An update of the biggest con job in American history: Tick, tick, tick. 80 years and the federal debt “ticking time bomb” still is ticking. Sunday, Jan 26 2020 

An update of the biggest con job in American history, that still is running:

Once again, I am compelled by recent articles to remind you that in 1940, when the phony federal debt was described as a”ticking time bomb,” America had not yet entered World War II.

The most popular songs were: Tommy Dorsey’s “I’ll Never Smile Again,” Bing Crosby’s “Only Forever,” and Artie Shaw’s “Frenesi

 The median annual income for a man in 1940 was $956. 

A postage stamp cost $.03.

A new car cost about $800 and for 18 cents, you could buy a gallon of gas.

And yes, the federal debt was called a “ticking time bomb.”

In 1940, when the federal debt first became a “ticking time bomb,” it was only $40-50 Billion. Today it exceeds $22 Trillion.

Year after year, that “ticking time bomb” of federal debt has kept ticking, and here we are, in 2020, with a  healthy economy, and still that phony bomb hasn’t exploded.

Eighty years of warnings, eighty years of being wrong, eighty years and many people still believe the doomsday sayers.

As we dance down Memory Lane, here they are, again:

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Back in 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.

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: 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, 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.

 

In Summary
The U.S. government is Monetarily Sovereign. It has the unlimited ability to create its own sovereign currency, the U.S. dollar.

The government has absolute control over all aspects of the dollar, including its value. Unlike state and local governments, and unlike businesses, and unlike the euro nations, and unlike you and me, the federal government can service any size debt without collecting a penny of income.

Yet, tick, tick, tick, the fake debt time bomb of terror keeps on ticking. The only question, “How many years of proven-wrong fear-mongering will you, the public fall for before the debt charlatans are excised from the news?”

By now, after 80 years of false warnings, you should have learned that phony concerns about the federal debt constitute the biggest con job in American history — and it still is running. And you still are buying it.

The fundamental purpose of this con job is to keep you from asking for benefits from the federal government — benefits the rich already receive, but because of Gap Psychology, don’t want you to have.

Is it possible that the rich really can fool all the people all the time?

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. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

From “ticking time bomb” to “Deficit of Doomsday” Wednesday, Jan 15 2020 

Regular readers of this post are familiar with the “ticking time bomb,” the name the Debt Henny Pennys have given to the federal debt.

You see, the Debt Henny Pennys (DHPs) do not understand the difference between the finances of a Monetarily Sovereign government (i.e. the U.S., Canada, Australia, Japan et al) and the monetarily non-sovereign finances of cities, counties, states, euro nations, you, and me.

Image result for bernanke and greenspan

Do the fools actually believe we use their tax dollars?

Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

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

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets (borrowing) to remain operational.

The DHPs do not understand that while Monetarily Sovereign entities cannot run short of their own sovereign currency, and do not even need or use any sort of income (including tax income), we monetarily non-sovereign folks can and often do run short of money, simply because we, as individual people, do not have a sovereign currency.

If I asked you how much money you own, you probably could give me a pretty good estimate. But if I asked you how much money the United States government owns, you could Google forever and never find the answer.

The reason: Being Monetarily Sovereign, the U.S. government has infinite dollars. It can create dollars instantly and endlessly.

Denying economic reality, the DHPs, do not want you to know that they called the federal deficit and debt (they mix the two), a “ticking time bomb” way back in 1940, when the federal debt was $40 Billion.

And they have used the same warning every year since.

(It reminds me of the cult leader who annually tells his flock the world is ending, so they give him all their worldly possessions and climb a mountain to sit and wait for the apocalypse. Then, when the world doesn’t end, they climb back down, financially poorer and having learned nothing, and a year later, the same thing happens.)

Today, the debt has climbed to over $20 Trillion, a 50,000% increase from 1940, and here we are, with the strongest economy in our history.

Well, here’s a new one from the DHPs: Out with the misleading, “Ticking Time Bomb” and in with even more misleading, “Decade of Deficit Doomsday.” Different words; even more ignorant.

