Credentials: The perfect excuse for a bad hiring decision.

It takes only two things to keep people in chains:
.

The ignorance of the oppressed
and the treachery of their leaders.

——————————————————————————————————————————————————————————————————————————————————————————–

Credentials are the “perfect” excuse for a bad hiring decision.

In my long life, I have been an owner of several companies, and personally have hired thousands of people — and I have made mistakes.

Some of those hires turned out badly. The fault may have been with the person; the fault may have been with my company. In any event, the fit was wrong, and ultimately the fault was with me who did the hiring.

Early on, I was too ready to give myself a ready, though poor, excuse: “Their credentials were good.”

Yet credentials are only as good as the person who weighs them. When you believe what a writer tells you, in effect, you have “hired” that writer to be one of your advisors on the specific subject.

You essentially have said to yourself, “I believe what he/she writes, not only because it sounds correct, but because I respect this writer’s credentials.”

Credentials have value, but I suspect they too often are overvalued. Here is a set of credentials that illustrate the point.

Kimberly Amadeo is president of WorldMoneyWatch.com. She has 20 years senior-level experience in economic analysis and business strategy working for major international corporations. Kimberly is the U.S. economy expert for About.com, the 15th most visited site on the web.

She speaks on the global economy, how it affects you and what you can do about it. Kimberly consults on how to use global economic trends to find profitable market niches.

With those credentials, I understand why people believe what she has to say, particularly about economics. And yet . . .

Here are excerpts from an article she wrote for a site called “thebalance.com,” with each excerpt followed by my own comments:

“An expansionary fiscal policy is usually impossible for state and local government. That’s because they are mandated to keep a balanced budget.”

It’s not exactly a mandate. The federal government is Monetarily Sovereign. It cannot run short of its own sovereign currency, because it creates its currency at will. That ability is what makes it Monetarily Sovereign.

State and local governments are monetarily non-sovereign. They do not have a sovereign currency — they use the federal government’s sovereign currency — and they, therefore, can run short of dollars after they reach their borrowing limit.

“As a result, the critical debt-to-GDP ratio has exceeded 100 percent.”

There is nothing critical about a debt/GDP ratio of 100 percent or any other ratio. In fact, the debt/GDP ratio essentially is meaningless.

A Monetarily Sovereign government does not pay its debts with GDP. The so-called federal “debt” is merely the total of deposits in T-security accounts.

Those deposits never are touched. They remain in the accounts until maturity, at which time the “debt” is paid off simply transferring those same dollars back into the checking accounts of T-security holders.

Further, the federal government creates dollars, ad hoc, every time it pays a creditor. So what erroneously is termed “borrowing,” is logically unnecessary. (If you owned a legal, dollar-creating machine, would you ever have the need or desire to borrow?)

The U.S. easily could support a debt/GDP ratio of 150%, 200% or 1,000%. Japan’s ratio is about 250%, and they could support a far higher percentage.

The debt/GDP ratio says absolutely nothing about the health of the economy, or the federal government’s ability to pay its bills, or future taxpayers’ liabilities. Nothing.

” . . . the contractionary monetary policy (Cutting federal spending and/or increasing taxes) is effective in preventing inflation.”

The opposite of inflation is deflation. Cutting federal spending and increasing taxes (aka “austerity”) would be effective in causing stagnation or a recession, which is quite different from deflation.

Reducing the money supply is a poor way to fight inflation. Spending cuts and tax increases are too slow, too political, and too uncertain in effect, because of three questions:

Which taxes should be increased?
Which spending should be cut?
By how much?

Inflation generally is not caused by insufficient taxation or by excessive federal spending, but rather by shortages of key goods (food, oil, etc.)

Because inflation is the loss in value of the dollar, the Fed fights inflation by increasing the value of the dollar. It does this by raising interest rates. Higher rates increase the demand for dollars (aka “strengthen”) the dollar, and importantly they can be administered apolitically, quickly and in small increments.

“Taxes provide the income that funds the government.”

