The inflation con. How can it be any clearer than this?

The Chicago Tribune, a mighty newspaper having substantial resources for information-gathering, repeatedly promulgates the “Big Lie” in economics — the lie that because U.S. federal finances are just like state/local government finances, business finances, and personal finances, the federal deficit must be cut and/or taxes increased to “pay for” it all.

In truth, federal finances have almost nothing in common with the finances of other entities, not even the finances of Germany, France, Italy, et al.

Here are some excerpts from a Tribune editorial dated 7/19/2021:

Spend-borrow-repeat will be the ‘debt’ of us
Mark Lennihan/AP

National governments worldwide — ours in the forefront — have fought the pandemic and its side effects with borrowed money. Much of this new debt will fall not only on today’s children and grandchildren, but also on our descendants not yet born.

Wrong: “Today’s children and descendants not yet born” will not pay for any part of the so-called “debt,” just as you have not paid anything for the $25 trillion already accumulated.

It’s not debt. The misnamed “debt” is nothing more than the total of deposits into Treasury Security accounts, which resemble bank safe deposit accounts.

The government never touches those accounts, except to deposit interest, and the “debt” easily is paid off simply by sending the money back to the depositors. No tax dollars ever are involved.

So we were concerned if not surprised by a Wall Street Journal news story headlined “Governments world-wide gorge on record debt, testing new limits.” The Journal reports: “The U.S. government is on course for a budget deficit of $3 trillion for the second year in a row.”

The deficit (the difference between taxes and spending) is not a real deficit. Federal taxes have no relationship to federal spending; all federal taxes are destroyed immediately upon receipt.

When you pay your federal taxes, you take dollars from your checking account (which is part of the M1 money supply), and you send them to the federal government, where they are destroyed. That is, they cease to be part of any money measure. They cease to exist.

The federal government does not use your tax dollars to pay its bills. It creates new dollars, ad hoc.

Even if the federal government collected zero taxes, it still could continue spending forever. The main purpose of federal taxes is to control the economy.  The government taxes what it wishes to discourage, and it gives tax breaks to what it wishes to encourage.

We mention this as our government’s Internal Revenue Service delivers the first of several child tax credit payments to single parents earning up to $95,000, and to couples earning up to $170,000. Meanwhile, Senate Democrats say they intend to pass a sweeping social, educational and environmental package they price at $3.5 trillion. 

A trillion of anything befuddles many Americans, journalists included. The temptation is to toss one’s fidgety hands in the air and mutter that these debts belong not to us individual Americans but to a faceless federal government.

That last paragraph is true. The misnamed “debt” is just a notation on the federal government’s books. It is completely unrelated to individual Americans or to taxes.

No one is liable for paying off the federal “debt,” which is paid off by returning dollars already in the T-security accounts.

Ah, problem already. That government is essentially a big checking account with a standing army; it collects and spends tax dollars.

Wrong. Although the government does collect tax dollars, it does not spend tax dollars.

It has the unlimited ability to create new dollars and that is what they use when paying their bills.

No one has said it better than former Fed Chairman Alan Greenspan:

Absolutely correct.

The U.S. government uniquely is Monetarily Sovereign — it is sovereign over the U.S. dollar. It can create as many as it pleases at any time it pleases, for any purpose it pleases, and give them any value it pleases.

As our national debt rises daily toward $29 trillion, the government’s perpetual printing of new dollars threatens to cheapen the currency. In short, we — or our progeny — have to repay every dollar now being lent to Washington by China and other buyers of U.S. bonds.

Mark Lennihan, the author of the editorial, publishes two errors in one paragraph. “Cheapen the currency” refers to inflation. Lennihan is claiming that the rising national “debt” (deposits into T-security accounts) causes inflation.

He is wrong. The “debt” has risen, in the past 80 years from about $40 billion to about $25 trillion (depending on who’s counting), a gigantic increase. But in those 80 years, inflation has been modest.

The red line is federal debt growth. The green and blue lines are different measures of inflation.

Further, being Monetarily Sovereign, the federal government retains absolute control over the value of the dollar. It can change the value at will, as it has done many times in the past, the most recent being in 1971.

Maybe the accumulation of debt continues indefinitely without consequence. Or maybe critics cited by the Journal are right to warn that our spending is excessive, “risking an overheated economy and a lasting rise in inflation and interest rates.”

If federal debt caused inflation the two lines should essentially be parallel. As you can see they are nowhere near being parallel. There is no relationship between federal debt and inflation.

The accumulation of debt has continued without consequence for 80 years, despite repeated (and wrong) warnings from debt fear-mongers. Inflation has been modest — close to the Fed’s 2% annual target.

Which raises a question we hope Illinoisans will direct to their members of Congress: When does necessary spending on pandemic relief mutate into optional spending on the desirable but unaffordable?

