollar in 2015. The yuan immediately plummeted. That indicated that the yuan was overvalued. If the yuan were undervalued, as Trump claims, it would have risen instead.

Question #10: Is Donald Trump clueless about international trade?

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Question #1: Is this trade deficit beneficial or detrimental for America as a nation and for Americans as consumers?

Our “trade deficit,” as the term is used, means that America sends more dollars to foreign countries than they send to us.

One of life’s enduring mysteries is why this even exchange is known as a “deficit.” It just as well could be called a “surplus” because the foreign countries send us more goods and services than we send them.

The United States is Monetarily Sovereign. It creates dollars at will.

Fed Chairman Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

Fed Chairman Alan Greenspan: “Central banks can issue currency, a non-interest-bearing claim on the government, effectively without limit. A government cannot become insolvent with respect to obligations in its own currency.”

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e.,unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.

But the United States has only a limited supply of goods and services.

Something you can create at will and at no cost (dollars) is not as valuable as something that is in limited supply (goods and services). To America, dollars are much less valuable than are goods and services.

Therefore, from the standpoint of America as a nation, the so-called trade “deficit” actually is a trade “surplus,” and is beneficial for America.

From the standpoint of American consumers, the trade “deficit” means Americans have money, and are able to use that money to obtain desired goods and services from other nations. This is a good thing.

Every time you walk into a store and buy something, you run what the economists might call a “trade deficit” with the store. Yet no one suggests that running a “deficit” with a store is detrimental to a consumer.

Questions #2 & #3: Who pays for the tariffs on Chinese steel and other goods? Who pays for the cancelation of China’s soybean imports?

Tariffs are taxes levied on the buyers. The tariffs on Chines steel and other goods are paid by U.S. consumers, and these tariff dollars are sent to the U.S. Treasury, where they are destroyed. (“Does the U.S. Treasury really destroy your tax dollars?“)

Like all U.S. taxes, U.S. tariffs take growth dollars out of the American economy and therefore are recessionary. Trump’s tariffs take money from your pockets.

And China’s cancellation of soybean imports hurts American soybean farmers.

Question #4: Who pays for a trade deficit?

A trade “deficit” reflects an even exchange between dollars vs. goods and services. As discussed in #1, the so-called trade-deficit actually is a trade surplus, that is beneficial to America.

Question #5: Who pays for a lower standard of living?

The poor. No matter how low a nation’s standard of living may be, the rich always have a high standard of living.

If, to achieve a trade “surplus,” a nation cuts wages, the working poor and the average standard of living will suffer.

Question #6: Who pays for a stronger (higher value) dollar?

Americans, who buy foreign goods, benefit from a higher value dollar. To some degree, every American buys foreign goods, much of which are part of the contents of the goods we buy.

Thus, despite the stock market’s immediate negative reaction to higher interest rates, higher rates strengthen the dollar and fight inflation by making imports cheaper in dollars.

Higher interest rates also are beneficial also because they force the federal government to pay more growth dollars into the economy, when paying interest on Treasury securities.

On balance, higher interest rates benefit the economy and consumers.

Question #8: Why does China’s purchase of Treasury securities reduce interest rates?

The common belief is that the U.S. must sell a certain amount of T-securities, and if China didn’t buy, then the government would have to raise rates in order to entice other people to buy.

In fact, being Monetarily Sovereign, the federal government has absolute control over everything related to the dollar, including interest rates.

Further, it is not forced to sell any amount of T-securities. If the government wished, it could stop accepting deposits into T-security accounts at any time.

Thus, it would not “be disastrous if China merely cut back on its Treasury purchases,” as the article’s author claimed.

Dollars were a creation of the U.S. government laws. The U.S. government is not permanently bound by the laws it alone creates.

Interest rates are what the government wishes them to be, as the Fed demonstrates every day.

Question #9: Why is a decline in manufacturing a concern?

It is a concern only to those who hold the outdated belief that the American economy relies on manufacturing.

While manufacturing employment has declined, employment in non-manufacturing industries has grown.

Today, unemployment is at historic lows, demonstrating the declining importance of the manufacturing sector.

Question #10: Is Donald Trump clueless about international trade?

Without a doubt. His pressure on the Federal Reserve to lower interest rates, and his trade wars, are ample proof of his ineptness.

He continually needs someone to blame for something — anything — to deflect any blame from himself, so he wrongly blames the Fed for less than impressive economic growth.

Business hates uncertainty.

The rapid turnover in Trump’s administration, plus his erratic flip-flopping on issues, plus his character attacks, plus his trade wars, plus his sudden and arbitrary withdrawals from international agreements, plus his nativist bigotry, all contribute to an adverse business climate.

Answer to the big question: The so-called “trade deficit” is a benefit to the United States.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Implementation of The Ten Steps To Prosperity can 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 you.

MONETARY SOVEREIGNTY

Credentials: The perfect excuse for a bad hiring decision.

It takes only two things to keep people in chains:
.

The ignorance of the oppressed
and the treachery of their leaders.

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Credentials are the “perfect” excuse for a bad hiring decision.

In my long life, I have been an owner of several companies, and personally have hired thousands of people — and I have made mistakes.

Some of those hires turned out badly. The fault may have been with the person; the fault may have been with my company. In any event, the fit was wrong, and ultimately the fault was with me who did the hiring.

Early on, I was too ready to give myself a ready, though poor, excuse: “Their credentials were good.”

Yet credentials are only as good as the person who weighs them. When you believe what a writer tells you, in effect, you have “hired” that writer to be one of your advisors on the specific subject.

You essentially have said to yourself, “I believe what he/she writes, not only because it sounds correct, but because I respect this writer’s credentials.”

Credentials have value, but I suspect they too often are overvalued. Here is a set of credentials that illustrate the point.

Kimberly Amadeo is president of WorldMoneyWatch.com. She has 20 years senior-level experience in economic analysis and business strategy working for major international corporations. Kimberly is the U.S. economy expert for About.com, the 15th most visited site on the web.

She speaks on the global economy, how it affects you and what you can do about it. Kimberly consults on how to use global economic trends to find profitable market niches.

With those credentials, I understand why people believe what she has to say, particularly about economics. And yet . . .

Here are excerpts from an article she wrote for a site called “thebalance.com,” with each excerpt followed by my own comments:

“An expansionary fiscal policy is usually impossible for state and local government. That’s because they are mandated to keep a balanced budget.”

It’s not exactly a mandate. The federal government is Monetarily Sovereign. It cannot run short of its own sovereign currency, because it creates its currency at will. That ability is what makes it Monetarily Sovereign.

State and local governments are monetarily non-sovereign. They do not have a sovereign currency — they use the federal government’s sovereign currency — and they, therefore, can run short of dollars after they reach their borrowing limit.

“As a result, the critical debt-to-GDP ratio has exceeded 100 percent.”

There is nothing critical about a debt/GDP ratio of 100 percent or any other ratio. In fact, the debt/GDP ratio essentially is meaningless.

A Monetarily Sovereign government does not pay its debts with GDP. The so-called federal “debt” is merely the total of deposits in T-security accounts.

Those deposits never are touched. They remain in the accounts until maturity, at which time the “debt” is paid off simply transferring those same dollars back into the checking accounts of T-security holders.

Further, the federal government creates dollars, ad hoc, every time it pays a creditor. So what erroneously is termed “borrowing,” is logically unnecessary. (If you owned a legal, dollar-creating machine, would you ever have the need or desire to borrow?)

The U.S. easily could support a debt/GDP ratio of 150%, 200% or 1,000%. Japan’s ratio is about 250%, and they could support a far higher percentage.

The debt/GDP ratio says absolutely nothing about the health of the economy, or the federal government’s ability to pay its bills, or future taxpayers’ liabilities. Nothing.

” . . . the contractionary monetary policy (Cutting federal spending and/or increasing taxes) is effective in preventing inflation.”

The opposite of inflation is deflation. Cutting federal spending and increasing taxes (aka “austerity”) would be effective in causing stagnation or a recession, which is quite different from deflation.

Reducing the money supply is a poor way to fight inflation. Spending cuts and tax increases are too slow, too political, and too uncertain in effect, because of three questions:

Which taxes should be increased?
Which spending should be cut?
By how much?

Inflation generally is not caused by insufficient taxation or by excessive federal spending, but rather by shortages of key goods (food, oil, etc.)

Because inflation is the loss in value of the dollar, the Fed fights inflation by increasing the value of the dollar. It does this by raising interest rates. Higher rates increase the demand for dollars (aka “strengthen”) the dollar, and importantly they can be administered apolitically, quickly and in small increments.

“Taxes provide the income that funds the government.”

Though this is widely believed by the lay public, is an extremely shocking comment coming from an economist. The federal government is Monetarily Sovereign; it never can run short of dollars.

Taxes do provide income and funding for monetarily non-sovereign state and local governments, but federal taxes do not fund the federal government’s spending.

Being Monetarily Sovereign, the federal government has no need for income — no need to levy taxes (though it unnecessarily does) and no need to borrow (which it does not).

Most federal taxation is a remnant from gold standard days (which ended in 1971), when the federal government’s money creation was limited by its gold supply. Today, nothing limits federal money creation other than the will of Congress and the President.

To pay its bills for goods and services, the federal government sends instructions (not dollars) to its creditors’ banks, telling the banks to increase the numbers in each creditor’s checking account. At the moment the bank does as instructed, brand new dollars are created and added to the money supply (termed “M1”).

Even if all federal tax collections and all federal (misnamed) “borrowing” were $0, the federal government could continue spending forever.

“The federal government is losing its ability to use discretionary fiscal policy.”

The federal government, being Monetarily Sovereign, has the unlimited ability to spend any amount it wishes on anything it wishes. It cannot “lose its ability to use discretionary fiscal policy.”

“When interest rates are high, the money supply contracts.”

This is not correct. Higher interest rates increase the amount of interest the government must pay on its T-securities, thus increasing the nation’s money supply.

High interest rates (blue line) do not reduce the money supply (red line). The opposite seems to be true.

There also is a common myth that high interest rates reduce borrowing, but again, there is no historical evidence for this.

Increases in interest rates (blue line) do not cause decreases in borrowing (red line).

“The current fiscal policy has created the massive U.S. debt level.”

The federal (misnamed) “debt” is the result of all past policies, not just the current policy, and the word “massive” is a misleading pejorative. “Massive” compared to what?

So-called federal “debt” or “borrowing” is merely the total of deposits into T-security accounts. These accounts are not a burden on the federal government or on taxpayers.

They are paid off at maturity simply by transferring the dollars that currently exist in these accounts back to the checking accounts of T-security holders. No tax dollars are used.

At this point, despite Ms. Amadeo’s impressive credentials, I am not quite ready to accept her economics expertise.

It happens that in economics, and perhaps many other sciences, credentials should be looked upon with a wary eye. They may tell you what the person has done, but not whether their opinions have proved to be correct, or are likely to be correct in the future.

And if ever you are in the position of hiring people, remember that resumes may be a beginning point, but they cannot be relied upon. I have come to believe that a simple face-to-face will provide far better information.

If the person is to work for you, do your own interviewing. Don’t rely on subordinates or Human Services.

To my mind, Ms. Amadeo’s credentials said one thing, but her own words said something far different.

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

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The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

MONETARY SOVEREIGNTY

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