Tag: Ten Steps to Prosperity

What will cause the end of the bull market

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

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

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

You have been invested in the stock market for the past nine years. You now view yourself as a financial genius. Calm down. It would have taken exceptional “skill” for an investor not to have made money, lots of it, in this bull market.

And the market still bulls upward, newly propelled by the anticipation of stimulative federal tax cuts.

Why do tax cuts simulate? Very simply, because they leave more dollars in the economy.

Think of yourself as a car and the gas station as the federal government. When you pump gas into your car, the gas station runs a gas deficit and you run a gas surplus.

The station’s gas deficit is a good thing, just as the federal government’s money deficit is a good thing for you.

But if for some strange reason, you are forced to give the gas station more gasoline than you receive (i.e. the station runs a gas surplus), your driving will be limited.

Now, you begin to see articles by pundits, who tell you the end is nigh, or surely must be nigh, because all bull markets end, sometime. The January/February issue of MONEY Magazine contains just such an article. It is titled, “3 Ways This Bull Market Could End.”

The “3 ways” are interesting, and each contains a grain of truth, but they don’t include the real way this bull market will end.

First, MONEY’s “3 ways”:

Scenario #1: The Economy Did It
What bull markets fear most isn’t the shock of war or political crisis, but recessions.

Two-thirds of all bull markets since World War II have ended in anticipation of an economic contraction. Still, most traditional indicators are signaling that the economy is doing just fine and isn’t likely to shrink in the next year or two.

Historically, real estate construction has been a terrific indicator of the economy because it takes months to construct a new home. Every recession since 1960 was preceded by a double-digit decline in housing starts.

Yet in October housing starts rose by double digits—13.7%, to be exact—indicating that construction firms aren’t betting on a slowdown in the economy in 2018.

There’s another concern. “The economy typically slips into a recession four years after the first Federal Reserve rate hike,” says John Lynch, chief investment strategist for LPL Financial.

The central bank actually started lifting rates in late 2015. Four years after that would put a possible recession start date in late 2019. And if stocks foreshadow recessions up to a year before, that means a bear could be lurking at the end of 2018.

The stock market is the world’s business-prediction method. With hundreds of millions of investors inputting their beliefs, it is the ultimate “Wisdom of the crowd” device.

But, a problem with this “wisdom,” it that not only does the “crowd” try to predict the overall market, and not only does it also try to predict the effect of individual stocks, but the crowd also tries to predict the actions of the crowd, and then act on these predictions.

Thus the crowd becomes a self-referential, self-fulfilling prophesy machine.

Further, federal interest rate hikes are not, in of themselves, recessive. On the contrary, to the degree a rate hike forces the federal government to pay more interest dollars into the economy, the increased rates are stimulative.

Rate hikes always are a prevention and cure for excessive inflation, and excessive inflation is a cause of business downturns.

It is the disease (inflation), rather than the cure (higher interest), that causes the symptom: Recession. 

Scenario #2: The Fed Did It
Central bankers at the Fed have publicly stated that they believe there will be around two or three more rate hikes in 2018, bringing the so-called Federal funds rate, which banks charge one another on overnight loans, to around 2% or so next year.

The markets have a knack for testing newly installed Fed chairmen.

It happened to Alan Greenspan, who became chairman in August 1987, at the end of an economic cycle. The Greenspan-led Fed proceeded to raise interest rates just before the October 1987 crash.

Similarly, Ben Bernanke assumed the Fed chairmanship in 2006 toward the end of another economic cycle as the central bank was hiking rates—and just before the 2007–2009 bear market.

The Fed doesn’t even have to make a big error—for instance, by raising rates too aggressively—to spook the markets. Simply raising rates unexpectedly or communicating their intentions poorly “could create volatility as rates rise.”

Although functionally, interest rate increases are not recessive, the mere belief that they introduce recessions can be sufficient to cause recessions.

The 2007-2009 bear market, which corresponded to the “Great Recession,” was caused by flagrantly illegal lending by big banks, not by interest rates.

Scenario #3: The Market Has a “Minsky” Moment
A “Minsky moment,” named after the late economist Hyman Minsky, who studied boom-and-bust cycles in the financial markets and argued how unstable bull markets can be after a long run.

[Investors take on additional risk during prosperous times or bull markets. The longer a bull market] lasts, the more risk is taken in the market. Eventually, so much risk is taken that instability ensues.

A Minsky moment was blamed in part for the global financial crisis, when investors took on ever more debt to make speculative investments in houses and mortgage securities without worry until it eventually reached a tipping point when every investor did start to worry.

To be sure, Rob Arnott, chairman of Research Affiliates, notes that “the temptation in a bull market is to buy more.”

Not only does a bull market tempt investors to buy more, but the bull market itself automatically rebalances an investor’s portfolio toward more speculative, higher-flying investments.

Market action alone could take a very conservative portfolio consisting of 50% stocks and 50% bonds, into a new, aggressive ratio of 75% stocks and 25% bonds.

And now, The Real Reason for Recessions:

A large economy contains more money than does a smaller economy. The U.S. economy contains more dollars than does the California economy, which in turn contains more dollars than does the Los Angeles economy.Related image

Gross Domestic Product, the typical measure of a nation’s economy, consists of three, basic measures: Federal Spending + Non-federal Spending + Net Exports.

All three are money measures. Federal Spending pumps dollars into the economy. Non-federal spending is done with dollars that are in the economy. Net Exports add dollars to the economy.

While Federal Spending adds dollars to the economy, federal taxes take dollars out of the economy. The difference between spending and taxing is Federal Deficit Spending, the net amount of dollars the government adds to the economy.

When net dollars are added to the economy, this stimulates economic growth. When net dollars are taken from the economy, this is recessive.

When the federal government runs a deficit, the economy receives dollars, and when the federal government runs a surplus, the economy runs a deficit.

If the normal federal deficit instead becomes a federal surplus, the economy will have a Depression or at “best,” a recession.

U.S. depressions tend to come on the heels of federal surpluses.
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%. Great Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

Even reductions in deficit growth can lead to recessions:

Monetary Sovereignty
Federal Deficit — 1955 – Present. Vertical Bars are recessions

As the federal deficit growth line drops, we approach recession. Recessions are cured only by deficit increases.

Federal deficit growth is necessary for economic growth.

Recently, the Republican-dominated Congress passed a tax law that included reductions in business and personal taxes, predicted to add $1.5 Trillion to the federal debt.

That represents $1.5 Trillion added to the economy, which is stimulative — or would be stimulative but for this:

Ryan says Republicans to target welfare, Medicare, Medicaid spending in 2018.

“House Speaker Paul D. Ryan (R-Wis.) said Wednesday that congressional Republicans will aim next year to reduce spending on both federal health care and anti-poverty programs, citing the need to reduce America’s deficit.”

Because deficits add stimulative dollars to the economy, deficit reductions lead to recessions. If Ryan cuts federal spending for social programs, we will have a recession, the severity of which will be related to the size of deficit cuts.

Starve consumers of their purchasing dollars, and businesses will experience reduced sales and profits.

In summary, interest rates are not a true point of concern. Rather, deficit growth cuts, or worse yet, federal surpluses, will drag us down to recession or depression, and only massive deficit spending will cure the disease.

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.

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

Quora question about Congressional will

 

Image result for money talks

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

 

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

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

Every few days, I’m asked by Quora, to answer a question, usually about the federal debt. Today, I was asked one I found particularly interesting. Perhaps you will, too.

The question was:

With a new tax cut bill expected to add a trillion dollars to the national debt, how will Congress find the will to pass new spending measures for infrastructure projects, added border security, etc., as promised by Trump?

My answer was:

Great question, that is based on fiction and fact. The fiction is that the so-called “debt” is like personal debt, in that it is a burden on the debtor.

Federal “debt” is nothing like personal debt.

The fact is: The so-called national “debt” simply is the total of deposits in T-security accounts. It is no threat to anyone — not to the government, not to taxpayers, not to you, your children, or your grandchildren. No tax dollars are or will be involved at any time.

Those deposits, which are like savings account deposits, will be paid back by transferring the dollars in those accounts back to the checking accounts of the depositors — the same way your bank pays off your savings account by transferring the balance to your checking account.

The further fact is that Congress is well aware of this, but has been bribed by the rich to promulgate the fiction. Why? Because the fiction inevitably leads to the fake “need” to cut social spending, thereby widening the gap between the rich and the rest of us.

The gap is what makes the rich, rich. Without the gap, no one would be rich — we all would be the same — and the wider the gap, the richer they are.

So the rich bribe politicians (with campaign contributions and promises of lucrative employment later), the media (with ownership and advertising funds) and the economists (with university contributions and employment in “think tanks”) to widen the gap.

Now for your question: The size of the national “debt” (deposits) has nothing to do with Congressional “will.”