The 2020s Will Be the Decade of Deficit Doomsday
America will have to pay for its spending spree and its wars.
ERIC BOEHM, a reporter at Reason.com, 1/10/2020

The decade that just ended saw a period of uninterrupted economic growth. In the decade to come, we’ll pay for squandering it.

Since the so-called Great Recession officially ended in the third quarter of 2009, the United States has enjoyed 42 consecutive quarters of solid if unspectacular economic growth.

That’s the longest run of uninterrupted growth since government economists began tracking the business cycle in the 1850s, far outpacing the average economic expansion of 18 months.

Employment has increased by 12 percent, the jobless rate reached record lows, and America’s gross domestic product (GDP) has increased by more than 25 percent.

It has been, by almost any measure, one of the best times in American history. Almost.

Ah, poor Eric Boehm, the author of the above. He describes the last decade’s economy in glowing terms, but forgets to mention one important fact: The economy grew because the federal government pumped money into it. How?

With deficit spending.

Increased rate of deficit spending (red line) cured the “Great Recession” (vertical gray bar) and led to increased economic growth (blue line).

Reduced deficit growth leads to recessions which are cured by increased deficit growth:

All seven recessions in the past 60 years have been introduced by reduced deficit growth and cured by increased deficit growth. 

Hanging over this decade of good news is the gloom of a missed opportunity.

After piling up trillions of dollars in deficit spending during the last recession, the federal government took some modest steps towards reducing that red ink during the middle years of the 2010s.

But after Republicans took full control in 2017, spending skyrocketed and the deficit inflated again.

Why is Boehm concerned about the federal deficit? Does he believe the government will run short of money? (It can’t.)

Is he concerned about inflation? (The Monetarily Sovereign government has absolute control over the value of its own sovereign currency, which is why we don’t have high inflation despite high deficits.)

Is Boehm ignorant about economics or is he a liar? (The only two alternatives.)

Since Trump was inaugurated, Washington has added $4.7 trillion to the national debt—almost entirely the result of a gigantic spending binge, but with a small assist from the 2017 tax cuts, which reduced revenues without offsetting spending cuts.

And that $4.7 trillion constituted growth dollars entering the economy.

Now, more than a decade after the last recession ended, the United States is carrying a record amount of debt: more than $23 trillion. The country is on track to add more than $1 trillion to that total in every year of the coming decade, with old age entitlements ramping up as Baby Boomers retire and the country as a whole ages.

It isn’t even “debt” in the usual sense. It’s the total of deposits into Treasury Security accounts (T-bills, T-notes, T-bonds) which are paid off simply by returning the dollars in those accounts to the account holders. No problem at all.

Banks boast about the amounts of deposits they hold, and they are monetarily non-sovereign. But Boehm fears the deposits our Monetarily Sovereign government holds.

Ridiculous.

“Debt matters because it’s the one issue that impacts all others,” says Michael A. Peterson, CEO of the Peter G. Peterson Foundation, a nonpartisan policy center dedicated to fiscal issues.

“Debt threatens our economic health and hinders our ability to make important investments in our future. If we want to tackle big issues like climate change, student debt or national security, then we shouldn’t saddle ourselves with growing interest costs.”

The Peterson Foundation is as “nonpartisan” as Mitch McConnell.

The second paragraph (above) implies that the federal government can run short of its own sovereign currency with which to pay its bills.

It can’t.

According to the Congressional Budget Office, the national debt will approach the size of the entire U.S. economy by the end of the current decade—and will keep on growing until it hits 144 percent of U.S. GDP in 2049.

The current situation, warns the Government Accountability Office (GAO), is “unsustainable.”

Rather than “unsustainable,” they should have called it a “ticking time bomb,” like the other DHPs do. Both characterizations would be equally inaccurate.

By the way, Japan (a Monetarily Sovereign government) has a “debt” (holds deposits) that total more than 250% of its economy. They never have had any difficulty servicing their debt, and never will.

Compare all this with early 2001, at the end of the second-longest economic expansion in history. The federal government was running a surplus.

The national debt was falling and amounted to only 31 percent of GDP. That’s what you’d expect to see now, since deficits typically fall when the economy is growing and grow when the economy is rotten.

