–Are federal taxes destroyed upon receipt? The shorter and longer answers.

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

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which ultimately 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.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
======================================================================================================================================================================================

Reader tetrahedron720 asked, “How would you go about explaining the decision to destroy money upon receipt as compared to not destroying it as is the case with state and local government, i.e., is there a url or source that shows a balance sheet of local government vs. the balance sheet of the federal government that would by comparison isolate the difference clearly?”

The shorter answer is: Federal balance sheet accounts are not part of the money supply. All of the money supply is in banks or other private hands. All state and local money is in banks or other private hands.

Here’s a longer, I hope better, answer:

Semantics. That is the real problem. We all do this: We say we take, send or give dollars to anyone. But, we really take, send or give instructions, not dollars.

Readers of Why a dollar bill is not a dollar, and other economic craziness know that a dollar has no physical existence. You cannot see, touch, hear, feel, smell or give a dollar.

That dollar bill in your wallet is not a dollar. It represents a dollar, just as a title represents a car or a note represents a loan. That dollar bill is a bearer bond, telling the world that the bearer of that note is owed $1 by the U.S. federal government.

By way of analogy, consider numbers. Numbers too, have no physical existence. You cannot see, touch, hear, feel, smell or give the number seven. You can see representations like “7” and “VII” and “SEVEN,” but you cannot see the number itself.

You can give me seven bats, 7 balls or VII brooms, but you cannot send me the number seven. Similarly, and contrary to intuition, you cannot send me a dollar, although we use that phrasing all the time.

You can send me a dollar bill, a piece of paper that represents a dollar. Or you can give me your $1 check, which is nothing more than a set of instructions, telling my bank to increase the number in my checking account by 1 (and to decrease the number in your checking account).

All money measures have one thing in common: All money exists in the private sector.

The federal government has no money. Why would it? It creates its sovereign currency, the dollar, ad hoc, when it pays bills. Whenever the federal government sends a check, in payment of a bill, that check is not money. The federal government, not having money, can send no money.

You never will see a number showing how much money the federal government owns, but you always will see how much the federal government supposedly owes.

When John Boehner famously lied, “Let’s be honest. We’re broke,” he was referring to the fact that the government supposedly owes trillions, but has no money. In fact, that always is the case for a Monetarily Sovereign nation. It creates its sovereign currency ad hoc, so at any moment in time, its debts far exceed its holdings of money. It has no holdings of money.

A federal government check merely instructs a creditor’s bank to increase the number in the creditor’s checking account. It does not deliver dollars, since dollars, having no physical existence, cannot be delivered.

At the same time the bank increases the number in the creditor’s account, corresponding federal accounts are decreased, but none of those accounts are part of the money supply. So when you send tax money to the government — or more properly, send your instructions in the form of a check or wire — the dollars that existed only as numbers in your checking account are destroyed. They cease to be part of the money supply.

What about state and local tax dollars? When you send your checks to your state and local governments, the numbers in your checking account are reduced. But, contrary to what the federal government does, the state government deposits its tax receipts in private banks. Those dollars are part of the money supply.

The process is like this:
1. You write a set of instructions (a check). [You still own the dollars.]
2. You mail the instructions. [You still own the dollars.]
3. Your state receives your instructions. [You still own the dollars.]
4. Your state mails your instructions to its bank. [You still own the dollars.]
5. The state’s bank follows your instructions, increases the number in the state’s account and tells your bank to reduce the number in your account. [At that instant, dollars have been “transferred” from your account to the state’s account. The tax dollars remain in the money supply.]

Bottom line: When you pay taxes, you actually send instructions, not dollars, to various governments.

When state and local governments follow your instructions, the nation’s money supply remains the same. When the federal government follows your instructions, the nation’s money supply falls.

The difference: The federal government is Monetarily Sovereign. State and local governments are monetarily non-sovereign. A Monetarily Sovereign government has the unlimited ability to create its sovereign currency, in any amount at any time, for any reason it wishes.

So it would make no sense to ask how much money the federal government has. It would be like asking (as Warren Moseley might say) how many points a scoreboard has. The answer in both cases: “As much as it needs at any moment in time; it creates them ad hoc.”

As for you and me and state and local governments and euro-using nations, none of us has a sovereign currency. We cannot create unlimited amounts of money instantly, so it’s reasonable to ask how much money we have — and that is the Money Supply.

And that is the longer answer.

I hope it helps.

Rodger Malcolm Mitchell

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

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

The most important problems in economics involve:

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

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

Ten Steps To Prosperity:

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

MONETARY SOVEREIGNTY

–The economics of chaos. What we know for sure. The value of money (inflation) formula

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

Because a large economy, by definition, contains more money than does a smaller economy, an economy growing from smaller to larger requires an increase in the money supply.