Though this is widely believed by the lay public, is an extremely shocking comment coming from an economist. The federal government is Monetarily Sovereign; it never can run short of dollars.

Taxes do provide income and funding for monetarily non-sovereign state and local governments, but federal taxes do not fund the federal government’s spending.

Being Monetarily Sovereign, the federal government has no need for income — no need to levy taxes (though it unnecessarily does) and no need to borrow (which it does not).

Most federal taxation is a remnant from gold standard days (which ended in 1971), when the federal government’s money creation was limited by its gold supply. Today, nothing limits federal money creation other than the will of Congress and the President.

To pay its bills for goods and services, the federal government sends instructions (not dollars) to its creditors’ banks, telling the banks to increase the numbers in each creditor’s checking account. At the moment the bank does as instructed, brand new dollars are created and added to the money supply (termed “M1”).

Even if all federal tax collections and all federal (misnamed) “borrowing” were $0, the federal government could continue spending forever.

“The federal government is losing its ability to use discretionary fiscal policy.”

The federal government, being Monetarily Sovereign, has the unlimited ability to spend any amount it wishes on anything it wishes. It cannot “lose its ability to use discretionary fiscal policy.”

“When interest rates are high, the money supply contracts.”

This is not correct. Higher interest rates increase the amount of interest the government must pay on its T-securities, thus increasing the nation’s money supply.

High interest rates (blue line) do not reduce the money supply (red line). The opposite seems to be true.

There also is a common myth that high interest rates reduce borrowing, but again, there is no historical evidence for this.

Increases in interest rates (blue line) do not cause decreases in borrowing (red line).

“The current fiscal policy has created the massive U.S. debt level.”

The federal (misnamed) “debt” is the result of all past policies, not just the current policy, and the word “massive” is a misleading pejorative. “Massive” compared to what?

So-called federal “debt” or “borrowing” is merely the total of deposits into T-security accounts. These accounts are not a burden on the federal government or on taxpayers.

They are paid off at maturity simply by transferring the dollars that currently exist in these accounts back to the checking accounts of T-security holders. No tax dollars are used.

At this point, despite Ms. Amadeo’s impressive credentials, I am not quite ready to accept her economics expertise.

It happens that in economics, and perhaps many other sciences, credentials should be looked upon with a wary eye. They may tell you what the person has done, but not whether their opinions have proved to be correct, or are likely to be correct in the future.

And if ever you are in the position of hiring people, remember that resumes may be a beginning point, but they cannot be relied upon. I have come to believe that a simple face-to-face will provide far better information.

If the person is to work for you, do your own interviewing. Don’t rely on subordinates or Human Services.

To my mind, Ms. Amadeo’s credentials said one thing, but her own words said something far different.

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-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.

MONETARY SOVEREIGNTY

What is Gap Psychology? A brief explanation.

It takes only two things to keep people in chains:

The ignorance of the oppressed and
The treachery of their leaders.

In brief:

Monetary Sovereignty describes money creation and destruction.

Gap Psychology describes the common desire to distance yourself from those “below” you in any socio-economic (income/wealth/power) ranking, and to come nearer those “above” you. The socio-economic distance is referred to as “The Gap.”

Gap Psychology manifests in infinite ways. It is everywhere in your life:

Bigotry
Image result for high fashion vs rags Bigotry is the dislike and/or demeaning of any group that is in some way different from your own or admired group.

Bigotry can be based on race, religion, age, weight, height, wealth, geography, political beliefs, or on any other attributes.

We tend to distance ourselves from groups we consider to be lower and to try to associate ourselves with groups we consider to be higher.

In compassionate or charitable people, this desire is repressed. In bigots, this desire is overwhelming.

Members of upper-income groups often feel disdain, even fear, about those in a lower income group, and wish to widen the socio-economic Gap between themselves and the lower group.

Widening the Gap is not limited to increasing one’s own income, power or wealth. It also can include reducing the income, power or wealth of those below.

It is the Gap width that matters, not the absolute income, power or wealth.

If you own $100 and everyone else owns $1, you are rich. But if you own $1 million, and everyone else owns $200 million, you are poor.

The Gap is what makes you rich or poor. Without the Gap, no one would be rich (We all would be the same.) The wider the Gap, the richer the rich are.

Bullying
Few acts more clearly exemplify Gap Psychology than harassing the weak, or seemingly weak.

The object of the bully is to lift himself by stepping on others.

Bullies live in fear of being found wanting or of being associated with those below. Typical of bullies is bluster, the attempt to lift oneself by making self-association with some superiority, i/e claiming “I’m the greatest [individual]” to appear close to those above.

Celebrity Endorsement
If basketball star Michael Jordan endorses a certain brand of basketball sneaker, buyers might assume he has special knowledge about what makes for the “best” basketball shoe. But what if Jordan endorses a brand of Tee-shirt? Why would that be convincing?

That sort of advertising is effective when buyers have a psychological belief that in some vague way, buying the shirt will make them more “like Mike.”

Fashion
The fundamental purpose of clothing is to protect your body. This can be accomplished in many simple, inexpensive ways. So why do you pay more to wear designer clothing?

A woman’s purse can accomplish its “bag” mission for just a few dollars. Yet some designer purses cost thousands of dollars.

Women pay these outlandish prices to close the distance between them and those financially above them.

The fundamental purpose of a car is transportation. A functional car, especially a used model, can be had for a few thousand dollars. Why then do you own (i.e. want to be seen in) a BMW, Lexus, Mercedes, Ferrari, or Rolls?

And then there are mansions, diamonds indistinguishable from “paste”), charitable contributions made public, personally named buildings, etc.

All are part of Gap Psychology.

Group and Team Support
As social animals, humans rely on groups, or at the very least, partners. Evolutionary survival has meant being part of a strong group or having a strong partner to watch your back.

With no thought necessary, people will support all sorts of groups — religious, sports, business, neighborhood, political. To be a “fan,” i.e. a fanatic, comes naturally.

It scarcely is possible to watch a sporting event between two unknown teams, without mentally aligning yourself with one of the teams.

All of the above merely demonstrate that Gap Psychology is in our genes, and there are innumerable Gaps. But there is one Gap that is most important of all:

The Power Gap
The power Gap, or more specifically, the income/wealth/power Gap, is the Gap that truly rules our lives. Like all Gaps, the power Gaps are bifurcated into the Gaps below you vs. the Gaps above you.

Lord Acton’s famous phrase, “Power tends to corrupt, and absolute power corrupts absolutely,“ applies here.

The certainty of the relationship between power and moral corruption is why the U.S. Constitution was created, especially its Amendments, the first ten of which commonly are known as the “Bill of Rights.”

The greater the power Gap between you and others who are “above” you, the greater will be their tendency to treat you badly and to demand your servility, especially if they are insecure about their own power.

American slavery, for instance, was evil, not only because the slaves were . . . well, enslaved . . . but just as importantly, because of the evil, corrupting effect it had on the slave owners.

Slavery cost America its moral compass, the loss from which many of us still have not recovered.

Sadly, some in America’s South still consider slavery to be a proud part of their heritage, and in the entire nation, the remnants of slavery exist as bigotry.

Tax Codes
Our tax codes are a collection of laws, and our laws are ruled by the richest and most powerful. That is why the most important financial laws in America are regressive:

Sales taxes are regressive in that they most affect the lower-income groups, who use a greater proportion of their income on taxable purchases. (The upper-income groups use a greater proportion of their income on investments.)
FICA taxes are regressive because they are levied only on salaries, not on investment income, and are limited to the $100M range.
Income taxes, though ostensibly progressive, actually are regressive in that special rules allow the rich to avoid paying the stated percentage (aka “loopholes”).
Student loans (which amazingly are the single largest asset class owned by the federal government) are regressive in that the rich don’t need them, while the poor can be held down with them for many of their otherwise most productive years.

