Encouraging the public to commit financial suicide. “Work ’til you drop.”

REASON Magazine is a Libertarian publication that disseminates false information encouraging Americans to vote against their best interests.

Here is another example from this shameful publication.

Congress can reduce the deficit by $7.7 Trillion in 10 Years
The Congressional Budget Office projects that future deficits will explode. But there’s a way out.

With public debt at an all-time high, the government should do the same.

Immediately, Veronique de Rugy reveals her abject ignorance of economics. She equates federal financing with personal financing.

The two are diametrically different. The federal government is Monetarily Sovereign. It has the unlimited ability to create new dollars. It never can run short of dollars and never can be unable to pay any debts denominated in dollars.

The public is none of those things. It is monetarily non-sovereign. It has a limited ability to create new dollars. It can, and often does, run short of dollars. It can, and often is, unable to pay its debt denominated in dollars.

Yet astoundingly, Veronique says the government “should do the same.” This unforgivable ignorance is responsible for every recession and depression in U.S. history.

Recessions (gray bars) are caused by reduced debt growth and are cured by increased debt growth. By mathematical formula, Gross Domestic Product growth requires federal spending growth and federal debt growth.

GDP = Federal Spending + Non-federal spending + Net Exports.

This feat isn’t that hard now that the Congressional Budget Office (CBO) has released a series of budget options showing Congress how to do it.

In Libertarian terms, “how to do it” invariably requires reducing benefits to the public — specifically, the part of the public that is not rich.

It’s worth repeating that maintaining spending at the current level is not a viable option.

Given the dramatic increase in annual federal government spending over the next 30 years—from 22.3 percent of GDP to 30.2 percent—combined with federal tax revenues that have remained fairly constant at around 19 percent, CBO projects that future deficits will explode.

It’s forecasted to triple from 3.7 percent of GDP today to 11.1 percent in 2052. Over the next 10 years, primary deficits (deficits excluding interest payment on the debt) amount to $7.7 trillion. Meanwhile, deficits with interest payments total $15.8 trillion—roughly $1.6 trillion a year.

You’ll notice that Veronique never says why maintaining spending is “not a viable option.” All she does is quote large numbers to shock you.

In effect, she claims that Monetary Sovereignty is not a viable option, because it allows the government to create dollars. 

The “not a viable option” claim resembles the “ticking time bomb” claim about the federal debt, that has been wrong for more than 80 years. In that time, the federal debt has grown more than 55,000%, yet the nation survives quite well, thank you.

Sadly, Libertarians refuse to learn from actual experience. They cling to the myth that a Monetarily Sovereign government should impose austerity, despite the repeated and inevitable failures of such a system.

Note, by the way, that half of our future total deficits will be driven by interest payments on the debt. This fact isn’t surprising considering the size of our deficits and the rise in interest rates.

Federal interest payments, which the government has the infinite ability to make, add growth dollars to the economy.

The U.S. federal government daily demonstrates that interest payments pose no burden on a government having the infinite ability to create the dollars with which it makes the payments. And for the same reason, interest payments pose no burden on federal taxpayers.

Given these realities, no one will be surprised that the ratio of debt to GDP, now roughly 100 percent, will, under the most conservative estimations, jump to 110 percent in 10 years.

In the next 30 years it will likely double. More realistically, in 2052 debt as a share of GDP will be 260 percent. And that’s assuming no major recessions or emergencies.

As we have seen here, and other places on this blog, the debt / GDP ratio is meaningless. Neither a low nor a high ratio indicates the health of an economy. The ratio predicts or demonstrates nothing.

Any time you read or hear about the “dangers” of a high debt / GDP ratio, you will know you are reading ignorance and lies.

GDP does not fund debt. Further, GDP is one-year figure while debt is a cumulative-over-many-years figure. No comparability at all.

Low ratios and high ratios can be seen equally among the world’s most and least healthy economies.

Despite these awful numbers, legislators in both parties are currently debating how best to add trillions more to the country’s credit card balance.

The federal government does not have anything comparable to a “credit card balance.” Libertarians use that term to trick you into believing that the federal government is about to go bankrupt. It isn’t and it can’t. 

Many, for instance, want to add a new entitlement program in the form of the extended child tax credit.

The rich hate entitlement programs like Medicare, Medicaid, and Social Security because such programs benefit the poor and the middle, thereby closing the Gap between the rich and the rest.

Libertarians argue for the rich by feigning a brand of frugality that widens the Gap. 

It is in this setting that the CBO published its report on budget options. The two-volume document highlights options for deficit reduction.

One volume details large possible spending reductions while the other lays out small ones—so the options are plenty. They include important reforms of some of the major drivers of future debt: Medicare, Medicaid, and Social Security.

The misnamed “reforms” actually are reductions in benefits to the poor and middle classes. The rich love cutting Medicare, Medicaid, and Social Security, while boosting dollars for the military and cutting taxes on the rich.

And heaven forbid there be a new benefit for the not-rich, extended child tax credit. 

Ms. de Rugy, as a tool of the rich, dishonestly calls these cuts “reforms,” to dissuade you from objecting.

All told, it’s possible to achieve deficit reduction of $7.7 trillion over 10 years.

The mathematics are clear: A deficit reduction of $7.7 trillion will reduce GDP by about $7.7 trillion and lead to a recession if we a lucky, and a depression if we are not.

That’s enough to accomplish what some people mistakenly believe to be out of reach: balancing the budget without raising taxes.

While “balancing the budget” is prudent for people, businesses and local governments, it is a disaster for the federal government. Sadly, Ms. de Rugy, being ignorant of economics, doesn’t understand this.

There are also a few options to simplify the tax code by removing or reducing unfair individual tax deductions and by cutting corporate welfare.

