–A few simple questions that never have been answered

Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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The nonsense in Washington boils down to a few simple questions that never seem to be answered

First the background:
The federal government is the largest customer and money provider in America, spending about $3.8 trillion dollars per year on goods, services and benefits. This compares with under $12 trillion for the entire domestic business sector.

(http://www.gpoaccess.gov/usbudget/fy11/hist.html ) and (http://research.stlouisfed.org/fredgraph.png?g=1jb )

The U.S. government also is America’s largest employer, with about 4.6 million full time employees:

Military: 1,430,000 (Department of Defense, Active Duty Military Personnel Strengths by Regional Area and by Country, September 30, 2010); 700,000 defense employees worldwide (Department of Defense Civilian Personnel Management Service); 2009 Number of Full-Time Federal Employees – 2,518,101 http://www2.census.gov/govs/apes/09fedfun.pdf

The federal government employs as many people as the top nine civilian employers – Wal-Mart, McDonalds, UPS, Sears, Home Depot, Target, IBM, GM and GE — combined.

( http://nyjobsource.com/largestemployers.html )

The President, the Tea (formerly Republican) Party, the Democrats, the media, most columnists and old-line economists agree federal spending should be reduced and/or federal taxes increased. The goal: To reduce the federal deficit.

The two biggest problems facing America are the recession and the related unemployment.

Now for the simple questions:
1. What do businesses do when their biggest customer reduces purchases? Do they fire employees, reduce purchases of goods and services or both?

2. When businesses fire employees, or reduce purchases of goods and services, how does this stimulate the economy or cut unemployment?

3. What do individuals do when their salaries and/or benefit checks are reduced? Do they spend less, save less or both?

4. When individuals spend less or save less, how does this stimulate the economy or cut unemployment?

5. Considering all of the above, how does a reduction in federal spending and/or an increase in taxing (aka “deficit reduction”) solve our two biggest related problems: the economy and unemployment?

These questions never are asked, much less answered, because the politicians do not care about the answers. Their prime concern is not the working (or non-working) Americans. The politicians prime concern is who gets elected, i.e., power.

President Obama, the Tea (formerly Republican) Party and the Democrats all have the same goal, with the differences being only in the execution. And I use the word “execution” intentionally, because whoever “wins,” the American public will lose. We, our children and our grandchildren will suffer the execution of joblessness, poverty and loss of health and lifestyle. Our great American dream will be shattered — needlessly — all for the greed, ambitions and ignorance of the politicians.

While we stress about traitors at Fort Hood, we give a free pass to traitors in Congress, who intentionally do more harm to America than al Qaeda ever could.

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

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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.

MONETARY SOVEREIGNTY

–The depression cometh

Historically, whenever dollars have been taken from our economy, or even when dollar growth has been reduced, the economy has gone into recession or depression. (See: Cause of recessions and depressions)

Congress and the President insist the federal deficit must be reduced. There are but two methods for reducing the deficit: Increase federal taxes and/or reduce federal spending. Both methods reduce the number of dollars in the U.S. economy.

7/29/11: Roya Wolverson, Time Magazine: “The bad news just keeps coming. The U.S. economy grew even less than expected in the second quarter, at a rate of 1.3%, down from what many economists predicted would be 1.8% or higher. The reasons for the continued lackluster performance haven’t changed. Consumers, squeezed by higher gas and other prices, are buying less of everything from electronics to meals out to new furniture.”

Recently, I posted, “Based on where Obama and the Tea/Republicans are headed, there will be a depression (not just a recession) next year. Only a miracle of realization, by both parties, can save us now. (See: Depression in 2012)

7/30/11: Alan Rappeport, Pharmaceuticals Magazine: “Merck, the US drug company, will cut as many as 13,000 jobs, or 13 per cent of its workforce, as it looks to slash costs and invest in emerging markets. The cuts, to be achieved by 2015, follow those announced last year when Merck said it would reduce its staff by 17 per cent. Merck has been looking to achieve the savings it promised when it acquired Schering Plough for $41bn in 2009.”

Congress and the President remain ignorant. They continue to call for increased taxes and/or spending cuts. The depression cometh.

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

MONETARY SOVEREIGNTY

–Today’s ignorant comment, this time from Robert J. Samuelson, Opinion Writer at the Washington Post

Unfortunately, this blog never will run short of material. With the vast majority of writers, politicians and even old-time economists, not understanding Monetary Sovereignty, and instead parroting today’s popular wisdom that federal government finances resemble personal finances, I have a huge selection of ignorant comments from which to choose.

This time, the myths come to us courtesy of Robert J. Samuelson:

Social Security, Medicare, Medicaid and other retiree programs constitute roughly half of non-interest federal spending.

These transfers have become so huge that, unless checked, they will sabotage America’s future. The facts are known: By 2035, the 65-and-over population will nearly double, and health costs remain uncontrolled; the combination automatically expands federal spending (as a share of the economy) by about one-third from 2005 levels. This tidal wave of spending means one or all of the following: (a) much higher taxes; (b) the gutting of other government services, from the Weather Service to medical research; (c) a partial and dangerous disarmament; (d) large and unstable deficits.

