When should a nation buy or sell gold? Friday, Apr 20 2018 

Image result for ben bernanke using a computer
“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.” Ben Bernanke, former Chairman of the Federal Reserve

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When should a nation buy or sell gold? Here is an article that gives the “The Daily Bell” answer to that question. (Spoiler alert: The Daily Bell is gold-bug paradise.)

How the poster boy for bad financial management lost shareholders $25 billion
By Simon Black – April 19, 2018

In January 1980, the price of gold hit a record high of $850 per ounce. Then it began a nearly two-decade slide. By the summer of 1999, gold hit $250 per ounce– a level not seen since the 1970s.

So naturally it was at this point that the British government made the infamously stupid decision to sell the bulk of their gold reserves.

They began dumping their gold on July 6, 1999. And it took more than two and a half years to auction all 395 metric tons. Gold prices remained depressed during the auctions. The Brits received about $275 per ounce on average.

Almost immediately after the sale, the price of gold started to rise. By the summer of 2002, gold was over $300 per ounce. It was over $400 in 2003… then $500 in 2005. Gold cracked $1,000 in 2009. And it’s $1,350 today.

The British government literally sold most of its gold reserves at the bottom of the market.

In retrospect, the decision looked completely short-sighted and idiotic. And taxpayers were rightfully furious.

Now, let’s get back to the title question: “When should a nation buy or sell gold?”Image result for buried in gold

This is not meant to be a market-timing question like, “Is now the time to buy gold or to sell gold?” Instead, it means, “Should a nation ever buy or sell gold?”

The answer is: It depends upon whether the nation is Monetarily Sovereign, and whether its currency is widely traded on foreign exchange markets.

The above article specifically describes the UK, which is Monetarily Sovereign and whose currency is widely traded. The article claims that the UK was “completely short-sighted and idiotic,” because it should have been able to predict that gold prices would rise.

If the British government were not so “short-sighted and idiotic” it could have received more British pounds for its gold.

I suggest that the article itself is “completely short-sighted and idiotic.” Examine the premise: That the British government should have waited until gold prices were higher.

But why? If they had waited until prices were higher, they would have received more British pounds.

But, being Monetarily Sovereign, the British government has the unlimited ability to create its sovereign currency, the British pound.

Having that unlimited ability, the British government has no need for, and obtains no benefit from, receiving pounds from any source. Even if the Monetarily Sovereign British government levied zero taxes, it still never could run short of pounds.

Visualize that you own a special computer; it allows you to add unlimited pounds to your checking account. You just press a couple keys and (poof!), your checking account has a few billion additional pounds.

You also own a bicycle, that two people wish to buy from you. One offers you ten British pounds and one offers you a million British pounds. To whom would you sell?

The answer: Clearly, it makes no difference. 

You don’t need the pounds; you create them at will. And if your goal simply is to get rid of the bicycle, you can give it to either person, or to anyone else.

The result would be the same. You would be rid of the bicycle, and you would have access to exactly the same number of pounds — i.e. infinite.

Does the British government need to own gold? No. If ever it wishes to make a new crown for the queen or to fill a prince’s teeth, it can get all the gold it needs simply by creating some British pounds, and exchanging them for gold on the open market.

Back to the question: “Should a nation ever buy or sell gold?” This time, let us consider a monetarily non-sovereign entity, like London or France, or you, or me. None of us uses our own sovereign currency. We don’t have one.

Cities, people, and businesses, even those in Monetarily Sovereign nations, need income, so they may have reason to trade — buy or sell — gold, silver, copper or any other commodity or product.

Being monetarily non-sovereign, we do not have the unlimited ability to create a sovereign currency. So we need income to fund our spending. London and France need taxes; you and I need salaries or some other form of income.

There may come times when you have a greater need for whatever currency you use than for gold, and those would be good times for you to sell gold.

There may be other times when you prefer to own a little-used product of limited functional value, that pays you no interest or dividends, costs you money to store and ship, and even more money to insure, and subjects you to more risk than does owning shares in an S&P index fund.

When that time comes, you can trade your currency for gold.

One other question should be answered: If net exports grow an economy, why don’t net exports of gold grow the economy?

Net exports are, in fact, imports of currency, and are part of the equation for Gross Domestic Product:

GDP = Government Spending + Non-government Spending + Net Exports

However, there is a vast difference between imports of currency to a Monetarily Sovereign government and imports of currency to the monetarily non-sovereign economy.