But in the minds of people ignorant about economics, every solution to recession, every solution to the income gap, every solution to other economic misfortunes — indeed every government action that involves adding to the money supply — always must lead to inflation and unsustainable debt.

For them economics is simple: Money Supply (MS) = Inflation (I). Period.

(The exceptionally ignorant believe all solutions lead to hyperinflation, with the inevitable, wrongheaded comparisons to Zimbabwe, Weimar Republic and Argentina.)

But economics actually is among the most complex of all sciences, encompassing psychology, sociology, mathematics, engineering, physics, chaos theory and innumerable other disciplines.

Inflation includes that complexity, for Inflation most certainly does not = Money Supply.

Inflation is the change in value of Money vs. the value of Goods and Services.

The Value of Money = Demand / Supply.
The Demand for Money = Reward/Risk
The Reward for owning money is Interest.

Put them all together and you have:
Value of Money = (Interest / Risk) / Supply.

Then we come to the Value of Goods and Services (G&S), which is calculated.

Value = (Demand / Supply) X Cost

Consider any Good, such as steel. The value of steel = the Demand for steel divided by the Supply of steel, x the cost of producing steel. The price of steel rises when demand rises, the supply falls and/or the cost of production rises.

So Inflation depends on this:
[(Demand for G&S / Supply of G&S) x Cost of producing Goods and Services] / [(Interest / Risk) / Supply of Money]

That is a long, long way from from the debt hawks’ simplistic: Money Supply = Inflation.

But, it gets more complicated. Each Good and each Service weighs differently on inflation. The cost of tomatoes might rise and have a very small effect on inflation, while the cost of oil has a huge effect on inflation.

Further, the price of some goods is artificially controlled (oil is an example), and the Demand for oil reacts minimally to price changes. Inflation then is the weighted Values of every Good and Service / the Value of Money, and that weighting, in of itself, is complex.

But, it gets even more complicated, for psychology is a big part of economics, and humans as a group, react differently to different situations.

Finally, a small inflation can be self curing or self perpetuating, depending on the power of automatic stabilizers (factors that automatically work against changes in inflation).

Many sciences encounter such complexity. Consider these excerpts from the January 25, 2014 issue of Science News Magazine

Tomorrow’s catch, Chaos theory’s potential for fisheries management
BY Gabriel Popkin, JANUARY 10, 2014

Pacific sardines all but disappeared from coastal waters in the 1950s. Numbers remained low until the late 1980s, when enough fish finally reappeared to make commercial harvesting worthwhile again. By then, sardines in the highly productive California Current were carefully managed.

Scientists still debate what causes sardine numbers to rise and fall. Overfishing certainly played a part in the collapse. Research suggests that a cooling of the eastern Pacific Ocean also played a key role.

The thinking goes that a cool period starting in the mid-1940s, combined with decades of overfishing, sank the sardine.

So, for the scientists, Sardine population = 1 / (Fishing x Water Temperature)

Based on this understanding, the Pacific Fishery Management Council developed a temperature-dependent method to predict population changes and set harvest limits for sardines in the California Current.

In 2010, however, scientists analyzed data from the previous two decades and published a study questioning the correlation between sardine population growth and sea surface temperature. As a result, the council removed ocean temperature from the mathematical models they use to forecast sardine population growth.

The council’s decision frustrates George Sugihara, a theoretical biologist. In his view, the simulations that fishery scientists use to predict population changes and set quotas are fundamentally flawed.

The simulations can’t capture how a population’s growth rate might change in response to the other fish species living in the ocean, for example, or to the amount of zooplankton, or to wind speeds or, for that matter, to fishing itself. He says “it’s like trying to understand reality by just looking at one page” of a book.

I do it. You do it. We all do it. We look for simple correlations. To the layman, Money Supply = Inflation makes perfect intuitive sense. “Print” more money, and we’ll have inflation. Right?

But somehow, it doesn’t work that way. In fact, since 1972, when we stopped using gold as a backing for the dollar, there has been no relationship between federal “money printing” (deficit spending) and inflation..

How is this possible? Complexity.

And as for federal debt being “unsustainable” and “costing taxpayers money,” these myths have been demolished in many posts throughout this blog, for instance here and here.

Intuition betrays us in all sciences. Time depends on speed (We age slower as we go faster.) An atomic particle can be in different places at the same moment. Fish populations do not correlate directly with fishing. Debt is not a burden on the federal government. And inflation does not result from federal spending.

