"Debt hawks", "Fiscal Conservatives" and others...(maybe some Libertarians I know...)
ignorant of Monetary Sovereignty, suffer from Anthropomorphic economics disease
http://rodgermmitchell.wordpress.com/2010/06/08/anthropomorphic-economics/
— the false belief that federal finances are like yours and mine. Some debt hawks say that a Debt/GDP ratio exceeding 100% puts a nation on the brink of bankruptcy. Yet today, Japan has a Debt/GDP ratio above 200%, and this Monetarily Sovereign nation has absolutely no difficulty servicing its debt. The debt hawks, as usual, having learned nothing from this, continue to wail about the meaningless debt/GDP ratio, which because it is a classic apples/oranges comparison, is devoid of significance (the numerator is a 200-year measure of cumulative T-securities outstanding; the denominator is a one-year measure of productivity. The two are unrelated).
Because a Monetarily Sovereign nation has the unlimited ability to create its sovereign currency, that nation needs neither to tax nor to borrow. Why would it? Further, that nation does not use tax money or borrowed money to pay for spending. Federal income has no relationship to federal spending and so, taxes and borrowing are unnecessary.
When the states, counties, cities, you and I spend, we transfer dollars from our checking accounts to some other checking accounts. When the federal government spends, it creates dollars, because to pay its bills, the government instructs banks to increase the dollar amount in suppliers’ checking accounts. If U.S. federal taxes and borrowing fell to $0, or rose to $100 trillion, neither event would reduce by even one penny, the federal government’s ability to create the money to pay any size bills.
Although Monetarily Sovereign nations need neither to tax nor to borrow, they may choose to do so for many reasons unrelated to financial need. The spending by Monetarily Sovereign nations is constrained only by inflation. However, since 1971, the end of the gold standard and the beginning of Monetary Sovereignty, there has been no relationship between federal deficit spending and inflation. More about this at Inflationhttp://rodgermmitchell.wordpress.com/2009/09/09/46/
and at SUMMARY.
http://rodgermmitchell.wordpress.com/2009/09/07/introduction/
At some level, deficit spending could cause inflation. For instance, if the government were to give every American $1 trillion, I am confident we would have inflation. But we are nowhere near that point. (Debt hawks love to propose extreme circumstances, like the $1 trillion gift to each American, as “proof” deficit spending is unsustainable. But that is no more proof than the other extreme circumstance (tax every American $1 trillion) demonstrates taxes are unsustainable.)
Because taxes do not pay for federal spending, FICA does not pay for Social Security benefits. FICA could (and should) be reduced to zero, and benefits could be tripled, and this would not affect by even one penny the federal government’s ability to pay Social Security benefits.
There had been some question about whether the federal government would or should make a profit on its purchases of corporate stock (GM et al). Any such profits come out of the economy, and therefore are anti-stimulative. By reducing the money supply, federal profits = losses for the economy. Federal surpluses = economic deficits.
There also has been talk about the federal government “saving” money by firing, or reducing the pay of, federal employees. Those so-called “savings” would be money not sent into the economy, and therefore, anti-stimulative.
Politicians and the press do not yet seem to understand Monetary Sovereignty. However, no one intelligently can discuss national deficits and debt without understanding the implications of Monetarily Sovereignty. The concept is the basis for all modern economics. Monetary Sovereignty is to economics as arithmetic is to mathematics.
http://rodgermmitchell.wordpress.com/2010/08/13/monetarily-sovereign-the-key-to-understanding-economics/
ignorant of Monetary Sovereignty, suffer from Anthropomorphic economics disease
http://rodgermmitchell.wordpress.com/2010/06/08/anthropomorphic-economics/
— the false belief that federal finances are like yours and mine. Some debt hawks say that a Debt/GDP ratio exceeding 100% puts a nation on the brink of bankruptcy. Yet today, Japan has a Debt/GDP ratio above 200%, and this Monetarily Sovereign nation has absolutely no difficulty servicing its debt. The debt hawks, as usual, having learned nothing from this, continue to wail about the meaningless debt/GDP ratio, which because it is a classic apples/oranges comparison, is devoid of significance (the numerator is a 200-year measure of cumulative T-securities outstanding; the denominator is a one-year measure of productivity. The two are unrelated).
Because a Monetarily Sovereign nation has the unlimited ability to create its sovereign currency, that nation needs neither to tax nor to borrow. Why would it? Further, that nation does not use tax money or borrowed money to pay for spending. Federal income has no relationship to federal spending and so, taxes and borrowing are unnecessary.
When the states, counties, cities, you and I spend, we transfer dollars from our checking accounts to some other checking accounts. When the federal government spends, it creates dollars, because to pay its bills, the government instructs banks to increase the dollar amount in suppliers’ checking accounts. If U.S. federal taxes and borrowing fell to $0, or rose to $100 trillion, neither event would reduce by even one penny, the federal government’s ability to create the money to pay any size bills.
Although Monetarily Sovereign nations need neither to tax nor to borrow, they may choose to do so for many reasons unrelated to financial need. The spending by Monetarily Sovereign nations is constrained only by inflation. However, since 1971, the end of the gold standard and the beginning of Monetary Sovereignty, there has been no relationship between federal deficit spending and inflation. More about this at Inflationhttp://rodgermmitchell.wordpress.com/2009/09/09/46/
and at SUMMARY.
http://rodgermmitchell.wordpress.com/2009/09/07/introduction/
At some level, deficit spending could cause inflation. For instance, if the government were to give every American $1 trillion, I am confident we would have inflation. But we are nowhere near that point. (Debt hawks love to propose extreme circumstances, like the $1 trillion gift to each American, as “proof” deficit spending is unsustainable. But that is no more proof than the other extreme circumstance (tax every American $1 trillion) demonstrates taxes are unsustainable.)
Because taxes do not pay for federal spending, FICA does not pay for Social Security benefits. FICA could (and should) be reduced to zero, and benefits could be tripled, and this would not affect by even one penny the federal government’s ability to pay Social Security benefits.
There had been some question about whether the federal government would or should make a profit on its purchases of corporate stock (GM et al). Any such profits come out of the economy, and therefore are anti-stimulative. By reducing the money supply, federal profits = losses for the economy. Federal surpluses = economic deficits.
There also has been talk about the federal government “saving” money by firing, or reducing the pay of, federal employees. Those so-called “savings” would be money not sent into the economy, and therefore, anti-stimulative.
Politicians and the press do not yet seem to understand Monetary Sovereignty. However, no one intelligently can discuss national deficits and debt without understanding the implications of Monetarily Sovereignty. The concept is the basis for all modern economics. Monetary Sovereignty is to economics as arithmetic is to mathematics.
http://rodgermmitchell.wordpress.com/2010/08/13/monetarily-sovereign-the-key-to-understanding-economics/
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