The former, having the unlimited ability to create its sovereign currency, does not benefit from imports of that sovereign currency. The latter grows because of currency imports, as the above equation demonstrates.

If a Monetarily Sovereign government exports gold, the currency goes to the government, where it is destroyed. If a person or business sells gold to another nation, the money goes into the economy, and is stimulative.

In summary, Monetarily Sovereign nations, whose currency is freely traded on foreign exchange markets, never need to sell anything to obtain more of their own sovereign currency. These governments need no income.

Yes, the Daily Bell article was “completely short-sighted and idiotic,” from the standpoint of financial advice, but it made perfect sense for a gold-bug web site.

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

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The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-lesses.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

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MONETARY SOVEREIGNTY

A perfect example of deception — by ignorance or by intent? Wednesday, Apr 18 2018 

It takes only two things to keep people in chains:
The ignorance of the oppressed
And the treachery of their leaders

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I do not understand quantum chromodynamics. Therefore, I do not pretend to understand quantum chromodynamics, and I do not write about the subject.

Would that all the people, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, abstained from writing about the subject. Unfortunately, many (most?) articles about federal finance reveal the authors’ abysmal understanding.

The U.S. government and others (Canada, Japan, the UK, Australia, et al) are Monetarily Sovereign. They create their own sovereign currency and pay their debts using that sovereign currency.

By contrast, cities, counties, states, euro nations, businesses, you, and I are monetarily non-sovereign. We do not have a sovereign currency with which to pay our debts. Unlike the U.S. government, you and I and the other non-sovereign entities can run short of whatever currency we use for bill-paying.

Writers, who do not account for the difference, wrongly seem to believe U.S. government finances are similar to monetarily non-sovereign entities.

Consider President Barack Obama:

“Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.” —President Barack Obama, weekly radio address, July 2, 2011

He was wrong. The U.S. government is not “just like families.” Federal finances are nothing like family finances. The President spoke out of ignorance or deceit, I don’t know which. Many speakers and writers do the same.

John Steele Gordon is one such writer.

Here are excerpts from his article that appeared in Commentary.

Lies, Damned Lies, and Statistical Deficits
The other last refuge.
By John Steele Gordon
April 17, 2018

John Steele Gordon is an economic historian and the author of, among other works, An Empire of Wealth:The Epic History of American Economic Power. He was educated at Millbrook School and Vanderbilt University, graduating with a B.A. in history in 1966. 

debt

The famous “debt clock” that wrongly implies you owe the federal debt.

Someone in the 19th century said that there are three forms of lying: lies, damned lies, and statistics.

If you would like a beautiful example of the last category of mendacity, check out David Leonhardt’s April 15th column in the New York Times, entitled (try not to laugh) “The Democrats Are the Party of Fiscal Responsibility.”

As you will see, Mr. Gordon will provide excellent examples either of his own mendacity or his pure ignorance of the subject.

In our previous post, The CRFB myth machine keeps on rolling, I assumed the Committee for a Responsible Federal Budget (CRFB) was deliberately deceptive. In today’s post, I wonder whether Mr. Gordon, a Bachelor of Arts in history, simply never learned about federal finance.

Including that notorious and misleading debt clock as a lead to his article, is only the beginning of his article’s wrongheadedness.

He continues:

In it, he compared the deficits run up by each Democratic and Republican administration from Jimmy Carter on to the present with the GDP of that time.

We have written at length about why high Debt/GDP and the Deficit/GDP ratios constitute no threat to a Monetarily Sovereign entity, the U .S. government.

These ratios are presented with the implications that a) the federal government can’t afford to service some level of deficit or debt, and b) that taxpayers will have to bear the burden.

In fact, the U.S. federal government can afford anything, and taxpayers do not pay for federal obligations. To quote some real experts:

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

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.”

St. Louis Federal Reserve: “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.

As Greenspan, Bernanke, and the StL Fed say, the federal government can pay any bills by “printing” dollars, not by collecting taxes. Clearly, you taxpayers and your grandchildren will not be burdened (as some pundits claim).

The article continues:

Whatever his methodology, Leonhardt was comparing apples and oranges.

Ah, the irony of the apples/oranges analogy, since there can be a no better example of that fruit salad than Debt and GDP, two unrelated, completely non-comparable figures.

“Debt” equals the deficit total over many years. GDP is a one-year measure of spending in America — federal, non-federal and foreign. A high Debt (or Deficit) / GDP ratio merely implies the financial contribution the federal government makes to our economy. The ratio says nothing about affordability, the need for taxes, economic growth or any other important measure.

Gordon wrote:

It was not Bill Clinton who slew the deficit dragon in the 1990’s but the Congress, which the public transferred to Republican control in 1994 for the first time in 40 years following an outcry over Democratic profligacy.

Gordon refers to the deficit as a “dragon,” not realizing that federal deficits add dollars to the economy, and that without federal deficits it mathematically is impossible for the economy to grow:

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

Federal Spending and Non-federal Spending both rely on the dollars created via federal deficit spending.

Gordon also demonstrates he does not understand the difference between “Total Federal Debt” and “Federal Debt Held By The Public,” when he writes:

 The Republican Congress increased spending by a mere 18 percent between 1995 and 2000, while the roaring economy increased tax revenues by 51 percent.

Nor did Leonhardt take into account the phony accounting the federal government uses to obscure reality. Officially, we ran surpluses (meaning, by definition, that income exceeded outgo) in 1998, 1999, 2000, and 2001.

But the national debt went up, not down, in each of those four years.

This graph demonstrates the difference:

The blue line (Total Debt) includes internal debt (dollars federal agencies owe to each other). The red line is the total of T-securities owned by the U.S. and other economies.

The national “debt” went up only if one includes the internal debt that federal agencies owe each other — i.e. what the right pocket owes the left pocket.

Surpluses however, refer only to external debt — dollars flowing from the federal government into the economy. The real federal debt went down from 1997 through 2000.

Predictably, the surpluses beginning in 1997 led to the recession of 2001, which was cured by deficit spending.

(As an aside, every depression in U.S. history, including the “Great Depression,” was introduced by years of federal surpluses, which sucked dollars out of the economy,)

Then comes perhaps the funniest or saddest paragraph in Gordon’s entire article:

Nor did Leonhardt take into account the fact that recessions cause government spending to go up and government revenues to go down—something quite beyond the control of Congress or the President.

Recessions don’t “cause” government spending to go up. Deficit spending, which pumps dollars into the economy, is the primary method governments use to cure recessions.

And to say that government deficit spending is “quite beyond the control of Congress or the President,” goes well beyond ordinary ignorance, into the land of the blind.

Gordon ends his screed, with this misleading, self-defeating conclusion:

But in the last forty years, the only time the federal government made a serious, sustained effort to rein in the deficit was when a Republican Congress was writing the checks.

In fact, Democrat Bill Clinton was President, and though Clinton often boasts about his surpluses, “reining in the deficit” caused a recession, which was cured by deficit spending.

In summary, I don’t know John Steele Gordon. I don’t know whether his wholly wrong article was designed to mislead or merely was written out of ignorance.

Either way, the effect is the same: Deception. A public that already does not understand Monetary Sovereignty and federal finances, is further vaccinated by complete misunderstanding.

And that always has negative consequences.

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

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The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-lesses.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

———————————————————————————————————————


MONETARY SOVEREIGNTY

The CRFB myth machine keeps on rolling Saturday, Apr 14 2018 

It takes only two things to keep people in chains:Image result for fortune teller
The ignorance of the oppressed
And the treachery of their leaders

…………………………………………………………………………………………………………………………………………….
Quotes: Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

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.”

St. Louis Federal Reserve: “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. Moreover, there will always be a market for U.S. government debt at home because the U.S. government has the only means of creating risk-free dollar-denominated assets.”

Alan Greenspan (Re. Social Security solvency): “There’s nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”

…………………………………………………………………………………………………………………………………………….

The CRFB (Committee for a Responsible Federal Budget) was formed in 1983. For the past 38 years, they have been telling the same old story, namely that the federal deficit and debt are too high —  really, really, really too high.

But while that myth . . . uh, story, remains the same-old, same-old, year after year, there is another story they conveniently have omitted: What does it mean for the deficit and debt to be high — really, really high? Why should we care?

  1. Does it mean the federal government is running short of dollars?
  2. Does it mean the federal government will be unable to pay its debts?
  3. Does it mean your taxes need to rise?
  4. Does it mean the economy will suffer because of the federal debt?
  5. Does it mean the federal debt will cause hyperinflation?
  6. Does it mean no one will want to buy Treasury securities?

You might think that after 38 years, the CRFB would be ready, willing, and able to provide data to answer such questions. But amazingly, during those 38 painfully wrong years, the CRFB never even attempts to answer.

They just keep repeating the myth that the deficit and debt are too high. The CRFB seems to believe that if they repeat a lie often enough, they can get people to believe it.

Here are excerpts from the sorry and ongoing saga of CRFB, the paid mouthpiece for the rich:

Welcome to the woeful world of free-lunch economics
By Maya MacGuineas. Opinion Contributor — 04/13/18

Congress and the president have been on quite the borrowing binge over the past few months — from multiple rounds of tax cuts to smashing through the budget caps. Meanwhile, talk of paying for these budget-busting policies has just about disappeared.

Immediately, MacGuineas jumps into the phony “paying for” theme. Why is it phony? Because the federal government, unlike state and local governments, uniquely is Monetarily Sovereign.

Being Monetarily Sovereign, the federal government created the very first dollars out of thin air, by creating laws out of thin air. And ever since that time, 240 years ago, the federal government has continued to create dollars out of thin air.

U.S. dollars are not physical things. They are balance sheet notations, and the federal government owns the balance sheets.

Monetarily non-sovereign, state and local government can’t do this. Nor can businesses. Nor can the euro nations. Nor can you and I. The public’s confusion between Monetary Sovereignty and monetary non-sovereignty, is what helps the CRFB promulgate its myth.

But, in fact, as both former Fed Chairmen Alan Greenspan and Ben Bernanke admit, the federal government, uniquely cannot run short of its own sovereign currency, the dollar (which answers questions #1, and #2, above).

Given that the federal government has the unlimited ability to create its own sovereign currency, it neither needs nor uses tax dollars to pay its bills.

In fact, even if all federal tax collections fell to $0, the federal government could continue to spend dollars, forever, simply by creating more dollars (which answers question #3, above).

So, why does the federal government levy taxes? Federal taxation mostly is a relic of our gold and silver standards — those years when the federal government voluntarily surrendered its unlimited ability to create dollars.

Taxation also is an economic control device to reduce certain activities — for instance sin taxes on cigarettes, gasoline, and liquor. Unlike state & local taxation, federal taxation does not fund its spending. 

Finally, the rich, who own the federal politicians, do not want you to know that federal spending is not limited by debt or dollar supply.

Continuing the CRFB article: Instead of the sensible conversation that starts with: “If something is worth doing it is worth paying for,” we have been hearing from our leaders: “Don’t worry, this will pay for itself,” and, “This is too important to have to pay for.”
Welcome to the world of free-lunch economics.

By “pay for itself,” many of our leaders try to make you believe something like: “Increased deficits will cause increased income, which will cause increased tax collections, which in turn, will reduce deficits, leading to lower tax collections.”

The CRFB is right. The whole notion that increased deficits can cause reduced deficits is nutty. The idea leads to a ridiculous endless circle, in which high deficits would beget low deficits, which presumably would again beget high deficits.

Thus, it logically and mathematically is impossible for deficit spending ever to “pay for itself” — impossible and wholly unnecessary for a Monetarily Sovereign government.

More to the point, however, the CRFB never acknowledges that increased deficits actually result in economic growth.

Deficit spending grows the economy by putting dollars into consumers’ pockets, which is why when deficit growth decreases we have recessions, and when we have recessions, deficit growth cures them.

The CRFB never mentions this fact, though that answers question #4, above. The economy does not suffer because of federal debt; it thrives.

Recessions (vertical bars) tend to begin after deficit growth has been low, and are cured by increased deficit growth.

Continuing the CRFB article: Just this week, we learned that budget deficits are now projected to be $12.4 trillion over the next 10 years — an increase of $2.3 trillion since 10 months ago.

The milestones of trillion-dollar deficits about to return and become permanent, the debt reaching the size of the economy in just over a decade, and annual interest payments increasing by $600 billion over the decade are signs this new school of economics is not putting us on a smart path.

Why are “trillion-dollar deficits” a problem? The CRFB never tells you, principally because they aren’t a problem — not for the federal government and not for taxpayers. No, your grandchildren never will pay the U.S. federal debt, just as you have not paid the debt accumulated for the past seventy years.

(Deficits are a problem for monetarily non-sovereign state and local governments, and for you and me, but the CRFB doesn’t want you to understand the difference.)

And as for question #5 above, do not believe the scaremongers, who tell you deficit spending will cause a Zimbabwe, Weimar Germany hyperinflation (which the U.S. never has had in all its 240-year history).

This graph shows the huge increase in federal debt compared to our modest increase in inflation.

