Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity starves the economy to feed the government, and leads to civil disorder.
●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.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

In economics, the BIG LIE is the idea that somehow a Monetarily Sovereign government unwillingly can run short of its own sovereign money. The purpose of the BIG LIE is to make the populace believe the federal government cannot afford social spending.

And the purpose of that is to increase the gap between the upper 1% income group and the lower 99% (The lower 99% receives a greater percentage of its income from federal social spending than does the upper 1%.) Increasing the gap is the primary goal of the 1%.

Republican Representative John Boehner, famously repeated the BIG LIE when he declared “America is broke.” Main Street Americans, not understanding the difference between federal finances and personal finances, accept the BIG LIE without question.

In an August 14th online discussion, AARP President Rob Romasco answered questions about Social Security funding, and essentially admitted the BIG LIE, though he didn’t realize it at the time:

Comment From Guest: “I hear conflicting statements in the media about Social Security running out of money. What is the real story: Is it expected to run out of money?”

Rob: “Social Security receives money from 3 main sources: the payroll tax, interest earned from bonds that are held in the Trust Funds, and the taxation of benefits.”

Comment From Guest: “Is the FICA tax holiday hurting Social Security?”

Rob: “This is a very good question… The FICA tax holiday is in no way hurting the Social Security program. Even though the payroll tax was decreased by 2 percent, money is transferred from the ‘General Fund’ to make up for the lost payroll tax.”

So there you have it. To pay for the “lost payroll tax,” money is transferred from the General Fund. And in fact, to pay for any “lost” payroll tax, money always can be transferred from the General Fund. If there were no payroll tax at all – i.e. if FICA were $0 – money to pay Social Security benefits still could be transferred from the General Fund.

What does this all mean? The General Fund, the Social Security Trust Fund, and indeed all federal funds are accounting fictions. They do not exist in any real form. They all are nothing more than numbers on balance sheets and the numbers are wholly controlled by the U.S. government. That is what we mean when we say the government is Monetarily Sovereign.

Until August 15, 1971, the federal government limited its dollar-creation to its supplies of physical gold. If gold supplies ran low, the government would not allow itself to create the dollars to pay its bills.

This was entirely a self-limitation; dollars have no physical existence. The federal government always has had the power to change the numbers in its balance sheets, but prior to 1971, chose to tie its own hands as a presumed protection against creating “too many dollars,” i.e. inflation.

By 1971, it had become clear this artificial limitation prevents economic growth and can cause a self-created bankruptcy. So President Nixon simply removed the limitation. After that date, nothing prevents the federal government from increasing its fictional supply of dollars by any amount.

Dollars don’t come from taxes. Dollars don’t come from borrowing. Dollars don’t “come from” anywhere. They simply are numbers added to the General Fund by arbitrary credits.

In accounting, any credit requires a debit, so where do the debits come from? Some come from the “taxes received” line of the balance sheet. And the rest come from what erroneously is called “borrowing,” but actually is the total of outstanding Treasury securities.

This provides the illusion that taxes and borrowing “pay for” federal spending. But if there were no taxes and no borrowing (T-securities), the federal government still could pay its bills as always — by crediting and debiting accounts. That illusion is what makes the BIG LIE persuasive.

What would happen if not enough people wished to own T-securities? The Federal Reserve Bank simply would credit T-security accounts (which are at the FRB) by enough to make up the difference.

Remember: Though dollars may seem real and scarce to you and me, for the Monetarily Sovereign federal government, dollars are an accounting fiction. They are nothing more than numbers the government can manipulate at will.

Need a trillion dollars to pay for Social Security? No problem. Credit the General Fund by $1 trillion, and debit the T-security account. Need another trillion to pay for Medicare? Still no problem. Credit the General Fund, and debit the T-security fund, by another trillion.

Need more dollars in the T-security account? No problem. Credit the T-security account and debit other accounts at the Federal Reserve Bank. This is especially convenient since all T-security accounts are kept at the FRB.

You and I are not Monetarily Sovereign. Neither are Illinois, Cook County, Chicago or General Electric. None of us has the legal authority to change the numbers in bank accounts at will. The federal government has this legal authority.

It can instruct your bank to increase the numbers in your checking account (i.e. pay your Social Security benefit). Your bank will obey, and forward these instructions to the Federal Reserve bank, which will clear the transaction (i.e. credit your bank’s account), because the instructions came from the government.

Bottom line: Dollars do not exist in any physical sense. They are an accounting fiction, wholly controlled by our Monetarily Sovereign government, which can create an infinite number of them, simply by crediting accounts. The government can credit Medicare, Medicaid and Social Security accounts endlessly, just as it can credit all federal agency accounts, endlessly.