Oops. Boehm “forgot” to mention that the surplus led to the recession of 2001. Why?

Federal surpluses bleed money out of the economy, and give them to the federal government, which destroys them.

Reduced deficit growth which transitioned to a surplus in 1998, cause the recession of 2001, which was cured by increased deficit growth

Indeed, since the end of World War II, the U.S. has seen deficits greater than 4 percent of GDP only in years when the country was either deep in the throes of a serious recession or emerging from one.

Boehm’s key words are, “emerging from one.” It’s the deficit growth that emerges us from recessions, by adding growth dollars to the economy.

Only by running deficits can America ever cure a recession or depression.

The Committee for a Responsible Federal Budget (CRFB), citing federal government data says that in the short term, deficit spending—or tax cuts that aren’t offset with spending cuts—can juice the economy and boost growth.

But in the long term, high levels of debt drag down economic growth.

The CBO projects that the average American household will lose between $2,000 and $6,000 in annual wealth by 2040 if the current trajectory continues. It also says America’s GDP will shrink by 2 percent over the next two decades if current policies continue and the debt keeps growing.

The “long term” comment is absolute nonsense, as demonstrated by history and by logic.

History shows that the federal debt has increased more than 50,000% since 1940, and the economy today is growing exuberantly.

History also shows that reducing federal debt (i.e taking dollars from the economy) causes depressions and recessions.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Great Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

Logic shows that adding dollars to the economy (which is what federal deficits do) is necessary to grow the economy, and that is exactly what the government does to cure recessions and depressions.

And the CBO projections are probably too rosy. They predate the approval of a new bipartisan budget deal in late 2019 that is expected to add another $1.7 trillion to the national debt over 10 years.

That would be 1.7 million growth dollars added to the economy. Growth dollars help prevent recessions.

Furthermore, the CBO is required to build projections based on current policies. Those assume, among other things, that some of the 2017 tax cuts will expire in the middle of this decade. Politically, that’s unlikely to happen.

Tax cuts grow the economy. Tax increases stifle economic growth.

Worse yet, the CBO’s projections don’t account for the inevitable eventual end to this run of economic growth. If we’re running a trillion-dollar deficit in the good years, what happens when the next downturn occurs?

When the next downturn occurs, the government will increase deficit spending to stimulate the economy.

“A recession could quickly push the deficit up towards $2 trillion,” says Brian Riedl, a former Republican congressional staffer now based at the Manhattan Institute. A recession would likely trigger politically-motivated calls for even more deficit spending, causing the debt to skyrocket even more than it already has.

Why would there be “calls for more deficit spending”? Because deficit spending is the only way to prevent or cure a recession.

And these calls would not be “politically-motivated.” They would be economically necessary.

It might also cause interest rates to spike, compounding America’s debt problem. Every percentage point that interest rates rise will add $1.8 trillion in added costs over the decade.

Isn’t it fascinating that intelligent people can make truly ignorant predictions that are completely at odds with obvious historical fact?

First, despite massive increases in the federal “debt” (deposits) interest rates have not “spiked.” Quite the opposite. They are low. The federal government has absolute control over the interest rates on its own sovereign currency.

Second, the federal government, being Monetarily Sovereign, can pay any amount of interest simply by pressing a few computer keys. It never can run short of dollars with which to pay its bills.

And third, if interest rates did “spike,” that would add growth dollars to the economy, thereby benefiting the economy.

“A nervous bond market could demand higher interest rates, further weakening both the economy and the deficit,” says Riedl. “So while the economy looks strong and the deficit seems irrelevant, the fiscal situation is quite fragile.”

The above paragraph is 100% bullsh*t, for the reasons explained previously. And the deficit is not “irrelevant.”  The deficit is necessary for economic growth.

America’s fiscal situation is not fragile at all. It is a rock-solid as any fiscal situation can be. It has the unlimited ability to pay bills, instantly and in any amount. Does that sound “fragile”?

Assigning blame isn’t the most important thing, but there is plenty to go around. The Trump administration and current crop of Republicans in Congress have made the problem worse than it already was.

