–An equation you should understand: CRFB + Debt/GDP = BS

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

Mitchell’s laws:
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The more federal budgets are cut and taxes increased, the weaker an economy becomes. .
●Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.
●Austerity is the government’s method for widening the gap between rich and poor.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Everything in economics devolves to motive, and the motive is the Gap.
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Here is an equation you should understand:
CRFB + Debt/GDP = BS

CRFB = Committee for a Responsible Federal Budget
Debt/GDP = the ratio of federal debt to Gross Domestic Product
GDP = Federal Spending + Non-federal Spending + Net Exports
BS = Ceaseless, constant, unrelenting bullsh*t

Now for the latest from the masters of deception, the CRFB (with assistance from the federal government).

CBO’s Analysis of the President’s FY 2016 Budget
March 12, 2015

Today, the Congressional Budget Office (CBO) released its re-estimate of the
President’s FY 2016 budget, using its own economic and technical assumptions.

According to CBO, debt held by the public in the President’s budget would reach 73.1 percent of GDP by 2025, 1 percentage point lower than in 2014 (and about what OMB estimated), but 1 percentage point higher than in 2020.

What does this mean? It means the total of deposits in T-security accounts at the Federal Reserve Bank will reach 73.1% of: Total spending by the federal government, plus spending by everyone else in America, plus Net Exports.

That’s the GDP = Federal Spending + Non-federal Spending + Net Exports equation.

If you are perceptive, you may wonder why Total Deposits in T-security accounts at the Federal Reserve Bank should be compared with everyone’s spending. Why, indeed?

The Committee for a a Responsible Federal Budget would like you to believe that for some mysterious reason, there should not be lots of deposits in T-security accounts, especially when compared with U.S. spending: The ultimate apples/oranges comparison.

CRFB’s Debt/GDP fear-mongering would be ludicrous if it weren’t so harmful.

Why then, do government agencies even bother to publish this meaningless fraction? The only reason I can imagine is: For a similar looking fraction, Deficit/GDP, has some value. That is, there is some value to comparing federal government deficit spending with total spending.

But federal deficits and federal debt debt are quite different. We could have deficits without debt (Simply stop accepting T-security deposits). And we could have debt without deficits (Continue to accept T-security deposits, while running a surplus).

For our Monetarily Sovereign U.S. government, that thing misleadingly called “federal debt,” isn’t what ordinary people would call “debt.” It’s really just the total of deposits in specific bank accounts, in this case, T-security accounts at the Federal Reserve Bank.

While technically, all bank account deposits are forms of debt, I doubt whether you spend many sleepless nights worrying about the amount of deposits in your neighborhood bank, and even fewer nights worrying about the amount of deposits in the Federal Reserve Bank.

But that is exactly what the CRFB wants you to worry about: The size of T-security deposits in Federal Reserve Bank accounts.

Now, if we were talking about monetarily non-sovereign state and local government borrowing, that would be a different story. For any monetarily non-sovereign entity (including you and me), debt and the repayment of debt, can be a real problem.

But for the Federal Reserve Bank, repayment of deposits requires only a transfer of existing dollars from T-security accounts to checking accounts. No problem at all, and no new dollars needed.

And the story gets even worse for the CRFB nonsense. They compare a non-problem, Federal Debt, to an unrelated figure, Gross Domestic Product.

Even for monetarily non-sovereign entities, the Debt/GDP fraction makes no sense.

For example, consider you and your cousin. You both are monetarily non-sovereign. You do not use your own sovereign currency, but rather you use the sovereign currency of the United States government, the dollar. Unlike the U.S., you cannot create dollars out of thin air.

Say you and your cousin both spend the same amount of money (i.e. your personal Gross Domestic Product), but you have half the debt your cousin has.

That is, your personal Debt/GDP is half of your cousin’s.

Who will have the easier time paying their debt, you our your cousin?

Answer: It’s a nonsense question, because you don’t pay your debt with your spending but rather with your income. And in the Debt/GDP fraction, there is no mention of income.

And while your monetarily non-sovereign income is limited, the Monetarily Sovereign federal government neither needs, nor uses, income. It creates dollars out of thin air, ad hoc, when it pays bills.