So where does that leave us? Economics is beyond complex; it is chaotic. It follows the butterfly effect (A butterfly flapping its wings can change world weather). So simple, linear causes and effects are rare.

We are left, then, with the few things we know for sure.

1. We know for sure that a growing economy requires a growing money supply, as discussed, above (although this is not to say there is a linear relationship between money supply and economic growth).

2. We know for sure that federal spending and exports add money to the economy while federal taxes and imports remove money from the economy.

3. We know for sure that the federal government (unlike state and local governments) cannot run short of dollars, so can pay any debt at any time (unless Congress rules against paying its debts).

4. We know for sure that money cures poverty, at least temporarily. Give a poor person money and/or services on which he must spend money, and at that moment he is less poor (recognizing that any given individual quickly may lose the money or waste the services provided to him).

5. We know for sure that a growing gap between the rich and the rest punishes the majority, while rewarding the minority.

6. We know for sure that rewarding the poor and middle classes more than we reward the rich, narrows the gap between the rich and the rest.

7. We know for sure that education in general helps people in general to grow economically.

8. We know for sure, that when crime is rewarded more than punished, crime will exist, and when the rewards grow vs punishments, crime will grow.

And this knowledge is what leads us to “The Nine Steps to Prosperity,” below.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================
Nine 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. 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
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)

—–

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

THE RECESSION CLOCK

As the federal deficit growth lines drop, we approach recession, which will be cured only when the lines rise. Federal deficit growth is absolutely, positively necessary for economic growth. Period.

#MONETARY SOVEREIGNTY

–Immigration, the Right way

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

Here is what immigration will look like if the right wing has control.

House GOP wants legal status but no citizenship for illegal immigrants
Calls granting them full citizenship unfair and contrary to the rule of law
By Stephen Dinan-The Washington Times

House Republican leaders have ruled out a special pathway to citizenship but do support granting some form of legal status and work permits to most illegal immigrants, according to the broad set of principles GOP leaders released Thursday.

House Speaker John A. Boehner, Ohio Republican, told reporters that his party’s leaders thought they had to make a good-faith offer.

Here are some of the details of Boehner’s “good faith” offer:

Secure the borders and verify that they are secure, including zero tolerance for those crossing the border illegally or overstaying their visas.

First, let’s not mealy-mouth. It’s not “borders,” it’s border, i.e. the Mexican border. You can imagine why.

Second, no one knows how to judge when borders are “secure.” Does that mean zero undocumented immigrants for the next 50 years? If not, what exactly does “secure border” mean?

And what form does “zero tolerance” take? Deportation of all 11 million undocumented immigrants. Or hang or shoot them? And what of their children?

Fully implement an entry-exist tracking system using biometric identification technology

Exactly what “biometric” technology are they talking about. Fingerprints? Iris recognition? Face recognition? Or how about that good, old standby: “Looking Mexican.” That seems to work pretty well in Arizona.

And what is meant by “tracking.” Will the police follow people around? Stop people in the street? Set up road blocks on highways?

Fully implement a “workable electronic employment-verification system.”

What’s the purpose? Will immigrants be deported if they lose their jobs? If so, might unscrupulous employers use that as leverage to force slave-labor conditions on helpless workers? But of course, that’s the point, isn’t it?

Institute an “employment-based immigration” system, with visa and green card allocations that “reflect the needs of employers and the desire for . . . exceptional individuals to help grow the economy.

How will politicians know the “needs of employers”? Will there be a central clearing house to which all employers will submit all their employment needs before hiring anyone? Who are “exceptional individuals”? What qualifies as exceptional?

Develop a temporary worker program that addresses the country’s economic needs and strengthens the nations security with particular concern for the needs of the agricultural industry.

What does “addresses the country’s economic needs” mean? If people work and are productive, doesn’t that address economic needs?

And how does it strengthen our security? Have there been many Mexican terrorists running around? Indeed, in a nation this size, have there been many foreign terrorists of any nationality?

But as for the agricultural industry, by all means let in all those “exceptional individuals” to do stoop labor picking crops in the field. Hey, farmers vote and contribute, don’t they?

Provide an opportunity for legal residence and citizenship for those who were brought to this country as children through no fault of their own, rewarding those who serve in the military or obtain college degrees.

They’ve made it very difficult for immigrants to get jobs and to earn enough money to send their kids to college, but that’s the plan. Right wingers tell poor people to do the impossible, then toss them out before they can do it. It’s genius.

