A debt question from Quora, asked and answered Wednesday, Dec 12 2018 

Quora is a site where people ask questions, and other people answer them. Many people ask about the U.S. federal “debt,” and I’ve tried to illuminate the world, one candle at a time.

Here, for example, is a typical question and answer, with a follow up by one reader. The original question and answer were:

Why would Trump state “I Won’t Be Here” when asked about the looming debt crisis?

Answer from Rodger Malcolm Mitchell: Contrary to what others are telling you, there is no “debt crisis.”

The federal government, unlike you and me, is Monetarily Sovereign. And unlike you and me, it never can run short of dollars with which to pay its debt. In fact, paying debts is the method by which the federal government creates new dollar.

In fact, the so-called “federal debt” isn’t even debt. It is the total of deposits into Treasury Security accounts, similar to savings accounts.

To “lend” to the federal government, you instruct your bank to send your dollars to your Treasury Security account.

There your dollars remain – they are not used by the federal government. Then when your account matures, your dollars, plus interest are returned to you.

Image result for federal reserve

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
Ben Bernanke: “The U.S. government has a technology that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
St. Louis Federal Reserve: “The government is not dependent on credit markets to remain operational.”

It is not a burden on our Monetarily Sovereign government, nor is it a burden on federal taxpayers.

Federal taxing does not fund federal “debt.”

People who worry about the federal debt do not understand Monetary Sovereignty.

The so-called “debt” has increased an astounding 40,000% since 1940, and here we are, with the economy healthy and growing, and inflation near the Federal Reserve target.

Pay no attention to the debt Henny Pennys who have been calling it a crisis for 78 years. These people don’t learn from reality.

Then came the follow-up question and its answer:

Chamchadik
You’re right- being fiat, the us federal reserve can just print as much currency as it wants and settle all debt: I would like to hear your reasoning on why they haven’t done this already?

————————–Reply——————————————-

Rodger Malcolm Mitchell
The so-called federal “debt” is merely the total of outstanding Treasury securities (T-bills, T-notes, T-bonds). It isn’t “debt.” It is “deposits.”

The government does not issue T-securities to obtain dollars. It creates all the dollars it needs.

Issuing T-securities has two primary purposes:

1. To provide a safe, interest-paying, storage place for holders of dollars. This helps stabilize the dollar.

2. To assist the Fed in controlling interest rates. This helps control inflation.

Yes, the government could eliminate all federal “debt” tomorrow, if it wished, simply by returning the dollars in the T-security accounts, back to the owners.

But, there is no reason why the government would want to reduce the “debt.” These T-securities serve valuable functions, and the “debt” is no burden whatsoever on the government, on taxpayers or on anyone else.

The word “debt” confuses people. If instead, it was properly called “deposits,” no one would want it reduced.

Perhaps, the next time someone tells you the federal “debt” should be reduced, you might answer, “Why would the government want fewer deposits into Treasury security accounts? These deposit accounts are valuable to the government and are no burden on anyone.”

Just a thought.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The single 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

2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to 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 you.

MONETARY SOVEREIGNTY

Finally, a faint ray of hope about the federal deficit Friday, Dec 7 2018 

In what may seem to be a strange result, we may be seeing a faint ray of hope about the U.S. federal deficit. Read the following excerpt:

Caring about the budget deficit cost George H.W. Bush the presidency; his successors took note
By DAVID LAUTER, DEC 07, 2018 | 5:10 AM

At the funeral for President George H.W. Bush, former Sen. Alan Simpson recalled his friend’s reaction when Simpson and other allies urged him to go along with a tax increase to shrink the budget deficit.

“OK, go for it, but it will be a real punch in the gut,” Bush said, knowing the political heat he would take.

“When the really tough choices come, it’s the country, not me,” Bush said, according to Simpson. “It’s not about Democrats or Republicans, it’s for our country that I fought for.”

We venerate that “country first” attitude in theory, but in practice, it likely cost Bush the presidency: The tax increase, as Simpson said, sparked a revolt within the Republican party that was “one of the main factors assuring his return to private life.”