Some of them—like former deficit hawk Mick Mulvaney and former House Speaker Paul Ryan, who made his name in Congress as the GOP’s budget-maker—deserve special ignominy for abandoning their fiscal conservatism when it was most needed.

Trump came into office promising to eliminate the national debt in eight years, and that’s even more of a joke now than it was then.

The “Trump administration and current crop of Republicans in Congress” are composed of the most incompetent, ignorant butt-kissers who ever have soiled the floors of the White House and the Congress building.

The fact that Trump promised what he didn’t do should come as no surprise to anyone who has been reading something more scrupulous than Brietbart.

(Still waiting to read Trump’s oft-promised replacement for Obamacare.)

Meanwhile, Democrats’ aversion to spending reductions and their refusal even to consider changes to entitlement programs—the biggest driver of the national debt—are equally large obstacles to any meaningful attempt at fixing this mess.

The party’s progressive wing is pushing for Medicare for All and expanding Social Security benefits, while elevating economic theories that say we should ignore the deficit.

The above is typical of the Party of the Rich — desperate to cut benefits to the middle- and lower- classes, but never eliminating those huge tax breaks for the rich.

In contrast to their elected officials, most Americans believe the debt and deficit are important.

A Pew Research Center poll conducted earlier this month found that 53 percent of Americans view the federal budget deficit as a “very big” problem facing the country.

That’s a larger share of the public than the portion that views terrorism (39 percent), racism (43 percent), or climate change (48 percent) as a major problem.

Sadly, the economic ignorance of the American public is equaled only by the economic mendacity of America’s politicians, media, and university economists, the majority of whom have been influenced (read: “bribed”) by the rich to lie about federal spending.

We had time. We may yet have more. But Washington is more likely to squander the 2020s, just like it did the latter half of the 2010s.

If by “squander, Mr. Boehm means “pump growth dollars into the economy,” then clearly the government has “squandered” the latter half of the 1900s, and we hope will continue to “squander” all of the 2000s and beyond.

Those who regularly preach doom because of government budget deficits (as I regularly did myself for many years) might note that our country’s national debt has increased roughly 400 fold during the last of my 77-year periods. That’s 40,000%!

Suppose you had foreseen this increase and panicked at the prospect of runaway deficits and a worthless currency. To “protect” yourself, you might have eschewed stocks and opted instead to buy 3 1/4 ounces of gold with your $114.75.

And what would that supposed protection have delivered?  You would now have an asset worth about $4,200, less than 1% of what would have been realized from a simple, unmanaged investment in American business. 

Warren Buffett

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. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Do you believe fortune tellers, Nigerian princes, and people who say the federal debt is a “ticking time bomb”? Thursday, Dec 12 2019 

Do you believe fortune-tellers, Nigerian princes, and assorted other snake oil salesmen? Do you accept phone calls from strangers offering you free time-shares and cruise vacations?Image result for crystal ball

No, fortunately, you are too smart to fall for those scams perpetrated by liars and fools.

But somebody must be deceived because those frauds have been around for a long time. If they didn’t work they would have died out by now.

In this world where presumably we have graduated from the dark ages, actual facts are easy to obtain from legitimate sources. But, many of us still accept the words of Tarot card readers, crystal ball gazers,  and other mass deceivers. Trump University is one proof of that.

Even today, you continue to be barraged with sad phone calls from non-existent grandchildren and claims by fake IRS employees, telling you urgently to send money, now, now, now.

It never ends.

And that is why you continue to experience the “federal-debt-is-a-ticking-time-bomb” scam, one of the most subtle, yet long-lived scams in history.

It is subtle and long-lived for three reasons:

  1. The speaker (or writer) does not directly ask you for money. No, he/she asks for something even more valuable: Your vote. He wants you to vote against your own best interests.
  2. It sounds so logical, so every-day reasonable, so innocent, so prudent — far more logical, reasonable, innocent, and prudent than that $5 million you will receive from Nigeria.
  3. It isn’t immediately clear to you who exactly benefits from the scam, but there are beneficiaries, big beneficiaries, and later in this article, I’ll tell you who they are.