Lest you believe the previous sentence indicates the Libertarians are willing to crack down on the rich, read the next sentence.

For instance, it’s high time for Congress to end tax deductions for employer-paid health insurance. This tax deduction is one of the biggest of what we wrongly call “tax expenditures.”

Get it? First Ms. de Rugy wishes to cut Medicare and Medicaid. Then, to further “balance the budget,” she wishes to cut employer paid health insurance. 

See the pattern? Starve the poor and middle classes to achieve a recession or depression. The very rich couldn’t be happier. They love widening the Gap between the rich and the rest. The wider the Gap, the richer they are.

It’s responsible for many of the gargantuan distortions in the health care market and the resulting enormous rise in health care costs.

The CBO report doesn’t eliminate this deduction; instead, it limits the income and payroll tax exclusion to the 50th percentile of premiums (i.e. annual contributions exceeding $8,900 for individual coverage and $21,600 a year for family coverage).

The savings from this reform alone would reduce the deficit by roughly $900 billion.

Why the limit? Why 50th percentile? No reason other than perhaps it seems more “generous” than eliminating the entire deduction.

A second good option is to cap the federal contribution to state-administered Medicaid programs.

Ah, more cuts to programs that help the poor. Ask Ms. de Rugy why not simply eliminate Social Security, Medicare, Medicaid, and all poverty aids. That would really “balance the budget.”

That federal block grant encourages states to expand the program’s benefits and eligibility standards—unreasonably in some cases—since they don’t have to shoulder the full bill.

CBO estimates that this reform would save $871 billion.

There is no reason for a Monetarily Sovereign nation to save $871 billion of the same dollars it has the infinite ability to create.

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.”

The states are monetarily non-sovereign and are supported by taxpayers. The federal government is Monetarily Sovereign and is not supported by taxpayers.

To pay its bills, the federal government creates new dollars, ad hoc. All federal tax dollars are destroyed upon receipt by the U.S. Treasury.

Ms. de Rugy wishes unnecessarily to balance the budget by punishing the poorest Americans. One wonders about the kind of person who would recommend such cruelty.

CBO also projects that Uncle Sam could reduce the budget deficit by $121 billion by raising the federal retirement age.

CBO’s option would up this age “from 67 by two months per birth year for workers born between 1962 and 1978.

As a result, for all workers born in 1978 or later, the FRA would be 70.” Considering that seniors today live much longer than in the past and can work for many more years, this reform is a low-hanging fruit.

In yet another disgrace, Ms. de Rugy wishes to cut Social Security by raising the retirement age. This has scant effect on the rich, but would be a hardship for the poor.

Her “solution” involves moving retirement three years away for working people, in short to keep them working ’til they drop.

The rich, of course, can retire at will.

Congress could save another $184 billion by reducing Social Security benefits for high-income earners. I support a move away from an age-based program altogether since seniors are overrepresented in the top income quintile.

Social Security should be transformed into a need-based program (akin to welfare).

Nevertheless, the CBO’s option would be a step in the right direction.

A not-so-clever suggestion by Ms. de Rugy to make Social Security “akin to welfare.” The political right hesitates to cut Social Security directly, but would do it by making it “welfare,” and then cutting welfare.

As right wingers “know,” people accepting welfare are lazy takers, not worthy of help.

Further, with inflation, the need-based option falls ever more heavily on the poor, exactly what REASON wants.

There are so many more options for long-term deficit reduction. All Congress needs is a backbone. Considering the end-of-year spending bill going through Congress right now, I am not holding my breath.


The article, which appeared in Reason.com, is a breathtaking litany of anti-poor, anti-middle, pro-rich recommendations to widen the Gap between the rich and the rest.

It is disgusting in its ignorance and cruelty, it’s lack of facts and its dissemination of false beliefs.

The sole purpose is to make the rich richer by widening the Gap between them and the rest of us. 

Lacking any recognition of Monetary Sovereignty, the author promulgates the usual right-wing austerity that punishes all but the rich. It is an inexcusable exercise in dishonor and immorality by Ms. de Rugy and her Libertarian accomplices.

What you should know about our economy that others don’t know.

On September 7, 2009, we published a summary of our economy, facts that seem unknown to the public and ostensibly to economists, the media, and politicians (though I believe many of them fake their ignorance.

Much has changed in the past 13 years, but not the realities, and it is these realities that seem to mystify our thought leaders.

Today’s post will give you those realities, so you will understand why our economy continually lurches from recession to recession, with Congress, the President, and the Federal Reserve flailing about in apparent helplessness against the winds of fate.

Our leaders are not helpless. On the contrary, they have all the tools necessary to exert absolute control over our economy, even during the most stressful times. Even in the face of war, COVID, global warming, and population changes, etc., recessions, depressions, and inflations could be prevented, and prosperity could be implemented, but for the prevailing lack of knowledge or effort.

Economists wish to portray economics as a mathematically-based science, similar to physics, where precise predictions often are possible. But because economics is intertwined with psychology, at best a pseudo-science, predictions veer from inaccurate to just plain WAG (Wild Ass Guesses).

Knowing that exact replication of economics studies is impossible, and even approximations can be wrong, economists tend not to stray far from earlier WAGs and to quote liberally from the past.

Unfortunately, the past, at least the more distant past, omitted Monetary Sovereignty. It is the recognition that the creator of a currency never can run short of that currency, does not need or use income to pay for things, and has absolute control over all aspects of that currency.

The finances of a Monetarily Sovereign entity are nothing like those of a monetarily non-sovereign entity. Confusingly, similar words are used to describe both.

Words like “debt,” “deficit,” “trust fund,” “taxes,” “financial burden,” “prudent,” “money supply,” “borrow,” and even “pay” have different meanings and implications when applied to Monetarily Sovereign entities vs. monetarily non-sovereign entities. These differences are not widely understood or taught in schools.

What follows is a summary-in-brief of those differences. 

But if it ever becomes widely understood, the intelligent application of Monetary Sovereignty will significantly reduce the incidence of inflations, recessions, depressions, poverty, hunger, homelessness, street crime, illiteracy, sickness, and the collection of taxes.

Here are some facts of which you may not be aware:

  1. The U.S. government arbitrarily created the U.S. dollar from thin air. There were no U.S. dollars in the thousands of centuries before the 1780s.
  2. Then suddenly, the U.S. government created U.S. dollars from thin air — as many as it wanted to — by creating new laws, also from thin air, which it has the infinite ability to do.
  3. Just as laws have no physical existence, so do U.S. dollars have no physical reality. Dollars are nothing more than numbers on balance sheets controlled by the government. Those printed dollar bills are only titles to dollars. Just as a house title is not a house and a car title is not a car, a dollar bill is not a dollar.
  4.  Every form of money is a form of debt. Bank savings accounts, checking accounts, money market accounts, C.D.s, travelers’ checks, and corporate bonds all are owed by someone or something. Even the dollar bill represents a debt of the federal government, which is why it has the words  “federal reserve note” printed on it. “Bill” and “note” are words referencing debt.
  5. Just as a car title is not a car, and a house title is not a house, a dollar bill is not a dollar. It is a bearer title to a dollar, which is no more physical than a number.
  6. Because dollars have no physical existence but are only numbers, the federal government has the power to create infinite dollars merely by pressing computer keys. It makes as many dollars as it wishes.
  7. (Former Federal Reserve Chairman 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.“)
  8. The federal government gives its dollars any value it wishes. Through the years, the federal government often arbitrarily changed the value of dollars.
  9. Today, the federal government retains the power to create laws that develop infinite dollars and to give those dollars whatever value it wishes.
  10. This ability is called “Monetary Sovereignty.” The federal government is sovereign over the U.S. dollar.
  11. While the federal government is Monetarily Sovereign, state/local governments, businesses, and people are monetarily non-sovereign.
  12. Monetarily non-sovereign entities do not have the infinite ability to create U.S. dollars or to give those dollars arbitrary values. Monetarily non-sovereign entities can run short of dollars.
  13. While the U.S. government and the governments of the U.K., Mexico, Canada, Australia, Sweden, and others are Monetarily Sovereign, the governments of France, Italy, Germany, Portugal, and others are monetarily non-sovereign. They use the euro. They cannot control their money supplies, nor do they have the ability to fight inflation, recession, or depression.
  14. The European Union (E.U.) is sovereign over the euro. The E.U. is run by the rich. It can fight inflation, recession, and depression but instead forces the poorest people of the euro nations to shoulder that burden.
  15. The U.S. federal government cannot unintentionally run short of dollars, even if it collects no taxes.
  16. Federal taxes and American federal taxpayers do not fund federal government spending. The federal government could provide unlimited benefits (Medicare for All, Social Security for All, College for All, etc.) without taxes. The term, “spending taxpayers’ money,” when referring to the federal government is incorrect. The government does not spend taxpayers’ money.
  17. The purpose of federal taxes is not to provide the federal government with dollars but rather to:
    A. Control the economy by taxing what it wishes to discourage and giving tax breaks to what it wishes to encourage
    B. To assure demand for the dollar by requiring dollars to be used for tax payments, and
    C. to discourage the public from asking for benefits. This is a function of Gap Psychology — the desire of the rich to distance themselves from the middle- and lower-income/wealth/power public.
  18. Money is the way modern economies are measured. By definition, a large economy has a larger money supply than does a small economy. Therefore, a growing economy requires an increasing supply of money. QED.
    The graph shows the essentially parallel paths of GDP (red) vs. a broad measure of the U.S. money supply, Domestic Non-Financial Debt (blue)
  19. Medicare and Social Security are not funded by so-called “trust funds,” which are not real trust funds but only balance sheet lines.
    September 20, 2016, Peter G. Peterson Foundation
         A federal trust fund is an accounting mechanism used by the federal government to track earmarked receipts (money designated for a specific purpose or program) and corresponding expenditures.
         The largest and best-known funds finance Social Security, Medicare, highways and mass transit, and pensions for government employees.
         Federal trust funds bear little resemblance to their private-sector counterparts.
         In private-sector trust funds, receipts are deposited, and assets are held and invested by trustees on behalf of the stated beneficiaries.
         In federal trust funds, the federal government does not set aside the receipts or invest them in private assets.
         Instead, the receipts are recorded as accounting credits in the trust funds, and the receipts themselves are comingled with other receipts that Treasury collects and spends.
  20. The government has total control over these balance sheet numbers, belying the false claim that the “trust funds” soon will run short of dollars. The federal government has absolute control over those balance sheet numbers. It can add to them or reduce them at will.
  21. Your Social Security check comes from a mythical trust fund that contains no money and receives no money. Social Security (and Medicare) benefits are paid ad hoc by the U.S. government, not from a trust fund, and are not dependent on FICA taxes. Which can and (opinion) should be eliminated.
  22. The federal government creates new dollars ad hoc by paying bills. No receipts by the Treasury are spent. They all are destroyed.
  23. Debt is not a burden on the federal government. It is not, as some have been calling it for over eighty years, “a ticking time bomb.”The infinite ability to create dollars means the government can service any debt denominated in dollars by creating dollars, ad hoc.
  24. The federal Debt/GDP ratio often is quoted with alarm. A high ratio wrongly is thought to indicate the federal government’s difficulty paying its debts. In fact, the Debt/GDP ratio is meaningless, having zero predictive power. Looking at a list of countries by their Debt/GDP ratio will not tell you which countries are better or worse able to pay their bills.
  25. It is impossible to evaluate any aspect of a nation’s economy by looking at its Debt/GDP ratio. The ratio says nothing about the health of the U.S. economy or about the federal government’s ability to pay its bills. See Debt to GDP ratio by country.
  26. The federal government creates dollars by paying creditors.
    A. To pay a creditor, the federal government sends instructions (not dollars) to the creditor’s Bank, instructing the Bank to increase the balance in the creditor’s checking account.
    B. The instant the Bank obeys those instructions, new dollars are created from thin air and added to the M1 money supply measure.
    C. The instructions then are cleared through the Federal Reserve and the government agency issuing the instructions.
  27. What is commonly called “debt” is the total of dollar deposits into privately owned Treasury Security accounts by the purchase of T-bills, T-notes, and/or T-bonds.
    A. To make a deposit into a T-security account, one opens a T-security account and uses U.S. dollars to invest in a T-bill, T-note, or T-bond.
    B. The government never touches those dollars other than to make interest deposits.
    C. The government does not use those dollars; it creates new dollars, ad hoc, to pay its bills.
    D. Upon maturity, the government returns the account balance to the account owner. Visualize how a bank treats deposits in safe deposit boxes.
    E. Because the dollars already exist in the T-security accounts, returning them is not a financial burden on the U.S. government or any taxpayer.
  28. Not needing an input of dollars, the government provides T-bills, etc., only to provide a safe place to store unused dollars and to help it control interest rates. Both purposes help the government stabilize the dollar. 
  29. Even if large holders of T-securities (China is a notable example) were to stop buying T-securities (the term “lending” erroneously is used), the federal government could continue spending as before. If the Federal Reserve felt a need to issue T-securities, they could buy them themselves. There is no financial need for the U.S. to sell T-securities to China.
  30. Some worry that one day the U.S. dollar will cease to be the world’s reserve currency. That should not be a concern. A reserve currency is nothing more than a currency banks hold in reserve to facilitate international commerce. Many currencies function as reserve currencies, including: the euro, Japanese yen, British pound, Chinese yuan, and others.
  31. A federal “deficit” is the difference between dollars the government creates and sends to the economy (aka “the private sector”) vs. dollars the private sector sends to the government.
  32. When federal deficit and debt growth are reduced we experience recessions and depressions.
    1804-1812: Federal Debt reduced by 48%. Depression began 1807.
    1817-1821: Federal Debt reduced by 29%. Depression began 1819.
    1823-1836: Federal Debt reduced by 99%. Depression began 1837.
    1852-1857: Federal Debt reduced by 59%. Depression began 1857.
    1867-1873: Federal Debt reduced by 27%. Depression began 1873.
    1880-1893: Federal Debt reduced by 57%. Depression began 1893.
    1920-1930: Federal Debt reduced by 36%. Depression began 1929.
    1997-2001: Federal Debt  reduced by 15%. The recession began 2001.
  33. Federal deficits enrich the economy and are necessary to grow the economy. They add dollars to the economy, and they help prevent and cure recessions.
  34. Gross Domestic Product (GDP) is a measure of dollars spent in the economy, which is why adding dollars to the economy stimulates GDP growth.
  35. Balanced budgets, though appropriate for personal finances, cause recessions and depressions when attempted by the federal government. To grow, the private sector needs to receive more dollars from the federal government than it pays to the federal government (aka a federal deficit).
  36. The federal government receives dollars from the economy through taxes, fines, and other payments.
  37. All dollars received by the federal government are destroyed upon receipt.
    a. Taxes are paid from the private sector (aka “the economy) checking accounts (Those dollars are part of the “M1” money supply) and are sent to the U.S. Treasury.
    b. When dollars reach the Treasury, they cease to be part of any money supply measure. Because the government has the infinite ability to create dollars, there can be no measure of how many dollars the government has. It has infinite dollars. (Infinite dollars + Tax Dollars = Infinite dollars. No change.)
    c. Because tax dollars do not increase the federal government’s money supply, they are effectively destroyed.
    d. Dollars sent to monetarily non-sovereign state/local governments, businesses, and people are not destroyed. They are deposited into private sector banks and remain part of the M1 money supply.
  38. Monetarily non-sovereign entities (state/local governments, businesses, etc.) create dollars by borrowing and lending.
    a. When a bank lends dollars, it does not lend depositors’ funds. It adds dollars to the borrower’s checking account (M1) and balances its books by counting the borrower’s note as dollars.
    b. Upon consummating the loan, the Bank has dollars (the note), and the borrower also has the dollars it borrowed. Thus a loan creates dollars.
    c. As the loan is paid down, dollars held by the borrower are sent to the lender, and the loan balance loses value.
  39. By contrast, the federal government does not borrow its own sovereign currency, the U.S. dollar. It pays all its bills by creating new dollars.
  40. The federal government collects taxes not to fund spending but to:
    a. Control the economy by taxing what it wishes to discourage and giving tax breaks to what it wishes to encourage
    b. Create demand for the dollar by requiring taxes to be paid in dollars
    c. Create the false impression that taxes are necessary to fund spending so that the public acquiesces to benefit limits.
  41. Import duties are taxes levied on imported goods. These taxes are paid by the purchaser, not by the seller. For example, a duty on imports of Chinese goods is paid by the American consumer, not by the Chinese exporter.
  42. Inflation is a general increase in prices.
  43. Prices increase because supply is insufficient to satisfy demand (scarcity).
  44. Historically, dollar creation has not caused an increase in demand sufficient to cause inflation. Federal deficit spending does not cause inflation.
    There is no relationship between increases in federal deficit spending (red) and inflation (blue)
    A. All inflations have been caused by the insufficient supply of critical goods and services, most often oil and food.
    B. Today’s inflation is caused by scarcities of oil, food, lumber, computer chips, shipping (supply chain), labor, and other COVID-related factors.
    Oil shortages cause most inflations. Curing oil shortages cures most inflations.
    C. These shortages are not caused by money creation and cannot be cured by restricting money creation plans such as interest rate increases. Those plans do not remedy the scarcities that are responsible for inflation.
    D. Curing inflation requires curing shortages, not recessing the economy.
    Federal deficit spending does not cause inflation.