Kick Them When They’re Down
That old phrase, “Kick them when they’re down” succinctly describes Gap Psychology. When we join in the “kicking,” we separate and lift ourselves from those being kicked.

A nation is a collection of rules and traditions, which often are manifested in laws. The laws have power over the people of the nation, and the nation’s leaders have power over the laws.

An immutable, or nearly so, Constitution was necessary to prevent each succeeding leader from redesigning the laws to favor his own passions.

Sadly, the corrupting power the Constitution was designed to prevent, still remains as the corrupting power that interprets the Constitution.

American history is replete with examples of a corrupted President, Congress, and Supreme Court twisting the words of the Constitution.

For example, the overly admired Franklin Roosevelt interned American people of Japanese descent, aided and abetted by our Constitutionally protected institutions.

The people, being a small minority, had little voting power, and whatever power of national empathy and compassion they had, dissipated with Pearl Harbor.

Being powerless, the people were set upon by those in power, using the traditional excuse of dictators: “National security.”

The fundamental meaning of the 4th Amendment (unreasonable searches and seizures) routinely is violated by police, with the full acceptance of the Supreme Court. People, who only are suspected of a crime, have seen all their assets stolen by the police, and not returned even after being declared innocent.

Public outcry about this clearly unconstitutional action has been muted. The British have a phrase for that sort of Gap Psychology: “I’m all right Jack, pull up the ladder”.

By “pulling up the ladder,” one separates from the unfortunates who remain below.

Law and Punishment
All law answers two fundamental questions:

What is unlawful?
What is the punishment for violating the law?

The mores of any civilization form the basis for answering both questions. But in society, the rich and powerful are treated more favorably by lawmakers and judges, who themselves are powerful.

Consider bail and bail bonds (bail handled by a bondsman), one of the more regressive aspects of American law.

The implicit purpose of bail is to guarantee the defendant will show up for trial.

Bail is not supposed to be a punishment. Usually, bail is set before a trial, meaning before the accused is known to be guilty, so punishment would be inappropriate. Yet in its use, bail functions as a pre-judgment punishment.

Judges decide the amount of bail on the basis of:

the risk of the defendant fleeing,
the type of crime alleged,
the “dangerousness” of defendants, and
the safety of the community.

An impoverished defendant might remain imprisoned by a $100 bail, while a wealthy defendant might go free and flee the country, even after putting up a million bail dollars.

But, the real risk of a defendant fleeing has nothing whatsoever to do with the defendant’s wealth.

If a judge is concerned that a defendant will flee, what then is the purpose of bail?

A rich guilty person very well could decide that fleeing and losing the bail money, is preferable to spending years in jail.
Lost bail money does not compensate the victims of the crime.
An innocent poor person is punished by the bail system.

The entire bail system is designed to allow the accused rich to separate themselves from the accused poor. It is a product of Gap Psychology.

In Summary:
Gap Psychology is everywhere, affecting our beliefs, our customs, and our laws. It is the proverbial “800 lb. gorilla” in every room of our lives.

Gap Psychology separates not only the rich from the poor, but it separates the poor from the very poor and the not-so-poor, the very rich from the almost-rich and the upward-middle, hoping-to-be-rich. It separates the powerful from the powerless.

Gap Psychology affects the clothes you wear, the house in which you live, the schools you attend, the car you drive, the stores and restaurants you frequent, the church you attend, your job, your hobbies, your vacations, your voting, the person you marry, even the name you give your child.

Visualize that you have built a wall around yourself to separate you from the “other.” The height and thickness of that wall, and the existence of any entrances all are based on Gap Psychology.

Gap Psychology guides our society. It should not be overlooked when we search for answers to any social question beginning with, “Why?”

This brief post leaves us with three truths:

Monetary Sovereignty is fundamental to questions about federal government and non-federal finances.
Gap Psychology is fundamental to questions about social interactions
Monetary Sovereignty and Gap Psychology are fundamental to Economics. All questions in Economics ultimately lead to Monetary Sovereignty and Gap Psychology.

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.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

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

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

MONETARY SOVEREIGNTY

What is the complex relationship among inflation, deficits, interest rates, oil prices, tax cuts, and GDP?

It takes only two things to keep people in chains:
.

The ignorance of the oppressed
and the treachery of their leaders.

To answer the title question, we begin with three questions:

What is the primary cause of inflation?
What is the primary cure for inflation?
What do high interest rates do to Gross Domestic Product?

If you ask the media, most economists, and the public to answer question #1, you probably will receive an answer something like the following:

Should we worry about inflation?
The Week, March 3, 2018

“Until recently, inflation seemed to be dead or, at least, in a prolonged state of remission,” said Robert Samuelson at The Washington Post.

Thanks to cautious companies holding down wages and prices in the aftermath of the recession, annual inflation between 2010 and 2015 averaged just 1.5 percent, “often too small to be noticed.”

Apparently. Mr. Samuelson believes that prior to the “Great Recession,” companies were not cautious, and so were willing to pay employees more. But, having been frightened by the recession, they now refuse to pay employees more — and that has prevented inflation.

Utter nonsense. Caution has nothing to do with it.

Employers are buyers of talent. Like all buyers, employers try to pay as little as possible to obtain the employee quality they want. Isn’t that what you do when you buy anything?

Companies cannot “hold down” wages at will.

And as for prices, they are a reflection of each company’s market analysis. Companies try to set prices at levels that will provide the highest short- and long-term profits, volume, and share-of-market.

While Robert Samuelson wrongly seems to believe that business “caution” has prevented inflation, most people wrongly believe that federal deficit spending causes inflation.

The green line is inflation. The blue line is federal deficit spending.

Federal deficit spending does not parallel inflation.

Inflation is a general increase in prices, and if there is one thing that generally increases (or decreases) prices it’s oil.

**The green line is Inflation; the silver line is the price of Oil.**

Oil prices parallel inflation.

No other factor so closely parallels inflation as does oil — not food, not housing and certainly not wages:

The green line is Inflation; the violet line is Wages

Contrary to popular wisdom, wage increases do not parallel inflation increases.

In January, the Consumer Price Index, which tracks everything from the price of groceries to education costs, surged 0.5 percent; at that pace, annualized inflation would hit 6 percent by the end of the year.

It almost certainly won’t go that high, but it leaves newly installed Federal Reserve chairman Jerome Powell “facing a tricky task”: to contain inflation “without killing the economy.”

Traditionally, the Fed would respond by raising interest rates, said The Wall Street Journal in an editorial.

Yes, while inflation primarily is caused by rising oil prices, inflation is controlled by increasing the value of the dollar, which is accomplished by raising interest rates.

(Value of the dollar = Demand/Supply; Demand=Reward/Risk; Reward=Interest)

But the corporate tax cut and President Trump’s deregulatory agenda could rapidly accelerate economic growth.

That could further fuel inflation, prompting the Fed to raise rates faster than anticipated. In the worst-case scenario, this will severely roil markets and darken the economic outlook.

Contrary to popular wisdom, economic growth does not cause inflation:

**The green line is inflation. The orange line is GDP growth.**

GDP growth does not parallel inflation.

The Fed’s most potent tool in fighting downturns is cutting interest rates. “Total cuts of 5 to 6 percentage points have been the norm in recent recessions.”

Wrong, again. Low interest rates do not stimulate economic growth:

The blue line is GDP growth. The red line is interest rates.

As interest rates fall, economic growth falls. There are several reasons for this, but the point is that low rates are not stimulative. In fact, by increasing the amount of interest money the government pumps into the economy, high rates can be stimulative.

Goldman Sachs expects the Fed to raise interest rates eight times over the next two years, largely to head off higher prices.

Each time the Fed raises rates, the stock market will respond negatively, only to rebound within a few days.

The negative response will be due to traders’ predictions that the market will respond negatively, not to any fundamental factors. It is a self-fulfilling prophecy.

Finally, we come to tax cuts. Although business tax cuts ostensibly help businesses grow, by cutting business costs, tax cuts actually help shareholders profit. The real, net effect of business tax cuts is to widen the gap between the rich and the rest.

BUSINESS The news at a glance
Taxes: Firms spend tax windfall on buybacks
The Week (US)

U.S corporations are spending most of their (tax cut) windfall not on higher wages or investment but on “buying their own shares,” said Matt Phillips in The New York Times. Over the past month, nearly 100 U.S. corporations have announced more than $178 billion in share buybacks—“the largest amount unveiled in a single quarter.”

Cisco is devoting $25 billion to buybacks; PepsiCo has announced $15 billion for shares; and Alphabet, home-improvement company Lowe’s, and chip equipment maker Applied Materials are each devoting between $5 billion and $9 billion.

“Such purchases reduce a company’s total number of outstanding shares, giving each remaining share a slightly bigger piece of the profit pie.”

“If the buyback frenzy continues, the administration is going to have some explaining to do,” said Jennifer Rubin in The Washington Post.

Part of the problem is that the Trump administration predicted that tax reform would boost U.S. household income by at least $4,000 a year.

Business tax cuts will stimulate the economy and will boost total household income, because tax cuts add dollars to (or remove fewer dollars from) the economy.

However, the benefits will go primarily to the upper-income groups.

In summary, contrary to popular opinion:

Inflation has not been related to federal deficit spending but rather to oil prices.
Wage increases have not been associated with inflation
Inflation and economic growth have not been related
Interest rate cuts have not stimulated economic growth, nor have interest rate increases slowed economic growth
While business tax cuts do stimulate overall economic growth, the benefit primarily goes to the upper-income groups, thereby widening the gap between the rich and the rest.

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

THOUGHTS

•All we have are partial solutions; the best we can do is try.

•Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money no matter how much it taxes its citizens.

•The more federal budgets are cut and taxes increased, the weaker an economy becomes..

•No nation can tax itself into prosperity, nor grow without money growth.

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

•A growing economy requires a growing supply of money (GDP = Federal Spending + Non-federal Spending + Net Exports). Federal deficit spending grows the supply of money

•The limit to federal deficit spending is an inflation that cannot be cured with interest rate control. The limit to non-federal deficit spending is the ability to borrow.

•Until the 99% understand the need for federal deficits, the upper 1% will rule.

•Progressives think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

•The single most important problem in economics is the Gap between the rich and the rest.

•Austerity is the government’s method for widening the Gap between the rich and the rest.

•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..

MONETARY SOVEREIGNTY

Yet another article that relies on you being ignorant about federal finances and Social Security

It takes only two things to keep people in chains:
.

The ignorance of the oppressed
and the treachery of their leaders.

Let us begin with three, very simple, related facts:

It is 100% impossible for the U.S. federal government to run short of dollars unless the President and Congress want it to.
Thus, it is 100% impossible for any federal agency to run short of dollars unless the President and Congress want it to.
Social Security is a federal agency.

Therefore:

Social Security cannot run short of dollars unless the President and Congress want it to.

Ignore all the crocodile tears about the Social Security “trust fund” running short of money.

Or, there not being enough FICA dollars to pay for future retirees.

Or, the “need” to cut benefits to certain groups, or to tax benefits to other groups.

They are all lies, there is no better way to say it — lies — designed to make you accept fewer benefit dollars, while the rich continue to grab more.

What set me off is the following Motley Fool article, that simply is loaded with the above-mentioned lies.

Will This New Social Security Proposal Gain Traction in Congress?
With Social Security facing a $12.5 trillion cash shortfall, this proposal aims to generate more revenue and reward those disadvantaged by the program.
By: Sean Williams Mar 10, 2018

Social Security, arguably the most important program in the country as more than 42 million retired workers receive a monthly payout, is in trouble.

Yes, Social Security indeed is in trouble, but not because of any shortfall in cash. Rather trouble lurks because the President and Congress want to screw you, on behalf of the rich, who run this country.

According to the 2017 report from the Social Security Board of Trustees, Social Security is expected to begin paying out more in benefits than it’s generating in revenue by 2022.

Just 12 years later, in 2034, the roughly $3 trillion in excess cash held by the program is forecast to be completely gone.

Based on the current payout trajectory, there’ll be an estimated $12.5 trillion budget shortfall between 2034 and 2091.

All of the above nonsense would be true if Social Security were a private enterprise, owned and operated by a private company — a monetarily non-sovereign company.

But it is absurd nonsense when describing an agency owned an operated by the United States government — a uniquely Monetarily Sovereign entity.

The federal government created from thin air, the laws that in turn created the very first dollars, also out of thin air. Today, it continues to own the laws that allow it to create dollars at will, simply by paying bills.

For that reason, the federal government needs no “revenue.” It always pays its bills by creating new dollars.

Think about this for a moment:

Federal spending has risen 37,500% (from $40 billion to $15 trillion) since 1940. Where did the $14, 960,000,000 additional dollars come from?

They can’t have come from federal borrowing. Where would those borrowed dollars have come from?

And the new dollars can’t have come from taxes. Tax dollars already exist.

Dollars are created in two ways and destroyed in two ways:

Created: Lenders create new dollars when they lend, and the federal government creates new dollars when it spends.

Destroyed: Dollars are destroyed when loans are paid down, and when the federal government collects taxes.

When the federal government pays an invoice, it sends instructions (in the form of a check or wire) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.

The instant the creditor’s bank does as instructed, new dollars are added to the nation’s money supply. Thus, because the federal government creates dollars by spending, it never can run short of dollars.

This shortfall has a lot of people, including working Americans, pre-retirees, retired workers, people with disabilities, and survivors, very concerned.

Americans are concerned because writers like Sean Williams tell them to be concerned. The people seldom are told the facts, so in the absence of facts, the people believe the lies.

There’s good reason for that, as 62% of today’s retirees lean on Social Security for at least half of their monthly income, and a majority of future retirees are expected to rely on the program in some capacity to make ends meet.

Yet, the trustees’ report suggests that benefits could be cut across the board by up to 23% in order to preserve the solvency of the program through 2091.

How sweet. The people desperately need Social Security, while the lying politicians prepare excuses for cutting this already insufficient lifeline.

What sort of cruel minds would find this acceptable?

The silver lining is that Social Security can’t go bankrupt as a result of the payroll tax, which provides the bulk of its funding; but that doesn’t mean the current payout schedule is sustainable.

A lie. Social Security payouts are infinitely sustainable. The pols and the rich don’t want you to know that the federal government never can run short of its own sovereign currency — the currency it originally created by writing laws.

The only option for current and future retirees to avoid having their Social Security benefits slashed is through congressional action.

Yes, Congress and the President can set Social Security benefits and FICA taxes at any levels they choose. The first step should be to eliminate the FICA tax altogether, while increasing benefits.

Lawmakers in Washington, D.C., certainly aren’t denying that a problem exists. Unfortunately, they’ve been unable to come to an amicable solution.

However, a new Social Security proposal, laid out last week by Sen. Patty Murray (D-Wash.), is aiming to change that.

They are “unable” to come up with an “amicable” solution (i.e. a solution that would be approved by rich donors), simply because they don’t want a real solution.

They only want a “solution” that will further widen the Gap between the rich and the rest, exactly what their rich donors tell them to do.

Known as the Stronger Safety Net (SSN) Act, Murray’s proposal aims to modernize the 83-year-old program for women, children, people with disabilities, and survivors, while at the same time having those who can afford to pay more cover the long-term funding gap in the program.

“Modernize” is one of those deceptive words, like “reform” that implies improvement but actually means nothing.

Making anyone pay more does absolutely nothing to “cover the long-term funding gap.” It takes dollars from the private sector (aka, the economy), which is recessive.

The SSN Act has four key proposals.

1. Divorced people over 62 who were married for at least five years would qualify, with a 10% step-down for each year below 10. A divorced person who was married for seven years would have a maximum spousal benefit of 70%, whereas someone who was married for nine years could max out at 90%.

Women often take care of children or loved ones who are sick. This means they take time out of the labor force, which can reduce their lifetime earnings and retirement benefit.

All this cockamamie rejiggering is “necessary” because of the myth that FICA pays for benefits and dollars are limited. The entire problem could be solved by simply giving every recipient the same, more-generous benefit. (See: Ten Steps to Prosperity: Step 3: Monthly bonuses for all)

2. Establish an alternative benefit for the surviving spouse where both husband and wife are retired workers.

The surviving spouse would be entitled to 75% of the sum of the survivor’s own work benefit and the primary insurance amount of the deceased spouse. This alternative benefit would be paid if it’s higher than what survivors would receive under the current law, and would begin in 2019.

More cockamamie rejiggering. Who could understand such nonsense, much less justify it?

The process resembles trying to feed a hundred people from one potato, by cutting the potato into a thousand pieces.

3. Under the current system, minor children have to be under the age of 18, or high school students under the age of 19, to qualify for benefits. But beginning in 2019, full-time students up to the age of 23 of retired, disabled, or deceased workers would be eligible to receive benefits.

Why age 18? 19? 23? Murray has no idea. It’s a complexity no one understands and no one needs.

Which leads us to this:

4. The SSN Act seeks to generate additional revenue for the Social Security Trust by imposing a 2% payroll tax on earned income in excess of $400,000. The current payroll tax of 12.4% does not apply to any income above $128,400.

The mythical Social Security “Trust Fund” doesn’t need additional revenue, especially since it is an accounting deception.

A Monetarily Sovereign nation can add to or subtract from any so-called “trust fund” at will. It’s all hocus pocus, smoke and mirrors, to make you believe the government can’t afford your benefits.

That said, taxing the rich to narrow the Gap between the rich and the rest is a good idea, even though those tax dollars disappear from the money supply.

The single most important problem in our economy and the world’s economies is the large and growing Gap between the rich and the rest.

I know what you’re probably thinking: “The rich aren’t reliant on Social Security, so they should pay extra tax to shore up the Social Security Trust.”

However, the $128,400 figure in 2018 — exists because there’s also a maximum monthly payout at full retirement age. It’s not “fair” to add a 2% payroll tax to an extra, say, $5 million in income if that individual won’t see an extra cent in Social Security benefits.

That’s not what I’m thinking. I’m thinking:

The mythical “Trust Fund” doesn’t need “shoring up.” It needs to be eliminated as an excuse for not paying benefits.
The government should increase benefits
The benefits should be paid to every man, woman, and child in America.
Taxing the rich more would narrow the Gap and benefit America (See: Ten Steps to Prosperity: Step 8: Tax the very rich more (dictatorship warning)

It’s unlikely that Republicans would go along with such a measure, and their votes will be needed in the Senate to pass the SSN Act.

I may be wrong, but I do not remember the Republican Party (the party of the rich) passing any legislation that was not designed to widen the Gap.

Undoubtedly, you have been told that Social Security (or Medicare, for that matter) will soon run short of money, and the “trust fund” will be empty.

And undoubtedly, you have been told your taxes must be increased and/or your benefits must be decreased.

And you will hear it from reliable sources with impeccable credentials:

The politicians, who have been bribed with campaign contributions and promises of lucrative employment when they leave office.

And the economists who have been bribed with university contributions and lucrative jobs with think tanks.

And the media, who are owned by the rich and have been bribed with advertising dollars.

It all is a lie, the biggest lie in economics. It is The Big Lie. So, next time you hear it, contact the liars and tell them you know: It’s a damnable lie paid for by the rich to widen the Gap between the rich and you.

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.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

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

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

MONETARY SOVEREIGNTY

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