Tag: popular wisdom

The antidote to popular wisdom

–Politics vs. people

Mitchell’s laws:
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The more federal budgets are cut and taxes increased, the weaker an economy becomes. .
●Liberals 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 rich and poor.
●Austerity is the government’s method for widening the gap between rich and poor.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Everything in economics devolves to motive, and the motive is the Gap.

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Today’s headline: “Fears grow as millions lose jobless benefits”
Body copy: Senate Republican leader, Mitch McConnell of Kentucky, said: “The fastest-growing parts of this Democrat economy aren’t jobs — they’re the crushing burden of the national debt and the size of the federal government.”

The “crushing burden” is not national debt, which crushes no one. The crushing burden is the false belief the national debt is a crushing burden.

As a result of this false belief, millions will lose jobless benefits, taxes will be increased, Medicare doctors will receive less than they should, Social Security payments will begin later, Medicaid payments will be cut, defense spending will be reduced, federal funding of K-12 education and school breakfast programs will be cut, mass transit funding will be cut and federal assistance to the states will be reduced — all because of a myth with no factual support.

So you, dear reader, will suffer a significantly degraded life style, all because the debt hawks say the federal debt is a crushing burden and the debt causes inflation, neither of which is supported by any data.

Go to any debt hawk web site and ask them for data proving the U.S. federal debt is unsustainable or causes inflation. If they answer you at all (unlikely), they merely will give you statistics regarding the size of the debt, but no evidence it has a negative effect on America.

Here are a couple debt hawk sites you can visit:
Concord Coalition
The Cato Insitute
The Heritage Foundation
The Manhattan Institute
The Hoover Institution

Go ahead. Contact any of them. Despite impressive doctoral credentials, and oodles of statistics, they have no evidence to back their claims. Why? No such evidence exists, though massive evidence shows the misnamed “debt” (should be called “net money created”) is necessary for economic growth.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Why the slow recovery?

The debt hawks are to economics as the creationists are to biology.

Recessions and recoveries ultimately are associated with money, and more specifically with money growth. In general, less money growth = less economic growth. (That actually is something of a tautology, since economic growth is measured in money.)

There are several definitions of money, most differing on the basis of liquidity, the ease of converting to currency. The most liquid form is called M1, which consists of currency and checking account deposits.

The government no longer measures the less liquid forms, M3, L and the most inclusive form: Debt of Domestic Non-Financial Sectors. And for many reasons, the supplies of the various money forms do not move together. For instance, there are periods when M1 goes up or down more than M2, even though M1 is part of M2.

I found an interesting pattern relative to recessions. In the following graph, you see a strong tendency for one form of money, Federal Debt Held by the Public, to grow more slowly before recessions, then grow quickly during recessions, then resume growing more slowly after recessions.

M1 exhibits a similar, though less consistent pattern, and M2 is less consistent yet. One consistency is: Following every recession, at least one of the money forms grows at an increasing rate — every recession except the most recent one:

Here, despite (or because of) worries about deficits, every measured form of money has shown a sharp decline in growth rate. Perhaps this overall decline in money growth is responsible for the slowness of the recovery — yet another bit of evidence that debt fear has hurt our economy, and increased federal spending is desperately needed.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Less debt . . . oh, wait. More debt.

An alternative to popular faith

The 6/30/10 editorial in the Chicago Tribune, titled, “Enough debt, already,” had me confused. At first I thought they meant private debt. After all, consumers now deal with mortgages they can’t handle and credit cards charging 20% or more interest. And business profits, or lack thereof, won’t support much more debt without increased consumer buying. Consumers and businesses are going bankrupt in droves, so at this stage of the recession, “Enough debt, already” seems like good advice for the private sector.

But no, that is not what the Tribune meant. They wanted less federal debt and more private debt. The federal government has the unlimited ability to pay any debt of any size. It is a government that neither needs nor uses tax money to pay its debts. Yet the editors say, “. . . the U.S. has gone way, way down the path toward unsustainable debt . . .”

Will the government be unable to service its debts? No, that cannot happen. So, what makes federal debt “unsustainable”? The Tribune editors never say. However they call for more lending to business, despite the fact that growing business debt can be unsustainable. To make matters worse, the Tribune cheers the restriction on unemployment checks to those people who would have used those checks to buy things from businesses, thereby stimulating business. (“Unemployment checks extending up to 99 weeks instead of the usual 26 add more indebtedness.”)

The editors correctly say, “The U.S. economy is hungry for credit,” not realizing this means the U.S. economy is hungry for money, and federal deficit spending is the government’s method for adding money to the economy. The editors lament, “Washington already has bequeathed to our descendants a nation debt of $13 trillion,” – an untrue statement – and simultaneously wants to bequeath to our descendants added business debt. (Who do they think pays for business debt?)

To summarize: The Tribune editors oppose debt creation by the one entity that can afford unlimited debt service, but advocate more debt for the over-extended private sector. They support looser lending standards, so that less qualified businesses can go deeper into debt. They oppose increasing regulations on lenders, the same lenders whose unsupervised, profligate lending triggered the recession. They favor the end to federal stimulus plans, which would add the money they say the economy needs. And they hope the economy will recover — somehow.

Clearly, economics is not the Tribune editors’ forte.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–More debt-hawk injuries to America

An alternative to popular faith

Here is yet another example of many such instances (See: DAMAGES) showing the continuing damage debt-hawks cause America and our poorest citizens:
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By Greg Hitt and Sara Murray, WASHINGTON, 6/25/10: “Spooked by concern about deficits, the Senate shelved a spending bill that included an extension of unemployment benefits, suddenly cutting off a federal cash spigot opened by President Barack Obama when he took office 18 months ago.

“The collapse of the wide-ranging legislation means that a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week. It will also leave a number of states with large budget holes they had expected to full with federal cash to help with Medicaid costs.”
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What is the evidence large federal deficits harm America? There is none. Yet, based solely on mystical faith and unsupported belief, the debt hawks have managed to punish millions of our poorest Americans.

The debt-hawks have heads of stone. They have hearts of stone, too.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity