Tuesday, December 29, 2015

Where Banks Get All That Money To Lend

I don’t know why, but for years, ever since I was a kid, I wondered how banks could possibly have enough money on hand to make the kinds of loans they do. For instance, how could a bank afford to loan a bunch of borrowers, say, $250,000 each on home mortgages? How could they do it? I know the interest on home loans is paid ahead of principal and that it amounts to many times the amount of the loan itself. But are deposits and interest enough to keep the banks in cash to make all those big loans over and over? Is there really enough money lying in their vaults to loan out as much as they do? How do you think the banks do it? I didn’t lose sleep about it, but I did wonder.

Here’s the standard story. Banks take in deposits. They keep some of that money from deposits and lend the rest out at interest rates higher than the rates they pay on deposits. In this scenario, if banks don’t receive enough new deposits, they can’t make new loans.

The standard story leads to the fractional reserve story. Here’s how it goes. Banks receive deposits, keep a percentage on hand and lend the rest out as above. But the amounts lent out become deposits at other banks which also keep some and lend out the rest. Let’s say the required amount to keep in reserve is 10%. Thus, Bank A may receive a $100 deposit, keep $10, and lend out $90. Bank B receives the $90 as a deposit, keeps $9.00 and lends out $81.00. Bank C receives the $81.00 deposit, keeps $8.10, and lends out $72.90. This can go on until the original $100 deposit has been lent, deposited, lent some more, deposited some more, until finally the original $100 has become $1000 in deposits in banks around the country. Thus, fractional reserve lending allows banks to create new money in the amount of $X / Y% where $X is the original deposit and Y% is the reserve requirement percent. Example: $100 / 10% = $1000. A whole lot of people are astounded at this. Some so much so that they decry fractional reserve lending as counterfeiting and inflationary, and want to see it stopped.

Trouble is, neither of the stories above is accurate. Banks do not lend existing money. They just don’t. They don’t need to. Why? Because when a bank makes a loan it always, always simply creates new money. Always. All bank loans come from thin air, not from existing deposits or even percentages of existing deposits. Let me repeat – banks always create new money from thin air when they make loans. That’s how they can lend all that money! Eureka!

Here’s how it works. The bank has a customer who wants a loan. If the bank deems the loan a good risk, the bank makes the loan by simply marking up the balance in the customer’s account by the amount of the loan (less any loan fees or charges). Thus, if I take out a bank loan of $100, my account is credited for $100 (an asset to me, a liability to the bank), the bank records a $100 loan on its books (an asset to the bank, a liability to me), and then the bank endeavors to acquire the reserve dollars needed to meet whatever the central bank’s requirements are.  And that’s how the bank can make all those big loans – it simply creates the money to make those loans. Is that a bad thing? Some people would say it is, but if banks did not have the authority to create money, our economy would certainly not be as robust as it is. You, for example, might have a very difficult time saving up the money to buy a new car if the bank were not allowed to loan you brand new money with which to buy it.

On the flip side, the loan payment process reverses the loan process and guess what? Your loan payment simply destroys the money created by the loan. When you make a $10 payment on your $100 loan, maybe $1.00 goes to interest and the other $9.00 reduces the amount of the loan. Your deposit asset and the bank’s deposit liability each shrink to $90, your loan liability and the bank’s loan asset each shrink to $91.00, and the bank books the $1.00 interest as capital gain. True, the bank has made $1.00 but what it has really done is transfer some of your assets to itself as the price for making it possible for you to buy that new car.

Two things to note.

First, the bank creates money only in the form of credit. It does not create new US dollars. US dollars are created only by the central bank (the Fed) at the behest of the Treasury. Most money is not in US dollars but simply credit against US dollars. Confusing, but true.

Second, it should be obvious that a money system consisting of only bank lending is unsustainable. There would be no place for interest to come from except new lending. For instance, if you have to pay back your $100 loan with $110, the $100 of loan money goes out of existence, but where is the extra $10 supposed to come from? Since all money would come from new lending, it too would have to come from new lending.

That is why federal deficit spending is the real source of permanent private sector money. When the federal government spends, it also creates new money, like the bank. But the federal government creates both real US dollars (which stay in the central bank) and credit against those dollars (which becomes a deposit in the recipient’s bank account). The critical difference is that, unlike with bank lending, federally spent money does not have to be paid back, thus, it stays in existence unless or until it is taxed back by the federal government. Without federal deficits and an ongoing federal “debt”, we in the private sector would have ever growing debt to the banks. That’s why a national balanced budget (which takes back all federal spending as taxes) would be ruinous to the economy.

