How the “experts” do everything possible to slow your recovery Saturday, Jan 23 2021 

Economists, perhaps hoping to justify economics as a real science, love to complexify to the point of quantum entanglement absurdity.

My message to economists: KISS (Keep It Simple, Stupid).

Start here: Fundamentally, all recessions are alike; they all involve a shortage of money.

Today’s recession began with a virus that scared away customers, which led to businesses laying off employees Millions of people who couldn’t afford to spend led to businesses closing for lack of income, which required laying off even more employees. We descended from MONEY to Money to money.

What is the solution for a private sector’s lack of money? How about: Add money to the private sector.
Benefits of Leech Therapy treatment for human | KANNADIGA WORLD

There is no question about whether to add money. The only questions are where are the best, most effective places to add the money, and how much?

Fortunately, the federal government has the unlimited ability to add money to the private sector.

So we answer the “How much?” question simply this way: “Add more than you think is necessary to end the recession and to grow the economy. Way more.”

Sadly, we are bound at the ankles by articles like the following:

President Biden’s Unity Has a High Price Tag
Biden’s proposed $1.9 trillion pandemic “relief” package would unite Americans in forcibly shared economic pain.
J.D. TUCCILLE, former managing editor of Reason.com and current contributing editor. | 1.22.2021 11:00 AM

President Joe Biden’s inauguration speech was full of calls for “unity” to a bitterly divided nation. But mixed in with a positive acknowledgment that “politics need not be a raging fire destroying everything in its path” were a politician’s traditional calls to unify around favored policy proposals.

And among those proposals is a $1.9 trillion pandemic “relief” package that might unite Americans the way a sinking ship brings passengers and crew together as they await their fate.

“We must set aside the politics and finally face this pandemic as one nation,” Biden urged in his speech. But there’s no way to set aside politics when government acts, since political concerns inevitably determine how governments use their power, including in terms of gathering and spending other people’s money.

To label these preceding paragraphs as “bullshit,” would be to underestimate the value of fertilizer.

How can adding dollars to an economy that desperately needs dollars, be equated to gathering the passengers on a sinking ship to await their fate?

A more apt analogy would be to gather those passengers into helicopters for instant rescue.

And the phrase, “spending other people’s money,” demonstrates abject ignorance about federal finances.

Apparently, the author, Mr. Tuccille, does not understand that:

  1. The federal government cannot run short of its own sovereign currency, the U.S. dollar because . . .
  2.  Being Monetarily Sovereign, the federal government (unlike state & local governments) creates dollars ad hoc, by paying creditors, so . . .
  3. Federal taxes (i.e. “other people’s money”) never fund federal spending, and in fact . . .
  4. Even if the federal government collected $0 taxes, it could continue spending forever. The federal government, unlike state/local governments, does not spend tax dollars.

And what “other people’s money” does Tuccille have in mind?

On top of the trillions already spent under the Trump administration to offset the pain of lockdowns or just to buy votes, the new Biden administration wants to distribute $1,400 per person “recovery rebates,” give hundreds of billions to state and local governments, underwrite a national vaccination program, subsidize government schools reopening, and offer more billions to small landlords and childcare providers.

Not counting the burden of hiking the national minimum wage to $15 an hour, which will fall on workers priced out of jobs and on frustrated employers, the total cost is an estimated $1.9 trillion.

Mr. Tuccille acknowledges that the spending would “offset the pain of lockdowns, give each person a minuscule $1,400, give much-need billions to state and local governments, underwrite a national vaccine program, subsidize schools reopening, and offer billion to small landlords and childcare providers” — but he’s against it, even though the federal government has unlimited money!

How can he be against those things? Here’s how? He erroneously believes (claims?) taxpayers will be forced to pay for them.

So, in his ignorance of federal financing, he is willing to forgo the end of the recession, in order to save taxpayers’ money.

And then, he complains that giving low wage workers $15 per hour will cost these people their current starvation jobs — some loss that is — and somehow cost the infinitely rich federal government $1.9 trillion.

Apparently, Mr. Tuccille doesn’t realize that exactly the same arguments could be used to justify slavery.

The proposed spending is supposed to help people.

The money is sold as s lifeline to a population hammered by social distancing and by government-mandated lockdowns as it weathers waves of COVID-19.

