I was going to discuss the recent Pew report about the vanishing middle class, but Rodger beat me to it. So today’s topic is this…
When you start with a false premise, you will inevitably commit errors that will compound on each other. For example, if you do not understand Monetary Sovereignty, then anything you say about economics, no matter how well-intentioned, will be erroneous, and will worsen the problem of inequality.
Since so few people understand Monetary Sovereignty, we continually see glimmers of hope, only to be disappointed. I’m talking about articles that begin with promise, but quickly lapse into errors that – intentionally or not – sustain the Big Lie, which in turn legitimizes austerity and inequality.
Here are some examples…
An article titled, “Will Congress Ever Grasp That the Debt Crisis Is Fake?” agrees that we need more deficit spending. That’s great, but the article also claims that “Yearly federal deficits pile up over time and increase the national debt.”
Wrong. The U.S. Treasury can choose to sell (or not sell) T-securities regardless of the size of the deficit. By law the Treasury is supposed to sell T-securities each fiscal year whose nominal value equals the federal deficit each fiscal year, but there are many ways around this. Federal finances are a giant sleight-of-hand game that involves myriad fictions and chimeras such as “trust funds” and “revenue constraints.”
The article goes on to say that the U.S. government is starved for revenue because rich people and corporations don’t pay their fair share in taxes.
Wrong again. The U.S. government does not need revenue. It creates revenue.
So why does the article say that the debt crisis is “fake”? Because…
Republicans don’t really care about deficits and debt. After all, Republicans created both — largely through tax cuts for the wealthy and unpaid-for wars during the George W. Bush administration.
Wrong again. “Unpaid-for wars” means the U.S. government borrows money to wage its wars. (No it does not.) Furthermore, tax cuts for the wealthy are not connected with the size of the so-called “national debt,” since the U.S. government does not borrow its spending money.
The whole Republican argument is a smokescreen for their core agenda — massive wealth transfers from the poor and what’s left of the middle class to the rich — through regressive tax policies and dismantling the safety net.
Yes, and your errors support the Republican project.
Here’s another glimmer of hope: Most of Our Debt Is Fake – Let’s Abolish It.
Wow! Maybe they have a clue!
The fact is, we live in a fiat currency system, meaning we can print an endless supply of dollars and not run up inflation, since the US dollar is the world’s reserve currency.
No. The U.S. government can indeed “print” an endless supply of dollars, but it is not true that inflation could never be a problem. If the supply of dollars far exceeded the demand for dollars, then we would have inflation. Today with austerity, the demand for dollars far exceeds the supply, which is why we are in a recession. People have no money to spend.
As for the U.S. dollar being the world’s reserve currency, this is largely irrelevant. A “reserve currency” is merely a convenience. If a manufacturer in Vietnam (for example) wants to sell to a store in Peru, and the manufacturer wants to be paid in Vietnamese dong, then the buyer and seller will need a third currency as a medium of conversion. The third currency is called a “reserve currency.” Peruvian nuevo soles can be converted to dollars, which can be converted to dong. Or converted to euros and then dong. Or converted to Australian or Canadian dollars and then dong. The U.S. dollar is simply the most commonly used medium of conversion between disparate currencies.
What gives the U.S. dollar its power is not that it is the most widely used reserve currency, but that it is the most widely used immediate currency. That is, the most widely used medium of direct exchanges between buyers and sellers, without currency conversion. The governments and central banks of all nations accept U.S. dollars directly. If the most widely used reserve currency ceased to be U.S. dollars, then it would have little effect on U.S. power. But if the most widely used immediate currency ceased to be U.S. dollars, then Americans could no longer use dollars to buy all imports. This would threaten the USA, since the USA has the world’s largest trade deficit.
From there on the article is full of non-stop errors. Here’s the next sentence…
Most of the paper money in circulation comes from fractional reserve banking, where banks lend out money they don’t have, which technically doesn’t exist, to anyone who applies for a loan.
No, no, no. I won’t waste your time explaining why this (and the rest of the article) is erroneous. The point is that these authors perhaps mean well, but their errors worsen the problem of inequality and mass confusion.
To repeat: If you do not understand Monetary Sovereignty, then anything you say about economics, no matter how well-intentioned, will be erroneous, and will worsen the problem of inequality.
Some people make a sincere effort to understand things, but they are sloppy in their writing. An example is “The Debt Crisis Is a Hoax.” Written in mid-2011, the article presumably refers to the “debt ceiling” antics that Republicans use in order to get their way. However the author fails to clarify the difference between the “national debt crisis” hoax, and the “debt ceiling” extortion racket.
(Under current Congressional laws, which Congress was free of between 1979 and 1995, a Congressional budget cannot be fully approved until the Congress votes to let the U.S. Treasury continue to sell T-securities. Republicans refuse to vote “yes” until the Republicans can get more money for themselves and their friends, and more austerity imposed on the public.)
And then the same article lapses into severe error…
All we really have in the US is a distant “deficit” problem. We’re overspending at a rate that — in the future — could take us to a point where we couldn’t pay the interest on money we’ve borrowed (i.e., US Government debt).
Sigh. From there it gets progressively worse, since the author has no understanding of Monetary Sovereignty. He thinks a money creator is the same as a money user. Once again we are disappointed.
Another article says that, “The national debt is a sham,” and that, “We have all been lied to.”
Wow! Maybe the writer has a clue!
But no, it’s just more errors. Whopping errors.
For decades, the leaders of both major political parties have promised us that they can get our national debt under control. As the 2012 election approaches, they are making all kinds of wild promises once again. It is all a giant sham. The United States has gotten into so much debt that there will be no coming back from this. The current system is irretrievably broken. Thirty years ago the U.S. debt was a horrific crisis that was totally out of control. If we would have dealt with it back then, maybe we could have done something about it. But now it is fifteen times larger, and we are adding more than a trillion dollars to the debt every single year. The facts that you are about to read below should set America on fire with anger. What we are doing to our children and our grandchildren is absolutely nightmarish. Words like “abuse”, “financial rape”, “theft” and “crime” do not even begin to describe what we are doing to future generations.
I thought, “Who wrote this trash?” Then I realized that it was on a blog associated with Peter Schiff and Jim Rogers, two notorious snake-oil salesmen who want you to buy “certificates” in their “gold exchange.” (You might as well buy cabbage patch dolls…literally.)
The article is titled, “34 Shocking Facts About U.S. Debt That Should Set America On Fire With Anger.” Every one of these “facts” is an error, or else is irrelevant.
It goes on and on. People who seem to have a clue, but who quickly prove that they do not. Or prove that they are right-wing liars.
Speaking of liars and idiots, the two-minute video below shows David Seeger, President and CEO of Great Lakes Credit Union in Bannockburn Illinois, about 25 miles north of Chicago.
Mr. Seeger issues a dire warning about the “national debt crisis.” He claims that because of this “crisis,” you personally owe hundreds of thousands of dollars to…whoever. Clearly Mr. Seeger is a liar or an idiot, and yet he heads a credit union!
Which brings up the question: would YOU deposit your money in a bank or credit union that was run by a liar or an idiot?