–More on (moron) the S&P downgrade of American national credit

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Quote from Fox News, 8/6/11:

For the first time in history, Standard & Poor’s downgraded the U.S.’s vaunted Triple-A rating to double A+ after the market’s close on Friday night, a rating it has held at S&P since 1941.

The rating was dropped to double-A+, S&P says, because of its deepening concern that Washington, D.C. cannot get a grip on the nation’s finances in the mid – to long-term, as well as fears that the economy could weaken, and that interest rates could spike higher, causing interest costs on the debt to rise. S&P also cited a weakening federal revenue picture as part of its reasons behind its downgrade.

Let’s examine this one line at a time:

“For the first time in history, Standard & Poor’s downgraded the U.S.’s vaunted Triple-A rating to double A+ after the market’s close on Friday night, a rating it has held at S&P since 1941.”

Think of it. S&P rated the U.S. AAA all through World War II, during which the federal debt was much higher relative to the size of the economy, and when we were being attacked by two powerful enemies, who very well could have defeated us. Today, with a relatively lower debt, and much greater national security, the U.S. is downgraded to AA+.

“S&P says, because of its deepening concern that Washington, D.C. cannot get a grip on the nation’s finances in the mid – to long-term . . . “

What does “get a grip on” mean? No one really knows. Does it mean the federal government will not be able to service its debts? No. As a Monetarily Sovereign government, it can service any size debt denominated in it sovereign currency, the dollar (100% of the federal debt is denominated in the dollar). In fact, the federal government has the power to eliminate all federal debt tomorrow, merely by crediting the bank accounts of all T-security holders. No T-securities = no federal debt = no debt worries.

Or perhaps S&P is not worried about the debt, but rather worried about the deficit??? If so, S&P may not understand the lack of functional connection between debt and deficit (we could have either without the other), but for certain they do not understand this basic equation in economics: Federal Deficit – Net Imports = Net Private Saving. If they did understand that equation, they would know that reducing the deficit reduces saving, which slows the economy.

“. . . as well as fears that the economy could weaken, and that interest rates could spike higher, causing interest costs on the debt to rise.”

Yet another thing S&P doesn’t understand: As a Monetarily Sovereign nation, the U.S. has the unlimited ability to service any debt including any amount of interest. In fact, there actually is a slight, but positive, relationship between federal deficits and GDP growth. The probable reason: Federal interest payments add stimulus dollars to the economy. Further, there is no historical relationship between federal deficits and interest rates.

“S&P also cited a weakening federal revenue picture as part of its reasons behind its downgrade.”

Finally, S&P does not understand that unlike spending by the states, counties and cities, spending by a Monetarily Sovereign nation is not constrained by revenue. If federal taxes fell to $0 or rose to $100 trillion, neither event would affect by even one dollar, the federal government’s ability to spend.

Someday, someone will ask the officers of S&P how their evaluation of France (a monetarily non-sovereign nation that hangs at the edge of bankruptcy, yet incredibly has been gifted with an AAA rating) compares with their evaluation of Monetarily Sovereign United States, a nation that unlike France can pay any bill, and time. Can you visualize the officers of S&P looking at each other and mumbling “Duuuhhhhh. . .”?

And that might be the smartest thing they will have said all year.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

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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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

–S&P downgrades itself

Just when you thought Standard & Poor’s couldn’t get more disfunctional, they outdo themselves. You remember S&P, don’t you? They are the people who became famous for giving AAA ratings to absolute junk, helping to cost investors hundreds of millions of dollars.

Now, showing neither shame nor remorse, they have downgraded United States debt from AAA to AA. In S&P’s opinion, this puts the federal government’s credit at a lower level than that of such companies as:

US Bancorp
XTO Energy
State Street Corp.
Citigroup
Bank of America
GE Capital
Wells Fargo
JP Morgan Chase
Goldman Sachs
Keybank
John Deere
West Corp.
GMAC
KFW International
Johnson & Johnson
Microsoft

Long after these companies — and S&P — have disappeared, the U.S. government still will be here, paying its bills, with no difficulty whatsoever. The Monetary Sovereignty of the United States will overcome the economic ignorance of Congress and the President.

But, if you feel safer buying the bonds of these firms than buying United States T-bonds, T- notes and T-bills, I have a bridge in Brooklyn I would like to sell you. And if you believe anything S&P says in the future, I have two bridges to sell you.

S&P didn’t downgrade the U.S. It downgraded itself. But don’t worry. This will have zero effect on our economy. It’s a publicity ploy by S&P.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

MONETARY SOVEREIGNTY

–Latest addition to the Idiot Patrol: Sen. Tom Coburn

Here is the latest addition to the Idiot Patrol: Sen. Tom Coburn (R-Oklahoma) Read all about it:

Washington Post: Sen. Tom Coburn’s cuts: Tackling Social Security
By Walter Pincus, Published: August 4

Editor’s note: Sen. Tom Coburn (R-Okla.) released a plan in July that he said would achieve $9 trillion in deficit savings over the next decade. Here we review parts of the proposal.

