You can’t say we weren’t warned

You can’t say we weren’t warned. Hitler warned us, but like the Germans before us, we didn’t listen. Now, we have been repeating Germany’s mistakes.

Read this reprint from a post titled “Astounding similarities: Hitler in America. It’s happening now.” It posted way back in September 2016, when Trump was still running for office.

A host of earlier biographers have advanced theories about Hitler’s rise, and the dynamic between the man and his times.

Some have focused on the social and political conditions in post-World War I Germany, which Hitler expertly exploited — a yearning for a return to German greatness; unemployment and economic distress; and longstanding ethnic prejudices and fears of “foreignization.”

Hmmm . . . “Make America great again,” anti-Muslim, build a wall. Now, who is that?

Hitler as a politician who rose to power through demagoguery, showmanship and nativist appeals to the masses.

Hitler was often described as an egomaniac who “only loved himself” — a narcissist with a taste for self-dramatization and what Mr. Ullrich calls a “characteristic fondness for superlatives.”

Image result for trump
Using the Hitler playbook, down to the smallest detail.

What about this: do demagoguery, showmanship, and nativist appeals sound familiar? And which egomaniacal politician describes everything about himself as “incredible.”

A former finance minister wrote that Hitler “was so thoroughly untruthful that he could no longer recognize the difference between lies and truth” and editors of one edition of “Mein Kampf” described it as a “swamp of lies, distortions, innuendoes, half-truths and real facts.”

Which politician not only lies the most of any in recent memory but repeatedly denies the incontrovertible evidence of lies?

And this:

Hitler was an effective orator and actor, adept at assuming various masks and feeding off the energy of his audiences.

Although he concealed his anti-Semitism beneath a “mask of moderation” when trying to win the support of the socially liberal middle classes, he specialized in big, theatrical rallies.

Which politician is a professional TV actor? Who boasts about massive rallies with thousands of cheering people? Which politician breeds hatred of minorities? And this:

He peppered his speeches with coarse phrases and put-downs of hecklers.

Even as he fomented chaos by playing to crowds’ fears and resentments, he offered himself as the visionary leader who could restore law and order.

Which politician yells “Get ’em outa here” when heckled? Which politician promises to enforce “law and order”? And this:

Hitler increasingly presented himself in messianic terms, promising “to lead Germany to a new era of national greatness,” though he was typically vague about his actual plans.

He often harked back to a golden age for the country, the better “to paint the present day in hues that were all the darker.

Everywhere you looked now, there was only decline and decay.

Which politician repeatedly tells us we are losing to the Chinese, the Mexicans, and the terrorists- losing, losing, losing- but is vague about plans (sometimes claiming they are “secret.”?) And this:

Because the understanding of the masses “is feeble,” Hitler said, effective propaganda needed to be boiled down to a few slogans that should be “persistently repeated until the very last individual has come to grasp the idea that has been put forward.”

Seen any political slogans printed on hats and constantly repeated in speeches to remind the “feeble” masses? And this:

Hitler’s rise was not inevitable. There were numerous points at which his ascent might have been derailed.

(But) in addition to economic woes and unemployment, there was an “erosion of the political center” and a growing resentment of the elites.

(There was) the belief of Hitler supporters that the country needed “a man of iron” who could shake things up.

“Why not give the National Socialists a chance?” a prominent banker said of the Nazis. “They seem pretty gutsy to me.”

Does resentment of elites (aka “the establishment”) ring a bell? What about the need for change, to “shake things up”? And this:

(Hitler’s) conservative coalition partners believed either that he was not serious or that they could exert a moderating influence on him.

Know of any politicians whose own party continues to try to moderate them? Was there speculation about politicians not really being serious about running for President? And this:

Hitler, it became obvious, could not be tamed.

The independent press was banned or suppressed and books deemed “un-German” were burned.

Think. Which American politician wants to sue the press for unflattering articles? Germans believed, “It cannot happen here.” But, as the author asks . . .