The CRFB article continues for six long pages, all pounding on the “high” debt and “high” debt/GDP ratio, and ends with this sentence:

In additional to tax reform and spending cuts, such entitlement reform will be necessary to put the county on a sustainable fiscal course for this and future generations.

First, as we have discussed, CRFB conflates “debt” with “deficit,” and demands decreases in the deficit to reduce the so-called “debt.” It doesn’t work that way.

And second, they love to use euphemisms to hide their economy-crushing suggestions:

“Tax reform” is a euphemism for “tax increase.” Any tax increase takes dollars out of the economy, and so is recessionary.

“Entitlement reform” is a euphemism for “cut benefits to the poor and middle income people. This serves to widen the Gap between the rich and the rest.

Here are some of the “entitlement reforms” the CRFB advocates:

–Reduce spending on prescription drugs

–Raise Medicare means-tested premiums and cost-sharing (i.e. punish the sick)
–Reduce spending on post-acute care (i.e. punish the recovering sick)
–Reduce farm subsidies (punish farmers)
–Increase Pension Benefit Guaranty Corp. premiums (make pensions riskier)
–Enact immigration reform (i.e. punish immigrants)

So, in addition to teaching nonsense, the CRFB advocates cruelty to the not-rich — and then complains it’s not enough.

What manner of people are these?

Rodger Malcolm Mitchell
Monetary Sovereignty

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The Ten Steps to Prosperity:

1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Federally funded, free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually. (Refer to this.)
8. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here and here)
10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

Initiating The Ten Steps sequentially will add dollars to the economy, stimulate the economy, and narrow the income/wealth/power Gap between the rich and the rest.
——————————————————————————————————————————————

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
1. A growing economy requires a growing supply of dollars (GDP=Federal Spending + Non-federal Spending + Net Exports)
2. All deficit spending grows the supply of dollars
3. The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
4. The limit to non-federal deficit spending is the ability to borrow.

THE RECESSION CLOCK

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.

#MONETARYSOVEREIGNTY

–More BS from Maya MacGuineas et al.

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

Well, I haven’t yet heard from Stephanie Kelton, who I pray is setting straight the Senate Budget Committee, of which she is Chief Economist.

But, Maya MacGuineas is not so reticent. Here is her latest nonsense:

Debt Limit Returns After $1 Trillion of New Borrowing
March 12, 2015

On Monday morning, the debt limit will return, capping the total amount of federal borrowing. Recent estimates suggest that so-called “extraordinary measures” will sustain continued borrowing into the fall, before the debt ceiling is breached.

The following is a statement by Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

“Politicians complain about raising the debt limit but put far too little effort in working to reduce the debt. Since the last time we suspended the debt limit, no effort has been made to put the debt on a more sustainable path.

“Instead, policymakers have actually increased deficits by enacting new spending and tax breaks to the tune of $100 billion.

“Of course, we must not breach or even threaten to breach the debt limit – doing so could have catastrophic results for the U.S. and world economy.

She must be referring to the “catastrophic results” that NEVER have occurred as a result of all past the “breaches” of the debt limit.

For those who do not understand federal financing: The federal debt is nothing more than the total of T-security accounts held at the Federal Reserve Bank.

These accounts essentially are bank savings accounts.

So why are they misleadingly called “debt.” Because all bank deposits are debts of banks. So strictly speaking, the so-called federal debt is nothing more than debt of the Federal Reserve Bank, not of the federal government.

How do banks “pay off” their savings account deposits (i.e. “debt”)? They simply transfer the dollars in those accounts to holders’ checking accounts.

So when Maya tells you the federal debt is “unsustainable,” she really is saying the Federal Reserve Bank somehow will be unable to transfer dollars from one bank account to another.

Huh?

No, really. That’s what she’s saying. And that is what has become known as the Big Lie.

We assume that Maya neither is stupid nor ignorant of the facts. We assume she knows the truth, which makes her BS even more appalling. Seemingly, she has so little regard for Americans, that she is willing to devote her life to spreading harmful ideas.

There is a word for someone who intentionally harms their own country. I’ll leave it to you, to fill in the blank.

Meanwhile, the Big Lie. continues:

“On Friday, the Committee for a Responsible Federal Budget will release a number of options to reform the debt limit so to make it a more effective tool to promote fiscal responsibility while reducing the risk of default.