SILENCE OF THE DEFICIT HAWKS
A generation later, Bush’s successors, especially his Republican successors, have learned that lesson: Voters say they care about reducing the national debt, but more often than not, they punish politicians who do it.

Bush’s immediate successor, President Clinton, built on the budget he inherited, adding an upper-income tax increase of his own. By the end of Clinton’s term, with the help of an economic boom, the federal budget was in surplus.

And that budget surplus helped cause the recession of 2001. In fact, virtually all recessions are caused by reductions in federal debt growth, while actual reductions in federal debt most often cause depressions.

Recessions (vertical gray bars) come on the heels of federal deficit reductions and are cured by federal deficit increases.

U.S. depressions tend to come on the heels of federal debt reductions.
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.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

Bush’s son, President George W. Bush, promptly pushed the government back into deficit with two large tax cuts. The financial crisis at the end of Bush’s presidency caused the deficit to rocket upward.

Republicans objected loudly to the deficit while President Obama was in office, even as he steadily brought it under control in his second term. But the deficit hawks have been mostly silent under President Trump as the red ink has once again spread.

And that is our ray of hope:. The deficit hawks, who tend to be right-wingers, being silent about debt.

No, it isn’t that they have learned why federal deficit spending is necessary for economic growth.

And no, they may not understand that the federal government is Monetarily Sovereign and never can run short of dollars to pay its financial obligations.

But, at least they are keeping their mouths closed for political reasons, and that will make it at least a bit more difficult for them to object to future federal deficits. Maybe.

This past year, the annual deficit hit $779 billion, despite a healthy economy. A big tax cut, combined with spending increases on the military and some domestic programs have pushed it higher.

By the time Trump’s current term ends, the deficit will likely have hit $1 trillion a year.

No one in either party claims that big deficits in healthy economic times are a good idea. But Republicans resist any tax increases, and neither side has much interest in cutting the biggest categories of federal spending — social security, the military, Medicare.

Perhaps “no one in either party claims that big deficits in healthy economic times are a good idea,” but the people who understand economic reality know that deficits grow the economy.

And no, deficits don’t cause Zimbabwe hyperinflations. (All hyperinflations in history have been caused by shortages, most often shortages of food.)

As Sarah Wire reported, Congress and the administration have a budget deadline right before Christmas that could cause a partial government shutdown.

But it’s not the rising deficit that’s at issue but, instead, whether to provide money for Trump’s wall along the Mexican border.

As much as anything else, Bush’s willingness to take political heat for a balanced budget marks him as a political figure from a bygone era.

We can hope Bush’s loss also set the stage for the realization that deficits are necessary for economic growth, and the federal debt is no burden on the federal government or on future taxpayers. (While state and local taxes fund state and local debt, federal taxes do not fund federal debt. That is the meaning of federal Monetary Sovereignty.)

Image result for bernanke and greenspan

It’s our little secret. Don’t tell the people we don’t use their tax dollars.

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.”

Alan Greenspan: “Central banks can issue currency, a non-interest-bearing claim on the government, effectively without limit. A government cannot become insolvent with respect to obligations in its own currency.”

St. Louis Federal Reserve: “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.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The single 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

2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to 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 you.

MONETARY SOVEREIGNTY

The tariff nose-cutting, pissing contest Wednesday, Dec 5 2018 

From THE WEEK Magazine:

“President Trump on Tuesday tweeted that trade negotiations with China are “ongoing.”

“Trump said he wants countries who “come in to raid the great wealth of our Nation” to “pay for the privilege of doing so,” arguing that tariffs will “always be the best way to max out our economic power.”

“Dubbing himself ‘a Tariff Man,’ the president threatened to impose tariffs once again if the two nations can’t reach a “fair” agreement in the next 90 days.”

The above, in typical Trumpian style, demonstrates either abject ignorance or intentional perfidy. Tariffs never have been even a good way, never mind “the best way,” to “max out economic power.”

And by calling himself “a Tariff Man,” Trump merely is saying, “I am willing to punish Americans so I can fool them into thinking they are winning.”

Let’s examine tariff reality.  The idea behind tariffs can be visualized by this invented example:

China, because of low local wages or material costs, and/or superior manufacturing skills, is able to produce a pot that is significantly cheaper than, or superior to, similar pots produced in the U.S.