What persuaded millions of ordinary Germans to embrace Hitler and his doctrine of hatred?

How did this “most unlikely pretender to high state office” achieve absolute power in a once democratic country and set it on a course of monstrous horror?

It happened in Germany. Actually, it has happened in many countries. People fundamentally are the same, everywhere, and everywhere they can be led like sheep to the slaughter by Hitlerian leaders.

Yes, it can happen here. It, in fact, is happening here, right in front of our noses. Don’t believe, even for one second, that we are immune.

Were it not for a few heroes who resisted Trump, we would have lost America’s democracy. Even now, there are Hitler, uh, Trump believers who would sacrifice America for a charlatan.

“Those who fail to learn from history are doomed to repeat it.” George Santayana

Learn.

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 socioeconomic ranking and to come nearer those “above.” The socioeconomic 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
  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

What are the purposes of the federal gas tax, FICA and federal income tax?

Question: What are the purposes of the federal gas tax, FICA, and federal income tax?

Answers:

  1. The federal government and states both impose gas taxes, with much of the revenue raised going toward fixing highways and other infrastructure projects.
  2. The Federal Insurance Contributions Act (FICA) is a U.S. law that mandates a payroll tax on the paychecks of employees, as well as contributions from employers, to fund the Social Security and Medicare programs.
  3. Tax revenue allows the government to operate and provide goods and services for citizens. These goods and services include roads, bridges, national parks, education, research and national defense.

The answers to the questions can be summarized as: The purpose of federal taxes is to fund federal spending. You can find these answers at the indicated links and in thousands of places on the Internet, except . . .

. . . the answers are wrong. Federal taxes fund nothing. 

 

 

 

Status of Major Federal Trust Funds
Dates “trust funds” supposedly will exhaust their cash, except it’s all a lie. The “trust funds” are not real trust funds, and there is no cash. Congress and the President have total control over all spending, which is done with newly created dollars, ad hoc. The government never can run short of dollars.

State and local taxes stay in the economy (aka, the private sector). They are deposited in private banks and then are used to fund state and local spending.

But federal taxes are destroyed upon receipt. They no longer stay in the economy. They no longer are part of the money supply measure M2. They cease to exist.

This fact is not understood by the vast majority because of the erroneous communications sent every day.

I. The Purpose of the Federal Gas Tax

Biden says decision on gas tax holiday may come this week
Aamer Madhani and Josh Boak
Associated Press
REHOBOTH BEACH, Del. (AP) — The administration is increasingly looking for ways to spare the public from higher prices at the pump, which began to climb last year and surged after Russia invaded Ukraine in February.

The Biden administration has already released oil from the U.S. strategic reserve and increased ethanol blending for the summer, in additional to sending a letter last week to oil refiners urging them to increase their refining capacity.

Yet those efforts have yet to reduce price pressures meaningfully, such that the administration is now considering a gas tax holiday. Taxes on gasoline and diesel fuel help to pay for highways.

There it is, the Big Lie that federal taxes pay for things. 

The government, being Monetarily Sovereign, has the infinite ability to create its own sovereign currency, the U.S. dollar. 

The federal government never unintentionally can run short of dollars. Even if total federal tax collections equaled $0, the federal government could continue spending, forever. The federal government already has unlimited dollars to pay for highways.

Given that simple fact, there is no reason why the federal government would need to collect taxes for spending. The sole function of the federal gas tax is to discourage driving. It’s an effort to reduce gasoline usage.

And that is the fundamental difference between federal finances vs. state/local government finances. State and local governments can and do run short of dollars. Their taxes do fund spending.

Federal taxes have only one purpose: Taxes discourage what the government wants to limit, and tax breaks encourage what the government wants to grow.

The Penn Wharton Budget Model released estimates Wednesday showing that consumers saved at the pump because of gas tax holidays in Connecticut, Georgia and Maryland. 

Sadly, the state and local governments, which do not have the infinite ability to create dollars are doing what the federal government should have done.

In an interview Sunday on ABC’s “This Week,” Treasury Secretary Janet Yellen expressed an openness to a federal gas tax holiday to give motorists some relief.

Oil refiners say their ability to produce additional gas and diesel fuel is limited, meaning that prices could remain high unless demand starts to wane.

The gas tax holiday would encourage driving, but this would reduce supplies, thereby increasing prices. Clearly, Janet Yellen has no plan for reducing inflation.

In all fairness, however, reducing inflation requires reducing shortages of key goods and services, and that is Congress’s job, not the Fed’s.

Only Congress has the power to increase supplies of scarce goods and services.

The American Petroleum Institute and American Fuel & Petrochemical Manufacturers sent a joint letter to Biden on Wednesday that said refineries are operating near their maximum capacityalready and nearly half of the capacity taken off line was due to the facilities converting to renewable fuel production.

A gas tax holiday would make the scarcity situation worse, although there would be an economic benefit to not removing dollars from the economy.

“Today’s situation did not materialize overnight and will not be quickly solved,” the letter said. “To protect and foster U.S. energy security and refining capacity, we urge to you to take steps to encourage more domestic energy production,” including new infrastructure and reducing regulatory burdens.

That letter does indicate one of the steps the federal government should take to fight inflation: Take steps to encourage more domestic energy production,” including new infrastructure.

Last week, the Federal Reserve stepped up its drive to tame inflation by raising its key interest rate by three-quarters of a point — its largest increase in nearly three decades — and signaled more large rate increases to come.

The cause of inflation is shortages of gas, oil, foods, shipping, computer chips, lumber, housing, and labor. An increase in interest rates will not address any of those causes.

II. The purpose of FICA

The Federal Insurance Contributions Act (FICA) is a U.S. law that mandates a payroll tax on the paychecks of employees, as well as contributions from employers, to fund the Social ecurity and Medicare programs.

Wrong again. Federal taxes fund nothing.

The sole purpose of FICA, as told by President Franklin D. Roosevelt, was so that “no damn politician can ever scrap my Social Security program” (because it is an earned benefit ostensibly funded by the workers themselves.) FICA is not economics. FICA is psychology.

Sadly, rather than protecting Social Security, FICA and its fake “trust funds” have been an excuse for reducing benefits.

Social Security has undergone significant changes since Fuller received her first check, including the addition of disability benefits in 1956. Today, 59 million retired workers, spouses, disabled workers and survivors get monthly payments averaging $1,194.

The latest overhaul came in 1983, when Social Security was on the brink of insolvency. Congress increased payroll taxes, cut benefits and gradually extended the age when retirees can claim full benefits.

The changes shored up Social Security’s finances so it could absorb the initial wave of retiring baby boomers.

The preceding paragraphs demonstrate the lie about Social Security being paid by “trust funds.”

Social Security was “on the brink of insolvency” only because Congress and President Reagan wanted to cut benefits. Otherwise, they merely could have authorized additional federal payments to the program, just as they do when the Army needs more money.

In a real “trust fund,” the trustees (the government) could not arbitrarily add disability benefits. In a real trust fund, the trustee could not arbitrarily extend the age for claiming full benefits. In a real trust fund, the trustee could not arbitrarily invent new rules about working people receiving or not receiving benefits.

Social Security is nothing more than a government agency, and like all other government agencies, it rises or falls on the whim of Congress and the then-current President.

In that sense, it is no different from the military, NASA, or the FBI, except none of them are limited by a fake “trust fund.”

III. The purpose of federal income taxes.

You can spend your life searching sources, and the vast majority will tell you something like this one:

“Taxes (in all their various forms) are the revenue stream that a government needs to provide the services that its citizenry demand of it. If you want the government to perform some action, well, it needs some money to pay for it. Taxes are how we do that.”

The first clue that the author doesn’t know what he or she is talking about comes from the words, “a government.” The tacit assumption is that the finances of a monetarily sovereign government are the same as the finances of a monetarily non-sovereign government.