But the money, whether spent wisely or poorly, has to come from somewhere. For a government that was spending well beyond its means long before anybody heard of COVID-19, that means the money has to be borrowed.

No, Mr. Tuccille, that is not what it means.

Tuccille says, “The money has to come from somewhere. “ He is correct. It comes from where it always has come: From federal money creation.

The phrase, “spending beyond its means” indicates that the federal government will not be able to afford such spending. But for a Monetarily Sovereign government, no amount of spending is unaffordable.

Nothing is beyond the federal government’s means, the proof of which is the fact that the federal government already has spent more than $28 trillion “beyond its means” with zero adverse effect.

And finally, the federal government does not borrow money. Why would it, given its unlimited ability to create dollars?

What erroneously is termed “borrowing” is not borrowing at all. “Borrowing” involves the temporary acquisition of spending money. But that is not what the federal government does.

Issuing T-securities, wrongly called “borrowing,” actually is the acceptance of deposits into T-security accounts. When you invest in a T-bond, you open your T-bond account, and you deposit your dollars therein. There your dollars remain, in your account, until maturity. They are not touched by the federal government.

Upon maturity, your dollars plus interest are returned to you. At no time are they ever spent by the federal government.

“In light of the enactment of the year-end spending and COVID relief deal, we estimate the deficit will total $2.3 trillion for Fiscal Year (FY) 2021,” the Committee for a Responsible Federal Budget noted earlier this month.

“This would be lower than the $3.1 trillion deficit in FY 2020 but at an estimated 10.4 percent of Gross Domestic Product (GDP), it would be higher than any other time in recorded history outside of World War II.”

Someone, please remind Mr. Tuccille that there were no recessions during World War II, while the federal government lived “beyond its means.”

It’s been years since the federal government balanced its books, so deficits add to debt accumulated long before the pandemic.

As of January 18, total debt held by the U.S. government is about $27.8 trillion, according to the U.S. Treasury Department, up from an already astonishing $23 trillion at the end of 2019.

By contrast, U.S. Gross Domestic Product at the end of 2020 was $21.17 trillion, according to the government’s Bureau of Economic Analysis.

Yes, “debt” accumulated long before the pandemic. And what has been the result? Economic growth. We only had recessions when debt growth was too low.

Recessions (vertical gray bars) coincide with reductions in federal debt growth (red line) and are cured by increases in federal debt growth. This is not a coincidence. Federal spending goes into the private sector, which mathematically increases GDP.

Deficits and debt of that size affect the economy.

Back in September, when federal pandemic-related spending was already mind-boggling but had yet to reach its full extent for the year, the Congressional Budget Office (CBO) projected the estimated impact.

“From fiscal year 2020 through 2023, for every dollar that it adds to the deficit, the legislation is projected to increase GDP by about 58 cents,” the CBO pointed out, indicating that, at best, taxpayers would lose 42 cents on every dollar spent.

“In the longer term, the legislation will reduce the level of real GDP, CBO estimates.”

Yes, deficits do affect the economy; they grow the economy.

And even if one were to agree with the dubious projection of 58 cent GDP increase for every dollar spent, what is wrong with that? Because Federal spending costs nobody anything, that 58 cents is free — additional GDP growth that would not have happened without the additional federal money.

Taxpayers would not lose a penny; they don’t pay anything for federal deficit spending.

“The legislation will increase federal debt as a percentage of GDP, and in the longer term, CBO expects that increase to raise borrowing costs, lower economic output, and reduce the income of U.S. households and businesses,” the CBO added.

“In addition, the higher debt—coming at a time when the longer-term path for debt was already high—could eventually increase the risk of a fiscal crisis or of less abrupt economic changes, such as higher inflation or the undermining of the U.S. dollar’s predominant role in global financial markets.”

More nonsense. How can increased federal borrowing costs (which are paid to the private sector) “lower economic activity” and “reduce the income of U.S. households and businesses”? The money goes to households and businesses.

Although Tuccille is not clear about this, perhaps by “increased borrowing costs” he refers to increases interest rates.

Sadly, he is wrong about that, too, for the Fed has absolute control over interest rates. It sets the short term rate arbitrarily, and the long-term rate generally follows. Further, adding dollars to the economy does not increase lending rates.

Quite the opposite. Lending rates go up when money is scarcer, not when it is more plentiful.

Finally, federal deficit spending does not cause inflation. Contrary to popular myth, inflations are caused by shortages — usually shortages of food or energy — not federal money “printing”

To be fair, the U.S. isn’t the only country to have been spending beyond its means and to have piled massive debt on top of a large pre-existing bill.

“The pandemic has exacerbated the risks associated with a decade-long wave of global debt accumulation,” the World Bank observes in its latest Global Economic Prospects report, published this month. “Debt levels have reached historic highs, making the global economy particularly vulnerable to financial market stress.”

Here, Tuccille,  as usual, fails to differentiate between the major, Monetarily Sovereign nations (U.S., UK, China, Japan, Canada, Australia, et al) vs the monetarily non-sovereign nations (euro nations).

For the former, so-called “debt” is no burden at all. In fact, Japan’s “debt” is more than double the size of its GDP, and the nation has no special vulnerability to financial market stress. In fact, the federal debt/GDP ratio is meaningless as a measure of a Monetarily Sovereign nation’s ability to finance anything. Completely meaningess.

“The pandemic-induced global recession has already reversed a decade or more of per capita income gains in roughly 30 percent of emerging market and developing economies (EMDEs),” the report adds. “By 2025, global output is still expected to be 5 percent below the pre-pandemic trend—a cumulative output loss that is equivalent to 36 percent of the world’s 2019 output.”

That’s a huge hit not just for Americans, but for a world in which governments were already borrowing against people’s economic futures in order to finance current expenditures. Pandemic-related spending—such as last year’s trillions in “stimulus,” and Joe Biden’s $1.9 trillion relief package—are proposed as means for alleviating suffering now. But, since the money they spend doesn’t exist, they can only do so by making us poorer in the future.

OMG! Tuccille says the recession has cost the world’s private sectors massive amounts of money, but he doesn’t want the federal government to create the money that would reverse that trend. Incredible?

At the end of 2020, the CBO returned to the problem of federal spending beyond the government’s means with a report exploring options for reducing the deficit from 2021 through 2030.

The report covered numerous ideas for reining-in spending and for hiking taxes, all with the goal of closing the gap between revenues and expenditures.

  • Nowhere in the report was there a suggestion for another $1.9 trillion in borrowing and spending to offset pandemic restrictions; its numbers depended, instead, on the assumption that the economy will produce and employ to generate wealth.

It just gets dumber and dumber. With the economy short of money, the CBO wants to reduce federal additions to the private sector while increasing federal deductions from the private sector.

It’s like treating anemia by applying leeches.

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.

And how the heck is the economy supposed to “produce and employ to generate wealth” with the federal government taking billions out of the economy. It simply makes no sense at all.

Even so, the cost of just paying interest on the national debt is separately projected by the CBO to rise from 1.6 percent of GDP in 2020 to 8 percent in 2050.

That’s without accounting for massive additional “relief” spending, such as advocated by President Biden, to offset the cost of forcing businesses to close and people to restrict their movements.

Not only do economic forecasts predict that the economy of the future will be smaller than it would have been, much of it is already allocated to pay for past spending.

Unity can be a good thing. But Biden’s $1.9 trillion dollar vision of unity builds on an unfortunate history of forcibly shared economic pain. Instead of making everybody go down with the ship, he might try bringing people together for a voluntarily shared vision.

If federal interest payments increase, that means additional federal dollars will go into the private sector. That is known as “growth.”

And yes, additional relief spending is necessary to “offset the cost of forcing businesses to close.” And this is supposed to be a bad thing??

And will someone explain how adding federal dollars to the economy will “make the economy smaller than it would have been”.

Mr. Tuccille closes with one last bit of abject ignorance. The “forcibly shared economic pain” comes not from federal spending but from the lack of federal spending which leads to recessions.

Finally, though Tuccille doesn’t mention this, many people claim federal deficit spending is “socialism.” It isn’t. Socialism is government ownership and control, not spending. “Socialism” is just a word often used to scare the innocent.

All of the above nonsense is what you will hear for the next four years, not only from Mr. Tuccille and the GOP, but even from the Dems, who lack either the courage or the knowledge to explain the facts to the American public.

Recessions don’t just happen. They always, always, always are caused by a Congress that wants you to believe federal money is scarce while you of the private sector have all the money you need.

I remind you of these arguments because you repeatedly are being told the federal government cannot or should not spend so much. The purpose of the falsehoods is to keep you from asking for the benefits the rich receive.

It’s a function of Gap Psychology, the desire of the rich to distance themselves from you.

What a pity that we allow ourselves to starve, while we own an infinite supply of food seed to plant.

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:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

Why the Senate will convict Donald Trump Thursday, Jan 21 2021 

Yogi Berra, the great Yankee philosopher, said in essence, “Predicting is hard, especially the future.”

But I am going do it because, as President John Kennedy said, ” . . . not because (it’s) easy, but because (it’s) hard.”

I predict the Senate will convict Donald Trump.

Follow my logic:

Too many to ignore, do trust him

The greatest danger to the Republican party comes not from the Democrats, but from Trump.

He controls a vast bloc of ignorant cult followers, who have proven they will vote for him even, as he himself claimed, he were to “shoot someone on 5th Avenue.”

The danger to the GOP is that Trump will run for President four years hence, and split the party as he already has, only even more so, when all his high crimes and misdemeanors come into bright light. That party split will lose to the Dems.

The more imminent danger is that two years hence, he will interfere with the midterm elections, and essentially take over the party.

So, just on the face of it, the GOP part of the Senate would be wise to convict him, just to prevent him from running and destroying the GOP.

But why would Trump even want to run in four years or to interfere with the midterms? He hates to work, and would much rather spend his years playing golf.

Answer: Because he is the classic AFAB (Anything For A Buck) guy, and he has some serious financial issues coming up.

Trump doesn’t give a hoot about the Presidency and he doesn’t give a fig about conservatism.

He’s not even a conservative. Never was. He was a Dem most of his life. He has no political philosophy to pass down through the ages. He strictly is a me-first, me-last and me-in-between psychopath.

But, as the slimy Republican Senator, Lindsey Graham said five years ago, “I’m thinking about running for president. You get a house and a car and a plane. It’s a pretty good gig,”

The financially needy/greedy Trump already has seen how good a gig it is.

Consider this:

  1. He is one of the worst business leaders imaginable — nobody but Trump goes broke running casinos — three of them — plus other bankruptcies. He doesn’t know how to run anything, as the past four years have taught us.
  2. Everything he touches fails — Trump steaks, Trump water, Trump airline, Trump vodka, Trump winery, Trump Magazine — or is crooked, like Trump University and Trump Foundation. The list of failures is endless.
  3. He has survived, not by running anything, but by renting his name, which now has fallen apart. No one wants to touch him.
  4. And another lucrative TV show is unlikely, because, being exposed as a crooked loser, he has nothing to offer.
  5. He owes banks and other lenders hundreds of millions of dollars.
  6. His Trumpers have given him hundreds of millions of dollars to do with as he chooses, and that money will keep flowing in, so long as he can keep running for President. When he no longer a candidate or prospective candidate, his leverage disappears.

Clever Mitch McConnell knows all this, which is why suddenly he has “not determined whether Trump should be convicted in the Senate’s upcoming proceedings.”

And if clever Mitch McConnell knows this, then he is telling it to the other Senate Republicans. And though the GOP seems to have a near-monopoly on stupid Senators, enough of them will get the message to swing the vote — so long as Democrats don’t let their usual high-and-mighty, faux morality pull defeat from the jaws of victory.

The sole problem for the GOPers is how to get rid of Trump without looking like they want to get rid of Trump, and that will require piling on the evidence, i.e working with the Dems, rather than against them in the hearings.

So you are going to see a ton sh*t hit the Trump fan, so much that even the Hannityesque FOXy phonies “reluctantly” will opt to convict because “the Constitution and the good of the nation require it.” (As though these pols FOXies even care about the Constitution and the good of the nation.)

Having no electoral future, Trump will abandon the GOP like it was a poor, drunk uncle asking for a loan, and will try to work something out with Putin and the Saudis.

Good luck with that, Donald. They need you like a duck needs a raincoat.

Bottom line: Trump and his good-for-nothing-kids are finished, while the GOP moves on — perhaps with a good-looking, female (white, of course) Presidential candidate.

So that is what I predict. The Senate will convict Donald Trump, and he even may become “Convict Donald Trump,” and wear an orange jumpsuit to match his face.

But predicting is hard, especially the future.

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:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

Do numbers make seat-of-pants guesses better? Thursday, Jan 14 2021 

The science of economics is loaded with numbers. Charts, graphs, and formulae abound.

Young Boy Writes Math Equations On Chalkboard High-Res Stock Photo - Getty Images

Yet, despite this pretense at exactitude, economics is unable to tell you what will happen tomorrow let alone a year or a decade from now.

Which brings us to the “fiscal multiplier.”

This bit of mathematical chicanery supposedly indicates how individual types of federal spending will affect the economy.

You can go to the following web page to see a good description of the process. Here are some excerpts.

Fiscal Multiplier
A measure of the short-term impact of a fiscal stimulus on the Gross Domestic Product (GDP) of an economy

The fiscal multiplier is extremely difficult to estimate. It is because the economy is complex, with multiple forces affecting its output.

In such a situation, it becomes too hard to pinpoint the change in output that is directly attributable to fiscal policy.

Hmmm . . . “extremely difficult to estimate” and “too hard to pinpoint change.” But does that scare us economists? No. Bravely we dive into the cesspool, hoping to catch a nice fresh fish.

There are two main approaches to estimating the fiscal multiplier. First is the econometric or statistical approach, and the second in the simulation or model-based approach.

1. Econometric Estimation
The econometric estimation of the fiscal multiplier is performed using a statistical model called a Structural Vector Autoregressive model or an SVAR model. The model is a multivariate time series model that measures the relationship between multiple variables through time. The SVAR approach requires a lot of data, which is not always available. Hence, even though the method is based on data, the results may not be stable.

2. Model-Based Estimation
The model-based estimation approach creates a model of the economy and then uses simulation to estimate the required variable. The models that are often used to model the economy are known as Dynamic Stochastic General Equilibrium (DSGE) models.

They model different sectors of the economy and the interaction among them. The simulations from the models are aggregated to measure the required variable, in our case, the fiscal multiplier. Such an approach does not require a lot of data, but it suffers from model risk.

3. Bucket Approach
The bucket approach is a very simple method that estimates the fiscal multiplier depending on how an economy ranks on various factors. It is more of a back of the envelope calculation, which can provide a ballpark figure for the multiplier based on the experience of other economies with similar features.

I suspect the more correct name for all of the above would be Dynamic Stochastic General Hocus Pocus (DSGHP).

Then, the economists stroke their chins and take these “extremely difficult to estimate” and “too hard to pinpoint the change” numbers and use them when . . .

Comparing Fiscal Multipliers

The output gap – the difference between expected economic output under current law and possible economic output if the economy were operating at full potential – is projected to total $1.85 trillion over the next two years according to the Congressional Budget Office (CBO).

Fiscal policy can reduce this output gap over time. How effective a policy will be depends on its “multiplier” – the output produced for each dollar spent. While COVID relief should be designed to achieve a number of different goals – and there is no “right” share or length of the output gap that must necessarily be closed – policymakers should focus on high-multiplier spending and tax cuts where possible.

 

Here we see how the false certitude of WAG (Wild Ass Guesses) is displayed in a Congressional Budget Office (CBO) official table, which proves, for instance, that a “Paycheck Protection Program” (whatever it eventually may be) is less than half as effective as a “Coronavirus Relief Fund for States” (whatever it eventually may turn out to be).

About the best one can say about the CBO estimates is that they are (usually, somewhat) less politically motivated than Congress is.

The real problem not only is that people believe the WAG estimates, but that the estimates are based on a fundament lie:

‘Importantly, these policies may boost economic activity in the short-term, but they will ultimately add to the debt and thus slow long-term economic growth.

‘Policymakers can balance these risks by focusing on the policies that produce the greatest amount of economic activity for a given cost and can mitigate or reverse them by coupling short-term fiscal support with long-term deficit reduction.

There is zero, no, make that ZERO evidence that reducing federal “debt” slows economic growth. Here’s why:

    1. Federal debt is not really “debt” in the usual sense. It is the total of deposits into Treasury Security accounts.
    2. The federal government does not use those deposits to pay its bills. It creates new dollars for that purpose.
    3. The federal government pays off the “debt” simply by returning those deposits.
    4. The way the government keeps its books, reducing the debt requires running surpluses, which always leads to depressions — or if we’re lucky, just to recessions.

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.

Today, we are running a serious recession. How are we trying to get out of it? By deficit spending, aka “throwing money at it.” That, in fact, is the only way we ever can cure recessions. Increased deficit spending prevents and cures recessions.

As for “coupling short-term fiscal support with long-term deficit reduction,” this makes no mathematical sense at all unless we are prepared to create massive surpluses (probably via tax increases) in the future. This is known as, “Kicking the can down Depression Road.”

In summary, we are being fed bad data compounded by bad economics.

What’s the solution? Begin with the fact that the federal government has unlimited money. Then consider each economics problem separately, and then throw money at it. Given infinite resources, why try to husband those resources via phony mathematics?

The economy is the private sector. When we enrich the private sector, we grow the economy. 

And finally, no “inflation” protestations, puleeeze!. Inflation is not caused by federal deficit spending. Inflation is caused by shortages — usually shortages of food or energy — and actually is cured by federal deficit spending.

Want economic growth? Implement the “Ten Steps to Prosperity” and forget about Fiscal Multipliers.

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:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

How I agree and disagree with the same article. Thursday, Jan 14 2021 

Perhaps the greatest Economics problem in the US and indeed, in the world, is the wide and growing income/wealth/power Gaps between the rich and the rest.

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 indeed, virtually every other issue in economics.University of Essex hikes salaries for female professors to eliminate pay  gap | THE News

Ironically, the following article appeared on the Committee For A Responsible Federal Budget (CRFB) web site.

I say “ironically,” because the CRFB continually calls for reductions in federal spending along with increases in federal taxes, all to reduce the dreaded “debt” and deficit.

Such reductions generally are regressive, slashing such social programs as Social Security, Medicare, Medicaid, and other poverty aids, while increasing FICA.

And yet the thrust of the article expresses concern that certain proposed efforts would be regressive, rather than progressive as is popularly assumed.

The concern is legitimate, and I agree with it, while disagreeing with the article in the overall, because of the second greatest economics problem (or is it first?). That problem is the universal misunderstanding of Monetary Sovereignty.

A Monetarily Sovereign government, like that of the United States, has the unlimited ability to create its own sovereign currency. It creates dollars at the touch of a computer key.

You and I, and businesses, and even state and local governments, are monetarily non-sovereign. We all are the “private sector.” financially different from the federal government, which is the true “public sector.”

You can read more about Monetary Sovereignty, here and here.

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.”

Here are excerpts from the CRFB article:

CYMI: Debt Cancellation and SALT Cap Repeal Would Benefit Higher Earners
January 11, 2021

In her recent Washington Post column, Catherine Rampell argues progressives should “be more progressive in an old-fashioned sense: by helping the poor more than the rich.”

I agree with the concept, though in actual excution, this is not always possible.

Being progressive is not exclusively devoted to helping the poor. It also means aiding the various middle classes. And therein lies the problem.

Rampell argues against three policies that are “handouts to the wealthy” — the repeal of the limit of the federal deductibility of state and local taxes (the SALT cap), canceling up to $50,000 per borrower of federal student debt, and the proposed $2,000 stimulus checks.

Rampell’s description of the $50,000 in student debt cancellation and SALT cap repeal is apt — the vast majority of the benefits of these policies would go to the highest earning families (we’ve written separately on the distribution of the $2,000 checks here).

Nearly two-thirds of the benefit of canceling $50,000 in student debt per person would go to the top 40 percent of households and over three-tenths would go to the top quintile, according to a recent paper by Sylvain Catherine and Constantine Yannelis. Less than 5 percent would go to the bottom quintile.

They estimate an average net lifetime benefit of $5,775 for someone in the top quintile and only $731 for someone in the bottom.

Assuming the math is correct, then in fact, the rich would benefit directly more than would the poor. But there are several points not considered.

1. Because of the above-mentioned three programs, fewer dollars would leave the private sector and go to the federal government, to be destroyed. This alone would stimulate the overall economy, which would benefit the middle- and lower-income groups.

2. More middle- and lower-income students would begin their working lives with the financial ability to create businesses and jobs, which also would benefit middle- and lower-income groups.

3. More middle- and lower income young people would be encouraged to attend college, which would benefit all of America, as more doctors, scientists and other professional talent entered the economy.

4. More middle- and lower-income people would be able to pay their rent and feed their families.

SALT cap repeal is even more regressive. The Tax Policy Center estimates that 96 percent of the benefit of repealing the $10,000 cap on the state and local tax deduction would go to the top quintile.

57 percent would go to the richest one percent of taxpayers. Those at the top would enjoy an average tax cut of $31,000 — while the average taxpayer would see no tax cut at all (the average cut in the middle quintile would be $10).

Even efforts to better target these policies don’t appear to fundamentally change their regressive nature. Catherine and Yannelis find that capping debt cancellation at $10,000 per household would still distribute 28 percent of the benefits to the top quintile and only 5 percent to the bottom.

Similarly, doubling the SALT cap to $20,000 rather than repealing it still delivers over 95 percent of the benefit to the top quintile and almost none to the bottom half of earners, based on estimates using Tax Brain.

This type of targeting can reduce the benefit of these policies for the very wealthiest Americans, but still offers little benefit to the vast majority of lower-earning and middle-class borrowers and taxpayers.

5. Again, I agree with the premise, while disagreeing with the implied solutions, i.e the status quo.

Those implied solutions would maintain or even increase the number of dollars taken from the private sector and delivered to the federal government for destruction. 

In her piece, Rampell argues that “in the new year, under a new president, Democrats should remember their obligation to aim their fiscal firepower at those who need it most.”

There are many effective ways to boost the economy and support struggling households during the current crisis.

Repealing the SALT cap or offering blanket debt cancellation are expensive, regressive polices, offer little bang for the buck, and most certainly do not qualify.

I disagree that encouraging and enabling college attendance offers “little bang for the buck.”

I especially disagree, because the federal government creates “the buck” from thin air, at no cost to anyone. So any “bang” that reduces the number of dollars taken from the private sector has overall benefit.

Still, there lingers the legitimate concern about benefitting the rich more than the middle and the poor, and I suggest that this concern can be mitigated in several ways:

A. The federal government can and should give significant per-capita stimulus dollars to each state, enough to reduce each state’s need for taxes. State taxes generally are regressive.

B. The federal government can and should provide significant financial support for grades pre-K-12, which currently receive massive amounts of regressive state tax dollars.

C. The federal government can and should begin to fund other state financial initiatives such as local roads, sewage, garbage, police, fire, parks, etc. The goal would be to substitute free Monetarily Sovereign, federal dollars for expensive monetarily non-sovereign, state and local tax dollars.

D. The federal government can and should offer financial aid to renters, not only to home owners.

E. The federal government can and should implement Step #8 of the Ten Steps to Prosperity: Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

Of course, all of the above-mentioned programs could be scaled according to income, which instantly would eliminate Rampell’s objections. A problem with so much scaling is that it, like our income tax, effectively becomes rescaled by the rich and the devious.

Ultimately, the CRFB cannot resist inserting the Big Lie into its article:

“Importantly, these policies may boost economic activity in the short-term, but they will ultimately add to the debt and thus slow long-term economic growth.” 

How is it possible that policies can boost growth in the short term, but slow growth in the long term? Actually, it isn’t possible — not mathematically, not economically, not no way, and not no how — at least it isn’t possible unless the federal government forces it to be possible by unnecessarily raising taxes or cutting benefits.

Since 1940, the fear-mongers have been claiming that the federal debt is a “ticking time bomb.” Meanwhile, the economy has grown from $40 billion to over $20 trillion, and the fake “time bomb” still awaits its detonation.

In Summary:

Some programs for aiding the poor also aid the middle- and upper middle-classes, thus actually widening some of the Gaps between the various income/wealth/power groups. There are several ways to mitigate this effect, including the use of income as a determinant for receipt of benefits.

Better, would be the implementation of the Ten Steps to Prosperity (below) which would stimulate the economy while narrowing the Gaps

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:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

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