Federal debt (red line); inflation (blue line)

(Aside: Hyperinflations historically have not been caused by deficit spending. They are caused by shortages. Zimbabwe’s was a shortage of food. Germany’s was a shortage of gold. Deficit spending often has been a government’s bad response to hyperinflation, not a cause.)

Continuing the CRFB article: In just a little over a decade, our debt could be the highest it has even been compared to the overall economy. The current record was set just after World War II. The difference here, though is there is no world war. No recession. No depression. Unemployment is low. Growth is strong.

There is no need for stimulus and no rationale to rack up such a huge tab during stable times and already historic levels of debt.

Apparently, Ms. MacGuineas doesn’t realize that she has just admitted the truth:

The highest debt it has even been” and “historic levels of debt” have brought us “no recession, no depression, low unemployment and strong growth.”

So Ms. MacGuineas, please remind us again why you wish to reduce the debt.

Continuing the CRFB article: Instead, at this point in the business cycle, we should be running surpluses (remember that quaint concept?) to be prepared for the next emergency. But there is zero talk of changing course.

Not only are federal surpluses a “quaint concept,” but they are an economically suicidal concept. U.S. depressions tend to come on the heels of federal surpluses.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

Why have federal surpluses repeatedly led to economic failures?  Because federal surpluses require either higher taxes and/or lower federal spending. In short,  federal surpluses take dollars out of consumers’ pockets, which depresses the economy. 

It’s really a simple and straightforward concept, which the CRFB wishes to obfuscate. Don’t fall for it.

Continuing the CRFB article: Sure, there is the empty idea of voting on a balanced budget amendment. If people were serious, this would be a reasonable idea for discussion.

Many details would need to be worked out, like escape hatches for recessions and emergencies, and balancing restraints on spending and revenue.

If a balanced budget was a “reasonable idea,” why would it need “escape hatches for recessions and emergencies?”

Hers is a tacit admission that a balanced budget cannot grow the economy, and whenever a balanced budget causes economic stagnation (which it always has), we need to “escape” from the balanced budget.

Escape how? By running federal deficits — by pumping dollars into the economy — and the bigger the deficits, the faster the recovery.

Continuing the CRFB article: Our fiscal hole is now so large that balance is a long, long way off, and it is better to focus on more credible goals. But come on, in this context, the balanced budget amendment is a total joke.

Here, we agree with MacGuineas. The balanced budget amendment is a total joke, because it would cause the greatest depression in American history, with no way out, no “escape hatch.”

Continuing the CRFB article: Voting to require balancing the budget without putting out a budget that does indeed balance is still looking for that free lunch.

MacGuineas never explains “free lunch,” but we’ll try to help her. A “free lunch” is what the rich receive whenever deficit reduction plans are put forth. The rich always make sure to escape the pain, while the poor and middle-income groups suffer.

Continuing the CRFB article: Our debt is projected to increase by almost 20 percentage points over the next 10 years. Spending on health, retirement and interest alone will double in dollars, and entitlement reform is long overdue.

During the next 13 years, our nation’s major trust funds for highways, Medicare hospital insurance and Social Security will run out of full funding. If Congress had addressed this problem 10 years ago, revenue and benefit changes would have been much smaller.

And here, the CRFB reveals its true motive: On behalf of the rich, the CRFB wants to cut Medicare, Social Security, and all other social programs (aka “entitlement reform”). 

Using the lie of unaffordability, the rich want to widen the income/wealth/power Gap between the rich and the rest.

(The Gap is what makes the rich, rich. Without the Gap, no one would be rich; we all would be the same. The wider the Gap, the richer they are.)

Continuing the CRFB article: Even today, changes can be phased in. But if we wait a few more years, the choices are much more difficult. Instead, this fiscal situation has been made dramatically worse by the large, irresponsible, unpaid-for tax cuts.

Taxes are “paid for” by taxpayers. But, who pays for tax cuts? Answer: The federal government which, being Monetarily Sovereign, neither needs nor uses tax dollars.

Continuing the CRFB article: Free-lunch economics appears poised to do major damage to our economy, slowing growth, increasing the chances of some type of crisis and starving the nation of the resources and flexibility to meet new challenges — from the threat of recession to grappling with artificial intelligence and the future of work.

Let’s examine the above nonsense paragraph. MacGuineas claims deficit spending “slows economic growth.” But how does pumping more dollars into the economy — the thing the government does to cure recessions — slow economic growth? It doesn’t.

And how does adding dollars to the economy “starve the nation of resources and flexibility to meet new challenges”? It’s all ridiculous.

Finally, if one wishes to “grapple with artificial intelligence (AI),” we must provide a source of income for people who have lost income to AI. Federal deficit spending, not tax increases, are needed.

Continuing the CRFB article: Policymakers have dug themselves into quite the hole. Our historic and unsustainable debt cannot be fixed with more tweaks and gimmicks.

What is “unsustainable” about the debt? It consists of deposits plus interest. The deposits are paid off with dollars already in the accounts, and the interest is paid by a government that has the unlimited ability to create dollars.

So, “unsustainable,” a word the CRFB often uses to describe the deficit and debt, is a lie, a Big Lie.

And then finally MacGuineas repeats the real purpose of the CRFB:

Continuing the CRFB article: It will take a big deal including new discretionary spending caps, a real plan to fix our entitlement programs and changes to bring in more revenues. Fairy dust, wishful thinking and free-lunch economics won’t get us there.

The real purpose of the CRFB is to facilitate cutting “entitlement” programs — Medicare, Social Security, Medicaid, aids to the poor, aids to education.

The CRFB wants to cut the programs that help narrow the Gap between the rich and the rest. That is the fundamental purpose of the CRFB.

Let’s end with a mention of question #6: Does it (a large debt) mean no one will want to buy Treasury securities?

As we already have discussed, the federal government does not need to sell T-securities — at least not to fund spending.  And even if the federal government did need to sell T-securities, and in the remote possibility that no one wanted to buy them, the Federal Reserve has the power to buy them — in fact, it already has, many times.

An excerpt from a December 22, 2010, Wall Street Journal article by Jon Hilsenrath, gives you one example:

“Back in March 2009, Mr. Ben Bernanke told CBS News’s Scott Pelley that the Fed was printing money to fund an earlier bond-buying program.

“It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank.

“So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed.

“It’s much more akin to printing money than it is to borrowing.”

The Federal Reserve, an agency of the federal government, the bank where other federal agencies maintain accounts, has the unlimited ability to “use the computer to mark up the size of the account that they have with the Fed.”

That is how the federal government creates dollars. It uses the computer to mark up accounts. It can do this endlessly if it chooses.

So think about it. If you could use your computer to create unlimited dollars simply by marking up your bank account, at any time, and in any amount you chose, would you worry about debt? Would you need to borrow? Would you need to ask anyone for dollars?

Of course not. And that is why the CRFB is a fountain of lies — lies that hurt America, just to widen the Gap between the rich and the rest.

To summarize:

  1. The federal government is not running short of dollars.
  2. The federal government always will be able to pay its debts.
  3. Your taxes do not need to rise.
  4. The economy will not suffer. because of the debt.
  5. The debt will not cause hyperinflation.
  6. It does not mean no one will want to buy Treasury securities.

Continuing the CRFB article: Maya MacGuineas is the president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt.

MacGuineas should be ashamed of damaging America by telling such monstrous lies, but apparently, a nice salary can be convincing.

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

…………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-lesses.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

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MONETARY SOVEREIGNTY

The persistence of myths: The federal “debt” myth Tuesday, Apr 10 2018 

It takes only two things to keep people in chains:
The ignorance of the oppressed Image result for in chainsand the treachery of their leaders.
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Some myths will not die. You can throw facts at them, stomp on them, refute them, and still they persist, like weeds in an untended lawn.

Here are excerpts from an article that ran in the Bozeman Daily Chronicle, describing one such myth: The federal “debt” myth.

Budget office projects growing deficits and massive debt during Trump administration
By Cathleen Decker Los Angeles Times (TNS) Apr 9, 2018

WASHINGTON — Propelled by the GOP tax-cut plan and increased government spending favored by both parties, the nation’s deficit will top $1 trillion by 2020 and its debt burden within a decade will approach rates not seen since the aftermath of World War II, the Congressional Budget Office said Monday.

Fact: There is no “debt burden” —  no burden on the government and no burden on future taxpayers —  simply because what is described as federal “debt” actually is the total of deposits in Treasury security accounts — very similar to savings accounts.

The dollars used to make those deposits remain in those accounts until the T-securities (T-bills, T-notes, T-bonds) mature, at which time the dollars are returned to the depositors, the owners of those T-securities.

(If ever you ask the Treasury, “How much is in my T-bond account?” you will be told the number of dollars that remain in your account. These are the minimum dollars you will receive when your account matures.)