    E. Shortages often begin with a disease, weather, war, or government mismanagement. COVID caused many shortages and was the original impetus for today’s inflation.
    F. The famous Zimbabwe inflation began when the government took farmland from experienced farmers and gave it to people who didn’t know how to farm. The resultant food shortage, not Zimbabwe’s money creation, caused hyperinflation.
  45. The federal government can cure shortages by additional deficit spending to obtain scarce goods and services or encourage their creation. 
  46. Eliminating the FICA tax would fight inflation by lowering labor costs and thus the cost of most goods.
  47. There is no economic benefit to privately owned banks. The federal government should own all the banks. Because the federal government doesn’t have a profit motive, there would be none of those risky securities the big banks have dreamed up. These garbage contracts led to the Big Recession of 2008, and because the banks were not punished, no lessons were learned. The same problems are happening today.
  48. More efficient and generous immigration laws would fight inflation by reducing the labor shortage.
  49. Low interest rates are not stimulative.
    Low interest rates (purple) do not correspond with high economic growth (green).
  50. Increasing interest rates can make the dollar more valuable and have some stimulative effect because low rates force the government to pay more interest dollars into the economy. But low rates do not cure shortages. They actually can exacerbate shortages and intensify inflation.
  51. Interest rate increases make private sector money creation (borrowing) more difficult, which can recess the economy.
  52. On balance, high and low interest rates have both stimulative and recessive elements. But they do not cure inflations, and it is the inflations that lead to recessions or “stagflation” (the combination of a stagnant economy and inflation). 
  53. A symptom of this bifurcation is the stock market’s adverse reaction to good economic news. Any good news (low unemployment, high GDP growth, etc.) impels the Fed to raise interest rates, which the public believes will hurt business and depress securities.
  54. Recessions have no agreed-upon definition but often are defined as a decline in real Gross Domestic Product (GDP) for two consecutive quarters. GDP is a measure of spending. Federal Spending + Nonfederal Spending + Net Exports = GDP.
  55. Depressions often are defined as recessions that last at least two years.
  56. The prevention and cure for recessions and depressions is federal deficit spending, which adds dollars to the economy (aka the private sector) and increases GDP. 
  57. Reductions in federal deficit spending or surpluses lead to recessions and depressions, providing the private sector with insufficient growth dollars.
  58. The Fed has no cure for stagflation, though Congress and the President do.
    A. The “stagnation” part of stagflation is cured by federal stimulus spending, as is done to cure every recession.
    B. The “inflation” part of stagflation is cured by federal spending to obtain the goods and services whose scarcity is causing inflation.
  59. Though state and local governments are monetarily non-sovereign concerning the U.S. dollar, nothing stops any entity –you, me or anyone–from creating their own sovereign currency and being Monetarily Sovereign concerning that currency.
    A. The currency would face the problem of demand, i.e., the acceptance of the money in payment, which in part would depend on the “full faith and credit” of the issuer.
    B. Many forms of money exist in America. One example is manufacturer coupons. They are issued by businesses, have a stated value, and are accepted by retailers.
    C. Some aspects of the U.S. dollar’s “full faith and credit” are:
         i. The government will accept only U.S. currency in payment of debts to the government
         ii. It unfailingly will pay all its dollar debts with U.S. dollars and will not default
         iii. It will force all domestic creditors to accept U.S. dollars, if offered, to satisfy any debt.
         iv. It will not require domestic creditors to accept any other money
         v. It will protect the value of the dollar.
         vi. It will maintain a market for U.S. currency
         vii. It will continue to use U.S. currency and will not change to another currency.
         viii. All forms of U.S. currency will be reciprocal; five $1 bills always will equal one $5 bill, etc.
  60. An example of Monetary Sovereignty and full faith & credit can be found in the board game, “Monopoly®.” By rule, the Bank in that game never can run out of Monopoly dollars, and it does not rely on income to pay its debts. Thus, the Monopoly bank is Monetarily Sovereign.
  61. Being Monetarily Sovereign, the Bank has infinite Monopoly dollars, and neither its deficits nor its debt is a burden on the Bank or on the players (corresponding to the real-world economy).
  62. Gold and silver are not, and never have been money. At most, they have been value standards to which the value of money is compared.
  63. Gold or silver never “backed” the dollar. The prices of gold and silver vary wildly, but through the years, the federal government arbitrarily and often has changed the value of dollars vs. gold and silver (which destroys the “backed” claim.) The only thing backing the U.S. dollar is the full faith and credit of the U.S. government.
  64. Lack of money is the mother of street crime. Impoverished neighborhoods endure far more street crime than do wealthy neighborhoods.
  65. The prevention and cure for street crime is not more police or more severe punishment. The prevention and cure for street crime is to reduce poverty.
  66. The federal government has the power to reduce poverty and thus to reduce street crime) by paying for health care insurance (Medicare for All), living expenses (Social Security for All), education (college for all), food (Supplemental Nutrition Assistance Program — SNAP for all), life insurance for all, and housing (rent assistance for all).
  67. “Rich” and “poor” are relative terms. A person having a million dollars would be poor if everyone else had ten million. A person with a thousand dollars would be rich if everyone else had ten dollars. The income/wealth/power difference between those who have more and those who have less is the Gap.
  68. The wider the Gap, the richer are the rich.
  69. To become more prosperous, the rich (who run our world) continually attempt to widen the Gap. They can widen the Gap by gaining more for themselves or by forcing the poorer to have less.
  70. To force the poorer to have less, the rich feed them the disinformation that the federal government cannot afford to pay for benefits, that federal spending causes inflation, or that benefits require taxes. None are true.
    A. The federal government can afford anything (It’s Monetarily Sovereign);
    B. federal spending never has caused inflation (shortages of oil and other goods and services cause inflation);
    C. federal taxes don’t pay for anything (the federal government creates dollars, ad hoc, to pay for all its spending). Federal taxes are destroyed upon receipt.
  71. The rich also spread the disinformation that if the federal government provides benefits, the poor will refuse to work. To debunk this myth, one only needs to look at the rich, or even at the upper middle classes, who continue to work despite receiving massive tax benefits.
  72. Human wants are unlimited. Even the rich wish to be richer, more powerful, more respected, more envied, more admired, and to have more of everything. Most people want a better life for themselves and their children.
  73. Thus, even upon receiving free medical care, housing, food, clothing, education, etc., people will continue to work for more than what is considered “basic” at any moment in time.
  74. To help spread their disinformation, the rich bribe:
    A. Politicians (via political donations and promises of future employment),
    B. Economists (via university donations and jobs in think tanks), and
    C. The media (via advertising dollars and media ownership).
  75. The rich bribe politicians to pass tax laws and other laws favorable to the wealthy and unfavorable to the rest of us, to widen the income/wealth/power Gap.
  76. Congress’s approval of benefits reveals an ugly part of the human psyche: Jealousy. President Biden’s approval of student loan debt reduction elicited cries of “Unfair” from those who already had paid off much or all of their student loan debt.
  77. But all benefits are felt to be “unfair” by those who didn’t receive the benefit before it was begun. This demonstrates the intimate relationship between economics and psychology. 
  78. The European Union (E.U.) is Monetarily Sovereign over the euro and is run by the rich, forcing the euro nations to struggle for lack of euros. This helps widen the Gap between the European rich and the rest.
  79. The United States is a not-very-democratic republic. While we, the people, do elect our leaders, the election system is highly skewed toward rural power. The Senators’ elections and the national Presidential elections give excessive power to rural voters vs. urban voters. This originally was done by our founders to encourage rural states to join the union.
  80. Within the Senate, voting rules give a few Senators, sometimes only one Senator, extreme power. Even the supposedly population-based House of Representatives accomplishes this dubious, undemocratic achievement via gerrymandering,the manipulation of an electoral constituency’s boundaries so as to favor one party or class. 
  81. The Supreme Court, the final arbiter of all laws, proudly pays no attention to what the public wants. Instead, they are nine (currently) unelected people who make national decisions based on their personal and religious philosophies and party affiliation. 
  82. As such, the unelected Supreme Court’s desired impartial functions have been superseded by the Justices’ personal biases. A case could be made for eliminating the Supreme Court and allowing the elected Executive and Legislative branches of government, which more closely reflect the desires of the public, to fill the role. An alternative would be to impose term limits on SCOTUS justices.