No Mr. Samuelson, it doesn’t mean any of those things. Let me address each:

(a)”. . . much higher taxes. . .”
Federal taxes have nothing whatsoever to do with federal spending. The U.S. is Monetarily Sovereign. It pays its bills by instructing banks to credit bank accounts. Whether taxes fall to $0 or rise to $100 trillion, neither event would change by even $1 the federal government’s ability to instruct banks to credit bank accounts.

In federal financing, there is no functional connection between taxing (or borrowing) and spending. When you and I spend, we transfer money. When the federal government spends, it creates money. Huge difference, that Mr. Samuelson does not understand.

(b)” . . . the gutting of other government services, from the Weather Service to medical research. . . “
This is based on the myth that federal spending is limited. It is, but not by what Mr. Samuelson thinks. It’s not limited by taxes. It’s not limited by borrowing. It’s limited only by Congress and inflation, which today is nowhere near. Remember, we’re in a recession, where the nation is starved for money. Federal spending adds needed money to the economy.

(c)” . . . a partial and dangerous disarmament. . . “
Same as (b)

(d)” . . . large and unstable deficits.”
Yes the deficits will be large. They need to be. This is a large country with large money needs. Deficits are the federal government’s method for adding money to this large country. Without large and growing federal deficits we will not be a large and growing country. And what the heck are “unstable” deficits? Or is “unstable” just a more erudite-sounding word you toss in as a synonym for “bad”?

Like most opinion writers, you do not understand the differences between Monetary Sovereignty and monetary non-sovereignty. Let me summarize our current situation:

Our economy languishes. Unemployment is far too high. We need to stimulate businesses so they will hire more people. You, Mr. Samuelson, are suggesting that the federal government pay less money to Social Security, Medicare, Medicaid and other retiree programs, because you erroneously believe the government does not have the unlimited ability to pay its bills.

If the federal government increases its payments to these programs, the recipients of this money will spend it, which will stimulate business and help reduce the unemployment problem.

Mr. Samuelson has joined the crowd who feels that funding ”. . . other government services, from the Weather Service to medical research” along with the military must be accomplished by reduced funding to our seniors and to our poor. If we follow Mr. Samuelson, America will decline to a mean, harsh, wretched nation, indeed.

Readers of Mr. Samuelson’s columns should drop him a note and suggest he acquaint himself with Monetary Sovereignty, before he spreads any more incorrect and harmful myths.

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

MONETARY SOVEREIGNTY

–The debt clock: A symbol of economic ignorance

Lately I’ve been seeing this image published more often, in various media.

This surely is the most misleading, downright untruthful sign you ever will have the misfortune to encounter. It’s untruthful because it shows the gross federal debt, which includes money the federal government borrows from itself.

Example: For convenience, my wife and I have separate checking accounts. When we are not together, she can write checks and I can write checks, and it’s easier to balance than if both tried to write checks from the same checkbook. Periodically, if one account is low, we transfer money from one account to the other (the government would call that “borrowing,” but it’s just debiting one account and crediting the other), so both accounts will have positive balances. I don’t feel I’m in debt to my wife, nor she to me. I never would consider these periodic internal transfers to be “debt.”

Similarly, the federal government’s internal “creditors” (i.e. Social Security et al) are not going to dun the federal government for payment of its “debt.”

While the Gross Federal Debt is around $14 trillion, the net debt is only about $8 trillion — well below the debt ceiling (another misleading, untruthful gimmick). Sadly, Congress and the President pretend not to understand that. So they injure our economy about something that isn’t real.

For their own selfish, political reasons, these politicians do more harm to America than al qaeda ever could. (I wish there could be a law precluding these traitors from standing in front of an American flag when they speak.)

The misleading part of the sign has to do with the words, “Your family share.” Most people interpret those words to mean their family owes a share of the gross federal debt, which as we have seen, is a fake number. But worse, your family does not owe a share even of the net federal debt. Your family could more accurately be said to own a share of the debt.

The federal so-called “debt” is the total of outstanding T-securities. When the government “borrows” it debits the “lender’s” checking account and credits the lender’s savings account (aka T-security account) at the Federal Reserve Bank. No dollars are shipped anywhere. It’s just an asset exchange accomplished by a debit and a credit.

When the government pays its “debt,” the process is reversed. The checking account is credited and the savings account is debited. At no time are taxes involved so at no time do you or any other taxpayers owe anything. Whether taxes are $0 or $100 trillion, the federal government’s ability to debit and credit bank accounts does not change.

Buying a T-security is essentially identical with transferring dollars from your checking account to your savings account.

You could be said to own a share of the debt, because federal debt is a measure of money in the economy. You are part of the economy, so that money benefits you. The greater the “debt,” the healthier the economy.

I don’t know whether the Durst family, which owns and maintains the clock, knows what it really means. They may be forerunners of the Tea Party, those clueless folks who hate government but love their Social Security, Medicare and Medicaid checks, their safe food and drugs, their highways, army protection, scientific research, FDIC security, homeland security and the myriad other perks provided by the federal government.

It’s enough you to know that every time you see that sign, you see economic ignorance at work.

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

MONETARY SOVEREIGNTY

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