The former are money creators like the governments of the U.S., Canada, the UK, Mexico, Australia, et al. The latter are money users like the governments of Illinois, Chicago, France, Italy, et al.

Money creators cannot run short of their own sovereign currency, and for that reason they neither need nor use tax. 

Former Federal Reserve Chairman, Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

The U.S. government cannot run short of dollars. Similarly, the Canadian, UK, Mexican, Australian etc. government cannot run short of their currencies.

By contrast, money users like the Illinois and Chicago governments can run short of dollars, and the governments of France, Italy, etc. can run short of euros. So they need to collect taxes. That is the way they acquire euros.

In further contrast, the European Union is monetarily sovereign. It cannot run short of euros.

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

Since federal taxes do not fund federal spending, why does the federal government collect them? 

The purposes of U.S. federal taxes are.

1. To narrow the gap between the rich and the rest. An overly wide gap gives the rich too much power in any economy, so tax rates take income into consideration, with increased rates for increased income.

Unfortunately, this purpose is followed more in the breach than in reality, because the rich have managed to distort tax collections in their favor. One outstanding example is Donald Trump, who despite being a billionaire, did not pay any federal taxes at all in 8 of the past 10 years.

2. To control the economy by taxing what the government wishes to discourage and giving tax breaks to what the government wishes to discourage.

A partial example is the gasoline tax which to a very small degree discourages gasoline usage. “Sin” taxes on cigarettes and alcohol fall into this category.

And then there is the real purpose of federal taxes:

3. To make the unwary populace believe that federal deficit spending is harmful so, federal benefits must be limited or taxes must be increased.

This is the insidious Big Lie promulgated by the rich, to widen the Gap between them and the rest of the people.

It is the reason why you repeatedly are told that the Social Security “trust fund” pays SS benefits, and the Medicare “trust fund” pays Medicare benefits, and both are running short of money. Neither of the so-called “trust funds” are real trust funds. Neither pays benefits and neither can run short of money unless Congress and the President want them to run short.

As with all federal agencies, the federal government pays for everything by creating new dollars, ad hoc.

In perhaps overly simple terms, it works like this for Social Security:

  • An agency of the federal government creates instructions (check or wire) from thin air and sends these instructions to your bank
  • Your bank is instructed to increase the balance in your checking account.
  • When your bank obeys those instructions, dollars are created and added to the M1 money supply. 
  • Your bank then “clears” (gets approval) the instructions through the Federal Reserve, which also is an agency of the federal government.

Thus, the circle is completed with one agency of the federal government’s approving the dollar-creation instructions by another agency of the federal government.

That is why federal checks don’t bounce. The federal government approves its own instructions.

Compare that to an agency of a state or local government. It too sends instructions to banks, and the banks obey those instructions. But when the banks try to clear the instructions through the Federal Reserve, the instructions will bounce unless the state or local government’s accounts have sufficient reserves.

For state/local governments, there is no self-approval system of dollar payments.

Actual dollar creation is done by banks at the instruction of the federal government. Those green paper Federal Reserve Notes printed by the Treasury are not in themselves, dollars. They are bearer titles to dollars.

Just as a house title document is not a title — it’s just a piece of paper — until it refers to a specific house, a dollar bill is just a piece of paper until it refers to a specific dollar on the government’s balance sheets.

Dollars are like laws.  They have no physical existence. You can’t hear, feel, smell, taste, or see a law or a dollar.

Dollars are only numbers on balance sheets. The Treasury provides banks with Federal Reserve Notes which merely are titles to dollars.

Banks use Federal Reserve Notes (dollar bills) as a substitute for increasing numbers in accounts. People use Federal Reserve Notes as titles to dollars that exist only as numbers on federal balance sheets.

For example, if you were to use dollar bills to purchase a car, you would exchange your title to dollars for the title to the car. The car seller then would own the dollar titles, proving he owned the numbers on the government’s books, and you would own the car title proving you own the car.

 

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
  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

Are you a Republican at heart? A Democrat? Independent? This test will help you know.

Do you generally vote Republican, Democrat, or independent? The two main parties have changed during the past few decades. Republicans have moved to the right. Democrats have split.

Have you moved with them?

Here are some beliefs often expressed in the news. How many beliefs do you agree with? Be honest with yourself.

TRUE or FALSE

  1. Donald Trump did much to make America great, again._____
  2. Donald Trump did not attempt a coup._____
  3. Trump was cheated out of the Presidency by fraudulent voting._____
  4. It’s OK that Trump employed his family in the White House._____
  5. Trump has not committed serious criminal acts._____
  6. It doesn’t matter whether or not Trump cheated on three wives._____
  7. It doesn’t matter whether or not Trump paid federal taxes._____
  8. FOX News provides reliable news.____
  9. Tucker Carlson provides reliable news._____
  10. The COVID vaccination is dangerous or useless._____
  11. COVID masks don’t work._____
  12. Scientific studies about climate change and COVID often lie._____
  13. God actually exists._____
  14. Christianity is the only true religion._____
  15. Atheists are a grave danger to America. _____
  16. Abortion is murder._____
  17. Gun control laws take away my 2nd Amendment rights._____
  18. Easy access to guns makes Americans safer._____
  19. School teachers should be armed_____
  20. The 2nd Amendment does not say gun owners should be in a well-regulated Militia,_____
  21. I favor open-carry of guns._____
  22. There should be no restrictions on the size of gun magazines._____
  23. Medicare for All is a bad idea._____
  24. There should be no separation between church and state._____
  25. Women generally are not as capable as men._____
  26. Blacks tend to be lazy, criminal, and/or receive too many free benefits._____
  27. Blacks receive unfair advantages._____
  28. Mexicans and other Latins tend to be lazy, criminal, and/or receive too many free benefits._____
  29. Undocumented immigrants are a danger to America._____
  30. Orientals are taking over America._____
  31. Jews are trying to take over the world._____
  32. Native Americans are not civilized._____
  33. The poor tend to be takers, not producers._____
  34. Global warming is not man-made._____
  35. White supremacists are correct in much of what they say._____
  36. QAnon is right about a lot of things.
  37. We are being replaced by non-white, non-Christians_____
  38. The Supreme Court was wrong not to have declared Obamacare unconstitutional._____
  39. Food stamps and most other poverty aids are a bad idea._____
  40. Building affordable housing for the poor in my area is a bad idea_____
  41. We need increased military spending_____
  42. There should be no immigration path to citizenship_____
  43. Gay marriage is morally wrong._____
  44. Gays are grooming young children to be gay._____
  45. Muslims are a danger to America._____
  46. There are some crimes for which I favor the death penalty._____
  47. Being born in America should not guarantee citizenship._____
  48. DACA children (“Dreamers”) should be sent home._____
  49. Most illegal drugs come into America via undocumented immigrants._____
  50. Children should not be allowed to have gender-affirming treatment._____
  51. A history of slavery and bigotry in America should not be taught.____
  52. Parents know better than teachers what their children should be taught._____
  53. The burning of books is appropriate in some cases._____

If you answered “False” to almost all of the above you probably are a Democrat or an independent depending on the number of False’s.

If you answered “True” to about half, you probably are a Republican or a RINO. You could slide either way.

If you answered “True” to more than half of the above, you are a Trump Republican.

Nice to discover who you really are, isn’t it? Proud of it?

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
  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

;

Free Minds, Free Markets, Free Ignorance.

Reason.com - Free Minds and Free Markets This is the masthead for the online Libertarian magazine, Reason.

These folks boast about having “free minds,” which one might assume means they are open to learning and not locked into a rigid belief.

Sure, they are.

I find it ironic that perhaps the most stone-headed political-economics group in America could claim freedom of mind.

These are anarchists in thin disguise who have no idea how federal financing works, and day after day, they publish proofs of their determined ignorance.

Here is just one of a seemingly endless supply of misinformation and disinformation from the “free minds.”

Rand Paul Asked Senators To Balance the Budget. Only 28 Agreed. Rising interest rates will only make it harder to balance the budget in future years. Eric Boehm  

Right off the top, we encounter ignorance. Rand Paul is a hopeless purveyor of nonsense, while Boehm and his fellow Libertarians are clueless about the differences between federal financing vs. state & local government financing, business financing, and personal financing.

The federal government is the creator of the dollar, which is why knowledgeable people say things like this:

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.”

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

Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”

The federal government “cannot become insolvent,” can “produce as many U.S. dollars as it wishes,” does not spend tax money or any other form of income, and does not borrow (i.e., “depend on credit markets”).

In short, the federal government uniquely is Monetarily Sovereign. All the others mentioned above are monetarily non-sovereign.You and I can become insolvent. You and I cannot produce dollars at will. We do rely on income. And we do borrow. Vast difference that Paul, Boehm and the Libertarians don’t seem to get.

The Libertarians essentially think the sun and the moon are the same because, hey, they both are in the sky, aren’t they.

Boehm’s mind seemingly is closed to the fundamental difference between Monetary Sovereignty and monetary non-sovereignty. So he wants to balance the budget as though the federal government was just like you and me.

Here is what happens when the government simply reduces deficit spending growth (not even going so far as to balance the budget; just reduce the growth).

The Red line shows the annual increases and decreases in federal deficit spending. Vertical gray bars are recessions.

We have recessions when the federal deficits increase less than the previous year. Those recessions are cured when federal deficits increase more than the previous year.

The graph shows deficits increase almost yearly, but we have recessions when they don’t grow enough. Now let’s take a closer look at what happens during those rare times when the federal government runs a surplus.

In the 3rd quarter of 1955, the government began to run a surplus, which led to a recession in 1957. The recession was cured when we started to run a deficit in 1958.

 

Deficit growth declined until the middle of 1969 we fell into a surplus, which led to a recession. The recession was cured after deficits returned in 1970.

 

Deficit growth declined until the 3rd quarter of 1998 until we fell into a surplus, which led to the recession of 2001. That recession was cured when we climbed back into deficit growth.

Here are more historical data showing what happens when the federal government runs 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.

Paul Rand, Eric Boehm, all the Libertarians, and many others do not understand a simple mathematical truth: A growing economy requires a growing supply of money.

A standard measure of the economy is Gross Domestic Product (GDP) which consists of Federal Spending + Non-federal Spending – Net Imports.

GDP can increase only if the net total of those three money measures increases. That’s arithmetic. Further, because Net Exports usually decrease, the burden is on Federal Spending to increase enough to overcome that money loss.

Thus, simple arithmetic demonstrates that for real GDP to grow, the money supply must grow and that money supply growth relies on federal deficits to exceed Imports and inflation.

That is why a balanced budget or a surplus invariably leads to recessions and depressions.

Continuing with the Reason article:

As he pitched his Senate colleagues on a plan to balance the federal budget in 2018, Sen. Rand Paul (R–Ky.) warned that rising inflation would be one of the consequences of a failure to bring deficit spending under control.

Wrong. There is no relationship between deficit spending and inflation.

Changes in federal debt (blue) do not parallel changes in inflation (red).

But, changes in oil prices (green) do parallel inflation (red). Inflation is caused by critical goods and services shortages, generally energy and specifically oil.

The graphs are clear. Oil prices, not federal spending, determine inflation.

Oil price changes are closely related to changes in oil supply, which is determined by changes in oil production.

Here is a graph of total world energy production:

Here is the data in millions of barrels:

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Oil production in 2020 and 2021 was lower than in 2014, the purpose being to work off inventories that had become too high during the COVID years.

As the world’s economies began to recover from COVID-19’s reduced oil usage, renewed oil production did not keep pace. This lack of oil production, not low-interest rates or “excessive spending,” caused today’s inflation.

Today’s critical shortages are food, housing, computer chips, shipping, baby formula,  lumber, labor, and other goods. Today’s shortages are not caused by increased demand. Mothers did not suddenly begin to demand more baby formula. The number of people needing shelter did not mysteriously increase.

As with most ailments, you must fix the cause to cure the symptom. Shortages are the cause; inflation is the symptom.

To cure inflation, we must cure the shortages.

Reduced availability of goods and services primarily was due to  COVID, global warming, and the Russia – Ukraine war. That is what caused the shortages.

Starving the economy of money, which Paul, Boehm, and the rest of the Libertarians wish to do, does not reduce shortages of oil and other vital goods. Neither does increasing interest rates.

Shortage-caused inflations can be cured only by treating the shortages.

This can be accomplished counterintuitively by increased government spending to improve the cost-availability of scarce goods and services.

At the time, Paul was pushing a bill that would have required a spending cut equal to one penny out of every dollar in the federal budget.

The so-called “Penny Plan” would have balanced the federal budget by 2023, Paul claimed at the time, without requiring serious cuts to any specific programs.

Paul exerted senatorial privilege to force a vote on the package; it failed 21–76.

Taking dollars out of the private sector accomplishes only one thing: Recession if we are lucky, depression if we are not.

Had Paul succeeded, we would have experienced a deep recession or a depression, together with inflation which would have been exacerbated by the Fed’s interest rate cuts.

That was before the federal government borrowed trillions of dollars in the name of combatting the COVID-19 pandemic.

Here again, Boehm reveals his ignorance of federal finance. The U.S. federal government never borrows dollars.

Think, Mr. Boehm: Why would an entity having the unlimited ability to create dollars ever borrow them? It wouldn’t, and it doesn’t.

Boehm is confused by the misleading word, “debt.” He assumes that T-bills, notes, and bonds are loans. They are not. Nor are they owed by the federal government.

T-bills, notes, and bonds are deposits into privately-owned accounts at the Federal Reserve. If you ever bought a T-bill, you owned such an account, which was similar to a safe-deposit box. You put your dollars into your own account. You did not give them to the government.

As with a safe-deposit box, the federal government never used the dollars in your T-security account. To pay you off, the federal government merely returns your dollars to you. No taxes or government dollars are involved.

It simply is a money transfer, similar to transferring dollars from your safe-deposit box to your checking account.

(Unlike borrowing, the purpose of T-securities is not to provide spending money for the government. T-securities provide a safe, interest-paying parking place for unused dollars. That’s why China et al has them. This helps the Fed stabilize the dollar.)

It was before President Joe Biden’s $1 trillion infrastructure package. It was before four more years of bulging federal budgets authorized by a Congress that’s increasingly blithe about borrowing.

“Bulging,” “blithe,” and “borrowing” are words meant to frighten or anger the innocent, but they only reveal ignorance. The budgets do not “bulge.” Congress is not “blithe.” And the government does not “borrow.”

In October 1971, in the greatest act of his administration, Richard Nixon took us off the last gold standard, thus freeing Congress to spend stimulus dollars, which no longer were limited by gold reserves.

With inflation now running seemingly out of control and trillion-dollar deficits being the new norm in Washington, Paul was back on the Senate floor Wednesday to offer another bill to balance the budget in five years.

This time around, however, it would require cutting six cents for every budgetary dollar.

The proposal failed, 29–67.

Thank goodness. Had it succeeded, we would have slipped into a severe depression. We still may if we rely on interest rate increases to cure inflation.

“Washington’s addiction to spending is hurting our economy and depleting our currency. Inflation is stealing every American’s purchasing power and financial security,” Paul said in a statement after the vote.

Paul should have said, “Washington’s spending adds growth dollars to the economy, without which the U.S. would suffer a depression. Spending does not cause inflation. Shortages do. Spending cures inflation when it cures shortages.”

“All this plan does is return to 2019 spending levels. If the federal government spent at 2019 levels this year, we would have a $388 billion surplus.”

That $388 billion federal surplus would have been a $388 billion deficit for the economy.

We have seen what results from federal surpluses. No knowledgeable person takes dollars from the economy and gives them to a federal government that has the infinite ability to create dollars.

The purpose of federal taxes is not to provide the government with spending money. Unlike state and local taxes, which remain in the economy, federal tax dollars are destroyed upon receipt.

They cease to be part of the private sector (aka “the economy”) and disappear into the federal government’s infinite supply of dollars. Add anything to infinity and it remains infinity.

The purpose of federal taxes is to help the government control the economy by rewarding what the government wishes to encourage and by penalizing what the government wishes to discourage.

Indeed, about the only thing that’s changed in the four years since Paul offered the Penny Plan is the size of the numbers involved.

America has piled up an incredible $11 trillion of debt since 2018—that’s more than one-third of the nation’s total credit card bill—as annual budget deficits surged even before emergency pandemic borrowing blew them through the roof.

More non-scientific street language from Boehm, who has yet to provide actual data to prove his point. Why? No data exists to demonstrate that deficit spending causes inflation or harms the economy in any way.

President Donald Trump oversaw an expansion of debt-fueled government spending during his term in office, and Biden has followed suit.

In his first year in office, Biden has added $2.4 trillion to the nation’s long-term deficit—despite the White House’s best efforts to hide that fact.

The White House would not hide adding growth dollars to the economy. It wanted to add even more growth dollars, with its “Build Back Better” proposal but was stymied by a GOP that feared BBB would grow the economy, reduce shortages, eliminate inflation, and assure Biden of a second term.

In the face of this unsustainable fiscal situation, an across-the-board cut of six pennies per every dollar to balance the budget seems like a pretty good deal.

“Unsustainable” is the favorite nonsense word of the budget cutters. That and “ticking time bomb” substitute for data. The “debt” has grown from $400 Billion in 1940 to $30 trillion today, and the government still is “sustaining.” No federal check has bounced.

And what would have been cut? Social Security, Medicare and other benefits for the middle- and lower-income groups.

And things are rapidly spiraling. The Federal Reserve announced a 0.75 percent interest rate hike on Wednesday, just hours before Paul presented his budget plan on the Senate floor.

Those higher interest rates will rebound into the federal budget in the form of higher interest payments on the national debt.

Under the Congressional Budget Office’s (CBO) latest budgetary baseline, interest payments on the debt are expected to triple between now and 2032.

If federal interest payments triple, the economy will receive triple stimulus dollars. Our Monetarily Sovereign government can afford it and our economy can use it.

If interest rates climb higher than the CBO expects, however, the federal government could be paying trillions more simply to finance government spending that already occurred.

Those trillions that Boehm fears actually will be stimulus dollars pumped into the private sector. Growth for the economy; easily affordable for our Monetarily Sovereign government.

Obviously, that will make any future attempt at balancing the budget an even more difficult task.

That’s good news.

The opportunity to balance the budget by cutting a mere penny out of every dollar of federal spending has come and gone. After Wednesday’s vote, the Six Penny Plan’s days are likely numbered too.

That’s even better news.

In Summary, the Pauls and the Boehms of the world do not know (or pretend not to know) the fundamental difference between a money creator and a money user, i.e. the Monetarily Sovereign U. S. government vs. monetarily non-sovereign everyone else who spends and accepts U.S. dollars.

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Taking money from the economy to cure inflation is like applying leeches to cure anemia.

Monetary Sovereignty is the basis for all of economics. Those who don’t understand it simply do not understand economics.

Money is the lifeblood of an economy. The budget-cutters remind one of the quack doctors who apply leeches to cure anemia, thus killing the patient.

Paul and Boehm wish to apply leeches to the economy, starving it of its money lifeblood. That is what ignorance can do.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

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

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
  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