The above points are merely summaries of broader truths about the U.S. economy. Most have been discussed at greater length in this blog’s preceding posts.

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell


The Sole Purpose of Government Is to Improve and Protect the Lives of the People.


It breaks my heart to see this headline. It should break your heart, too.

[Why would any sane person take dollars from the economy and give them to a federal government that has the infinite ability to create dollars?]

It breaks my heart to see the following headline. It should break your heart, too.

Millions of vulnerable Americans likely to fall off Medicaid once the federal public health emergency ends
By Amy Goldstein

This image has an empty alt attribute; its file name is image-1.png
“Pay no attention to those many trillions behind me. I’m too broke to help you (unless you’re rich.)”

Begin with two central facts: The U.S. federal government is Monetarily Sovereign, and a Monetarily Sovereign entity cannot unintentionally run short of its own sovereign currency.

The federal government has infinite dollars.

Thus, your federal tax dollars do not fund federal spending.

Even if all federal tax collections totaled $0, the federal government could continue spending, forever.

All federal taxes are destroyed upon receipt.  Your M1 money-supply tax dollars cease to be part of any money-supply measure, once they reach the Treasury. They effectively are destroyed.

The government creates new dollars, ad hoc, every time it pays a bill. That is how the federal government creates dollars. The more debts the government owes, the more money it creates.

Contrary to what you repeatedly are told, your grandchildren are not liable for the federal “debt.” Not now, not ever.

WASHINGTON — The bipartisan spending deal that Congress cleared last week provides billions of dollars in aid for Ukraine, but it cuts other humanitarian programs meant to address mounting hunger crises elsewhere in the world, including Afghanistan and West Africa.

The initial House-passed bill and one offered in the Senate, written by majority Democrats, would have largely fulfilled the White House’s humanitarian funding request.

In interviews and statements, foreign aid advocates said they were “embarrassed” and “flabbergasted” that Congress reduced funds for dealing with the worst refugee displacements since World War II and other crises caused by mounting natural disasters and manmade conflicts.

The cuts to nonemergency humanitarian spending, as well as the lack of any international COVID-19 assistance in the omnibus, are a “self-inflicted wound” to America’s ability to recover from the pandemic and to pursue its long-term national security interests, said Liz Schrayer, president of the bipartisan U.S. Global Leadership Coalition.

Independent budget analysts have pinned blame on Republicans’ insistence that any increases in nondefense spending be kept roughly equal to increases in defense spending.

“We have more people who are hungry and people who are hungrier getting hungrier and we have no grain. It is absolutely catastrophic,” Peña said. “SFOPs got the raw end of the stick.”

The Senate’s lead foreign aid appropriator issued a similar view in an uncharacteristically blunt statement for a congressional appropriations cardinal criticizing his own bill.