She is trying to make you believe there is a “risk” that the United States federal government or the Federal Reserve Bank will default. Utter nonsense!

The only thing that could make the U.S. government default on its debts is if enough Congress people and the President follow Maya’s recommendations.

And there is nothing that could make the FRB default on its ability to transfer dollars from one bank account to another.

“Our leaders need a plan that will leave this country better off for future generations, not a new, clever trick to avoid making or recognizing the hard choices.”

Oh sure, she’s so-o-o-o-o very concerned about future generations that she wants to increase taxes and cut Social Security, Medicare, aids to education, aids to the poor, Research and Development, while increasing pollution, climate change and the destruction of our environment.

Our future generations surely will suffer bleak lives if “Mayaisms” are followed.

She really should be ashamed.

But right-wing dollars seem to have soothed her conscience.

Rodger Malcolm Mitchell
Monetary Sovereignty

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The Ten Steps to Prosperity:

#MONETARYSOVEREIGNTY

–Stephanie Kelton vs. Maya MacGuineas: The Big Truth vs. the Big Lie

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

Regular readers of this blog might remember:

“Stephanie Kelton: Bon Voyage and Godspeed Saturday, Dec 27 2014”

Reader Ian Winograd alerted me to the fact that Stephanie Kelton has been chosen to be Chief Economist for Senate Budget Committee. This is great news.

As many of you know, Stephanie is Chair of the Economics Department at the University of Missouri, Kansas City. UMKC is the primary hub for Modern Monetary Theory, the sister of Monetary Sovereignty.

Presumably, Stephanie will have the opportunity to insert some reality into the government’s budgeting process, although she will be constrained by politics.

I then listed some of the problems she would face, including:

Many people go to Washington, filled with knowledge and faith, but then the political birds whisper in their ears — things like “To get along, go along,” and “The people can’t handle the truth,” and “It’s not politically possible,” and the not-so-subtle threat, “You can accomplish more on the inside than on the outside.”

And soon those well-meaning people sip the political drug, and gradually lose their principles, and themselves become part of the Big Lie.

I believe Stephanie has too much courage and honesty to fall into that trap, and here comes a test of my belief in her:

The arch-enemy of truth and one of the foremost purveyors of the Big Lie, Maya MacGuineas just appeared before Stephanie’s committee.

MacGuineas Testifies Before Senate Budget Committee on Balanced Budget
March 11, 2015

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told the Senate Budget Committee today that our long-term budget problems persist despite the recent good news on annual deficits.

To MacGuinness, a reduction in deficits (i.e. austerity, i.e. reduced income for the economy, i.e. “just-what-the-rich-want”) is good news.

Yes, to the rich, starving the economy of money is wonderful, because it punishes the poor more than the rich, thereby widening the Gap between the rich and the rest.

Testifying at the hearing, “The Better Way: Benefits of a Balanced Budget,” MacGuineas cited the advantages of taking steps to put debt on a more sustainable path, as the country’s debt-to-GDP ratio is the highest since WWII.

A “balanced budget” means the government removes as many dollars from the economy as it puts in, thereby assuring recession. (See: #3 and #4 here.)

A “sustainable” debt is one a debtor can pay off in a timely manner. But there is no debt, of any size, the federal government could not pay off. Every debt in dollars is sustainable to the U.S. federal government.

Not only does our Monetarily Sovereign government have the unlimited ability to create its sovereign dollars, but paying off the debt requires that virtually no new dollars be created.

The so-called federal “debt” really is nothing more than the total of T-security accounts at the Federal Reserve Bank. These accounts are much like savings accounts.

How does a bank “pay off” savings accounts? It simply debits the savings accounts and credits checking accounts. No new dollars needed.

So when MacGuineas whines about federal debt “sustainability,” she is mouthing the Big Lie.

MacGuineas said, “trillion dollar deficits are projected to come back within a decade.”

Translation: The government will pump a trillion dollars worth of stimulus into the economy, every year.

And this is a bad thing??

Ideally, MacGuineas said, the country would balance the budget over the business cycle.