As recently as August of this year, we added yet another example to the list of ticking-time-bomb scams that goes back to 1940, when the federal debt was only $40 billion. (It’s above $20 trillion today, and that ole time-bomb still’s a’tickin’.)

And here’s yet another one: Same wording to the same lies.  It even includes that same ridiculous “debt clock” currently parked in a Manhatten alleyway.Image result for debt clock

Our national ticking time bomb
By Bill Yeargin, SPECIAL TO THE SUN SENTINEL |
SEP 12, 2019

The U.S. has a big problem that, if not corrected soon, will have a significant negative impact on our country, including Florida.

Our growing national debt has resulted in a debt-to-GDP ratio that is over 100 percent, one of the world’s worst.

See the scam language. Something has to be done “soon”. (Even though the federal debt has grown more than 50,000% over the past 70 years, and the U.S. economy is the strongest in the world, something must be done, SOON. Don’t think. Just act, soon!)

And that meaningless debt-to-GDP ratio, which is one of the world’s “worst.” For the U.S., it’s a bit above 100%.  Don’t you wish it was more like Russia’s (14%) or Zimbabwe’s (21%)? Or does Mr. Yeargin prefer Guatemala’s ratio of 25% or Nigeria’s ratio of 30%?

Or how about Japan’s ratio of 238%? Which economy and which inflation would you prefer, Japan’s or Zimbabwe’s?

Here is a list of national debt/GDP ratios for countries. See if you can see a relationship between that useless ratio and the strength of a nation’s economy. Save your effort. There is no relationship. As we said, it is a useless ratio.

Mr. Yeargin’s article continues:

In retrospect, it is hard to believe in the late 90s, the U.S. was running budget surpluses and on track to have no national debt by 2006.

Uh, excuse me, Mr. Yeargin, but the Clinton surpluses of 1998-2001 led directly to the recession of 2001. We actually were lucky then, because surpluses, which remove dollars from the economy, often have a worse result than a recession:

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.

Ah, those pesky facts.

And the ignorance becomes laughable:

Now, we have a national debt approaching $23 trillion dollars — about $68,000 per citizen — and it’s still growing fast.

The past two years the federal deficit has exploded to over a trillion dollars a year (yep, a trillion.) It is endangering our country and state’s future. We need our leaders to deal with this problem now.

The “per citizen” line is supposed to make you think you owe the federal debt, or your taxes will be taken to pay it off. Neither is true.

The so-called federal debt is not like your debt or my debt. The federal debt is nothing more than the total of deposits into Treasury security accounts, which are paid off every day simply by returning the dollars in those accounts to the account holders. Neither you nor your taxes are involved.

The federal government does not use those dollars. They remain in the T-security accounts until maturity, at which time they are returned.

Even if the federal government did not collect a single penny in taxes, it could pay off the entire federal debt today, simply by closing all those accounts and sending the dollars back.

And then there’s the line that includes the words, “and states.” The false implications seem to be either that state financing is like federal financing, or that somehow states are liable for federal debt.  Mr. Yeargin isn’t clear about what he means, but either meaning is wrong.

And now we come to the really, really ignorant part (Yes, amazingly even less knowledgeable than the preceding).

So, how did we get here?

After World War 2, the U.S. had a huge national debt, but a growing economy and fiscal discipline (at least more than we have now) reduced it to manageable levels.

Here is the “fiscal discipline” Mr. Yeargin claims we had, but no longer have: Beginning in 1945, we had 5 recessions in only 15 years. That is his version of “fiscal discipline.”

By contrast, our “undisciplined,” debt-based economy has not had a single recession in 11 years, and is not even close to one now.

But it gets even worse:

By the late 90s, the president and Congress had worked to generate national surpluses and were heading toward a debt-free U.S.

If the federal debt is, as Mr. Yeargin warns, “approaching $23 trillion,” to have a “debt-free U.S.” would require us to have a combination of spending cuts and tax increases totaling $23 trillion!

Can you imagine what taking $23 trillion out of the U.S. economy would do? It would be a financial disaster unparalleled in U.S. history.

The Great Depression was caused by a removal of only 36% of the debt; Mr. Yeargin wants to remove 100%. It boggles.

And it continues:

Then, in the early 2000s, the combination of tax cuts, increased Medicare benefits for the elderly, and waging two wars on a credit card resulted in the return of national deficits and we lost our opportunity to be debt-free.

The financial crisis in 2008 resulted in huge government spending to avert a depression.

Mr. Yeargin manages to confuse even his own confusion. He claims correctly that huge government spending averted a recession, but he already has claimed that huge government spending is a danger, a “ticking time-bomb.”

Federal spending pumps dollars into the economy, which grows the economy. Federal surpluses take dollars from the economy, which causes depressions and recessions.

So which is it Mr. Yeargin? Did huge spending endanger us or save us? You can’t have it both ways. Or, if you know nothing about economics, perhaps you can have it both ways — in your imagination.

After we got through the Great Recession, our deficit was high but dropping. The past three years has seen increased spending and tax cuts, which have exploded the annual deficit to over $1 trillion.

(Meaning that the federal government, which never can run short of dollars, will add $1 trillion to the economy, which needs dollars to grow. And this is a bad thing?)

And then, just when you hope it could not possibly be dumber, yes, it gets even dumber.

So, why is it a problem?

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.

Because the U.S. federal government has the unlimited ability to create its own sovereign currency the U.S. dollar, it has no need to borrow dollars from anyone.

And indeed, despite the misleading use of the words “debt” and “borrow,” the U.S. government does not borrow. It provides T-security accounts, into which investors can deposit dollars.

Why does it provide these accounts if it doesn’t touch the dollars in them? Two primary reasons:

  1. To provide a safe “parking place” for unused dollars, which helps stabilize the dollar, and
  2. To assist the Federal Reserve in setting interest rates.

No, Mr. Yeargin, the federal government is not like state and local governments; it is not like businesses; it is not like you and me. It doesn’t borrow. It doesn’t need or use borrowed money.

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e.,unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.

The federal government uniquely is Monetarily Sovereign, a term Mr. Yeagin clearly does not understand. The government creates dollars by passing laws, at the press of a computer key.

The article drones on, sliding ever downhill from a low beginning:

Additionally, we have lost two of our most powerful tools to pull out of a future recession.

From Economics 101, recall that deficit spending and low interest rates are tools used to end a recession. But we are now using them in a good economy, which is sort of like eating your seed corn.

Except that the federal government has the unlimited ability to deficit spend, and contrary to popular perception, low interest rates are not stimulative. They help control inflation, but do not add growth dollars to the economy.

So, why do we accept this?

It feels good to spend. Just like anyone who borrows to buy something they cannot afford, the U.S. finds it to easy to use its credit card (deficit spending).

In the short run, this spending makes politicians look like geniuses because it fuels the economy and drives votes.

In the long run, the politicians will be out of office when the problems occur. When the economy is doing well — even when artificially propped up with huge deficit spending — people feel like things are going well and don’t worry about those huge credit card bills (national debt) piling up.

Well, golly, the so-called “credit card bills (national debt)” has been “piling up” for 70 years, and here we are, stronger than ever. Again, those pesky facts.

So, what’s the solution?

We need leaders who have the will, character and courage to tackle this problem like any business leader would for their organization.

More ignorance. He still doesn’t understand the differences between federal (Monetarily Sovereign) financing and business (monetarily non-sovereign) financing.

If we want low taxes, then we must decide how to cut expenses. The challenge with federal expenses is that most of the money goes to the elderly, through Social Security and Medicare, and the military.

Unlike state and local governments, which being monetarily non-sovereign and so use tax dollars to pay for spending, the Monetarily Sovereign federal government does not use tax dollars.

So why does the federal government collect taxes?

  1. To control the economy by taxing things it wishes to discourage and by giving tax breaks to things it wishes to encourage
  2. To help the rich, who run America, widen the Gap by giving them tax breaks not available to the non-rich.
  3. To convince the public that benefits must be rationed or taxes increased. The rich, who run America, fear that if you, the public, knew the truth, you would demand more benefits, thereby narrowing the Gap. (Think of Medicare for All and Social Security for all, etc.)

And finally, we get to the heart of it. Mr. Yeargin suggests the need to cut Social Security and Medicare which mostly benefit the middle-classes and the poor.

Gap Psychology tells us that the rich promulgate lies about federal financing, in order to widen the Gap between the rich and the rest.

It is the Gap that makes them rich (Without the Gap no one would be rich; we all would be the same.) And the wider the Gap, the richer they are.

One easy way to widen the Gap is to cut benefits to the non-rich.

The “federal-debt-is-a-ticking-time-bomb” scam benefits the rich because it widens the Gap between the rich and the rest.

I apologize if I seem to pick on Mr. Yeargin this way. He may be a very nice, honest gentleman, but clearly, he is not an economist. Perhaps, all the errors in his article are innocent and without any malicious intent.

But he writes about economics, which is typical of what you read, day after day: Writings by people who do not understand that federal finances are nothing like personal finances, though you are led to believe they are alike.

Your intuition and incorrect information combine to fool you.

I don’t know Mr. Yeargin, but according to his web site:

“Bill Yeargin is CEO of Correct Craft, a boat-building business based in Orlando. He’s also on the board of the University of Central Florida.”

Someone please, please assure me that Mr. Yeargin has nothing to do with the teaching of economics at the University of Central Florida.  Please.

Unfunded Govt. Liabilities — Our Ticking Time Bomb? Nah! Saturday, Aug 10 2019 

On January 10, 2019, RealClear Politics published an article titled, “Unfunded Govt. Liabilities — Our Ticking Time Bomb” by Myra Adams (A media producer and writer who served on the McCain Ad Council during the GOP nominee’s 2008 campaign and on the 2004 Bush campaign creative team.) 

Like all these previous articles comparing the federal debt to a ticking time bomb, the article was utter nonsense.

Here are some excerpts and comments:

Tick, tick, tick goes the time bomb of national doom. Every second the ticking grows louder, but you won’t hear the muffled sound that’s more akin to white noise.

The doom of which I speak is unfunded liabilities — $122 trillion in payments the government owes and has promised its citizens — without the funds to fulfill those obligations.

Across all media platforms, the threat goes largely unreported. Members of Congress from both parties are also deaf to the ticking.

The same is true at the White House, where Donald Trump, like Barack Obama before him, never mentions this impending catastrophe.

Oh, my. “Time bomb of national doom.” Hyperbole usually is used when facts are absent. That is the case with Ms. Adams’s article

Obama said,

“My goal is not to chase a balanced budget just for the sake of balance.  My goal is how do we grow the economy, put people back to work, and if we do that we are going to be bringing in more revenue.

“If we control spending and we have a smart entitlement package, then potentially what you have is balance – but it is not balance on the backs of the poor, the elderly, students who need student loans, families that have disabled kids.

“That is not the right way to balance our budget.” 

In short, Obama believed the debt was too high, but didn’t want to make the middle classes and the poor suffer, which by the way, is the only way to stop the “time bomb of national doom.”

Why? Because that so-called “time bomb,” consists primarily of federal deficit spending — the “unfunded liabilities” for entitlements — Social Security, Medicare, Medicaid, poverty aids, education aids, and everything else the government does to help the middle classes and the poor.

And, Obama knew that cutting these programs would be a political disaster. Sadly, he didn’t reveal that cutting deficit spending also would be an unnecessary economic disaster.

The article continues:

Image result for debt clock

The electric sign of ignorance

Among the hordes of 2020 Democratic candidates, count on the time bomb to be a topic non grata while Medicare-for-all gains momentum and Medicare-as-is remains a lethal bomb component.

Before you call me an alarmist, I refer you to the U.S. Debt Clock. Here you can watch our time bomb tick in real time with that $122 trillion in unfunded liabilities as one of the major “fuses.”

Ah, the inevitable, phony debt clock sign, which is funded, and then referred to, by those least knowledgeable about economics.

And notice those words, “YOUR family share.” Ridiculous and a lie. Your family does not owe a penny.

Your parents never paid a penny for past federal debt; you will not pay for the present federal debt, and your grandchildren never will pay for the future federal debt.

Not one tax dollar ever is used to pay for the federal debt. This is explained later in this post.

Then the article becomes truly childish in its attempts to shock you:

Surely, such an incomprehensible number makes you gasp. But now, get ready to gag because in 2023 the “Debt Clock Time Machine” projects unfunded liabilities will be $157 trillion, a $35 trillion increase in only four years.

I would wager that a majority of citizens have no concept of what “just” $1 trillion looks like or even means. For the record, one trillion is 1,000 times 1 billion.

And, since $1 billion is thrown around Washington like a rounding error, it is instructive to remember that 1 billion itself is 1,000 times 1 million.

OMG! I’ll bet 1 million is 1,000 times 1 thousand! Am I right, Ms. Adams?

The Debt Clock displays federal tax revenue at $3.3 trillion, but spending at $4.2 trillion.

This annual imbalance means that not only are we promising too much down the road, we can’t cover our current costs, and we fall behind even more — every second of every day.

No, what it really means is the federal government is pumping .9 trillion growth dollars into the economy — dollars that go into the pockets of Americans. Without federal deficit spending, the economy would fall into recession or depression.

The so-called, misnamed federal “debt” was only $40 billion in 1940, and now, 80 years later, it is near $20 trillion.

And every year, for those last 80 years, writers like Ms. Adams have been calling it a “ticking time bomb.” (See: “It is 2019, and the phony federal debt “time bomb” still is ticking.”)

Strangely, it never seems to occur to the Myra Adamses of the world, that the “bomb” never explodes.

Being wrong for 80 consecutive years is a strong signal to change your mind. But they just keep on shoveling the bullsh*t.

And now we come to the “solution” that the rich want you to believe is necessary: Cut benefits to the middle and the poor.

Here it is, as delivered by Ms. Adams:

Reducing Social Security benefits — the main driver of unfunded liabilities — will be painful now, but even more painful in 2034 when present inaction forces draconian cuts.

What if every news network continuously displayed the $122 trillion unfunded liabilities debt clock — all 15-digits rapidly ticking in real time — at the same corner of the screen?

Perhaps then, when the public is fully aware of the problem, our leaders will be forced into discussing very tough and real solutions followed by legislative action.

But doing nothing is not an option.

What a marvelous idea. Every news network continuously displaying the most misleading piece of crap imaginable, just so the rich can get richer.

How does that make the rich richer? By making the middle classes and the poor poorer. “Rich” is a comparative term. The greater the Gap between the rich and the rest, the richer that makes the rich.

If you have $1 million are you rich? Yes, if everyone else has $1 thousand; no if everyone else has $10 million. It’s the Gap that determines whether or not you are rich.

Widening the Gap is exactly what the rich want. It’s called Gap Psychology: the desire to distance oneself from those below, and to approach those above.

Here are the facts:

1. The U.S. Federal government is Monetarily Sovereign. It has the unlimited ability to create its sovereign currency, the U.S. dollar.

Former Fed Chairman Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

Former Fed 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.”

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.

2. Get it? No matter how much the federal government owes, it simply creates the dollars to pay its creditors. Even if federal tax collections were zero, the federal government could pay its bills, forever.

3. Not only that, but the so-called federal “debt” isn’t a real debt. It is the total of deposits into Treasury Security accounts (T-bills, T-notes, T-bonds).

The government doesn’t touch those dollars, because having the unlimited ability to create dollars, the federal doesn’t need to use the deposited dollars. So these accounts are paid off upon maturity, simply by returning the dollars to their account owners.

Thus, the sole effect (and possibly the sole purpose) of the “National Debt Sign” is to fool you, the public, into docilely accepting cuts to your federal benefits, just as the rich want.

People who use that debt clock sign to “prove” the supposed unsustainability of the federal debt either are ignorant of economics or are being intentionally deceptive.

It’s one situation or the other.

Ask Ms. Adams which is hers.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

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The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

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

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

 

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