We argue that unchecked cycles of spend-borrow-repeat eventually enfeeble any nation. That may not happen while interest rates are as low as today’s. But those rates — the relentless cost to taxpayers of carrying so much debt — now are likelier to rise than to fall.

Nothing is “unaffordable” for the federal government. It has infinite money. The author is confusing federal finances with personal finances or state/local government finances.u

Federal taxpayers have not and will not “carry” any of the federal debt. Tax dollars are destroyed upon receipt. They do not fund the debt.

Thus far in the pandemic, global securities markets happily support all of our borrowing; because of its prosperity, America is a safe haven for investors.

The federal government, having the infinite ability to create dollars, never borrows. More confusion by the author of the editorial.

But as Robert Rubin, the treasury secretary under President Bill Clinton, warned in a 2018 op-ed published in the Tribune: “The European financial crisis that began in early 2010 shows how markets can ignore unsound conditions for a long time — until they don’t. For many years,

Greeksovereign bonds traded at virtually the same yields as their German counterparts, which made no sense. Then, when the bond markets suddenly focused on the fiscal problems plaguing Greece and the other weaker countries, interest rates spiraled into crisis.”

Astoundingly, the treasury secretary did not understand the differences between a Monetarily Sovereign government (the U.S.) and monetarily non-sovereign governments (euro nations, Greece, Germany, Italy et al)

Greece, Germany and all the other euro nations do not have the ability to create their sovereign currency at will. Like you, and me, and our cities and states, they do not have a sovereign currency. They use the euro, which is the sovereign currency of the European Union, not of any individual nation. (It’s similar to the way American states are not sovereign over the dollar.)

All of us can run short of money. The U.S. government cannot. Anyone who does not understand the difference, does not understand economics.

Many Tribune readers are smarter than their government: Chastened by the Great Recession in which the inability to pay mortgage debt cost people their homes, Americans have attacked private-sector debt even as their politicians raised public-sector debt.

Again, Mr. Lennihan demonstrates a shocking ignorance of economics. He confuses personal (monetarily non-sovereign) finances with federal (Monetarily Sovereign) finances. It is amazing that he receives such a nationwide platform to spew such nonsense.

A classic example of citizens taking to heart the admonition, “Don’t try this at home.”

To reiterate arguments you’ve read here before: We write often about debt in part to counteract the popular (and in Illinois, political) tendency to see borrowed money as free manna that somebody else will worry about, someday. The truth is that, whether it’s enforced or nominally forgiven, someone always pays.

The admonition, “Don’t try this at home” is correct, because “home” is not Monetarily Sovereign.

Since it’s not real debt, but rather it’s deposits, no one pays. However, the federal government always pays its creditors — with newly created dollars.

When America’s debt inevitably grows too onerous for taxpayers to bear or global investors to tolerate, expect a furious blame game: Why did our politicians let this happen?

America’s debt is not borne by taxpayers. If it were, the debt could not have reached $25 trillion. It already would have been “borne.”

The “blame game” only will occur if we have a recession, which would be caused by too little deficit spending.

We voters didn’t demand that spending not exceed revenue, that debt not be allowed to pile up like snow atop a mountain. A long line of presidents and Congresses have talked about preventing the avalanche. But we voters have let them get by on that lip service alone.

When spending doesn’t exceed revenue, we have recessions if we are lucky, and depressions if we are not lucky.

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%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

A growing economy requires a growing supply of money. If the money supply shrinks, or even grows too slowly, we have recessions or depressions.

Their greatest sin thus far is abject failure to reform the debt-manufacturing entitlement programs such as Medicare (whose hospital coverage trust fund is projected by its trustees to run dry in 2026) and the Social Security retirement fund (projected as empty in 2034).

Finally, toward the end of his editorial, Mr. Lennihan reveals the true purpose of his Big Lie: He wants to cut the benefits that would go to the masses.

Why? Because that is what the very rich, who really run America, want.

It’s called Gap Psychology, the desire to distance oneself from those below. The rich are rich only because of the Gap. If there were no Gap, no one would be rich; everyone would be the same. And the wider the Gap the richer are the rich.

To widen the Gap, the rich bribe the media (via ownership and advertising dollars). They bribe the politicians (via campaign contributions and promises of lucrative employment, later.) They bribe the economists (via university endowments and promises of employment with “think tanks.)

So as members of Congress and President Joe Biden ponder a massive expansion of social, educational and environmental spending, we have a request:
Whatever the final shape of your package, pay for it rather than borrow for it. Because given how you’ve behaved — especially since the pandemic struck — your binge of spend-borrow-repeat will be the debt of us.

Fear, not Mr. Lennihan, it all will be paid for in exactly the same manner as always. No, the federal government will not borrow its own sovereign currency. It will create new dollars, ad hoc.

Now we have a request: Stop disseminating the Big Lie, either by ignorance or intent.

If you don’t understand Monetary Sovereignty, read up on it before writing anything more.

If you do understand it, and still are spreading the Big Lies, retire immediately in ignominy. You don’t deserve to have any of your work published.

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

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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

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.

MONETARY SOVEREIGNTY

Yes, you can have it all. Here’s how.

The U.S. federal government has all the tools it needs to control the value of the U.S. dollar.

You can have it all. We all can have it all. Nothing prevents it other than our own ignorance.

How is your imagination? Imagine a world in which:

  1. We have no poverty
  2. We have is no violent crime
  3. We all can afford the best health care
  4. We all can afford as much, and as fine an education as we wish
  5. There is no air, water, or land pollution, nor shortages of pure water
  6. Global warming does not exist
  7. Our entire infrastructure is kept current
  8. Our government is run to benefit all of us, not just the very rich

We actually do have the power to create this paradise on earth. We can have it all.

Background: The Problem Begins With Poverty

Money is not the root of all evil. Lack of money is.

Have you noticed that street crime — robbery, burglary, assault, murder, rape, shoplifting, drug-pushing — is most prevalent in impoverished neighborhoods? Of course, you have.

Before becoming a resident of Florida this year, I lived 60+ years north of Chicago, in what locally is known as “The North Shore.” It includes mostly upscale, “bedroom” communities, one of which is Wilmette, Illinois, where I lived.

According to “Neighborhood Scout:” 

Wilmette home prices are not only among the most expensive in Illinois, but Wilmette real estate also consistently ranks among the most expensive in America.

Wilmette is a decidedly white-collar village, with fully 94.76% of the workforce employed in white-collar jobs, well above the national average. Overall, Wilmette is a village of professionals, managers, and sales and office workers.

Wilmette is home to many people who could be described as “urban sophisticates”. Urban sophisticates are people who are both educated and wealthy, and thus tend to be older, richer, and more established than young professionals.

“Urban sophisticates” is not just about being educated and well-off financially: it is a point of view and state of mind, one that you might call ‘urbaneness’. But such people can and do regularly live in small towns, suburbs and rural areas, as well as in big cities. They read, support the arts and high-end shops, and love travel.

Do you have a 4-year college degree or graduate degree? If so, you may feel right at home in Wilmette. 83.23% of adults here have a 4-year degree or graduate degree, whereas the national average for all cities and towns is just 21.84%.

The per capita income in Wilmette in 2018 was $87,576, which is wealthy relative to Illinois and the nation. This equates to an annual income of $350,304 for a family of four.

Can you visualize Wilmette?

Google “Murder in Wilmette,” and you might possibly find a half dozen references from the past 50 years. Here is what violent crime looks like in Wilmette, in Illinois, and in the whole United States.


Get the picture?

What is the fundamental difference among Wilmette, Illinois, and the U.S., which can account for the massive differences in crime rates, education rates, and home prices?

Money.

No people are born murderers, rapists, robbers, burglars, and attackers. But lacking money, people are far more likely to grow up as street criminals.

And please spare yourself the anecdotes about impoverished kids who ultimately became pillars of society. Yes, there are plenty of them, and somewhere in their lives occurred fortuitous events that led to their achievements.

Perhaps nature provided them with the necessary brains or brawn to succeed, despite the odds. Or some mentors took them under wing and provided them with the leadership to find success.

And yes, there are rich people who commit crimes, though most often of the white-collar variety. Scant exceptions do occur, but the relationship between poverty and crime, especially violent crime, cannot be denied.

I am as opposed to the proliferation of guns as anyone, but I now do not believe guns are an important cause of crime, though they are an important facilitator of crime (and an even more important facilitator of suicide).

I have come to the conclusion that America could enact the most draconian gun laws on the planet, and that would not solve our crime problems. 

We are at the stage in which gun ownership is an addiction, similar to alcohol and drug addictions. The time long has passed when we legally could prevent gun ownership and usage, any more than we were able, via laws, to prevent alcohol ownership and usage during Prohibition, or prevent drug ownership and usage during the “War on Drugs.” 

We once could have prevented the disease, but now we are too infected for a cure.

We simply cannot stop gun crime by using the brute force of prohibitive laws. That mule will not respond to the stick. At long last, we must learn to use the carrot — the federal government’s infinite ability to create dollars– and thus cure the poverty that is the root cause of violent crime.

Our primary problem is: People who are not impoverished resent the government giving to the poor. It’s a state of mind that each day is fostered by wealthy propaganda.

Additionally: 

The U.S. federal government has the financial power to provide a generous form of Social Security to every man, woman, and child in America, instantly eliminating poverty. 

The U.S government has the financial power to eliminate not only most federal taxes (including the onerous, regressive FICA tax), but importantly to reduce the need for state and local taxes — those sales and use taxes that disproportionately affect the less wealthy — by simply giving state and local governments money.

The U.S. government has the power to eliminate the financial impoverishment caused by lack of insured health care, simply by providing no-deductible, comprehensive Medicare for All.

The U.S. government has the financial power to provide schooling to all Americans who want it — grades K through advanced education, thereby not only reducing the costs of college, but by reducing the need for local K-12 school taxes.

The U.S. government has the financial power to reduce global warming by supporting not only net-zero energy use and production, but also by supporting carbon-removal technology usage, research, and development

The U.S. government has the financial power to support water recycling and desalination usage, research and development. There is plenty of water on earth, but too little is fresh, drinkable water, and we rapidly are reducing those supplies.

The U.S. government has the financial power to repair and modernize our infrastructure — our roads, bridges, dams, sewers, electric grid, telecommunication, tunnels, transportation, parks, beaches, etc.

Many of the above initiatives are being attempted by elements of local government and the private sector, all of which have limited funds,

But, for the federal government, money is unlimited and free, created at the touch of a computer key.

Will so much federal spending cause inflation? No, as we have demonstrated here, and here, and hereinflation is not caused by federal deficit spending. Inflation is caused by shortages of goods and services, and often can be cured by federal deficit spending to reduce shortages.

Will so much federal spending be a burden on future taxpayers? No, federal taxes do not fund federal spending. The Monetarily Sovereign federal government pays for its spending by creating dollars, ad hoc. The sole purpose of federal spending is to control the economy by taxing what the government wishes to discourage, and by giving tax breaks to what the government wishes to encourage.

(This is different from state and local government taxes which do fund state and local spending.)

Will so much federal spending be socialism? No, socialism is not funding; socialism is control.

Consider Social Security. It spends billions but it is not socialism. It doesn’t control. It merely funds.  Similarly, Medicare has very little control over your medical services other than the amounts it funds.

It does not tell you what doctor to see, what hospital to visit or what medicines to take. It does not control what your doctor diagnoses or treats. Medicare does not fund every procedure, but it does not control your financial ability to have the procedure.

Being Monetarily Sovereign, the American federal government has the financial ability to create paradise on earth. We lack only the knowledge and the will to do it.

The populace has been led to believe slogans like “Too good to be true,” and “No such thing as a free lunch,” which replace facts with a world of disinformation and cynicism, making us surrender before we begin.

From the standpoint of federal financing, nothing is “too good to be true,” and yes, federal spending is a “free lunch.”

As for the will, the government is blocked by the very rich, whose “Gap Psychology” goal is to widen the Gap between the rich and the rest. No matter how rich they are, the rich seem always to want to become even richer, and that requires ever-widening the income/wealth/power Gap. — and that requires pushing down those who are not rich.

In Summary:

The more you experience life’s failures, the more you tend to believe cynically, that a perfect world cannot exist, and that attempts to create perfection are fruitless, wasteful, naive, and even harmful. You have grown to expect disappointment.

So, when you are told the U.S. federal government has the infinite power to create U.S. dollars, and do it without adverse side effects, your knee-jerk response is to deride the idea. Thus, the “too good to be true,” and “no such thing as a free lunch” responses.

Yet, when you are told the U.S. government has the infinite power to create laws, and that U.S. dollars are nothing more than legal creations, not physical creations, you may pause that knee-jerk response.

Just as a federal law can say anything the federal government wishes it to say, the U.S. dollar can be anything and worth anything the law says it is, i.e. anything at all.

Throughout American history, federal law has stated that U.S. dollars were worth varying amounts of silver and gold, a process one hopes finally will have ended in the Nixon year 1971. But the U.S. government could pass a new law stating that the U.S. dollar is worth anything at all — a 1-carat diamond, or a pound of salt, or a quart of pure water. The value of the dollar, i.e. inflation, is in the hands of the government.

Beginning in 1971, the government has allowed the U.S. dollar to “float,” i.e. to allow the public to decide the exchange rate (vs. other currencies) of the dollar. 

For that reason, there now can be no real answer to the question, “What is a dollar worth?” You can express it only with regard to other currencies, whose worth is equally vague. 

Because a dollar is, in reality, a debt owed by the U.S. government, its value, like the value of all debts, is determined by its collateral, and the full faith and credit of the debtor, the U.S government. 

Without gold, (or even with gold), the real collateral for the U.S. dollar is the full faith and credit of the U.S. government — not our “spacious skies or amber waves of grain” — just our full faith and credit.

If you were to try to drill down below exchange value to find the “real” value of the U.S. dollar, you would have to determine the “real” value of the full faith and credit of the U.S. government, an impossible task.

All of the above is meant to show you the truly amorphous nature of the U.S. dollar. It is what the government says it is, and it is worth what the government says it is — and there is no limit to the number of dollars the government can create. The dollar is the offspring of the government’s laws.

In short, there is no limit to what the government can spend to purchase paradise.

Authentic Happiness | Authentic Happiness
Working together, we have all the tools we need to create our paradise.

This simple fact makes a mockery of the President’s and Congress’s “struggles” to pass spending legislation, against those who falsely claim the government cannot or should not spend so much money.

In addition to interest rate control, which affects the market demand for money, and Federal Reserve bond purchases and sales, the federal government can revalue or devalue the dollar, at will.