Translation: This is ideal for the rich — you know, the people who pay her salary. Not so good for the poor and middle, but who cares about them? Right, Maya?

“This doesn’t mean we should balance the budget every year. In fact, it makes economic sense to borrow during recessions, and save during times of higher growth.

Here, MacGuineas admits (without realizing it) that deficits grow the economy.

That being the case, why would she not want the economy to grow every year. Answer: She is paid by rich people, not to want it.

But getting to balance on average would allow us to save when the economy is strong and have the government help inject more money into the economy when it is weak.

No, federal deficit spending, which pumps dollars into the economy, allows us to save more of those dollars.

MacGuineas listed the benefits of putting the debt on a downward path relative to the economy: faster economic growth, higher wages, lower interest rates, increased flexibility to respond to crises, and declining government interest payments that would free up resources for higher priorities.

That’s a lot of BS for one short sentence:

1. First she confuses deficit reduction with debt reduction — two completely different actions. The government could eliminate all debt tomorrow while continuing to run deficits. Simply liquidate all T-security accounts and transfer the proceeds to the owners.

2. GDP = Federal Spending + Non-federal Spending + Net Exports. There is no mechanism by which removing dollars from the economy leads to “faster economic growth and higher wages.”

3. The Fed controls interest rates, and has them near zero already. Why MacGuineas wants them lower is a mystery.

4. Tying the government’s hands by forcing austerity does not provide “increased flexibility” and does not “free up resources.”

MacGuineas (pretends she) believes the government can run short of its own sovereign currency, so must husband it for emergencies, like you and I must But you and I are monetarily non-sovereign — much different from the U.S. government.

She (pretends she) has no knowledge of the differences between Monetary Sovereignty and monetary non-sovereignty. She’d be fired if she mentioned those differences.

Finally, MacGuineas warned about the danger of increasing deficits. Last year, Congress added $100 billion to the debt through 2024. Congress again 2 this year, faces demands for a highway bill, patching the Sustainable Growth Rate, and preventing sequestration. Without responsible budgeting, they could add $2 trillion above what current law allows.

Translation: Actually she didn’t warn about the danger of increasing deficits. She merely said deficits were increasing. She never explained why that was dangerous. The reason: Increased deficits pump dollars into the economy, enriching the economy and helping it grow.

“The United States is poised to take off economically. In order to do that we need to increase our competitiveness, grow our economy, and ensure the gains are spread broadly. Key to all of those things will be controlling our national debt,” she said.

And there you have the Big Lie, all tied up, nice and neat, into one sentence.

Today, I sent the following note to Stephanie Kelton, along with an attachment of MacGuineas’s posting:

Just curious about this, Stephanie. Since Maya is 100% wrong, as usual, I was wondering how your committee reacted to her comments:

MacGuineas Testifies Before Senate Budget Committee on Balanced Budget

I’ll let you know Stephanie’s response.

Rodger Malcolm Mitchell
Monetary Sovereignty

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The Ten Steps to Prosperity:

#MONETARYSOVEREIGNTY

–Oh woe! Here we go again: The phony trade-deficit hysteria

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

Oh woe! Here we go again: The phony trade-deficit hysteria. Seldom has so much Henny-Penny, sky-is-falling BS been packed into one short article.

OpEdNews Op Eds 3/7/2015
Trade Deficit Drops To Enormous, Humongous Level In January
By Dave Johnson

The U.S. Census Bureau reported Friday that the January goods and services trade deficit was $41.8 billion in January, down $3.8 billion from $45.6 billion in December.

Since the neo-liberal “free trade” pro-corporate ideology took hold in the late 1970s the US has consistently run a trade deficit every single year, and it just gets worse. This literally drains our economy, jobs, wages, factories, entire industries and our ability to make a living as a country.

Rep. Alan Grayson Explains Trade Deficit Harm:

“Day after day, month after month, and year after year, Americans are buying goods and services manufactured by foreigners, and those foreigners are not buying goods and services manufactured by Americans.

“We are creating millions — no — tens of millions of jobs in other countries with our purchasing power, and we are losing tens of millions of jobs in our country, because foreigners are not buying our goods and services.

“What are they doing? They’re buying our assets.

“So we lose twice. We lose the jobs, and we are driven deeper and deeper into national debt — and, ultimately, national bankruptcy. That is the end game.

“That’s why we have the most unequal distribution of income [among all industrial nations] in our country, [and] the most unequal distribution of wealth in our history.

“Let’s not only have a trade policy. For once, let’s also have a trade deficit policy.

“Let’s deal with the reality that has robbed the American Middle Class now for decades. Let’s address it, and let’s defeat it. That’s what I’m calling [for], right now.

“Let’s stop digging deeper. Let’s raise ourselves up, let’s climb out of this hole, and rebuild the American Middle Class. Thank you very much.”

First, let us dispense with the notion that a trade deficit is harmful and that a trade surplus would be better. We wrote about this myth way back in 2009:

The China trade deficit myth Thursday, Nov 19 2009

A trade deficit is an example of one country devoting great effort to creating scarce materials for another country in exchange for something that requires no effort by the other country.

In that sense, China is our servant. They work, sweat and strain and use their valuable resources to create and ship to us the things we want, while we, hardly lifting a finger, ship dollars to them.

Who has the better deal?

As readers of this blog know, the federal government creates unlimited dollars at the touch of a computer key. It does so by sending instructions to its creditors’ banks, telling the banks to increase the balances in the creditors’ checking accounts.

That is how the federal government pays its bills.

At the instant the banks comply with these instructions, dollars are created — yes, created from thin air. That is the reality of Monetarily Sovereign finances.

It is possible (and commonplace) for the U.S. to run short of various food items, various ores and various manufactured items. It even is possible for us to run short of labor. But it is absolutely, positively impossible for us to run short of dollars (unless Congress demands “debt limits”).

When we run a so-called “trade deficit,” we receive goods and services that may be in short supply here, and in exchange we send U.S. dollars, which are in infinite supply to us.

When we receive more goods and services than we send, why do we call it a “trade deficit,” when receiving more than we send really is a “trade surplus“?

As for “robbing the American Middle Class,” this is the old, “Blame the opposition for your own crimes” ploy. Nothing has done more to rob the “American Middle Class” than the Congressional programs to cut federal deficit spending.

The vast majority of federal spending benefits the middle and lower income/wealth/power groups. From Social Security to Medicare to Medicaid to all the poverty aids to federal construction projects — federal deficit spending benefits the very people Rep. Grayson pretends to love.

So Congress increases FICA (the most regressive tax in U.S. history), while forcing the states, counties and cities to rely on sales taxes (the 2nd most regressive taxes in U.S. history). Meanwhile, Social Security benefits have decreased and many programs benefiting the poor and middle classes cut — and all the while, Congress proclaims its everlasting affection for the “American Middle Class.”

Does it get any phonier than that?

And as for the loss of dollars involved in a “trade deficit,” here’s a very, simple solution:

How to defeat that huge, frightening, trade deficit, Chinese dragon — in one simple step Friday, Mar 9 2012

Every quarter, the federal government should replace the trade deficit. It should send the amount of the trade deficit to the American consumers, dollar for dollar.

It could be in the form of mailed checks — something resembling the very first stimulus attempt in 2008. The result: Consumers would continue to have spending money, businesses would continue to thrive and hire employees, and at long last, Congress could stop blaming China for its own mistakes.

And as for Rep. Grayson’s “concern” about the loss of jobs, if the above-mentioned checks don’t replace enough lost income, the federal government simply should buy more goods and services from American suppliers.

Spend more on roads, bridges and dams, more on schools and teachers, more on R&D, more on building things, creating things, discovering things. There is no limit to the goods and services the federal government can buy.

Or very simply, begin to institute the “Ten Steps to Prosperity.”

Bottom lines:
1. The thing we misname “trade deficit” actually is a “trade surplus,” and is a benefit to the U.S.
2. Congressional “cut-the-debt” policies, not the so-called “trade deficit,” are responsible for the loss of jobs and the widening of the Gap between the rich and the rest.

Congress has failed to help the “American Middle Class,” but Congress is very good at two things:
— Spouting the Big Lie
— and pointing fingers of blame.

Rodger Malcolm Mitchell
Monetary Sovereignty

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The Ten Steps to Prosperity:

#MONETARYSOVEREIGNTY

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