–Will someone please, please explain Monetary Sovereignty to Stephen Gandel and Joseph Stiglitz. Please.

One problem with the science of economics is: The people who win the awards don’t understand the science. Examples: Paul Krugman and Joseph Stiglitz, who do not know the implications of Monetary Sovereignty. The effect of our most respected (or at least most prominent) economists expounding with false information, is to create a vast blanket of ignorance that has shaded from knowledge, not only our political leaders, but the voters who select them.

For your amusement and/or anger, here is yet another misleading article, this time written by Stephen Gandel, who in it quoted Mr. Stiglitz:

View from Davos: How Bad is a $1.5 Trillion Deficit?
Posted by Stephen Gandel Thursday, January 27, 2011 at 12:38 pm.

The title itself misleads by talking about the deficit being “bad,” when in fact it not only is good, but absolutely necessary. A growing economy requires a growing supply of money, and the misnamed “deficit” is the federal government’s method for supplying the economy with money.

Joseph Stiglitz is one of the many economists talking about debt at Davos. Now that we have the recovery, we will have to pay for it. The question is did we take the appropriate measures or did we overspend.

The notion of having to “pay for” the recovery some time in the future, is nonsensical. The recovery was enabled by yesterday’s federal spending, or perhaps more accurately, yesterday’s money creation.

On Thursday, the CBO estimated that the federal deficit in 2011 will reach nearly $1.5 trillion. That’s up from nearly $1.3 trillion last year. Three years after the financial crisis many had hoped what were supposed to be temporary budget deficits would be shrinking by now.

Shrinking deficits cause recessions and depressions See: Recession cause. The “many” who had “hoped” the deficits would shrink do not understand the realities of economics.

At a dinner of economists on Wednesday night, economist Carmen Reinhart predicted that the US was headed toward a crisis where we would be forced to cut many of our social services. Raghuram Rajan, a former chief economist at the IMF, said that the measures that the UK were making to deal with their deficit right now were a good move. He said we too should deal with our fiscal problems now, rather than putting them off.

Lacking knowledge of Monetary Sovereignty, Messrs. Reinhart and Rajan equate Europe’s monetarily non-sovereign problems with U.S. finances. The U.K, which is Monetarily Sovereign, has begun to punish its children and grandchildren by choking off the nation’s money supply, needlessly.

But not everyone thinks the US debt problem is so dire. While the total deficit is larger this year than last year, it is slightly smaller as a percentage of GDP than last year.

Not only does Mr. Gandel misunderstand Monetary Sovereignty, he doesn’t realize he is making the classic apples/oranges comparison: Debt/GDP. Debt is the total of outstanding T-securities issued since the beginning of our nation. GDP is a one-year measure of production. How an intelligent person can compare a one-year measure with a 200-year measure is beyond me.

What’s more, the US may have more ability to borrow than other countries because of the dominant role of the dollar in the world economy. The fact that our dollars are so widely seen as a safe asset gives America the ability to borrow more than say Greece or Ireland before hitting the breaking point.

It gets worse and worse. A Monetarily Sovereign nation does not need to borrow the currency it previously created and has the unlimited ability to create. There is no “breaking point.” If tomorrow, the U.S. stopped “borrowing” (i.e. creating T-securities from thin air and exchanging them for dollars it previously created from thin air), this would not reduce by even one cent the federal government’s ability to pay its bills. And mentioning monetarily non-sovereign nations (Greece and Ireland) in the same breath as the U.S. displays stunning ignorance of economics.

Nobel prize winning economist Joseph Stiglitz, who is also at Davos, said that while he is worried about some of the US states debt problem, he thinks (federal) debt may not be as bad as some people think. In fact, Stiglitz would even be for increasing our debt even more. As long as it was spent on things like infrastructure and education, which can produce jobs, and boost incomes.

Mr. Stiglitz is correct that the “debt may not be as bad as some people think,” unless one realizes the debt is too small, which is bad. But, Mr. Stigltiz is a victim of “first use syndrome,” wherein he thinks money ceases to exist after its first use. No, Mr. Stigltiz, the first use does not need to be infrastructure and education. It can be virtually anything – aid to the poor, aid to states, army pay or research and development – anything that gets money circulating in the economy.

So there is a debt cliff, but the US may not be there yet.