Now you know how our monetary system really works, and how banks can make all those big mortgage loans.     

Monday, December 28, 2015

The Siege of Fort Texas and Its Future Civil War Generals

In August 1845 the 5,000 man American Army under General Zachary Taylor encamped at Corpus Christi, Texas as the "Army of Observation" when the American annexation of Texas threatened war with Mexico. In April 1846, Taylor marched his army to the Rio Grande as the "Army of Occupation" and hostilities commenced. There, Taylor constructed a large, earthen fort across the river from the town of Matamoros. On Friday, May 1st, Taylor marched the bulk of his army east 26 miles to his supply base at Point Isabel leaving about 500 men of the 7th US Infantry regiment under Major Jacob Brown and companies of the 3rd and 5th US Artillery regiments under Captain Allen Lowd to defend the unfinished fort. In addition to its garrison, the fort housed handfuls of wounded soldiers, women, children, civilians, and Mexican prisoners. Taylor named the structure Fort Texas.

On Sunday, May 3, 1846, the Mexican Army, across the river, launched a cannon barrage against the fort. Inside Fort Texas, the 7th Infantry's company commanders under the direction of engineer Captain Joseph K. F. Mansfield busily supervised the continued construction of bombproofs while the artillerymen on the parapets returned fire with their small assortment of 18 and 6-pounder cannon. The Mexican shells did little damage at first as they thudded harmlessly into the dirt sides of the fort - harmlessly except for one shell that hit and killed infantry sergeant Horace A. Weigert. The Americans knocked out a Mexican gun emplacement on the bank at Matamoros then reduced their fire in order to preserve their ordnance.

There were ten companies of 7th Infantry at Fort Texas: Co A under Gabriel Rains, Co B under Francis Lee, Co C under Theophilus H. Holmes, Co D under Richard H. Ross, Co E under Dixon Miles, Co F under Richard C. Gatlin, Co G under Washington Seawall, Co H under Edgar S. Hawkins, Co I under Gabriel Paul, and Co K under Daniel P. Whiting. All the company commanders were captains except for Paul who was a 1st Lieutenant filling in for Captain Stephen W. Moore who had days earlier decided to resign from the army rather than fight in the Mexican War. The artillery units were manned by 1st Lieutenants Braxton Bragg, George H. Thomas, Arnold Elzey, John Reynolds and others.

The Mexicans soon crossed the river and surrounded the fort, even as their mortar and cannon fire kept pressure on the American soldiers inside. The Mexicans kept up a steady but ineffective rifle fire that failed to unnerve the Americans who held their ammunition and their ground.

On day three, Wednesday, May 6th, a cannon ball took Major Brown's left leg off. As Brown lay there mortally wounded, Mexican General Ampudia sent a surrender delegation to the fort, but new acting commander Captain Edgar A. Hawkins gathered his fellow officers and by unanimous vote chose to reject the Mexican capitulation demand. The Mexicans then charged the fort from the rear but Lt. Bragg's 6-pounder battery dispersed them with canister shot.

Another day passed under fire while inside the fort the soldiers remained on alert and a tall, angular young civilian laundress named Sarah Borginnis took on the task of tending to the sick and wounded, cooking, and comforting the other civilians. The same day 2nd Lt. Earl Van Dorn of Co K dashed out of the fort and, dodging rolling cannonballs and whizzing bullets, raised a US flag that that had come off its lanyard.

On  Friday, May 8th, Taylor and his army arrived back from Point Isabel and the bulk of the Mexican army set out to meet him. Taylor defeated the Mexicans at the Battle of Palo Alto that day and, on May 9th, he defeated them again at the Battle of Resaca del Palma. The Mexicans re-crossed the Rio Grande, fled from Matamoros, and abandoned the six-day Siege of Fort Texas. Major Brown and Sergeant Weigert were the only American deaths and only a handful of soldiers were wounded. The 500 men of Fort Texas had held against a 2,000 man Mexican force and much superior firepower. The fort was immediately renamed Fort Brown in honor of its gallant commander, and the city of Fort Brown later grew up around it. The American army went on to defeat the Mexicans again in late September 1846 at Monterrey, where Captain Gatlin was wounded in the shoulder while leading his company in street-to-street combat. Most of the defenders of Fort Texas took part in that campaign and others until the end of the war in January 1848. 

Including the future adversaries in the critical Battle of Chickamauga, Braxton Bragg and George H. Thomas, at least seventeen future Civil War generals were among the Fort Texas defenders, eight for the Union and nine for the Confederacy. The future Union generals were Joseph K. F. Mansfield (killed at Antietam), John F. Reynolds (killed at Gettysburg), George H. Thomas (the Rock of Chickamauga), Samuel B. Hayman, Napoleon J. T. Dana, Henry B. Clitz, Gabriel Paul, and Joseph Potter. The future Confederate generals included: Braxton Bragg, Arnold Elzey, Gabriel Rains, T. H. Holmes, Lewis Henry Little (killed at the Battle of Iuka in Mississippi in 1862), Franklin Gardner, LaFayette McLaws, Earl Van Dorn (murdered by a jealous husband in 1863 in Tennessee), and our own Richard C. Gatlin. In addition, Dixon Miles, as a Union colonel, was mortally wounded by Confederate cannon fire at Harpers Ferry in 1862. Also, Gatlin's good friend and fellow Fort Texas defender Daniel P. Whiting rose to the rank of colonel in the Civil War Union Army. There may not have been another such compact concentration of future Civil War generals in any US Army engagement prior to the Civil War. 

Postscript: The six-foot tall heroine of Fort Brown, Sarah Borginnis (or Bowman, her subsequent married name), became a legend in her own right as she continued to serve the US Army for twenty more years. Her nickname was "The Great Western" and following her death in 1866 she was breveted an honorary Army colonel and buried with military honors in the Fort Yuma cemetery.  

Wednesday, December 23, 2015

Facebook Debate Requires One More Attempt at Reasoning With Doubters

Here is another shot at what is becoming a tedious subject for me and probably for some of you who may read this blog.

Virtually all of my friends and correspondents cling to the ideological certainty that the federal government spends too much and will soon go broke because of it. They cannot conceive of the idea that the federal government does not need tax money in order to spend. They also are convinced that the government must borrow money in order to spend, thus digging itself into deeper and deeper debt that we, the taxpayers, must eventually cough up the dough to repay.

Why, I ask you, would a nation that has full Constitutional authority and financial wherewithal to "print" (that is, to create and issue) money need to tax and borrow other peoples' US dollars in order to get money to spend? Is it absurd to think that the US government creates money? No, even my doubting Thomas friends and correspondents readily admit that the government can and does "print" money. Still, they cling to the paradigm of the US government having the same financial constraints as a business or household. Why is that?

Okay, there are constraints, two of them, but both are self-imposed by Congressional dictate as a means of, I guess, controlling inflation. I will get to those two constraints in a minute, but first let me tell you how the federal government creates US dollars (and it does not "print" them and scatter them to the wind for people to latch onto).

First, the federal government issues a check or an electronic deposit and voila, someone's bank account balance is increased. Simultaneously, the central bank (the Fed) marks up the receiving bank's reserve balance. The reserve balance is the number of on-account dollars the receiving bank has with the Fed to clear checks. The Fed creates those reserve balance dollars out of thin air when the government spends. That is how banks get the money to cash and clear checks. They do not use depositor dollars for those purposes. By authorizing the Fed to create reserves, the federal government creates money when it spends.   

Now let us look at the two self-imposed and arbitrary artificial constraints on the monetary system. The first is that when the government runs a spending deficit, the Treasury must "borrow" money in an amount equal to that deficit by selling bonds, notes, and other security types to the public. The federal deficit is the amount the government spends in excess of tax collections in a given year. For example, if the government spends $4 trillion in a year and collects $3 trillion in taxes, the deficit equals $1 trillion and the Treasury must sell $1 trillion in securities. On the surface, it would seem that the government "borrows" the money from the sale of securities in order to pay for what it spent in excess of its tax "revenue". This is not really the case because the government had already created the money and paid for what it spent. The Treasury, therefore, does not spend the money it receives from the sale of securities. The securities money really goes into the buyers' (investors) accounts at the Fed as safe and secure investment savings. The Fed returns those savings to the buyers (investors) along with some newly created interest dollars when the securities expire. The purpose of selling Treasury securities is to take dollars out of circulation thus offsetting any inflationary pressure federal spending might have triggered, not to acquire money to spend.

The government defines the federal "debt", currently approaching $19 trillion, as the total dollar amount of outstanding Treasury securities at any one time. This leads us to the second self-imposed and arbitrary artificial constraint on the monetary system - the debt ceiling. Even though Congress requires the Treasury to sell securities equal to the deficit as described above, it also imposes a limit on the total amount of Treasury security dollars in existence at a given time. Thus, if Congress sets the debt ceiling at $20 trillion and the deficit becomes $1.5 trillion, the Treasury must sell securities equal to $1.5 trillion. Selling that amount of securities, however, would cause the outstanding treasury security balance to exceed the $20 trillion debt ceiling. Congress would have has painted itself into a corner (and frequently does) with its two conflicting rules. Congress creates a deficit by spending more than it gets in taxes, but does not tie its spending to the debt ceiling until after it has already spent. That is why Congress must periodically raise its arbitrary debt ceiling. The fact that Congress has spent the money before selling the securities is ample proof that the government does not depend on borrowing in order to spend.

These two arbitrary constraints on the federal monetary system have caused untold waste and rancor in Congressional debate. They have also bamboozled the American public into believing that the US government must borrow money in order to spend, even from competitor nations such as China, which itself invests its extra US dollars from its trade surplus into Treasury securities for safe-keeping and to earn interest. Neither constraint is necessary now that the US monetary system is no longer on a gold standard and no longer runs the risk of insolvency. The whole premise that the federal government accrues "debt" from spending and borrowing is pure fabrication.

The US dollar is itself a debt - that is - it is an IOU of the federal government to pay the holder of that dollar another US dollar, nothing else. It is simply a permanent or temporary accounting liability. The other side of that liability, the asset, belongs to the holder of that US dollar. Those asset holders are we in the private sector.

Do not federal taxes pay for federal spending, you might argue. No. The receipt of federal tax dollars by the Treasury removes those assets from the holder and removes the liabilities from the government. Tax dollars simply go out of existence, even though ledger entries continue to show their amounts.

In summary, the federal government creates US dollars by spending. It destroys US dollars by taxing. It neutralizes US dollars by parking them in Treasury securities. The government does not tax or borrow in order to spend but I will bet that you, the reader, and most of Congress do not believe it.

Friday, December 18, 2015

I Still Say the Federal Government Does Not Borrow

My understanding of treasury securities operations are rudimentary at best, and I invite comments, but from my exposure to Monetary Sovereignty and MMT I presume that the federal practices of taxation and treasury security sales function not to fund federal spending (as the government and most economists would have us believe) but to neutralize the inflationary impact of federal spending,

Here is what I mean. Assume the federal government spends (disburses) $4 trillion in a given fiscal year. Assume also that federal tax collections for the year are $3 trillion (federal taxes, as we know, are dollars removed from circulation and accounted out of existence). Because, by definition, federal spending over and above tax collections constitutes a "deficit", that leaves a federal deficit of $1 trillion for the fiscal year. In accordance with a federal ruling (which I am unable to cite), the treasury must sell securities equal to the deficit amount, in this case $1 trillion. The treasury sells the securities and parks the $1 trillion paid for them into accounts at the Fed, thus removing the $1 trillion from circulation. Consequently, for the fiscal year, the entire $4 trillion spent by the federal government goes out of circulation. The $3 trillion in taxes is gone forever and the $1 trillion spent on securities will reenter circulation on expiration of the securities but, in all likelihood, will roll into new securities. Bank reserves, of course, remain in play for the $1 trillion in securities, but bank reserves do not circulate.

My observation, then, is that federally spent dollars float in circulation for a year and disappear into taxes and securities accounts leaving only bank-created dollars in circulation. By that reckoning, I conclude that any money supply influence on inflation comes from only the amount of bank-created money in circulation. The federal rules, laws, mandates, statutes, or whatever, that require the Treasury to sell securities to match the deficit seem to dictate the removal of federally spent dollars from the hands of private sector spenders.

From this, I conclude that tax collections are not spent, that selling treasury securities is not really federal borrowing, and, because selling treasury securities does not constitute borrowing, that the federal debt is not really debt. And for those inflation-phobes who fear federal money "printing", I propose that there is more likelihood that the private sector will "print" too much money than there is in the federal government sector doing so.


Tuesday, May 5, 2015

Don't Hate Welfare Just Because It's Federal

As far as I can tell, there are four arguments against the federal government providing any kind of welfare to its citizens. Well, actually three arguments and one reason. Let's dispense with the reason - resentment. People just seem to resent anyone else getting anything that they don't get or wouldn't want. Thus, when someone receives a government check, someone else is going to resent it - reasons, needs, economic benefit notwithstanding. Many people even resent Social Security. So let's just dispense with resentment. It's nothing but an emotion.

The three arguments against government-provided social welfare are cost, addiction, and vote buying. People opposed to government welfare are convinced that the government cannot afford it. People opposed to government welfare are also convinced that welfare robs people of the initiative to work, makes them lazy and dependent, and addicts them to government support. People opposed to government welfare are convinced that politicians bribe voters with promises of free stuff. I have a few thoughts on each of these arguments.

First - costs. Welfare paid for by the states does typically cost state taxpayers money. That's because the states must collect revenue in order to spend and revenue collected by most states takes the form of state income, property, and sales taxes. Except for federally provided money, states spend money collected from their residents. So yes, state-run welfare costs the taxpayers money. But this is not so at the federal level. Federal spending is not dependent on, or even related to, federal taxation. Because the federal government creates dollars by spending, welfare funded by federal spending does not cost taxpayers a dime. In fact, federal welfare adds dollars to the economy providing a degree of stimulus which promotes increased private sector spending which promotes greater private sector production which promotes private sector job creation which lessens the need for many welfare payments. So rather than argue that welfare costs the government money, I would argue conversely that federal welfare adds to the country's economic growth. I would further think that all government welfare should be paid for by the federal government, not the states, even if the states were to continue to administer the programs.

Second - addiction. Face it, there will always be some relatively few cases in which welfare recipients grow dependent on the government dole for an extended period of time or even a lifetime. In fact, Social Security is a form of federal welfare that lasts a lifetime and sometimes longer and I am certain that few, if any, Social Security recipients have ever chosen to quit receiving their payments because they already make enough money to get by. Make no mistake, Social Security is every bit as much welfare as food stamps and section 8 housing. We think we paid for Social Security with our payroll taxes, but as we've already discussed, federal payroll taxes are just federal taxes and as such, they just remove dollars from circulation and destroy them. Federal spending is not funded by federal taxes - remember? But I digress. If federal welfare promotes laziness and dependency, then do not all sources of welfare promote laziness and dependency? Welfare is welfare is it not? You can grow as dependent on the largesse of your parents or siblings as you can the federal government. Is it any less moral for the federal government to provide someone money for food than for the Red Cross, Salvation Army, or local soup kitchen or homeless shelter to provide food or money for food. Does it really make sense that welfare provided by the federal government causes more welfare dependency than welfare provided by private means? If I am hungry and broke what difference does it make to me where the welfare comes from? If I am prone to dependency, I can grow just as dependent on the Salvation Army as I can the federal government. To argue that federal welfare breeds dependency is to argue that all welfare breeds dependency.

Finally - vote buying. People vote in their own best interests whether those interests are promises of tax breaks, new roads, federal spending on pet projects, or the promise of welfare. Pick your poison. 'Nuff said.

You may choose to oppose federal welfare, that's your right. But just don't be so quick to convince yourself that because the welfare is provided by the federal government that it is inherently bad.

Sunday, April 19, 2015

The Crazy Platform Plank

1.       Money is created and enters the economy when the federal government spends.

2.       Money leaves the economy and is extinguished forever when the federal government collects taxes.

3.       The federal government does not need or spend our tax money. To think it does is like thinking a theater needs to take back and reuse its tickets in order to have tickets. Or like saying the Post Office needs to take back and reuse its stamps in order to have stamps. The federal government creates money - it is not going to go broke or have to borrow if it does not tax it back.

4.       If the federal government were to tax back all the money it spends, then (much to the relief of too many of us) the federal government would have (big deal) its much sought-after "balanced budget". But if the federal government had a "balanced budget", then the economy would end up with no money. We the people, in aggregate, would have no money. The economy would tank.

5.       When the federal government spends more than it taxes back, the government ends up with a "deficit" (so what, it can always create money), but the private sector ends up with a surplus of money enabling us to spend and save. A deficit simply means that the government has created more money than it has destroyed. Is that a bad thing for us in the private sector?

So I ask you - why the political rush, especially among presidential candidates, to cut the deficit and eliminate the (mis-named) debt? What is the matter with all those politicians who want to cut the deficit and "balance" the budget? Do you get it?

With thanks to petermartin2001.wordpress.com

Sunday, April 12, 2015

Kindle Version Has Arrived!

I must say, the soft cover version of my book, Richard Gatlin and the Confederate Defense of Eastern North Carolina (The History Press, 2015), is a good-looking, good feeling book, but for those of you who do all or most of your reading on eBooks now, it is available in Kindle version from amazon.com for just $9.99 plus tax. I am a Barnes and Noble Nook reader myself, but the Nook version is not available yet so I downloaded the free Kindle app for my Nook Android tablet and bought a Kindle copy of the book.

For any of you who would like an author-signed softcover version of the book, I have a limited number of copies that I can sell at $20.00 each, including tax and shipping (domestic only). Just send me an email at jimg320@gmail.com and we'll get together on how to pay and where to send the book. Sorry I don't take credit card payments. Because most sales will be through amazon.com or barnesandnoble.com, or through book stores and historic sites, I just won't have enough personal copies to make credit card sales feasible.

I encourage everyone to get a copy, though, regardless of format or source. You and I will both be glad you did! As one of my favorite readers said in his excellent review, "This is a great read for Civil War buffs and for those wanting to see real life in the nineteenth century!"  

Friday, April 10, 2015

Beware Those Balanced Budget Candidates

I wish there were some way to make my formerly rational-seeming friends see that their growing angst over the federal government’s deficit spending and the growing federal debt, currently at about $18+ trillion, is misplaced and a needless waste of their time and energy. I know, because until a couple of years ago I was of that same mindset.

It made me furious to think that my tax dollars, dollars that I could have better used for my own well-being, were being taken from me and handed over to a myriad array of government spending schemes, notably welfare. When guys like Ron Paul demanded that we cut federal spending, lower the debt to save interest, and balance the budget it made sense to me. Why? Because in my pea-sized mind I associated federal spending with federal taxes. It seemed only logical that reduced federal spending would result in lower taxes which meant that I could hang on to more of my own money. Besides, I thought it unfair and virtually unconstitutional for the federal government to take my money from me and spend it on someone else, especially when that someone else could be using my money to buy cell phones, beer, cigarettes, drugs, and flat screen TVs. And, I was afraid that the US could actually go broke as Obama and Bill O’Reilly warned.

Then, in 2012, I had an epiphany. When, in one the Presidential debates, Ron Paul said he would reduce the tax rate to zero I did a double take. Curiosity started me digging into money, the nature of money, and how the federal government gets and uses money.

What I discovered makes guys like Paul Ryan, Ron Paul and Rand Paul, Ted Cruz, Scott Walker, Lindsey Graham, and other guys like Barack Obama, Bill Clinton, Alan Simpson, and Erskine Bowles, and ladies like Nancy Pelosi and Hilary Clinton look like imbeciles or villainous liars. They all want to either cut federal spending to get our fiscal house in order or to increase federal taxes to finance national initiatives. What they all really want is to cut us, the private sector, off at the knees. What I learned is this: federal spending creates all the dollars that we in the private sector get to keep and use for all our financial activities, and federal taxes destroy those same dollars making them unusable by us.

And there it is – Bam! Federal taxes do not fund federal spending. Let me repeat – the federal government does not spend tax dollars! The federal government creates money. It does not need our taxes to have money. It does not even need to borrow money to have money. Because it creates money by spending, the federal government can always pay any bill, no matter the size, as long as it is denominated in US dollars. If all federal income, payroll, inheritance, and other taxes were suspended tonight, the federal government could continue to pay for everything it pays for now, including Social Security and Medicare. My taxes and your taxes don’t go to anybody else’s cell phone or F-35 fighter jet. The federal government always creates new money to pay for those things.

Further, the dollars the federal government spends and does not tax back are the dollars that you and I and everyone else gets to spend, save, and invest. Lower federal spending and higher taxes both equate to less money for the private sector. A balanced budget simply means that the federal government taxes back every dollar it spends – that is – no more federal deficit spending. A balanced budget boils down to two results: 1) an end to the money supply for the private sector and 2) the federal government pays for nothing – just like a socialist government it would basically own the factors of production. It does not hurt the federal government to spend more than it collects.

So there you have it. Any candidate whose platform includes cutting spending, or raising taxes, or more specifically promoting a balanced budget amendment, is serving someone other than the private sector of the United States. They may be serving the government, or the oligarchy, or the lords of idiocy or socialism, but they are not acting in the best interest of the American republic. That’s why I can’t get excited over Rand Paul, Ted Cruz, Scott Walker, or any of the other potential Republican, Tea, and Libertarian Party hoo-hahs of their ilk. It’s also why I can’t get excited about Hilary either. I want someone who exposes a balanced budget for the lie that it is. I want someone who will either cut federal taxes, or increase federal spending, someone who will strengthen the economic well-being of the private sector and not try to appeal to our misguided idea that the federal government should mimic a household.