The dollars are not removed from the accounts, because the U.S. federal government is Monetarily Sovereign. It has the unlimited ability to create its own sovereign currency, the dollar, at the touch of a computer key.

Thus, it has no need to borrow your dollars. Instead, the government simply is providing a safe place for people, companies and businesses to store dollars and earn interest. This safe storage facilitates demand for the dollar.

(By contrast, when cities, counties, and states issue bonds, the money is used. These governments are monetarily non-sovereign. They do not issue dollars as their sovereign currency, so do not have the unlimited ability to create dollars.)

The national debt will rise from nearly $16 trillion at the end of 2018 to almost $29 trillion by 2028, the nonpartisan office said.

“The bigger the debt, the bigger the chances of a fiscal crisis,” CBO Director Keith Hall warned Monday, noting that debt as a percentage of the gross domestic product in 2028 will be the highest since 1946.

Here, Hall expresses two myths in one short paragraph:

  1. No matter how large the debt, it never causes a fiscal crisis. Quite the opposite. When the Monetarily Sovereign U.S. encounters a fiscal crisis — a war, a recession, a depression — the federal government combats that crisis with increased deficit spending, which increases the so-called “debt.”

  Thus, curing a fiscal crisis demands a debt increase, rather than a debt increase causing a crisis.

2. There is no relationship between Gross Domestic Product and federal “debt.” GDP is all domestic spending in any one year; the “debt” is the net total of outstanding T-security deposits made within the past 30 years.

Further, the “debt” is not paid off with GDP; it is paid off by the deposits that exist in T-security accounts. The Debt/GDP ratio is the classic apples-and-oranges comparison.

3. In truth, we aren’t sure what sort of “fiscal crisis” Mr. Hall means, but the U.S. government never can run short of dollars, so if Hall’s “fiscal crisis” refers to the government’s ability to pay off any obligations denominated in dollars, the U.S. can’t inadvertently have such a crisis.

To demonstrate the lack of relationship between the debt/GDP ratio and the health of an economy, here are some recent national ratios. See if you can answer a simple question about them:

Russia 14%
Libya 17%
Iran 35%
Canada 99%
United States 105%
Singapore 112%
Japan 253%

The question: Based on Debt/GDP ratios, can you tell which economies are healthiest and which are in a “fiscal crisis”?

Of course you cannot. The Debt/GDP ratio is the least meaningful number in all of economics though it is quoted frequently.

He said that the expansion of debt was particularly troublesome during a time of economic growth, rather than in response to a recession, such as after the 2008 financial collapse.

“We’re quite a few years off a recession and we have very high deficits,” Hall said.

Right. When we have a recession, the federal government deficit spends to grow the economy.

Why? Deficit spending grows the economy by adding dollars to the economy, and deficit reduction shrinks the economy by reducing the number of dollars added to the economy.

Hall understands this, yet he still promulgates the “fiscal crisis” myth.

The new CBO report said the shortfall will now hit $12.4 trillion over the span ending in 2028, after breaking the $1 trillion mark in 2020. That’s three years earlier than expected, because of the tax cut and spending plans.

Why is the increase in T-security deposits referred to as a “shortfall” when there is no shortfall? The federal government, being Monetarily Sovereign, cannot run “short” of dollars.

Neither Republican congressional leaders — who railed against President Barack Obama’s deficit spending — nor Trump, who once vowed to balance the budget, had any immediate comment on the report.

Balancing the budget would cause a recession or a depression:

U.S. depressions tend to come on the heels of federal surpluses.
1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

While deficit growth cures recessions, reductions in deficit growth lead to recessions.

 

Reductions in federal debt growth lead to inflation

Vertical gray bars are official recessions. Declines in deficit growth (blue line) lead to recessions, which are cure by increases in deficit growth.

 

The CBO also confirmed earlier estimates that despite Republican promises that the tax cuts would pay for themselves through economic growth, the plan would actually increase the deficit about $1.9 trillion over 11 years.

That’s 1.9 trillion stimulus dollars (less foreign spending) that will be pumped into the U.S. economy. This will grow the economy.

Ironic, isn’t it, that the one good thing the GOP Congress and President Trump have accomplished — increasing federal deficit spending — is the only thing Trump doesn’t boast about.

Democrats said the report rebuked Republicans’ claims to be fiscal conservatives.

“In their craven haste to give corporations and the wealthiest 1 percent massive tax breaks, Republicans saddled our children and grandchildren with trillions of dollars of debt,” House Minority Leader Nancy Pelosi of California said in a statement.

Here, Pelosi joins in the lie. Our children and grandchildren will not pay one penny of the “debt.”

Federal taxes do not pay for the federal deposits; in fact, federal taxes pay for nothing. They cease to be a part of any measure of the nation’s money supply, as soon as they are received. Functionally, taxes are destroyed upon receipt.

(Think about it. There is no way to measure the number of dollars the federal government has. If you own a dollar-creating machine, how many dollars do you have? Either zero or infinite, depending on how you wish to count.)

Democrats warned that Republicans may next try to slash Social Security and Medicare in an effort to pare back the deficit they’ve made worse.

Some House Republicans have floated the idea of a balanced budget amendment, which would require huge cuts to discretionary programs and those that support older and sick Americans.

It is unlikely to pass the Senate.

Yes, that is the usual GOP plan: Cut social spending for the poor and middle-income groups, and give more to the rich.

“From Day One, the Republican agenda has always been to balloon the deficit in order to dole out massive tax breaks to the largest corporations and wealthiest Americans, and then use the deficit as an excuse to cut Social Security and Medicare,” said Senate Democratic leader Charles E. Schumer of New York.

Right. The fact that many poor and middle-income people vote Republican is proof that H.L. Mencken was correct when he wrote:

“No one in this world, so far as I know — and I have searched the records for years, and employed agents to help me — has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby.”

Democrats, however, contributed to the deficit’s additional rise by supporting the March spending measure, which gave Republicans higher military spending and Democrats a boost in domestic funding.

Increased deficit spending is economically stimulative.

The CBO estimated that by 2027 the national debt would comprise 88.9 percent of the gross domestic product, just below the level at which economists say its load would harm the economy.

Any economists who say that are damn fools.

The CBO is the nonpartisan agency charged with delivering independent analysis of the economy, budget bills and other legislation.

Being supposedly “nonpartisan” does not mean they know what they are talking about.

Last year, congressional Republicans and the Trump administration criticized the CBO as lacking credibility after it delivered negative assessments of GOP health care bills.

Historically it has been considered a dependable source of fiscal predictions, even as legislators have ignored its increasingly heated warnings about the national debt.

The CBO has been reasonably accurate in predicting the amount of deficits, but is completely incompetent regarding the effect of those deficits.

Trump has routinely ignored the debt and deficit when it has come to advancing programs that are popular among his voters.

During the campaign he advocated protecting numerous expensive programs — including Social Security and Medicare — and never explained how he would finance them.

Contrary to popular myth, Social Security and Medicare are not paid for by FICA taxes. They are paid for by federal spending. Even if FICA were eliminated (which it should be) the government could continue paying benefits, forever.

While the report offered Democrats substantial ammunition in a campaign year, it offered the president some limited good news.

The average economic growth will rise 0.7 percentage points as a result of the tax plan, and about 1.1 million jobs will be added, the report said. That, in turn, will also boost the gross domestic product.

Huh?  All those warnings about the supposed negative effect of increased “debt,” and now we are told economic growth will increase, jobs will be added, and GDP will grow.

Strikingly, the CBO report underscored how the options ahead for legislators and the president are narrowing.

Over the next 10 years, for example, Social Security spending will rise to 6 percent of GDP and health care costs to 6.6 percent — both the outgrowth of the retirements of baby boomers and factors whose curtailment would be politically difficult.

The options have not changed.

Since it is functionally impossible for the U.S. federal government ever to run short of its own sovereign currency, the government always has the same payment options.

Social Security and Medicare payments benefit the economic growth. The federal government simply funds these programs without any tax increases.

But they do not represent the fastest-growing segment of federal spending. That would be interest on the debt, which will double to 3.1 percent of GDP over the next 10 years.

“Interest on the ‘debt’ (deposits) are dollars that stimulate economic growth.

Bottom line:

  1. The federal deficit is necessary for economic growth.
  2. The federal debt is the total of deposits, similar to saving account deposits.
  3. The Debt/GDP ratio is meaningless.
  4. The GOP wants to cut benefits to the poor and middle, while increasing benefits to the rich. 
  5. Most politicians, most of the media, and most economists are lying to you because they have been bribed by the rich. The politicians are bribed with campaign contributions and promises of lucrative employment. The media are bribed with advertising dollars and owners’ money. The economists are bribed with university contributions and employment in “think tanks.”

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

………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

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MONETARY SOVEREIGNTY

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