Congress always balances two constituencies: Big donors and voters.

No matter how large the “debt,” Congress and the President will do what the big donors want, unless there is enough voter anger against it. In that case, Congress still will attempt to satisfy big donors, but pretend to appease voters.

Today, the GOP Congress has caved 100% to big donors, and doesn’t care a fig what the voters want.

Even though 2/3 of the voters hate the newest tax change laws, the big donors love these gap-widening laws, so that is the way the GOP (aka “the party of the rich”) will vote.

Later, the GOP will use the excuse that the “debt” (deposits) has grown too large. They will try to eviscerate Social Security, Medicare, Medicaid, etc., to satisfy their big donors by widening the gap between the rich and the rest.

Bottom line: Congress has no “will.”

Its primary desire is to be elected, which requires money and the votes money buys.
Its secondary desire is to find lucrative employment after leaving Congress — employment the appreciative rich donors will provide.

Now you know everything you need to know about Congress and the so-called “debt.”

Clearly, the author of the question believes Congress is struggling with the size of the federal debt. There is no such struggle. Congress doesn’t care about the deposits in T-security accounts.

Congress cares about money and votes, in that order. Nothing more.

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.

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

How to cut the fake “national debt”

It takes only two things to keep people in chains:Image result for blindfold

.

The ignorance of the oppressed

and the treachery of their leaders.

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

Here is a letter, written by Dr. Joseph M. Firestone, a kindred spirit who understands that the so-called “national debt” is a gigantic lie, created by the rich to keep you from receiving federal benefits.

Dr. Firestone asks that you send your version of this letter to your Senators and Representative:

Firestone says, “Please remember that it’s important that everyone do their own letter. That’s why I call this a sample letter:”

Dear __________________

At one time or another you and nearly every one of your fellow Representatives (or Senators) have expressed great concern, even alarm, at the size of the national debt and the often increasing debt-to-GDP ratio.

Many of you have pointed out that if the national debt were broken down into how much each American owed that would add more than $50,000 to our individual debts, even though the national debt is not an obligation of each American citizen, but of our government.

You and your political allies have also pointed out that in view of the size of the national debt it is important for the Government to either reduce spending, raise taxes or both.

You have said doing this is necessary to be “fiscally responsible”, and, at least, to reduce the annual deficit, and the debt-to-GDP ratio.

You have voted for and supported legislation in order to be “fiscally responsible” in this way, and in doing so you have cut many programs of long standing that were delivering great benefits to people, harming them and their families.

Some of you have expressed regret and sorrow about this, while insisting on the need for sacrifice in order to be fiscally responsible.

I, your constituent, have heard this fiscal responsibility story from you for many years now, including your sentiments about how much you hate “the national debt,” what an evil it is, and how much we have to lighten its burden on our grandchildren.

In view of all this from you, it surprised me greatly to learn recently, that the very existence of the national debt is Congress’s fault, including your own and your colleagues. I say this for a very simple reason.

That reason is that you and your colleagues can, in an afternoon, make it standard legislative practice to include the following clause, or an alternative formulation meaning the same thing, in every appropriations bill or continuing resolution for Federal Spending. The clause is:

Now here comes the key part:

“Upon passage of this appropriations bill, the Federal Reserve is directed to fill the Treasury’s spending account at the New York Federal Reserve with the addition to its Reserve Balance necessary to spend the appropriation.

“In addition, the Federal Reserve is directed to fill the Treasury spending account with the additions to the Treasury Reserve balances necessary to repay all outstanding debt instruments including principal and interest as they fall due for the fiscal year of this appropriation.”

In short, the Federal Reserve would pay off T-securities, making the so-called “debt” disappear.

The Fed simply would create U.S. dollars from thin air, just as it always has been authorized to do, and just as it does when it buys federal bonds with its Quantitative Easing (QE) programs.

The first sentence provides the reserves necessary for the Treasury to spend its mandate from Congress without issuing new debt.

And the second provides the reserves necessary for the Treasury to pay down the existing outstanding Treasury debt instruments as they fall due within the time period of the appropriation or continuing resolution bill.

If this or similar language were included in every such bill it would mean that (1) deficit spending by Congress would no longer involve issuing new debt instruments, so the debt would no longer grow and (2) that all outstanding debt instruments would be paid off as they fall due as long as Congress continues to include the new language in all its appropriations bills and continuing resolutions.