The only way Social Security could run short of dollars is if the government fails to credit its accounts. The same is true for Medicare (which is why the much-despised individual mandate is unnecessary). The same is true for all federal spending.

Sadly, Rob Romasco ended his response to the Social Security question, with this comment:

Rob: “Nevertheless, AARP believes the temporary payroll tax holiday should not be extended beyond the current year.”

Thus, despite admitting benefits can be (and are being) paid by debiting the General Fund, AARP continues to promulgate the BIG LIE that the federal government can run short of dollars.

After all, AARP is a private organization, owned and directed by the 1%.

Rodger Malcolm Mitchell
Monetary Sovereignty

==========================================================================================================================================
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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports

#MONETARY SOVEREIGNTY

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity starves the economy to feed the government, and leads to civil disorder.
●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.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

One of the most important and timely equations in economics is:

Federal Deficits = Net Private Savings + Net Imports

This neither is theory or even hypothesis. It is an accounting description of U.S. dollar flow. No economist disputes this equation.

The equation shows that federal deficits are the ultimate source of all dollars, and despite economically suicidal efforts to reduce deficits, if there were no deficits there would be no dollars. Without federal deficits, your net savings — even Bill Gates net savings — would be zero.

“Deficit” and “debt” fool most people, because these words sound negative. But think about it this way:

A federal “deficit” occurs when the federal government creates and spends more dollars than it receives in taxes. Similarly, when the government runs a surplus, the government takes more dollars out of the economy than it sends into the economy. A government surplus is the economy’s deficit.

The added dollars from federal deficit spending go to one of two places:

1. Into the U.S. economy, where they become Net Savings, or
2. To foreign economies to pay for Net Imports

Thus, the equation: Federal Deficits = Net Private Savings + Net Imports

Banks create dollars by lending, but those are not net dollars. For every dollar created by a bank, a loan obligation also is created –- the new dollars are offset by new obligations, so they net to zero. Only the federal government creates net savings dollars.

Lately, the blogosphere has been crackling with graphs illustrating this simple concept. First, I received an Email from several economists, containing an illustrative graph from Warren Mosler’s site. Then, I sent them back the following graph which shows Federal Deficits (red line) and Total Savings Deposits at all Depository Institutions plus Imports of Goods and Services (BOPMGSA)

(The lines would be exactly coincident but for slight measurement differences. Also, “Total Savings Deposits at all Depository Institutions” is not identical with Net Private Savings, and Imports of Goods and Services is not Net Imports.)

The graph makes this point clear: The more deficits rise, the more net savings rise.

The misnamed “deficit” is the source of all net dollars, i.e. all net private savings. Cutting deficits cuts private savings, which depresses the economy. Cutting deficits is a prescription for depression.

The Tea Party, Romney/Ryan, the Chicago Tribune, AARP and the Wall Street Journal editors all act on behalf of the upper 1% income group. They tell you the myth that federal deficit and debt are “unsustainable” and should be reduced. They never explain why a Monetarily Sovereign nation cannot “sustain” its deficits.

The 1% wants you to believe the myth, because that belief leads to your acceptance of cuts to social benefits and a large and growing income gap between the 1% and the 99%.

Reducing the deficit takes dollars out of the economy. When the government deficit spends, dollars flow into your pockets. When the government taxes, dollars flow out of your pockets. It’s that simple.

Because the government is Monetarily Sovereign it can create endless dollars. It does not need taxes. It does not need to borrow the dollars it creates. It can support endless Medicare, endless Medicaid and endless Social Security and never bounce a check.

Federal social programs will be in financial trouble only if the government cuts federal spending. It’s a self-fulfilling action. The more deficit cutting, the more financial trouble, which (according to the 1%) “requires” more deficit cutting, and on and on, until the lower 99% are sucked dry.

Don’t let the 1% starve you to feed a Monetarily Sovereign government that does not need to be fed. Vote against all tax increases and benefit cuts.

(By the way, if the Ryan budget doesn’t really cut Medicare, but actually “saves” Medicare, why does Ryan repeatedly assure those 55 and older, that the plan will not apply to them? Does he think we are so selfish we don’t care what happens to our kids?)

Rodger Malcolm Mitchell
Monetary Sovereignty

==========================================================================================================================================
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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports

#MONETARY SOVEREIGNTY

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity starves the economy to feed the government, and leads to civil disorder.
●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.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

Have you bribed a politician lately?

The Washington Post published an interesting article titled, When is a campaign contribution a bribe?
By Robert Barnes, Published: August 12

A few excerpts:

Former Alabama governor Don Siegelman heads back to prison next month, contrite about and embarrassed by his bribery conviction. But when he faced resentencing earlier this month, he still was not quite ready to concede that he knowingly broke the law.

“If I had known I was coming close to the line where a campaign contribution becomes a bribe and a crime, I would have stopped,” Siegelman told U.S. District Judge Mark Fuller, who sentenced Siegelman to 6 1/2 years in prison.

Federal law makes it a crime to corruptly solicit or accept money with the intent of being rewarded or influenced in official actions.

In 1991, (the Supreme Court) ruled that a campaign contribution could be a bribe if prosecutors proved a quid pro quo — that the contribution was “made in return for an explicit promise or undertaking by the official to perform or not to perform an official act.”

In a subsequent case, Justice Anthony Kennedy said the quid pro quo need not be expressly stated. But lower courts have differed, since then, on exactly what standards apply.

In Siegelman’s case, the contribution at issue was to his pet project, a lottery referendum measure that would help education. Richard Scrushy, a health-care facility magnate who had been appointed to a state hospital facility planning board by previous Republican governors, gave $500,000 to the referendum campaign. Siegelman, a Democrat, later reappointed him to the board.

Let’s say you understand that the Romney/Ryan ticket is a shill for the upper 1% income group, and intends to slash benefits for the 99% under the guise of “fiscal responsibility.” You are part of the lower 99% who would be hurt by cuts to Medicare and Social Security, so you send in your $25 donation to re-elect Obama.

Later, Obama votes to expand Medicare and Social Security. You keep your benefits. Have you bribed the President?

Let’s say you are one of the Koch brothers who, to quote an article in The New Yorker, “believe in drastically lower personal and corporate taxes, minimal social services for the needy, and much less oversight of industry—especially environmental regulation. These views dovetail with the brothers’ corporate interests.”

So you give $100 million to the campaigns of numerous right-wing politicians, all of whom express their undying gratitude by voting to drill for oil in ecologically sensitive lands, cut taxes on the wealthy and on corporations, and reduce Medicare, Social Security, Medicaid and aid to the poor.

Have you bribed these politicians?

You may try to find an answer, but you will fail. No matter how you twist and turn the semantics of what constitutes a bribe and what merely is free speech, you will not be able to find a boundary.

For instance, you might say a bribe involves a direct quid pro quo, in which something specific is promised in return for something else specific. Does this include giving money to someone who has promised to give you money if elected? Does “direct quid pro quo” include the tax savings right wing politicians have promised to the Kochs?

I submit that everyone, who gives money to a politician, does it for the same reason: They want that politician to do something to benefit someone. There is no bright line difference between the Alabama governor who reappointed a guy to yet another term on a board, the Koch brothers who essentially bribe the entire right wing, the gal who slips a cash-filled envelope to the small town mayor to get a job for her brother. – and you, who gave $25 to the politician who promises not to cut your Medicare.

While there is no clear solution, there may be some partial solutions – some steps in the right direction. And they have to do with money, and with what I consider the false belief that giving money is a form of free speech.

The 1st Amendment says, “Congress shall make no law . . abridging the freedom of speech, or of the press . . . “ That’s it. In my innocense, I would include talking and writing as “speech.” Although money supposedly “talks,” somehow I don’t consider giving a politician money, to be a form of speech – especially when the money is so big it simply cannot be ignored by the recipient.

The Dalberg quote, “Power tends to corrupt, and absolute power corrupts absolutely,” could be refashioned. “Money corrupts, and big time money corrupts big time.” While your $25 contribution to Obama, may not elicit a quid pro quo, is there any doubt that a million dollar contribution to a politician will get that politician to do almost anything?

Sadly, the Supreme Court does not recognize the difference between $25 and $100 million – something like not recognizing the difference between a machine gun and a Nerf gun – so in removing limits from campaign contributions, the Court, in essence said, “Guns are legal, Nerf guns, machine guns, all he same to us.”

Further, while I disagree that giving money is free speech, previous Supreme Courts have held that even some speech can be proscribed. Oliver Wendell Holmes, Jr. famously said, “The most stringent protection of free speech would not protect a man falsely shouting fire in a theater and causing a panic.”

Yes, even “free speech” is not endlessly free. There are limits. Similarly, there can and should be limits on the “free speech” of political donations.

My suggestion: A limit of $10 per person to each candidate. That would level the playing field. A rich man would have no more “free speech” than would a poor man. Not enough to influence a vote, that $10 worth of “free speech” would tell the politician how you feel.

Rather than being a bribe, that $10 would be “free speech” in its purest form — not a total solution, but perhaps a start.

Rodger Malcolm Mitchell
Monetary Sovereignty

==========================================================================================================================================
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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports

#MONETARY SOVEREIGNTY