OMG! I never thought I would be forced to say this, but the Editorial Board of the Washington Post may even be more ignorant and/or dishonest than the leaders of Fox News.

We’ve published some excerpts from an article that ran today, October 7, 2023, in the Washington Post. It was written by the Post’s “Editorial Board.”

First, here is what the Post says about its Editorial Board:

The Post’s View | About the Editorial Board Editorials represent the views of The Post as an institution, as determined through discussion among members of the Editorial Board, based in the Opinions section and separate from the newsroom.

Members of the Editorial Board: Opinion Editor David Shipley, Deputy Opinion Editor Charles Lane, and Deputy Opinion Editor Stephen Stromberg, as well as writers Mary Duenwald, Shadi Hamid, David E. Hoffman, James Hohmann, Heather Long, Mili Mitra, Keith B. Richburg, and Molly Roberts.

Now that you know who is responsible, here comes the epitome of misinformation, or dare I say, disinformation.

Opinion Higher interest rates mean greater danger for U.S. debt By the Editorial Board October 7, 2023, at 7:00 a.m. EDT

Borrowing is expensive again, as anyone who has tried to buy a car or home lately can tell you. The interest rate on 10-year Treasury bonds, the benchmark for home loans, is hovering around 4.75 percent, a nearly two-decade high.

This will significantly add to the federal government’s expenses and raise the urgency to lower the deficit.

Immediately, you see the incredibly ignorant (intentional or otherwise) parallel between personal and federal government finances.

This is Economics 101, folks. You and I are “monetarily non-sovereign. We didn’t create a sovereign currency. We use the currency created by the Monetarily Sovereign U.S. government.

Get it? They are the creators; we are just the users. Huge difference.

As the Monetarily Sovereign creator of the U.S. dollar, the federal government cannot unintentionally run short of dollars.

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”

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.”

Quote from former Fed Chairman Ben Bernanke when he was on 60 Minutes: Scott Pelley: Is that tax money that the Fed is spending? Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the (checking) account.

Statement from the St. Louis Fed: “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.”

This is true of all major currencies created by a Monetarily Sovereign entity like Japan, China, England, the European Union, etc.:

Press Conference: Mario Draghi, President of the ECB, 9 January 2014 Question: I am wondering: can the ECB ever run out of money? Mario Draghi: Technically, no. We cannot run out of money.

The abovementioned Washington Post Editorial Board geniuses presumably have not taken Economics 101; if they took it, they flunked.

Despite its being able to “pay any debt” denominated in dollars, “produce as many dollars as it wishes.” and “simply using the computer to mark up its accounts, the U.S. government’s ability to pay the interest on its T-securities is questioned by the Post editors.

I am stunned by their ignorance, real or feigned.

Interest costs are already the fastest-growing part of the budget. Net interest costs — a nonnegotiable expense — nearly doubled as a share of federal outlays between 2020 and 2023, going from $345 billion, or 5 percent, to $660 billion, or 10 percent. (Defense, by comparison, cost $815 billion, or 13 percent of spending in 2023.)

The higher rates partly reflect the Federal Reserve’s necessary campaign against inflation, but they also mean that the miracle of compounding is now working against the country’s fiscal stability.

The country’s fiscal stability is infinite. If faced with a billion-dollar, a trillion-dollar, or a thousand trillion-dollar invoice, the U.S. federal government could simply “use the computer to mark up the size of the (checking) account” and pay the invoice.

Thus, interest rates do not mean greater danger for U.S. “debt.”

Barring policy changes, recent interest rate increases could add $3 trillion over the next decade to interest costs, according to Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget.

If the government pays $3 trillion in interest to U.S. security owners over the next decade, that means the government will add $3 trillion growth dollars to Gross Domestic Product.

If some of those dollars go to foreign security holders, that will simply increase foreign citizens’ ability to buy U.S. products.

And all of this will not cost American federal taxpayers one cent. The federal government creates new dollars, ad hoc, every time it makes an interest payment.

It is beyond my belief that the Washington Post’s editors do not understand this fundamental fact about federal finances.

The Department of Health and Human Services announced more than $103 million in funding to address the maternal health crisis.

The money will boost access to mental health services, help states train more maternal health providers, and bolster nurse midwifery programs.

The $103 million will circulate through the U.S. economy, further adding to economic growth.

The doctors, nurses, hospitals, and other health workers will buy products, enriching their sources. Then, those companies that supply doctors, nurses, and hospitals will spend the dollars to enrich their sources.

These initiatives are an encouraging step toward tackling significant maternal health and well-being gaps. In August, the Editorial Board wrote about how the United States can address its maternal mortality crisis.

In addition to financial danger, there’s irony here: While millions of Americans bought or refinanced homes at mortgage rates below 4 percent in recent years and locked those cheap rates for 30 years, the U.S. government failed to do so.

What is the phony “financial danger”? Unlike monetarily non-sovereign state and local governments, the federal government cannot run out of money.

Even if the government did not collect a single penny in taxes, it could continue spending forever.

Top Democratic economists such as Janet L. Yellen and Lawrence H. Summers urged a government borrowing spree during a period of seemingly permanent low-interest rates before 2020.

They argued it was wise to borrow long-term and invest in productivity-enhancing infrastructure, education, and the green transition.

The government borrowed massively in 2020 to keep businesses and consumers solvent during the pandemic.

Think about it. The federal government has the infinite ability to create dollars by “simply using the computer.” So why would it borrow dollars? It makes no sense at all.