Wonderful. That’s $9 trillion less in an economy starved for money. What a concept!

“Today, Americans on average live 14 years longer, retire three years earlier (at 62) and spend 20 years in retirement,” Coburn has written, implying correctly that this is one reason the system is running out of money.

No, Tom and no, Washington Post. Social Security is an agency of the Monetarily Sovereign U.S. government, which cannot run out of money. If every man, woman and child received Social Security benefits from the day of birth, the federal government still would have no difficulty supporting the program to infinity.

(And pul-eeeze don’t tell me about inflation. I know. I know. If the federal government spent unlimited money, at some time in the future we’d have inflation. I’m not suggesting everyone go on SS from the date of birth. I’m just talking about federal spending capabilities).

Here is Coburn’s “Work ‘Til You Drop” plan:

Pertinent facts that “better reflect life expectancy,” Coburn argues, justify his plan to continually raise the Social Security retirement age beyond the scheduled bump to 67 in 2027. Those who want to retire early, at age 62, will be able to do so in 2022, but they would receive only 70 percent of what they would have received by retiring at 67.

Coburn would have retirement ages automatically increase, but gradually, one month every two years. Under his plan, someone who turns 62 in 2026 could begin collecting at 68 and someone who hits 62 in 2070 would have to wait until age 69.

This is how Congress will provide a better life for us, our children and our grandchildren: Continually raise the retirement age.

But that’s not all. We need to restrict payments to disabled people, too.

Coburn directs much of his attention in preserving Social Security to two other programs run by the Social Security Administration.

One is the Social Security Disability Insurance program. . . Created in 1956, SSDI was to be “a safety net of last resort for disabled Americans who could not work” . . .Coburn argues that billions could be saved on SSDI if the Social Security Administration conducted “continuing disability reviews” of beneficiaries.
[…]
Coburn quotes a Social Security inspector general’s finding last year that eliminating the medical CDR backlog “would result in saving $15.8 billion in improperly paid lifetime federal benefits.”

“Saving” for whom? For a government with the unlimited ability to pay its bills, a government that never, ever, ever can run short of dollars? Or for the American economy that is starved for cash, and sinking deeper into recession?

The second troubled program is Supplemental Security Income (SSI), which was established in 1972 and is a means-tested benefit to the disabled poor, elderly and blind.
[…]
Coburn said one serious concern in the program, which sets income limits and the holding of assets, is that payments are going to improper people or at the wrong level. The Social Security inspector general testified in June that in 2009 $4 billion in overpayments went “to SSI recipients who did not properly report assets,” one of the main qualifying elements.

Yes, there must be millions of people who no longer are elderly, no longer are disabled and no longer are blind. They must be getting rich on those meager payments. We have to crack down. The next thing you know, those cheats actually will want subsistence benefits, to pay for food, clothing, housing and (gasp!) air conditioning. The nerve of them! We have to crack down.

The Social Security inspector general said that if redeterminations had been carried out at the 2003 level, his agency “would have saved taxpayers $3.3 billion during fiscal years 2008 and 2009.”

No, Tom. No SS inspector general. Taxpayers do not pay one cent toward the disabled poor, elderly and blind. If taxes fell to $0 or rose to $100 trillion, neither event would affect by even one penny, the federal government’s ability to support every federal agency.

Yes, yes, I know, Tom. Inflation. Zimbabwe, Weimar Republic. Hyper-inflation, big government. Those are today’s real problems. Forget about unemployment, recession, homelessness, starvation, disability, health, education, poverty, the infrastructure, crime, security and food and medicine safety.

We need to cut, cut, cut — drain that money out of the economy — especially during a recession.

Let’s save as much money as possible for a government that doesn’t need it, so we can starve the economy and its people of the money they urgently need. Welcome to the Idiot Patrol, Tom.

And welcome to the mean, cruel world you wish to create for our children and us.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

MONETARY SOVEREIGNTY

–There is too much money in the economy. The big problem is not recession; it’s too much federal spending.

Today’s headline:

Dow Jones closes down 513 points;

worst drop since October ’08

Well obviously, we need to cut federal spending. Quickly, write your Congressperson and thank him/her for cutting the federal deficit. Tell him there still is too much damn money in the economy, so we need to cut spending even more. And thank you Mr. President for giving us austerity. That should eliminate the unemployment problem.

By the way, last month I predicted a depression for 2012. What can prevent it? Federal deficit spending. (But don’t tell the Tea Party).

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

MONETARY SOVEREIGNTY

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