So to protect the U.S. pot industry, and the jobs therein, the U.S. levies a tariff on pots imported from China.

The President then boasts that he has saved the U.S. pot industry and prevented China from “taking advantage of us.”

What really has happened?

  1. The U.S. government has levied a tax on Americans, punishing people who buy Chinese pots.
  2. The U.S. consumers’ cost of all pots has been increased, which is inflationary.
  3. Dollars have flowed from the U.S. private sector to the U.S. government. Taking dollars from the private sector is recessionary.
  4. The U.S. pot industry, being protected from foreign competition, does not need to strive for efficiency, and thereby stagnates, while other nations improve their pot-making efficiency.
  5. China retaliates by levying an import tariff on American pans, which hurts the U.S. pan industry, thereby costing jobs in the U.S. pan industry.

    Image result for water fight

    Trump says we’re winning.

Bottom line results for the trade war: Taxes on Americans have increased; inflation has been stimulated; the pot industry has been protected, but the pan industry has been hurt; and no net jobs are produced.

Trump, and most Americans, do not understand, that punishing Americans with higher taxes, is not a good way to protect Americans. The irony is that Trump boasts about cutting taxes, while his tariffs increase taxes.

If Americans’ income and jobs, and/or a particular American industry, need to be protected, there are far better ways than the self-destructive, pissing contest that Trump and his predecessors have initiated over the years. To:

I. Increase and Protect Americans’ Income: Initiate the Ten Steps to Prosperity (below). Step #1 alone (Eliminate the FICA tax) would increase the incomes of all salaried people. The other Steps would protect the incomes of Americans’

II. Protect Americans’ jobs: The elimination of FICA would cut employment costs, thereby encouraging employment in all industries, not just specific industries.

III Protect American Industries: Step 6. (Eliminate federal taxes on business) would benefit American businesses at no cost to anyone. The U.S. government, being Monetarily Sovereign, neither needs nor uses tax dollars. It creates new dollars, ad hoc, every time it pays a creditor.

Additionally, the federal government could assist vital industries via direct subsidy.

In summary, all tariffs, whether import or export, hurt all nations involved. They are inflationary and recessionary, and being protectionist, they inhibit innovation.

Our Monetarily Sovereign federal government has the unlimited power to protect its citizens, not by punishing them, but by rewarding them. This is a lesson yet to be learned by politicians and the American people.

Tariffs never, never, ever are a good solution to any Monetarily Sovereign government’s trade problem. Tariffs always are harmful to the  people. They are the ultimate nose-cutting, pissing contest.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The single 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

2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to 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 you.

MONETARY SOVEREIGNTY

Why does Trump get away with THIS? Saturday, Nov 24 2018 

In the previous post, we answered the question, “Why does Trump get away with lying?”

The answer, in short, is: His followers want to be lied to.

But why does Trump get away with THIS:

Trump-Appointed Judge Hands Donald Trump Bad News In Robert Mueller Russia Case, Rules ‘Collusion’ Is A Crime

In addition to his frequently repeated assertion that there was “no collusion” between his campaign and the Russian government during the 2016 presidential election, Donald Trump has also followed the lead of his lawyer Rudy Giuliani, claiming that even if Russian collusion did exist, “collusion is not a crime.”

Judge Dabney Friedrich ruled that merely collaborating with a foreign entity in a “conspiracy to defraud the United States” violates federal law — even if none of the acts by either party are themselves crimes.

And this:

Judge allows lawsuit against Trump Foundation to proceed, rejects Trump claim that he can’t be sued
The lawsuit accuses the president of misusing his charitable foundation for his own personal and political purposes.

New York State Attorney General Barbara Underwood filed the action against the president, Donald Trump Jr., Ivanka Trump and Eric Trump earlier this year, charging that they had engaged in “extensive unlawful political coordination with the Trump presidential campaign, repeated and willful self-dealing transactions to benefit Mr. Trump’s personal and business interests, and violations of basic legal obligations for nonprofit foundations.”

Underwood said, “the Trump Foundation functioned as little more than a checkbook to serve Mr. Trump’s business and political interests.” 

The suit charges that foundation funds were used to pay off Trump-owned companies’ legal obligations, including a $100,000 payment to a charity that was mandated in the settlement of a lawsuit.

Supreme Court Justice Saliann Scarpulla noted that a judge in a different case had already ruled earlier this year that Trump is not immune to civil actions “related purely to unofficial conduct because he is President of the the United States.”

Colluding with Russia to fix the federal Presidential election and stealing from your own charitable foundation. What next for Trump?

Major Trump administration climate report says damage is ‘intensifying across the country’
Scientists are more certain than ever that climate change is already affecting the United States — and that it is going to be very expensive.

The effects of climate change, including deadly wildfires, increasingly debilitating hurricanes and heat waves, are already battering the United States, and the danger of more such catastrophes is worsening.

Numerous federal agencies say they are more certain than ever that climate change poses a severe threat to Americans’ health and pocketbooks, as well as to the country’s infrastructure and natural resources.

The report’s sense of urgency and alarm stands in stark contrast to the lack of any apparent plan from President Trump to tackle the problems, which, according to the government he runs, are increasingly dire.

The Trump administration has rolled back several Obama-era environmental regulations and incentivized the production of fossil fuels.

Trump also has said he plans to withdraw the nation from the Paris climate accord and questioned the science of climate change just last month, “I don’t know that it’s man-made” and that the warming trend “could very well go back.”

As the Northeast faced a cold spell this week, Trump tweted, “Whatever happened to Global Warming?”

This shows a misunderstanding that climate scientists have repeatedly tried to correct — a confusion between daily weather fluctuations and long-term climate trends.

The administration last year downplayed a separate government report calling human activity the dominant driver of global warming, saying in a statement that “the climate has changed and is always changing.”

And those who face the most suffering? Society’s most vulnerable, including “lower-income and other marginalized communities,”researchers found.

O.K.: Colluding with Russia to fix the federal Presidential election,  and stealing from your own charitable foundation, and fiddling while the world burns. What next for Trump?

Trump suggests ‘vicious world’ should be blamed for Khashoggi murder while disputing Saudi responsibility

Donald Trump has suggested, “maybe the world” should be held accountable for the murder of Jamal Khashoggi, as he doubled down on his insistence the CIA had not concluded Saudi Arabia’s crown prince was responsible for the killing. 

The president again denied the country’s pre-eminent intelligence agency believed the powerful Mohammed bin Salman was behind last month’s murder.

“They did not come to a conclusion. They have feelings, certain ways, but I have the report. They have not concluded. Nobody’s concluded. I don’t know if anyone could conclude that the crown prince did it.”

Mr Trump spoke after the Washington Postreported last week the CIA had concluded the crown prince ordered the assassination of journalist the 59-year-old journalist.

Of course, defending such murderous dictators as Putin, Kim, and Duterte is typical for Trump.

He reserves his criticisms for people like Admiral William McRaven, the former commander of U.S. Special Operations, who captured bin Laden, and for France’s Emmanuel Macron and for other allied leaders, and for any judge who disagrees with him. 

(Chief Justice John Roberts who issued a rare rebuke Wednesday after President Donald Trump told reporters that he wanted to file a complaint against the “Obama judge” who ruled against his migrant asylum policy.after Trump criticizes ‘Obama judge.’)

So, we have the President of the United States accused of colluding with Russia to fix the federal Presidential election, stealing from his own charitable foundation, fiddling while the world burns, and defending a murderer (for personal, financial reasons) and criticizing an American war hero.

And that’s just in the past few days.

Now, he has topped it off with:

Trump says he is most thankful for himself on Thanksgiving after extraordinary call with US troops in Middle East

How does he get away with it all, day after day, week afteImage result for see no evilr week? We are reminded of the quote often attributed to Abraham Lincoln: “You can fool all the people some of the time and some of the people all the time, but you cannot fool all the people all the time.”

Apparently, Trump’s followers fall into that “some of the people” category — people who can be fooled all the time.

Fortunately, they are in a declining minority. Now, let us pray we can limit the damage to America and the world for the next two years.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The single 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

2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to 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 you.

MONETARY SOVEREIGNTY

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