And indeed, the U.S. government never borrows dollars. Never, ever, never.

People borrow to obtain spending or investing money. However, the federal government is “not dependent on credit markets to remain operational.”

Federal T-bills, T-notes, and T-bonds are nothing like private sector notes, bills, and bonds. When you buy a T-security, you are not lending to the federal government. The government does not spend those dollars.

Instead, your dollars go into your account at the Federal Reserve. There, they stay, with interest additions, until maturity, when the federal government returns the balance to you.

There never is a time when the government uses your dollars to pay its bills. 

The Biden administration and Congress have subsequently made investments but could not lock in low rates for decades.

There is no reason for the federal government to “lock in low rates.” The more it spends, the healthier the U.S. economy.

That fact is proven by the formula for Gross Domestic Product:

GDP = Federal Spending + Non-federal Spending + Net Exports

The more the federal government spends, the greater GDP growth is. Locking in low rates would mean the government would pump fewer growth dollars into the economy, the economy would grow more slowly or even shrink, and the federal government would be no healthier than it already is.

The average maturity in the federal debt portfolio is about six years, meaning a huge chunk of government debt must soon be refinanced at high rates.

If the government offers T-securities at high rates, that is good for economic growth (though high interest rates hurt private sector business.)

Consider the three-month Treasury bill. The yield on that was almost zero in 2021. Now, it’s over 5 percent.

That means the government will pump much more growth dollars into the economy. The downside is that businesses and consumers also will pay more interest, so prices will rise.

The irony is that the Federal Reserve increases interest rates to fight inflation, while high-interest costs increase the prices of everything. 

Inflation is caused by shortages of vital goods and services and by high-interest rates.

To show you how high-interest rates cause inflation, here is a comparison between two mortgages:

Your house costs you $200,000, so you take out a $100,000, 30-year mortgage. Here are your payments if interest payments are at 1% (left) or if they are at 6% (right.)

With a 1% mortgage, your $100,000 house costs you $115,790. With a 6% mortgage, the same house costs you 215 838.

Now, Chairman Powell, tell me again how your interest rate increases to fight inflation without being recessionary.

Inflation is caused by shortages. The way to fight inflation is for the government to spend more to obtain and distribute the scarce goods and services.

Today’s inflation is caused by shortages of oil, food, computer chips, metals, lumber, labor and other assets. The way to fight this inflation is not to raise interest rates but for Congress to spend more money to obtain and distribute oil, food, computer chips, metals, lumber, labor, and other assets. 

There was already a critical need for Congress and President Biden to start addressing the long-term fiscal situation through higher taxes, moderate expense cuts, and adjustments to Social Security and Medicare.

You have just read the most ignorant sentence you will ever encounter.

All three of those suggestions will take dollars out of the economy (which needs a continual flow of dollars for growth or maintenance) while giving those dollars to the federal government, which has infinite dollars.

Higher taxes take dollars out of your pocket, the same effect as inflation has. Federal expense (i.e., spending) cuts cause recessions, taking dollars out of your pocket. And don’t get me started on what cuts to Social Security and Medicare do to your pocket.

The Washington Post wants to cut GDP so that the Monetarily Sovereign government won’t run short of the dollars it has the infinite ability to create.

And they want to cut Social Security and Medicare, which should be expanded, not cut. Have they now become a right-wing newspaper akin to Breitbart?

Cutting federal spending to grow the economy is like applying leeches to cure anemia.

We laid out a plan earlier this year to stabilize the debt.

Mathematically, when the so-called debt is stabilized (i.e., doesn’t grow), the economy can’t grow.

The esteemed editors of the Washington Post are calling for a recession, the definition of which is a lack of GDP growth.

The sobering new interest-rate reality makes it even more pressing. Indeed, the infamous crowding-out effect from large federal debts might start making a comeback.

The so-called “crowding-out” effect does not exist. The theory is that if you invest in T-securities, you won’t have enough dollars to invest in private debt.

This never ever has happened in the history of the universe, but economists repeatedly bring it up.

Increases in so-called federal “debt” are caused by increased federal deficit spending, which puts dollars into your pocket. So, you have more dollars for investing and spending, not fewer.

Instead of providing capital to invest in private business, directly or through the stock market, people with extra cash are likely to choose to earn high rates on less risky government debt.

Again, look at the stock market and tell me whether this has happened. The economists who disseminate the “crowding-out” BS must not own stocks.

This could hurt U.S. growth. One sign that investor caution, and not just Fed policy, is at work: Interest rates on government debt have continued to rise well after the Fed’s last hike, which occurred in July.

The federal government is not market-constrained. It pays whatever interest rates it wishes.

It doesn’t need to sell T-securities. It doesn’t need to set attractive prices for interest rates. As the St. Louis Fed said, the government easily could operate without offering any T-securities.

The purposes of T-securities are:

1. To stabilize the dollar by providing a safe, interest-paying place to put unused dollars and
2. To help the Fed control interest rates.

T-securities do not provide the federal government with operating funds. The government never touches the dollars in T-security accounts.

Those accounts are owned by depositors, not by the government. Think of T-security accounts as being like bank-safe deposit boxes. Depositors own the contents of those boxes. The bank never touches them.

With the House of Representatives in chaos, the best hope is for a bipartisan group of senators to launch a debt commission to generate a plan. It might not get taken seriously for a while with the 2024 election looming.

But if interest costs remain high, so will the risks of inaction.

We can only pray that the “bipartisan group of senators” understands economics better than the Editorial Board of the Washington Post.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY