The sound of stupid

This is in connection with Ellen Brown’s latest blog post, which you see above. I once corresponded with Ellen Brown for a month, trying to explain the facts to her, but she was too “brilliant” to grasp reality.

Unfortunately her blog posts are reprinted in so-called “progressive” blogs, thereby sustaining the falsehood that the U.S. government needs tax revenue. From this falsehood come attacks on social programs as “unsustainable.”

Ellen also pushes the falsehood that all dollars are loans from bankers.

In reality, all euros are loans from bankers, but not all U.S. dollars, or Canadian dollars or Australian dollars. In fact the governments of all but a handful of nations create their own spending money out of thin air. Banks also create money out of thin air (as loans) but that is a separate matter.

As I said, all euros are created by banks as loans. Therefore any nation that uses the euro, and which has a trade deficit (like France and Greece) must fall further into debt each day. Consequently those nations’ governments must impose more austerity each day.  Therefore those nations’ politicians who cling to the euro, while also claiming to be “progressive” must be liars.

When the banker-vampires installed the SYRIZA coalition in Greece (Jan 2015) I commented on several blogs that SYRIZA was a fraud, since SYRIZA championed the euro. I said that Greece would have more austerity no matter what. Many people flamed me. I was correct, of course, and many people have awakened from their delusion about SYRIZA, but not all. For many people, just calling yourself “progressive” makes you progressive, no matter how neoliberal you actually are.

If your nation uses the euro, and has a trade surplus (like Germany) then your nation sucks energy and assets from nations that use the euro, and have a trade deficit. And Germany, like all parasites, claims to be the “host,” while claiming that its victims (e.g. Greece) are parasites. Meanwhile politicians in the host nations (e.g. Greece and France) cling to the euro because they are on the bankers’ payroll.

For the host nations, the euro makes endless austerity and mass privatization obligatory. Any politician who opposes the euro is condemned as a “fascist” (e.g. Marine Le Pen).

Anyway, regarding Ellen Brown’s latest blog post , if you start with false premises, you will proceed through false corollaries to false conclusions.

If the Federal Reserve raises the fed funds rate to 3.5% and sells its federal securities into the market, as it is proposing to do, by 2026 the projected tab will be $830 billion annually. That’s nearly $1 trillion owed by the taxpayers every year, just for interest!

Oh no!

Fortunately the Fed creates money out of thin air to pay interest on T-securities.  When you buy a T-security, it is exactly like when you buy a CD from a regular bank. Your money is automatically credited to a Fed savings account that is automatically created for you.  Later when your T-security (or your CD) matures, your money is debited from your Fed savings account, and is credited to your regular bank checking account, plus interest. Taxpayers owe nothing on this, and pay nothing. The computer-automated system simply changes the numbers in computer logs (otherwise known as bank accounts). This is how banks work.

Then Ellen spouts total gibberish…

Personal income taxes are at record highs, ringing in at $550 billion in the first four months of fiscal year 2017, or $1.6 trillion annually. But even at those high levels, handing over $830 billion to bondholders will wipe out over half the annual personal income tax take. Yet what is the alternative?

Japan seems to have found one. While the US government is busy driving up its “sovereign” debt and the interest owed on it, Japan has been canceling its debt at the rate of $720 billion (¥80tn) per year. How? By selling the debt to its own central bank, which returns the interest to the government. While most central banks have ended their quantitative easing programs and are planning to sell their federal securities, the Bank of Japan continues to aggressively buy its government’s debt. An interest-free debt owed to oneself that is rolled over from year to year is effectively void – a debt “jubilee.”

WTF? This is claptrap. It’s meaningless. Federal income tax revenues are effectively destroyed upon receipt, and have nothing to do with paying back the “national debt.” Also, how can “Japan sell its debt to its own central bank”? This makes no sense. The “debt” is deposits in central bank savings accounts. All Japanese sovereign bonds (aka T-securities) are issued by the Bank of Japan. People buy Japanese T-securities in order to gain interest. Meanwhile the Japanese government creates its spending money out of thin air, just like the U.S. government. It has no need or use for tax revenues, or for interest from T-securities.

True, the US and Japanese governments gain interest from T-securities, because 40% of T-securities of the USA and Japan have been purchased by the governments of the USA and Japan.  (Hence 40% of the “national debt” is what the U.S. and Japanese governments owe themselves. So much for the “crisis.”) But as I said, the central governments have no need for this interest money.

The Bank of Japan is in the process of owning most of the outstanding government debt of Japan (it currently owns around 40%). BoJ holdings are part of the consolidated government balance sheet. So its holdings are in fact the accounting equivalent of a debt cancellation. If I buy back my own mortgage, I don’t have a mortgage.

What is Ellen smoking?  The Bank of Japan is not “in the process” of anything. This is the way it has always been. Ellen thinks the “national debt” is what the USA and Japan owe to bankers, or to China, or…someone.

The Saudis have deposited $700 billion in Fed savings accounts. Where did they get that $700 billion? For Ellen, the Saudis borrowed it from the Fed, so the Saudis could deposit it in the Fed. (Huh?) In reality they got $700 billion by selling oil to the USA. The $700 billion came partly from the U.S. government, and partly from banks that gave loans to people who wanted to buy Saudi oil.

Incidentally, last year the Pentagon evaluated China’s ownership of “U.S. debt” to see if it was a national security matter. The answer was no, since “ownership of U.S. debt” simply means that China has deposited $1.4 trillion in Fed savings accounts. That $1.4 trillion is seven percent of the total “national debt,” i.e. the national deposits / national assets. (Oh no!)

I’ll stop here, because Ellen proceeds to spout more and more of the same  gibberish. And her disciples lap it up.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s