No, no, no, Mr. Gandel. There is no debt cliff, unless spending too little can be considered a cliff. I urge my readers to contact Mr. Gandel and beg him to familiarize himself with Monetary Sovereignty. If he, Mr. Stiglitz and Mr. Krugman don’t get it, how can the average voter, much less the politicians, understand?

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

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

–Religious zealotry, homeopathic medicine, creationism and debt fear: The debt hawks and the vaccine deniers

The existence, for instance, of religious zealotry, homeopathic medicine and creationism, have inoculated me against amazement at the human ability to believe strongly in ideas for which there is no supporting evidence. So rather than being surprised, I was strangely fascinated by an article appearing in the January 2011 NewScientist magazine, titled “The irrationality vaccine.”

The article described three books, The Panic Virus: A true story of medicine, science and fear, by Seth Mnookin, Deadly Choices: How the anti-vaccine movement threatens us all, by Paul Offit, and Tabloid Medicine: How the internet is being used to hijack medical science for fear and profit, by Robert Goldberg. Here are excerpts from the article:

As he tells it, Mnookin was annoyed by the clueless intellectuals he encountered at New York dinner parties, who boasted about withholding necessary vaccines from their children. To these elites, these thinkers, giving children so many shots “just felt wrong.”

Hmmm. Clueless intellectuals. Science trumped by intuition. Medicine withheld. Sounds familiar.

. . . one cannot grasp how we became so dangerously irrational in our outlook on vaccines without first understanding the role of the mass media – now almost entirely shorn of its science journalists and increasingly driven by sensationalism and crass financial considerations.

Hmmm. Media dominated by sensationalism. Sounds familiar.

Anti-vaccine activists and a few sympathetic scientists raise concerns that, although implausible, draw uncritical media attention.

Hmmm, Uncritical media attention. Sounds familiar.

. . . the activists continue to draw followers and, if anything, only grow more extreme in their convictions. They continue to garner media attention, and so the irrationality the media let out of the bag is never put back in.

Hmmm. More extreme convictions garner even more media attention. Sounds familiar.

Sustained encounters with a small group of like-minded people almost inevitably leads to the conclusion that everyone thinks the way you do. . . Children are dying out there because of anti-vaccine misinformation and those who act on it. . . Offit hopes the press will tell the other side of the story – about the harms caused by anti-vaccine advocates.

Hmmm. Children sick and dying because of misinformation. Sounds familiar.

. . . these three books . . . are a call to arms against the broader phenomenon of tilting against reality, or making up ones’ own version of it, and clinging to it fiercely despite all evidence and consequences . . . Irrationality can be a very dangerous and communicable disease – and we still don’t know how to adequately inoculate against it.

Hmmm. Clinging to ideas fiercely, despite all evidence and consequences. Sounds familiar.

I found the article about vaccine deniers eerily reminiscent of what has happened to the science of economics, where intuition overrules fact, media (especially TV) are shorn of real economists and dominated by sensationalism and extremism, uncritical media attention for factually unsupported ideas, children sick and dying as a result, and vain hopes the media some day will tell the other side of the story – about the harms caused by the anti-deficit advocates.

In essence, the debt hawks are religious zealot, creationist, vaccine deniers. They encourage the media to print wrong-headed, “sky-is-falling” sensationalism. They rely not on facts, of which they have none, but on personal intuition. They withhold from the economy, the one medicine necessary to cure it: Money.

As a result, we have an epidemic of debt-fear, sentencing millions of American men, women and children to a future of mean and miserable lives, then to die prematurely.

Who is at fault? The debt hawks? The media? The politicians? The voting public?

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

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

–Advice to Republicans: Here’s how to appeal to voters and win the next election

Here is some advice for the Republican party. Don’t be deceived by your successes in the past election. That was the result of voter panic. Your downward slide already has begun. Look at the polls. Look at the drop in money contributions.

If you follow this advice, you will reverse the coming slide, appeal to voters and possibly win the next election. If you don’t follow it, and continue on your current path, you will win — the race to the edge of the cliff.

What is the biggest problem facing America? The voters will tell you it’s jobs. What is the Republican focus? Obama and the budget. You Republicans have forgotten your strengths in your tunnel-vision rush to oppose everything Obama and the Democrats want.

The Republicans should stop trying to cut the deficit. Reducing the deficit will provide exactly zero jobs. Your strength is your support for, and your understanding of, business. And it is business that provides the jobs, not budget cuts.

Here’s what the Republicans should try to accomplish:
1. Eliminate FICA. FICA takes money from the pockets of businesses and consumers, and it’s regressive. It probably is the worst tax in America. It is dramatically negative for jobs.

2. Reduce business income taxes. Why punish the people who provide jobs if you want to increase jobs? Why reduce business’s ability to grow and to hire?

3. Provide more financial support for the states, so the states can fund those local projects that create jobs, for instance construction, education, police and fire. I suggest, as a start, giving each state $1,000 for each resident, no strings attached.

Not only would these initiatives provide a powerful stimulus for the American economy, but they would give Republicans good talking points with the voters. Republicans would be able to lay claim to the “job-building party.”

Sadly, the Republican “leadership” (Is there a Republican leadership?) wants to fire people, by cutting federal jobs and by cutting federal spending on dozens of job-creating initiatives. They simply don’t get it.

I am sad to see how far the Republican party — once my party of choice — has fallen. This is not the Reagan party any more. It’s the Tea Party now, and America is paying the price.

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

No nation can tax itself into prosperity.

–Playing politics with your life, your health and your finances

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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Rep. Fred Upton(Republican) said, “If we pass this bill with a sizable vote, and I think that we will, it will put enormous pressure on the Senate to do perhaps the same thing.” “This bill” is the attempt to repeal the health care bill. He went on to say, “But then, after that, we’re going to go after this bill piece by piece.”

So, he expects to fail in his attempt to repeal the entire bill, but then he will try to gut it. If he is successful in either attempt, here is what will happen to you:

–Your children may be denied health insurance because they have a pre-existing condition.
–Your insurance company might put a ceiling on the claims you can submit, during your lifetime.
–You can be charged extra for an emergency room visit to a hospital not in your insurance company’s network.
–You will lose coverage of your children through age 26.
–Your coverage can be cancelled if you get sick.
–When you are a senior, you will not receive free screening for cancer, the biggest killer of Amercians.
–Millions of Americans will lose insurance coverage.

And other bad stuff too numerous to mention.

So why do the Republicans want to do this to the American public? Four reasons:

1. Through time, this bill will gain in popularity, and become known as a signature Democratic initiative, on a par with Social Security, Medicare and the civil rights bills. Since most recent Republican initiatives have been to go to war with Iraq based on a lie, deport undocumented aliens and the Bush tax cuts, the Republicans are desperate either to come up with something great or to destroy whatever the Democrats do. They need an issue, and this is all they can think of (Heaven forbid they come up with something beneficial to the lives, health and finances of the general public.)

2. The stated belief the “individual mandate” is onerous or illegal, in that you can’t penalize people for not buying something. Really? Try driving in my state, Illinois, without buying significant amounts of liability insurance. Try buying anything without paying the retailer sales tax. (And unless you think this is just a tax, it isn’t. The retailer actually makes a profit on it, because he pays against total sales, while he receives a rounded up amount from each sale.) True, the self-styled “originalists” on the Supreme Court may rule against it, because it does not meet their right wing agenda, but this will just open the door to a single payer option, which the right wing will hate even more.

3. Pandering to the Tea Party. Unfortunately for the Republicans, the bloom is going off the Tea Party rose, and soon Sarah Palin and the rest of the gang will be remembered laughingly in the same terms as the infamous “Know Nothing” party, which the Tea Party closely resembles. See: Know Nothing party

4. The bill is “too costly” or “unsustainable” or will force tax increases on taxpayers. Those who have read the posts on this blog have learned that taxpayers do not pay for spending by a Monetarily Sovereign government, taxes will not need to be increased, there is nothing that is unsustainable for the federal government, and all the talk about affordability is utter nonsense. If you have not read the posts, you can begin with: Introduction and work your way forward.

Although I have spend most of my life voting Republican (because I didn’t like the “tax” part of the Democrats’ tax ‘n’ spend policies), I find myself drifting leftward, partly because of the mean-spirited, hate filled, ultra-political beast the Republican party has become. So it will be entertaining to watch the Republicans try to destroy one of the great human initiatives in American history. Yes, the health care bill is not perfect. I’ll repeat that: The health care bill is not perfect. But it’s an excellent start toward doing what any great nation must do – protect its citizens – whether against foreign invaders, poverty, illiteracy or sickness. It’s the reason we have a government.

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

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

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