So, it seems to me that the sole reason why the national debt exists at all in 2017 is that when President Nixon took the United States off the gold standard in 1971, the Congress did not adjust to the new reality of fiat monetary sovereignty by funding Federal spending using language like the above.

I believe that Congress made a grievous mistake in not changing its funding language immediately after the change to a fiat currency in 1971, and mandating the Federal Reserve to fill Treasury’s spending account with the reserves needed to spend its appropriations.

That mistake has led to the whole situation of debt terrorism we see around us now, and to all the damaging propaganda and horrible legislative outcomes we have suffered at the hands of Republicans and Democrats alike.

You have all been very wrong about the need to sacrifice. There was no need to sacrifice!

You have been all wrong about all of that for 40 years now, and you should all wear sackcloth and ashes and hang your heads for the damage you have done to America.

Since the Administration of President Carter we have been treated to these meaningless harangues about a faux financial problem that is purely one of politics and messaging and not one of public financing at all.

And this faux problem, solely of Congress’s own making has led to much suffering among most of the American people, including decades of less than full employment, the denial of universal health care coverage, deteriorating public spaces and infrastructure, refusal to deal with a life-threatening climate change problem, increasing economic inequality, a declining educational system, decreasing life expectancy, and a host of other problems too numerous to mention.

Well, I have had enough of all this, and especially of the pretense that the Federal Government doesn’t have enough money to buy any goods or services for sale using US currency.

I know that using the words above or words very like them, you and a majority of your colleagues in Congress can appropriate funds for anything you want to spend on.

So, never let me hear from you ever again that we can’t afford this good program or that good program or any other program that will benefit a majority of the people of the United States.

I now know that is a lie. And I insist that you never tell that lie again in public, and that from now on you advocate for and insist on legislative language similar to the above, being included in all appropriation bills and continuing resolutions passed by Congress.

I demand, that as my representative, you vote against any bill that lacks that language.

And I tell you now that if you fail to comply with this demand of mine, I will do all I can to defeat you in the next election and will work for and vote to elect any opponent of yours who is willing to promise that she or he will include such language in all appropriations bills or continuing resolutions.

In closing, I hope I have made myself abundantly clear. I insist that the lies and propaganda advancing faux fiscal responsibility stop immediately.

I insist that the issue of the national debt be taken off the table by including the language suggested above or a similar formulation, followed by gradual pay-off of all outstanding Treasury debt instruments. And I insist that you represent me in this way going forward and for as long as you serve.

I want Job 1 for you to be seeing to it to the best of your ability that this language is in all appropriation bills or continuing resolutions coming out of Congress. I will want other things from you too.

But, as I say, this is Job 1, and if you want my vote in the future you will see to it that it is well done, so that the various lies and fables surrounding Federal spending are at last ended, and so our nation may move forward to true fiscal responsibility, which is Government spending for public purpose.

Sincerely Yours, Your Constituent,

The above letter is way too long to send as is. Further, I disagree with two of the points it makes:

  1. I disagree that all “debt” (i.e. T-securities) should be allowed to expire. T-s and not replaced. T-securities serve useful purposes. They help the Fed control interest rates and they provide a safe place to hold large amounts of money.
  2. I disagree that “. . . Treasury Reserve balances (are)necessary to repay all outstanding debt.” Maturing Treasuries are repaid by transferring existing dollars from the T-security accounts back to the checking accounts of the T-security holders.

That said, the fundamental idea of having the Fed buy enough T-securities to reduce the outstanding “debt” would change the dialog, and ease the drive to cut social benefit spending.

In summary, edit the letter your way to send your demand that the part shown in blue be included in all future appropriation bills, along with your statement that the federal “debt” is a fraud.

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.

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 happens when Gap Psychology dominates Decency?

Image result for discoverIt takes only two things to keep people in chains:

.

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

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

Question: If your wealth totals $100, does that make you rich or poor?

Answer: If everyone else has $1, you are rich. If everyone else has $1,000, you are poor. and if everyone else has $95, you are well-off, but not rich.

Thus it is the Gap, between you and the rest — not your absolute wealth — that determines whether you are rich or poor. If there were no Gap, no one would be rich and no one would be poor, no matter how much money they had.

“Gap Psychology“ is the name for the human desire to distance oneself from those below in any social ranking, and to near those above.

We see Gap Psychology everywhere. It is the reason for the purchase of a Rolls Royce that does little if anything more than a Hyundai. It causes the demand for a perfect diamond vs. moissanite. A Rolex vs. a Timex.