No special path to citizenship, but adult illegal immigrants can live legally and without fear in the United States if they admit their culpability, pass rigorous background checks, pay significant fines and back taxes, develop proficiency in English and American civics, and support themselves and their families without access to public benefits.

God forbid these Mexicans are allowed to be citizens. First, they have to admit their culpability (why, we don’t know, but it makes right wingers feel strong to bully helpless people.).

Then they have to pass tests very few politicians could pass. And of course, pay unaffordable fines and taxes, all while becoming proficient in English, learning American civics and supporting themselves. And do not, I repeat DO NOT, ask for any benefits.

Of course, the minute you “admit your culpability, the police will toss you out of the country.

Who says Republicans are a bunch of mean, cowardly bullies, so unsure of our own abilities, they fear those inferior Mexicans will overthrow our government? Who says?

No legalization program will be implemented before there are specific enforcement triggers to ensure that our immigration laws will indeed be enforced.

We’re not sure what “triggers” we mean, but anything to make life difficult for poor, hard-working people trying to make a better life for themselves, is good for Republicans.

Maybe, they’re talking about the triggers on AK-47s that they love so much.

Bottom line question: Are there any people meaner, more cowardly and Un-American than “religious” conservatives?

They are so afraid of Mexicans, they do everything possible to make life miserable for good people who risk their lives to come here, even people who have lived here many years — even babies, for heaven’s sake.

They are so afraid of “terrorists” and criminals (especially black or brown criminals), they never can have enough guns, the more powerful the better.

They are so afraid of competition from the poor, they want to reduce any spending that benefits the poor — things like federally supported housing, food, retirement, unemployment compensation.

Yes, the conservatives are mean, as all cowards are, but what are they really afraid of?

An analysis from the Eagle Forum, a group run by conservative icon Phyllis Schlafly, argues that adding immigrants will doom the Republican Party.

The analysis looked at immigrants’ ideologies and found that they were likely to be liberal on social issues.

“The key conclusion of the report is this: For conservatives, there is no issue more important than reducing the number of immigrants allowed into the country each year,” the analysis says.

And there it is. The conservatives don’t car about “security,” “the rule of law,” “fairness,” “employment,” “college degrees,” “the military,” “farmers,” “citizenship,” “learning English,” “learning civics,” admissions of culpability,” “college degrees” or any of the other hoops the conservatives demand immigrants jump through.

No, they’re just frightened — frightened to death — frightened that immigrants will vote for Democrats. Period.

But here’s a thought. How about letting those oh, so religious, right wingers pass the same tests they put forth for immigrants — you know the English, civics, college or army, background check, support your family and above all, no federal benefits requirement.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================
Nine 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 and 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. 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
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)

—–

#MONETARY SOVEREIGNTY

–Edward Snowden Nominated For Nobel Peace Prize. The Obama legacy.

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

We’ve discussed l’affaire Snowden before at:

Police state: Which vital secret did Edward Snowden reveal? Wednesday, Jun 12 2013

Police state: Which vital secret did Edward Snowden reveal? PART II Monday, Jun 17 2013

Obama: Edward Snowden is a stinkin’ traitor and should be hung . . . er . . . ah . . . I said what? Friday, Aug 9 2013

Why I love the National Security Agency Monday, Jan 20 2014

And now we have:

Edward Snowden Nominated For Nobel Peace Prize by Bill Chappell

You can read the article by clicking the above link, but I thought the key paragraphs were these:

Saying Edward Snowden has “contributed to a more stable and peaceful world order” by exposing U.S. surveillance practices and forcing a new debate over security and privacy, two Norwegian politicians nominated the former intelligence contractor for the Nobel Peace Prize on Wednesday.

Days before Clapper spoke on Capitol Hill, Snowden discussed the (U.S.) spy chief in an interview with German TV, as The New York Times reports:

“Mr. Snowden cited previous testimony from Mr. Clapper, in March of last year, as a prime factor in his decision to leak information to the public about the agency’s work. ‘I would say sort of the breaking point was seeing the director of national intelligence, James Clapper, directly lie under oath to Congress,’ Mr. Snowden said.

‘There’s no saving an intelligence community that believes it can lie to the public and the legislators who need to be able to trust it and regulate its actions. Seeing that really meant for me there was no going back.’“

That’s right, Mr. Snowden. The proven liar still has his job, while the one who exposed the lie is hounded by his government.

When criminal government employees, criminal bankers and criminal companies are rewarded for their lies, you know the nation has lost its moral leadership.

And that is the legacy of the Obama administration.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================
Nine 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 and 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. 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
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)

—–

#MONETARY SOVEREIGNTY

Share this:

Share this:

Share this:

Share this: