Sloppy thinking (Part 2)

The major reason why we have rich and poor is that most people indulge in sloppy thinking about money.  For example the video at the bottom of this post shows the U.S. Bureau of Printing and Engraving, which prints all U.S. currency notes.

At 19:22 the video mentions that in 1956 the U.S. Congress decreed that “In God we trust” shall be printed on U.S. currency notes. (The words were already being printed on coins.).  In November 2005 Michael Newdow filed a lawsuit claiming that “In God We Trust” was an unconstitutional endorsement of religion. A federal judge rejected Newdow’s lawsuit, saying the words did not dictate anyone’s beliefs.

Then at 19:53 the video shows Tom Ferguson, who was Director of the U.S. Bureau of Printing and Engraving when the video was made in Dec 2005. Ferguson says that in order to remove the words “In God we trust” from currency notes, the printing plates would all have to be changed, and that this would, “Add to the cost of currency,” and…

Hold it.

The U.S. Bureau of Printing and Engraving has no “costs,” since the bureau creates $650 million dollars out of thin air every day (and the Federal Reserve shreds over $500 million worth of old worn-out notes every day.)

If something “costs” a dollar, then I must surrender a dollar to buy it. However the Bureau of Printing and Engraving does not surrender money. It creates money. Therefore it has no “costs.” Neither does the U.S. government. The words “cost” and “save” is for entities that cannot create money out of thin air.

And this silliness about “cost” is from the bureau’s director! I suppose this should not surprise us, since most people who work for the U.S. Treasury are likewise confused regarding the nature and function of money. Popular columnist Paul Craig Roberts has a PhD in economics, and was an Assistant Secretary of the Treasury – and yet Roberts still thinks the U.S. government borrows its spending money, and therefore has a “national debt crisis.”

By the way, the bureau periodically alters the plates to thwart counterfeiters, and does not have to worry about “costs.” Also, currency notes must change every time there is a new U.S. Treasury Secretary, since his signature appears on the notes.

What all of this shows is that people fail to understand money because they confuse themselves with contradictory assertions. This is why we have rich and poor.

  1. The U.S. government creates as much money as it likes out of thin air.
  2. The U.S. government is near bankruptcy.

This contradiction is idiotic.

Some people rationalize their idiocy by falsely claiming that all dollars are lent into existence by banks. Therefore the U.S. government must borrow all its dollars. Therefore the U.S. government is “near bankruptcy.” Therefore the U.S. government must impose austerity on us. It must privatize.

Once you fall into this mental error (about banks creating all dollars) you cannot be saved by anyone except yourself.

Other people rationalize their idiocy by compounding it. They admit that yes, the U.S. government could create all the money it liked out of thin air, but if it did, then everyone would want things like Universal Medicare and a Basic Guaranteed Income. Everyone would sit on their yachts, enjoying life like rich people do. This would be evil.

Still other people rationalize their idiocy by simply shutting down. They admit that yes, the U.S. government can create all the money it likes out of thin air, but the U.S. government is nonetheless “bankrupt.” Why? It just is. Politicians and the corporate media outlets say so. And they never lie. Right?

Speaking of sloppy thinking, at 43:40 the video claims that, “Money used to get its value from gold.” Wrong. Money never got its value from gold. On the contrary, gold has always gotten its value from money. If there was no money, then a ton of gold would not be worth a cent. When the U.S. government first started using standardized dollars in 1865, it pretended that dollars were “backed” by gold in order to make people habituated to using dollars. The amount of dollars created always far exceeded the market value (in dollars) of available gold. In 1971 the U.S. government finally did away with this pretense, but many people still delude themselves that gold is the only “real” money, even though gold was never money. Nor did gold ever physically “back” money. Gold is a commodity. The “gold standard” was merely a gimmick; a pretense.

At 43:50 in the video, Tom Ferguson (then-Director of the U.S. Bureau of Printing and Engraving) says that money today gets its value from something that makes no sense. What is that something? I have no idea, nor does Ferguson. His comments are meaningless gibberish.

After that garbage, the video finally gets it right. At 44:18 the narrator says, “The U.S. dollar is only valuable because we say it is.”

Exactly. A dollar is worth a dollar of “full faith and credit” of the U.S. government, plus every person in the world who thinks a dollar is worth a dollar.

Then the video says that if the U.S. government created more money than it creates now, it would cause inflation. Wrong. It would only cause inflation if there was a shortage of things to spend the extra money on. There is no such shortage in the USA. All of us want more dollars, so we can buy more stuff.

Then at 44:50 the video notes that some people think that pennies are obsolete, while other people disagree, saying the U.S. government cannot monetarily “afford” to eliminate pennies. That is, since it “costs” the U.S. government 0.7 cents to make a penny, the government is “making money” off pennies.

Here again is the silly nonsense about the U.S. government having “costs,” and needing to “profit” in money that the U.S. government creates out of thin air.

This kind of bullshit is what sustains poverty and inequality.

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10 thoughts on “Sloppy thinking (Part 2)

    1. Correct. True money only exists in the human mind, and is represented by coins and bills, and by bank account numbers.

      I said the U.S Bureau of Printing and Engraving creates $650 million a day out of thin air. Technically I was not correct. The Bureau creates pieces of paper. When the Fed sends the paper to a bank, the bank logs those pieces of paper as money, but the paper notes themselves are, as you observed, just pieces of paper.

      Thanks for the sharp observation. My point was that money is limitless. When someone robs a bank, and gets away with currency notes, we pretend that he has stolen something that is difficult to replace.

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  1. ‘Paul Craig Roberts has a PhD in economics, and was an Assistant Secretary of the Treasury – and yet Roberts still thinks the U.S. government borrows its spending money, and therefore has a “national debt crisis.”’

    http://www.paulcraigroberts.org/2017/04/04/worlds-best-economist/

    Even though PCR claims Michael Hudson is the world’s greatest economist (wrong, but Hudson is hands down better than 99.9%), Roberts somehow continues to cling to the bullshit “Positive Money” charade. Unbelievable.

    A treasury bond IS a dollar (w/ a coupon)-the govt creates them out of thin air-they are 100% US dollars, what’s not to understand Mr. Paul Craig Roberts?!

    Stop with the pictures of she-devil herself, the delusional Ms. Ellen Brown. (Just kidding.)

    Liked by 1 person

    1. A Treasury security is basically a Certificate of Deposit (CD). You are paid interest for leaving your money in a savings account for an agreed-to amount of time. Your money is on loan to the bank. It is both a debt and an asset for the bank. If you withdraw your money early, you don’t get the interest. While your money is in the savings account, it cannot be spent, and therefore it assumes the status of “reserves” for the bank. In regular banks, CD’s are insured by the FDIC. With the Fed, T-securities are insured by the Fed itself (or if you prefer, insured by the U.S. government). The Fed has $20 trillion in reserves (i.e. deposits).

      Of course, none of this is physical. It’s all just numbers on spreadsheets.

      Regarding Michael Hudson, I agree with most of what he says, but Hudson too is confused about the “national debt.” Hudson is, however, correct about what I call the “financialization” of the economy. That is, there are two economies: the financial economy and the real economy. The financial economy entails rentiers, private debt, speculative markets, and making money from money. It is a deadly parasite on the real economy, which is the realm of buying and selling goods and services in the conventional way.

      The differences between the two economies are something that Rodger Mitchell has never been able to grasp.

      Liked by 1 person

  2. ‘After that garbage, the video finally gets it right. At 44:18 the narrator says, “The U.S. dollar is only valuable because we say it is.”’ Best comment ever! Take that you “taxes drive money” MMT clowns!

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    1. In my humble opinion, calling proponents of MMT “clowns” is counterproductive; the political climate is already FUBAR and insulting/mocking the people who agree with you on major issues (e.g. the federal gov is not broke) will not get us anywhere.

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      1. Thanks for visiting and commenting. MMT people’s understanding of money is 99.5% correct. Unfortunately they don’t want to take the final step (the remaining 0.5%). For example, they cling to absurdities such as their “taxes drive money” mantra.

        Oh well.

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  3. Wow. Eliz. Harris sounds smart. I’ll have to look for more of her info and encourage governments to heed her advice. What about “sovereign money”? Is it on the right track?

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    1. All money is subject to the sovereign authority of a national government, or in the case of the euro, an international government which consists of the European Commission and the European Central Bank.

      (Meanwhile the European Parliament has no real power, and only exists to maintain the illusion that the European Union is in fact a union.)

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