Everywhere you turn, the phony belief that the federal government must operate under restrictive budgets, like you and I must, is a self-inflicted wound on America.

The so-called “federal debt” is not a debt (It is deposits in T-security accounts), and it is not a burden on anyone. (The “debt” is paid off simply by returning those deposits.)

Our federal government, having unlimited resources, pretends it is limited, and the public believes the lie.

The sole purpose of the lie is to keep you from asking for the same federal benefits that the rich (who pay no taxes year after year) receive.

So long as you are kept ignorant, the rich will keep getting richer and you will keep paying.

In addition to the lie about the federal debt being a burden, there is the lie that federal deficit spending causes inflation. It is widely believed, but it is a flat-out lie backed by no facts.

There is no relationship between federal deficit spending (red line) and inflation (blue line).

Inflations are caused by shortages, most often shortages of oil.

Today’s inflation is caused not only by shortages of oil but also by scarcities of food, shipping, labor, computer chips, vital minerals, lumber, and many other COVID-induced problems.

For many, many years, the US had massive deficit spending with low inflation, but now, with the effects of COVID and the Putin war, we suddenly see inflation. Clearly, deficit spending was not the cause.

The Fed’s attempt to address inflation by raising interest rates will not succeed while the real causes, shortages of oil et al, persist. Congress can address these shortages by spending more to facilitate the supply of all scarcities.

One good step would be to eliminate the harmful FICA tax, which doesn’t fund Medicare or Social Security but does discourage hiring by increasing the cost of labor.

And this is what breaks my heart. A Congress that never has to worry about having enough to eat, or a place to sleep, or good schools for their children, has decided America “can’t afford” to provide these things to the “lazy” poor.

Of course, the “can’t afford” meme is a blatant lie. America can afford anything that costs dollars.

But the rich, who bribe and control our government, don’t want the Gap between them and the rest of us to narrow. The wider the Gap, the richer are the rich, so widening the Gap is the way our spineless Congresspeople vote.

“Spineless” is the only way to describe the 100% refusal of one party to approve spending for the poor. These subservient sheep do exactly as they are told by the rich, then collect their excessive salaries and bribes, while the less fortunate among us pay the price.

So long as you believe that your federal taxes fund federal spending and that federal spending causes inflation — so long as you believe those two lies — then the rich will have won and you will have lost.

Ignorance has its costs.

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



The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and 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. 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 the rest.


The only way to teach children right from wrong

“Right” and “wrong” are social conventions that differ among societies. Canibals think eating people is just fine. Aztecs supposedly enjoyed ripping out hearts. Slavery was de rigueur in America.

You were not born knowing right from wrong. You learned from your family and friends. You learned from your schools and other outside sources.

There is only one way to teach children right from wrong. Children must be taught what is right and taught what is wrong. They must be taught the truth.

So, for instance, if your family and friends were bigots — — i.e. intolerant of people because of their race, religion, or sexual orientation — and your schools said nothing about bigotry, you probably would have become a bigot.

Why would your family and friends teach you bigotry? Because their families and friends taught them bigotry, a chain extending down through the generations, families and friends teaching bigotry as a standing tradition.

Why would your schools say nothing? Perhaps because of laws that prevented them from teaching you right from wrong, for fear you would find such teaching “uncomfortable.”

Although you, like most people, probably harbor some forms of bigotry in your heart, you probably also agree that bigotry, in general, is a sin. How do we solve that dichotomy and break the historical chain?

I was reminded of that question when some years ago, on a visit to Germany, I toured the Dachau concentration camp.

Dachau’s commandant, Theodor Eicke, introduced a system of regulations which inflicted brutal punishments on prisoners for the slightest offenses, while scientists there conducted cruel experiments.

Prisoners were subjected to injections of malaria and tuberculosis, and the untold thousands that died from hard labor or torture were routinely burned in the on-site crematorium.

As Allied units approached, at least 25,000 prisoners from the Dachau camp system were force-marched south.

During these death marches, the Germans shot anyone who could no longer continue; many also died of starvation, hypothermia, or exhaustion.

When American forces liberated Dachau, they found more than 30 railroad cars filled with bodies.

I was able to tour the camp because the German government neither hid nor denied the existence of the horrors committed there. In fact, they use the camp as a reminder of the past, to help prevent a repeat.

A movie describing in detail, the horrors of the camp, is shown to daily busloads of German school children as a right-vs.-wrong lesson.

The German people, but for a small minority, do not celebrate the misdeeds of Naziism. There are no statues of Hitler in Germany. The Holocaust is revealed and decried.

The Germans do not fear admitting this dark period of their history. In fact, they actively teach it.

I think of that approach to the shameful parts of Germany’s heritage when I compare it to the American — or rather, the right-wing — approach to the horrors of our past and even of our present.Nearly 100 Confederate Monuments Removed In 2020, Report Says; More Than  700 Remain : NPR

Slavery was an abomination that was celebrated by statues which, at long last, were pulled down despite claims of “Southern heritage.”

And today, in America, “well-meaning, good citizens,” protest against teaching the parts of our past that shame us. Their stated concern is that such reminders and revelations would make their children “uncomfortable.”

But ignorance is uncomfortable. Bigotry is uncomfortable. Denial does not change reality.

Today, our black families continue to undergo hardship. No, it isn’t of Holocaust levels, but still is terribly destructive and wholly unnecessary in our wealthy nation.

GOP advocated denial is the worst approach because it teaches no lessons. It condemns us to repeat the sins of the past.

Those who cannot remember the past are condemned to repeat it.”
George Santayana, The Life of Reason, 1905. From the series Great Ideas of Western Man.

We neither can, nor should try, to erase the blemishes of our past. Nor should anyone blame our children for our sins or for the sins of those who came before us. Leveling such blame would, in itself, be bigotry.