We created a Monetarily Sovereign federal government and gave it all the power it needs to make America a paradise on earth. It is not constrained by money. It has infinite money and infinite control over the value of its money.

Our world is constrained only by our intellect, our imagination, our will, and our honesty. Barring a meteor strike or the sun failing us, we always will have exactly the world we create for ourselves — exactly the world we deserve.

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

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

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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

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.

MONETARY SOVEREIGNTY

 

 

It’s 2021, and after 81 years, the “debt bomb” is about to explode. Again?

As President Ronald Reagan said (often), “There you go again.”

And again.

And again.

The Boy Who Cried “Wolf!”
The economists who cried, “Wolf!”

For 81 years, the debt-nuts have been predicting the imminent doom of the U.S. government and U.S. taxpayers, because the so-called federal “debt” (which isn’t even a “federal debt”) supposedly is too big.

And in the following article, the doom-sayers do it, again.

The Democrats’ ‘Big’ Infrastructure Plan: A Giant Debt Bomb? by Rachel Bucchino, a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill.

“What would happen to the national debt will depend on the extent to which the bill would include revenue raisers as well as spending.

Of course, Congress basically has two options: borrowing money or raising taxes, whether it uses reconciliation or not,” Stan Veuger, a resident scholar in economic policy studies at the American Enterprise Institute, said.

Wrong, in every respect.

The federal government,  unlike state and local governments, and unlike what the debt-nuts tell you, does not need “revenue raisers.” To pay its bills, the federal government creates new dollars, ad hoc. It cannot run short of its own sovereign currency, the U.S. dollars.

The irony is that the debt-nuts, having made exactly the same complaint for 81 years, do not recognize that their complaint actually disproves their own complaint.

The so-called “debt,” which isn’t actually debt, exceeds (depending on who is counting) $25 trillion. So, if “revenue raisers” are needed, where did the $25 trillion come from? 

And if you think the government borrowed it, then explain where the “lenders” got it.

The answer is that despite the byzantine process by which all dollar lenders create dollars, ultimately all U.S. dollars begin with the U.S. government, and that government never can run short of U.S. dollars.

Why isn’t the U.S. debt actually debt? Because those T-bills, T-notes, and T-bonds are not loans. They are deposits, similar in nature to your deposits into your bank safe-deposit vault.

When you buy federal “debt,” you open a T-security account into which you put dollars. The federal government is Monetarily Sovereign. It has the unlimited ability to create dollars, so it has no need for, or use of, your dollars.

No matter how much the federal government spends, you never will see a deduction, even temporarily from you T-security account.

Your dollars will remain untouched in your T-security account, earning interest, until maturity, at which time your dollars are sent back to you.

No taxes or other sources of revenue are involved. Those are your dollars simply being returned, unused and unneeded by the federal government. 

Here's who owns a record $21.21 trillion of U.S. debt - MarketWatch
The U.S. government owns more than $8 trillion of its own U.S. “debt.” If the government borrows, it must borrow more than a third from itself!

Immediately, the situation looks less dire than the debt-nuts would have you believe. But, here’s even more proof that all the hand-wringing about federal “debt” is nonsense.

The purpose of borrowing is to acquire money. But the U.S. federal government never needs to acquire money. It creates all the money it wishes, just by pressing computer keys.

Exactly correct. So, if the government does not borrow, what is the purpose of T-securities? Answer: In days past, the U.S. government was not Monetarily Sovereign. It did not have the unlimited ability to create dollars.

Its dollar creation was limited by its gold and silver supplies.

The Bretton Woods System tied all global currencies to the value of the dollar, and set the value of the dollar at 1/35th of an ounce of gold.

In 1971, President Nixon revalued the dollar to 1/38th of an ounce, which in turn caused a run on gold reserves.

In order to stop the run on gold reserves, Nixon severed the ties from gold completely.

The above demonstrates that the value of the U.S. dollar is completely arbitrary, and is under the total control of the U.S. President and Congress. Because inflation is a reflection of the dollar’s value, compared with other currencies and with commodities, U.S. inflation also is controlled by the President and Congress. 

The above also demonstrates that precious metals standards limit the government’s ability to create dollars, a limit the federal government has not suffered since 1971.

Days after President Joe Biden’s $1.9 trillion rescue package finally passed, Democrats are already working on another big-spending initiative that will likely target the nation’s infrastructure and invest billions into new projects like broadband internet.

It will likely include provisions aimed at gaining a tighter grip on climate change, mirroring the $2 trillion infrastructure and climate plan proposed by Biden on his campaign trail.

“It is going to be green and it is going to be big,” Rep. Peter DeFazio (D-Oregon), said.

The president’s infrastructure and climate proposal outlined goals including achieving a carbon pollution-free power sector by 2035, upgrading four million buildings and weatherizing two million homes over four years, constructing 1.5 million sustainable homes, expanding broadband internet to every American and investing in 500,000 electric vehicle charging stations.

The initiative also aims to create millions of jobs in related industries such as agriculture, clean energy and auto manufacturing.

Think of what the Biden government wishes to address: Infrastructure, internet, pollution, upgrading, weatherizing, electric charging station, and job creation — and it will not cost you, the taxpayer, one cent. Not one.

The government will create, from thin air, all the money needed. In fact, it could cut tax collections to zero and still pay for everything. And it will do all that while growing the economy.

(Question: Why does the federal government collect taxes if it doesn’t need the money? Answer: To control the economy. It taxes what it wants to discourage and gives tax breaks to what it wants to reward.)

But the debt-nuts in the Republican Party don’t want these wonderful benefits to happen under a Democratic President. So they promulgate lies about the federal “debt,” falsely comparing it with personal debt.

But federal “debt,” not being debt, and not owed by the federal government, is nothing at all like personal debt. It is not a burden on the federal government. It is not a burden on today’s or future taxpayers.

It merely is deposits into quasi safe-deposit boxes.

Think about it. When you put bonds into your bank safe-deposit box, does the bank owe you money? At most, it simply owes you the contents of the box.

While Republicans support widespread infrastructure spending, most have concerns about the overall price tag of the package that would add to the alarming national debt level and the Democrats’ push to incorporate items on climate into a big-spending initiative.

There is nothing alarming about the national “debt” (deposit) level. It is an invented “alarm” to keep you from receiving the benefits our government was designed to create.

These are the same Republicans who supported Trump’s tax cuts for the rich, which also added to the “debt,”

The ratio of debt held by the public to gross domestic product (GDP), which currently stands at 99.37 percent, could reach as much as 110 percent by the end of fiscal year 2021.

It will continue to grow under current law, “but if we were to add another $2 [trillion] from the infrastructure bill by borrowing the full amount, it would go up to a little under 120 percent.

That is very high by historical standards, but interest rates are at historically low levels, making for more moderate annual interest payments.”

Contrary to popular myth, the “debt”/GDP ratio is meaningless.  GDP is a measure of spending in any one year. Federal “debt” measures the net amount of deposits into T-security accounts.

Two completely different measures and two completely time scales. The “debt”/GDP ratio isn’t just apples and oranges. It’s apples and adverbs — two measures that could not be more different.

The meaningless Debt/GDP ratio. It’s not related to growth, to recessions, to inflations, or to any other economic measure. It, very simply, is meaningless.

The ratio has no predictive value. You could examine the ratio for every nation on earth, and it would tell you nothing about the health of that nation’s economy.

Anyone quoting that ratio essentially is telling you, “Either I know nothing about economics, or I believe you know nothing, so I feel I can con you.”

“The problem is that rates may go up and that the debt to GDP ratio will go up dramatically over the next few decades if we continue on the current path. Both of those factors will lead to a dramatic increase in interest payments.” 

While the growing national debt is a looming issue, some economists pointed to the historically low interest rates for borrowing and that investing in infrastructure projects tends to yield a high rate of return.

“What matters is not the debt but the size of interest payments relative to GDP. Since interest rates are so low, any investment that raises GDP significantly is worth it.

Investing in infrastructure has a high rate of return and so it should be done,” Jonathan Gruber, a former technical consultant to the Obama Administration and an economics professor at the Massachusetts Institute of Technology, said.

Now, a new story: “What matters is not the debt but the size of interest payments relative to GDP”?

See? Now the dept doesn’t matter. It’s that meaningless ratio that matters. No not the Debt/GDP ratio. A new meaningless ratio: Interest payments/GDP.

It’s like eating Jello with one chopstick. As soon as you disprove one lie, the slippery debt-nuts come up with a new one.

They want you to worry about interest payment ratios, all while knowing the federal government has the unlimited ability to make interest payments, no matter how large.

And why exactly does the ratio matter? No one knows, but the debt-nuts are sure that somehow, someway it simply must matter, and you should be very afraid.

The fact: Those interest payments are no burden on anyone, and they will help grow the economy.

Top congressional Democrats have suggested removing former President Donald Trump’s 2017 tax cuts or implementing stiff tax policy on the wealthy to help fund the package, moves that will likely see rejection from the other side of the aisle.

While removing tax cuts for the wealthy will do nothing to “fund the package,” it will help narrow the Gap between the rich and the rest, and that is important. The wide Gap punishes millions of Americans while giving near-dictatorial power to the chosen few.

It’s unclear how Biden and the Democrats will look to fund the infrastructure and clean energy plan at this point, as the focus is more targeted on developing a bipartisan package that won’t resort to budget reconciliation.

What a terrible shame. For no good reason at all, the marvelous benefits the federal government is able to provide, are stalled because of ignorance and politics.

In summary, here is the latest sampling of the ignorant, disgraceful, “ticking time-bomb” references — all proven wrong by history — that we have recorded since 1940.

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September 1940, the federal budget was a “ticking time-bomb which can eventually destroy the American system,” said Robert M. Hanes, president of the American Bankers Association.

September 26, 1940, New York Times, Column 8

By 1960: the debt was “threatening the country’s fiscal future,” said Secretary of Commerce, Frederick H. Mueller. (“The enormous cost of various Federal programs is a time-bomb threatening the country’s fiscal future, Secretary of Commerce Frederick H. Mueller warned here yesterday.”)

By 1983: “The debt probably will explode in the third quarter of 1984,” said Fred Napolitano, former president of the National Association of Home Builders.

In 1984: AFL-CIO President Lane Kirkland said. “It’s a time bomb ticking away.”

In 1985: “The federal deficit is ‘a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell. (Remember him?)

Later in 1985: Los Angeles Times: “We labeled the deficit a ‘ticking time bomb’ that threatens to permanently undermine the strength and vitality of the American economy.”

In 1987: Richmond Times–Dispatch – Richmond, VA: “100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB’”

Later in 1987: The Dallas Morning News: “A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government.”

In 1989: FORTUNE Magazine: “A TIME BOMB FOR U.S. TAXPAYERS

In 1992: The Pantagraph – Bloomington, Illinois: “I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion.

Later in 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion.”

In 1995: Kansas City Star: “Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.”

In 2003: Porter Stansberry, for the Daily Reckoning: “Generation debt is a ticking time bomb . . . with about ten years left on the clock.”

In 2004: Bradenton Herald: “A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB

In 2005: Providence Journal: “Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb.”

In 2006: NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.

In 2007: USA Today: “Like a ticking time bomb, the national debt is an explosion waiting to happen.

In 2010: Heritage Foundation: Why the National Debt is a Ticking Time Bomb. Interest rates on government bonds are virtually guaranteed to jump over the next few years.

In 2010: Reason Alert: “. . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”

In 2011: Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode.”

June 19, 2013: Chamber of Commerce: Safety net spending is a ‘time bomb’, By Jim Tankersley: The U.S. Chamber of Commerce is worried that not enough Americans are worried about social safety net spending. The nation’s largest business lobbying group launched a renewed effort Wednesday to reduce projected federal spending on safety-net programs, labeling them a “ticking time bomb” that, left unchanged, “will bankrupt this nation.”

In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb

On Jun 18, 2015: The ticking economic time bomb that presidential candidates are ignoring: Fortune Magazine, Shawn Tully,

On February 10, 2016, The Daily Bell“Obama’s $4.1 Trillion Budget Is Latest Sign of America’s Looming Collapse”

On January 23, 2017: Trump’s ‘Debt Bomb’: Deficit May Grow, Defense Budget May Not, By Sydney J. Freedberg, Jr.

On January 27, 2017: America’s “debt bomb is going to explode.” That’s according to financial strategist Peter Schiff. Schiff said that while low interest rates had helped keep a lid on U.S. debt, it couldn’t be contained for much longer. Interest rates and inflation are rising, creditors will demand higher premiums, and the country is headed “off the edge of a cliff.”

On April 28, 2017: Debt in the U.S. Fuel for Growth or Ticking Time Bomb?, American Institute for Economic Research, by Max Gulker, PhD – Senior Research Fellow, Theodore Cangeros

Feb. 16, 2018  America’s Debt Bomb By Andrew Soergel, Senior Reporter: Conservatives and deficit hawks are hurling criticism at Washington for deepening America’s debt hole.

April 18, 2018 By Alan Greenspan and John R. Kasich: “Time is running short, and America’s debt time bomb continues to tick.”

January 10, 2019, Unfunded Govt. Liabilities — Our Ticking Time Bomb. By Myra Adams, Tick, tick, tick goes the time bomb of national doom.

January 18, 2019; 2019 Is Gold’s Year To Shine (And The Ticking US Debt Time-Bomb) By Gavin Wendt

[The following were added after the original publishing of this article]

April 10, 2019, The National Debt: America’s Ticking Time Bomb.  TIL Journal. Entire nations can go bankrupt. One prominent example was the *nation of Greece which was threatened with insolvency, a decade ago. Greece survived the economic crisis because the European Union and the IMF bailed the nation out.

July 11, 2019National debt is a ‘ticking time bomb‘: Sen. Mike Lee

SEP 12, 2019, Our national ticking time bomb, By BILL YEARGIN SPECIAL TO THE SUN-SENTINEL | At some point, investors will become concerned about lending to a debt-riddled U.S., which will result in having to offer higher interest rates to attract the money. Even with rates low today, interest expense is the federal government’s third-highest expenditure following the elderly and military. The U.S. already borrows all the money it uses to pay its interest expense, sort of like a Ponzi scheme. Lack of investor confidence will only make this problem worse.

JANUARY 06, 2020, National debt is a time bomb, BY MARK MANSPERGER, Tri City Herald | The increase in the U.S. deficit last year was about $1.1 trillion, bringing our total national debt to more than $23 trillion! This fiscal year, the deficit is forecasted to be even higher, and when the economy eventually slows down, our annual deficits could be pushing $2 trillion a year! This is financial madness. There’s not going to be a drastic cut in federal expenditures — that is, until we go broke — nor are we going to “grow our way” out of this predicament. Therefore, to gain control of this looming debt, we’re going to have to raise taxes.

February 14, 2020, OMG! It’s February 14, 2020, and the national debt is still a ticking time bomb!  The national debt: A ticking time bomb? America is “headed toward a crisis,” said Tiana Lowe in WashingonExaminer.com. The Treasury Department reported last week that the federal deficit swelled to more than $1 trillion in 2019 for the first time since 2012. Even more alarming was the report from the bipartisan Congressional Budget Office (CBO) predicting that $1 trillion deficits will continue for the next 10 years, eventually reaching $1.7 trillion in 2030

April 26, 2020, ‘Catastrophic’: Why government debt is a ticking time bomb, Stephen Koukoulas, Yahoo Finance  [Re. Monetarily Sovereign Australia’s debt.]

August 29, 2020LOS ANGELES, California: America’s mountain of debt is a ticking time bomb  The United States not only looks ill, but also dead broke. To offset the pandemic-induced “Great Cessation,” the US Federal Reserve and Congress have marshalled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup kitchen levels. Assuming that America eventually defeats COVID-19 and does not devolve into a Terminator-like dystopia, how will it avoid the approaching fiscal cliff and national bankruptcy?

March 17, 2021The Democrats’ ‘Big’ Infrastructure Plan: A Giant Debt Bomb? by Rachel Bucchino, a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill. Congress basically has two options: borrowing money or raising taxes, whether it uses reconciliation or not,” Stan Veuger, a resident scholar in economic policy studies at the American Enterprise Institute, said.

 

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.

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.

MONETARY SOVEREIGNTY

 

 

Percentages of people who failed to throw their dollars into the IRS bonfire

Those who understand Monetary Sovereignty are familiar with these basics:

  1. The federal government, being Monetarily Sovereign, has the unlimited ability to create its sovereign currency, the U.S. dollar.

    Chapter 4: Costs of Iran's nuclear programme and the potential for renewable energy sources « Naame Shaam – نامه شام
    When we pay federal taxes, this is exactly what we are doing.
  2. Thus, unlike state and local governments, which are monetarily non-sovereign, the federal government cannot unintentionally run short of U.S. dollars.
  3. The federal government pays for all its spending by creating new dollars, ad hoc.
  4. It creates dollars by sending instructions, (“Pay to the order of”) to each creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.
  5. The instant the bank obeys those instructions, new dollars are created and added to the M1 money-supply measure.
  6. So, even if all federal tax collections ceased, the federal government could continue spending, forever.
  7. In fact, no form of income, whether taxing or borrowing, provides spending dollars to the federal government.
  8. Tax dollars sent to the federal government leave the economy. They leave the M1 money-supply measure and effectively are destroyed upon receipt.
  9. The purpose of federal taxes is to control the economy, by taxing what the government wishes to discourage, and by giving tax breaks to what the government wishes to encourage. That is why the very rich, who own Congress and the President, are given such generous tax breaks that the richest pay little or no taxes at all.

In essence, you might as well throw your tax dollars into a bonfire, for all the good they do to prevent federal government insolvency.

In return for your obeying the law, the Treasury does you the service of throwing your dollars into that federal bonfire, so you don’t have to bother.

The Committee for a Responsible Federal Budget (CRFB), in bemoaning the lack of tax-payment compliance in America, has published the following graph.

Presumably, the graph is meant to make you feel outrage about so many people having refused or neglected to throw their dollars into the IRS bonfire.

PERCENT OF PEOPLE WHO HAVE FAILED TO THROW
THEIR DOLLARS INTO THE FEDERAL BONFIRE

In reality, the outrage you feel should be directed at the politicians and groups like the CRFB.

They are the ones who claim that the federal government either can’t afford to, or must raise taxes to, provide free Medicare for All, Social Security for All, College for All, reduced carbon emissions, improved infrastructure, air, water, and land, narrowed Gap between the rich and the rest, etc.

The U.S. Congress, having unlimited disposable dollars, could and should be doing so much more to improve your life.

Instead, they argue about whether spending by the federal government has exceeded the government’s “means” (It has no “means” to exceed), or whether federal spending is “socialism” (It isn’t), or whether the poor will refuse to work if given financial aid (They won’t refuse if the aid is on top of, rather than instead of salaries).

President Richard Nixon, a Republican, gave us Monetary Sovereignty by eliminating the last gold standard, so it is a special disgrace that the current Republican Party now refuses to use the most valuable asset any nation can have: Unlimited money.

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.

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.

MONETARY SOVEREIGNTY