Designer clothing, expensive restaurants, mansions — all the symbols of wealth — the primary purpose of which are to separate the owners from the poor and draw them closer to the rich.

Even sports team fandom, where one must win and the other lose, is an expression of Gap Psychology, where the fan takes personal pride in the accomplishments of a team of strangers.

The Gap below you can be widened in two ways: You rise on the social scale and/or those below you fall. That is why so many middle-class people are unsympathetic to the plights of the poor, and view the poor as “lazy takers.” Pushing the poor down, widens the  Gap below.

Similarly, the Gap above you can be narrowed in two ways: Again, you rise on the social scale and/or those above you fall. That is why the middle classes both despise and envy the rich, and take secret (or not-so-secret) pleasure in seeing the rich fall. Pulling the rich down narrows the Gap above.

The Gap not only is widened by wealth, but by stigmatizing. As a justification for Gap Psychology, those in a different group often are stigmatized as being ignorant, immoral, lazy, or bereft of redeeming qualities.

Gap Psychology is 100% selfish. It is a survival method. To members of a social species, there come individual Darwinian advantages from being associated with the fittest members.

But for a group as a whole, Gap Psychology is divisive. But there are “group-within-the-group advantages, because Gap Psychology can increase cohesiveness within the smaller group. That, for instance, is the power of religions, which in part gain strength by separation from “outsiders.”

Decency is the opposite of Gap Psychology. The decent person wishes to lift those below or outside the group,  and does not find gratification in the downfall of the rich and powerful, or those outside the group.

Often, Gap Psychology and Decency are blended. For example, in Chicago, we have Image result for Ann & Robert H. Lurie Children's Hospitalthe Ann & Robert H. Lurie Children’s Hospital.

Mr. & Mrs. Lurie donated many millions of dollars to improve what formerly was called “Children’s Memorial Hospital,” (Decency), but in return demanded that their names be featured (Gap Psychology).

All American Presidents exhibit strong symptoms of Gap Psychology, and all during my lifetime (since WWII) have had some measure of Decency — Roosevelt, Truman, Eisenhower, Kennedy, and Johnson were decent men. Nixon perhaps less so, but Ford, Carter, Reagan, Bush I, Clinton, Bush II, and Obama were fundamentally Decent.

And then came Trump.

I suggest that Donald Trump, with his pathological urge for aggrandizement and credit, his compulsive lying, and his evading of all blame for everything, exhibits 100% Gap Psychology, and does not burden himself with Decency.

He cares nothing for the poor and everything for his own image. He is, I submit, the ultimate product of today’s anti-poor, pro-rich, anti-deficit, pro-military Republican party, as first created in 1994 by Newt Gingrich and Dick Armey.

With the focus (unwisely and unnecessarily) on cutting federal budgets, and the (invented) need to feed the military, the Republicans then claimed that social programs were the items that had sufficient budgets to cut meaningfully.

This led to the “Personal Responsibility Act (which was replaced by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Among its directives were:

  • Cut welfare and related programs that aid unmarried women and pregnant teens
  • Punish Families with Dependent Children for having more children while receiving welfare
  • End AFDC payments after five years
  • Create a “two-years-and-out” provision with work requirements for such families
  • Provide food vouchers to unwed mothers under 18 instead of cash
  • Suspend the drivers’ and/or professional licenses of those who fail to pay child support.

In short, not only were benefits for the poor to be cut, but the poor were to be punished for being poor. (Gap Psychology)

The Tea Party, which began in 2009, not coincidentally at the beginning of the Obama administration, pushed the GOP even further to the right, with strident, anti-deficit demands.

And now, having arrived in 2017, we find the Republicans attempting to enact a half-dozen anti-poor, pro-rich laws to destroy Obamacare (ACA), and to widen the Gap with their many variations on tax “reform.”

Trump’s repeated appointments of people to who have demonstrated antipathy to the missions of the agencies they lead, and his nominations to judgeships of people wholly unqualified to be judges, will have long-lasting, deleterious effects on America, particularly on the poor and middle classes.

In short, today’s Republican Party has tipped so far into Gap Psychology, it has lost even the semblance of decency.

Like most of our past Presidents, Americans are fundamentally Decent. We root for the underdog. We are charitable. We despise unfairness. Trump is the opposite, as is today’s GOP. Thus, I believe, the GOP is out of step with America.

While Gap Psychology continues to exert a strong emotional pull on American voters, I suspect that our basic Decency will come to the fore, and that is very bad news for the GOP.

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.

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