The purpose of teaching history is not to lay blame or to create guilt, but to help us know our own successes and foibles, and the circumstances that can move a nation to bigotry and hatred.

We are not pure. No nation is. Pretending purity is blindness and naivete. Let us be honest with ourselves. To some degree, we all receive mistreatment at times, but in America people of color have been, and still are, disproportionately mistreated. 

We allow the teaching of the Holocaust, and even have museums dedicated to that education. Few object, because it was the Germans, and to a degree, the Poles, Austrians, French and others who committed those crimes.

But the teaching of racism in America is an anathema to some Americans, because it is we, or more correctly, some of us, who are the perpetrators. And to hide that historical fact, we countenance angry denial.

This brings us to something called “Critical Race Theory,” perhaps the most reviled yet least understood and least taught academic subject in education.

Critical race theory (CRT) is an academic concept that is more than 40 years old. The core idea is that race is a social construct, and that racism is not merely the product of individual bias or prejudice, but also something embedded in legal systems and policies.

One example: In the 1930s, government officials literally drew lines around areas deemed poor financial risks, often explicitly due to the racial composition of inhabitants. Banks subsequently refused to offer mortgages to Black people in those areas.

Scholars who study critical race theory in education look at how policies and practices in K-12 education contribute to persistent racial inequalities in education, and advocate for ways to change them.

Among the topics they’ve studied: racially segregated schools, the underfunding of majority-Black and Latino school districts, disproportionate disciplining of Black students, barriers to gifted programs and selective-admission high schools, and curricula that reinforce racist ideas.

Solving racial inequalities first requires admitting that they exist and then admitting that they should be solved. 

And that requires study.

Sadly, there are those who deny any study is necessary, deny such inequalities exist to be solved, and claim any such equalities are the fault of the Black students — a “blame-the-victim” rationalization.

The Catholic confessional begins, “Forgive me father for I have sinned.” The confession of sin is the first necessary step for absolution. Without realization and confession, the sin compounds.

The Germans seem to have understood that the denial of sin is in itself a sin.

“Forgive America, father, for we have sinned.” Those are the words of the truly moral, truly righteous.

An evil man, like Donald Trump, would have you deny the obvious. He would have you deny the clear fact that people of color have received worse treatment in America than white Christians. That denial compounds the evil.

For you who are religious, here is are reminders:

John 1:9 If we confess our sins, he is faithful and just to forgive us our sins and to cleanse us from all unrighteousness.
James 5:16 Therefore, confess your sins to one another and pray for one another, that you may be healed. 
Proverbs 28:13 Whoever conceals his transgressions will not prosper, but he who confesses and forsakes them will obtain mercy.
Psalm 32:5 I acknowledged my sin to you, and I did not cover my iniquity; I said, “I will confess my transgressions to the Lord,” and you forgave the iniquity of my sin.
Romans 3:23 For all have sinned and fall short of the glory of God
James 4:17 So whoever knows the right thing to do and fails to do it, for him it is sin.

Perhaps you are one of those rare souls who has not sinned and has not felt bigotry in your heart. But to deny, or even to countenance the sins of others against strangers is in itself a sin.

Discomfort is not an excuse for denial.

Children must be taught about the existence of sin so they can recognize it and learn to avoid it. Without this teaching, the children can be sucked into sin by evil persons.

We are not born bigots. We learn to be bigots, unless we first learn about the evils of bigotry.

The people who object to the teaching of racism in America often blame their children’s sensitivity. But this is a false excuse. The real reason is, they are ashamed of our past, and want to bury it.

But the past has become the present, and it cannot be buried so long as it still lives. The only way to end the shame is to recognize it and to speak against it, else it will not only continue but multiply.

Perhaps, the real problem lies not in the reluctance to admit that bigotry exists but rather in the fear of the cures.

“Affirmative action” often has involved establishing racial quotas or preferences to “even out” representation in school admissions or job hiring. The problem here is that it invariably requires the less qualified to take precedence over the more qualified, and always will be seen as unfair.

Affirmative action” also stigmatizes the very people it is supposed to help — the “You got in only because you are black” appearance, which further adds to the bigotry rather than reducing it.

Once we recognize the bigotry problem itself, and once we determine to solve it, the solution lies not at the top but at its foundation: Money and poverty, i.e. the income/wealth/power Gap at the bottom of the financial scale.

Lacking money, such minorities as Blacks and Latins suffer poorer primary schools, more crime, less family stability, poorer housing, poorer nutrition, and a desperate culture, where immediate needs take precedence over future plans.

These all lead to poorer primary-school academic results which, in turn, lead to less-educated older students and less qualified job- and college applicants.

The solution lies not in taking from the top to give to the bottom (which always will be fought by America’s most powerful), or in giving solely to the bottom (which will be viewed as unfair by America’s middle).

Rather, the solution is to lift the lower levels far enough above subsistence so that the problems of poorer primary schools, more crime, less family stability, poorer housing, poorer nutrition, and desperation culture cease to impact even the least fortunate among us.

This would be a “rising tide” approach that lifts all boats. Examples can be found in the “Ten Steps to Prosperity” (below). For example:

  1. Eliminate the FICA tax
  2. Offer free Medicare to All who want it.
  3. Offer Social Security to All who want it.
  4. Offer free College to All who want it.

Offering the same money to everyone, regardless of current income or wealth, will not affect the lifestyles of the rich, but can lift the poor to levels where school and job achievements are seen as being in reach.

It will not evoke cries of “unfairness” and “discomfort” that currently plague the accurate teaching of America’s history.


[Why would any sane person take dollars from the economy and give them to a federal government that has the infinite ability to create dollars?]

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



The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and 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. 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 the rest.