Tuesday, March 31, 2015

Book Sales Appear Strong!

My book, Richard Gatlin and the Confederate Defense of Eastern North Carolina, was released on March 23, 2015, a little over a week ago. As far as I can tell, book sales are satisfyingly strong. I've sold 27 copies myself from my small cache. I can't tell how many copies have been sold on amazon.com or on barnesandnoble.com but, even though it has fallen back now, at one point early on it ranked around number 124,000 on Amazon in overall sales and 15th in the category of Civil War - Confederate. On Barnes and Noble it has consistently ranked between 450,000 and 550,000. I don't really know what any of those numbers mean in terms of actual sales, however.

At any rate, I have heard from a handful of folks who have read it and let me know about it that it is a good, easy-flowing read. They seem to universally relate to and sympathize with General Gatlin too. I am looking forward to the appearance of the Kindle and Nook versions online, but don't know how soon that will be. I learned yesterday that there is only one copy in the Barnes and Noble store in Greenville, NC but that they have eight more copies on order for arrival this week. I have seen online ads for the book also from Target, Wal-Mart, and Sam's Club. Apparently, they either will carry it or sell it online.

This book is not a novel folks, but a biography and non-fiction historical account of Gatlin's life and his command of the North Carolina Department early in the Civil War. I strongly urge each and everyone to go ahead and get a copy, read it, even if you're not a Civil War buff (it's not just a Civil War book), and leave a review out on Amazon or Barnes and Noble. Or just post your thoughts on this blog page in the comments somewhere. If you want a signed copy, email me, then send $20 bucks, and I will get one into the mail (foreign delivery extra). Thanks to each and everyone who has bought, will buy, and has read or will read my work.   

Can America run out of money? No.

Can Americans run out of money? Yes.

Let's examine these two seemingly contradictory assertions.

First, America, that is, the United States government, cannot run out of money because it actually creates money by spending. You see, US dollars are essentially federal government IOUs. Dollars are created when the federal government issues checks or makes electronic payments and the recipient's bank increases the balance in the recipient's account by the amount of the payment. At that point of balance increase, and not before, money is created in the US economy. If nothing else, the US government is authorized by the Constitution to spend. Of course, Congress could theoretically put an end to federal spending through legislation. That legislation might end government spending, but, it technically would not end the government's ability to spend. Thus, the federal government, which does not need to have money in order to spend money, can never run out of money.

What about the federal "debt" you say? Well, decades ago Congress enacted an arbitrary law that requires the US Treasury to sell Treasury securities in an amount equal to the difference between federal spending and federal tax collections. Get that? Spending does not follow Treasury security sales. Rather, Treasury security sales follow the amount of federal spending and tax collections. The federal "debt" that everyone complains about is the amount of outstanding Treasury securities, not some amount of money the federal government had to borrow to pay for its spending. The "debt ceiling" is a limit on Treasury sales, not a limit on federal spending per se.

Now, on to the second assertion - Americans can run out of money.  

Money is created in two ways: 1) through bank lending, and 2) federal spending. In both cases, the private sector, of which the American people, households, businesses, and local and State governments are a part, are the recipients of this newly created money. With bank lending, however, the borrower incurs a responsibility to pay the money back. When he borrows $1000 from the bank he must pay it back, with interest. Consequently, if money came only from bank lending there would be no net money in play except for loan defaults. A growing money supply would necessarily be only the flip side of a growing private sector debt load. In aggregation, the private sector cannot, has not, and will never be able to create a positive net amount of money. If it had to depend on itself, the private sector would always stay in the hole to the tune of interest amounts.

On the other hand, when the federal government spends into the private sector (all its spending goes into the private sector by definition) there is no requirement that that money be repaid to the federal government. However, there is a little thing called federal taxes. The money paid to the federal government in the form of taxes simply reduces the net amount of money the federal government has injected into the private sector via its spending. If the federal government were to tax back exactly as much as it spends, then there would be no net money flowing to the private sector and the private sector would eventually run out of money, and be unable to save a dime or pay interest on any private borrowing. Oh, by the way, that situation where the federal government taxes back every dollar it spends, thus depriving the private sector of any net money flow, is known as "The Balanced Budget". Good thing we don't have a Constitutional requirement to balance the budget, huh? Hear me Oh Tea Party, Libertarian Party, Republican Party, and even Democrat Party!!!

Tuesday, March 24, 2015

Book Sales Are On!

Okay. Now that the publication date of March 23,2015 has come, book sales are officially under way. I can't tell how many copies have been sold on amazon.com and Barnes and Noble, but I had an impromptu book signing at the Kinston Civil War Round Table meeting tonight and sold my first 15 copies. Gatlin's story wraps itself around many of the major events of the 19th century and I really want it to get out there into the reading public. I'll bet you did not know, for example, that as a new West Point graduate in 1832 Gatlin and several of his newly graduated classmates volunteered to join General Winfield Scott on the first Great Lakes military steamboat armada, from Buffalo, NY to Fort Dearborn, IL, to fight in the Black Hawk War. Unfortunately, a deadly cholera outbreak short-circuited the voyage, several hundred soldiers died, and the West Pointers returned to Buffalo having faced the army's greatest enemy - disease. That was the first, but not the last time that Gatlin would come face to face with death and win. His family was not so lucky however. Check out Richard Gatlin and the Confederate Defense of Eastern North Carolina. It's not just a Civil War book.

Tuesday, March 17, 2015

Why the Federal Debt Is a Backward Issue

Chew on this if you truly think there is a problem with having a federal debt of $18.5 trillion.

The danger of a large debt is that the debtor could go insolvent, that is, unable to pay the debt.

Well that problem was resolved for the federal government in 1971 when the US went completely to a fiat monetary system. That means that the US can create as much money as it wants without fear of running short (as long as it maintains a floating exchange rate and all its debts are in US dollars). Or to put it another way, the US is free to create any amount of money to repay any debt, no matter how large - it can never come up short of money.

But a closer look reveals something else about the nature of the federal debt that should make us welcome it rather than fear it. Here is what you are probably not going to understand unless you really think hard about it - the federal debt is actually money itself. When we talk about federal "debt", we are actually talking about the net amount of money the federal government has spent. Think about this: a US dollar is a federal "debt" to the holder of that dollar. When you and I have debt, it refers to dollars we have borrowed, either physically or on credit. We actually owe those dollars. When the federal government has debt, it refers to the net dollars it has spent. Big difference!

Let me reiterate: your debt is dollars you owe. Federal debt is dollars it has spent. You repay debt by giving up dollars. The federal government repays its debt by taking back dollars. Because US dollars are federal debt and federal debt is US dollars, eliminating or reducing the federal debt means reducing or eliminating the number of dollars in circulation. Could you get along with a lot less money? Not likely. But the US government can because it can create money at will. Therefore, it never has to reduce its "debt". So don't hate the federal debt. Be glad of it.

That leads to one more thought. Federal taxes - you know, those horrible obligations that take money from us - are the federal government's way of reneging on its debt to us.    

Sunday, March 15, 2015

Branch and Anderson Led Brigades - Why Not Gatlin?

Brigadier General Richard C. Gatlin was commander of the Confederate North Carolina Department from August 19, 1861 to March 15, 1862. In 1862, he had two subordinate generals, Brigadier General Lawrence O'Bryan Branch in New Bern and Brigadier General Joseph R. Anderson in Wilmington. Due to a sudden recurrence of an old case of malaria, Gatlin was unable to assume the field command from his subordinate, Branch, when the Union's Burnside Expedition attacked New Bern on March 14, 1862. The Confederate forces retreated, New Bern fell, Branch was the losing general, and Gatlin was stripped of his command by the Confederate War Department, officially due to his illness.

A mystery I have been struggling with for years is why Gatlin never received another Confederate command. This seems very odd to me because among North Carolina-born Confederate officers, Gatlin, a 29-year veteran, was the third most experienced former officer of the US army, trailing only Generals Gabriel Rains and T. H. Holmes. Holmes was a division commander in Virginia and Raines led a brigade there. Holmes, in fact, replaced Gatlin on March 25, 1862 as commander of the North Carolina Department. Holmes' new organization consisted of four brigades, two of which were commanded by none other than Generals Joseph R. Anderson and Lawrence O'B. Branch, Gatlin's recent subordinates. Anderson and Branch were strictly civilian generals, neither had extensive military experience prior to the war, although Anderson was a West Point graduate. Further, less experienced officers such as Dorsey Pender and Matt Ransom became brigade commanders during Gatlin's hiatus.

After recovering from his illness, in April 1862, Gatlin petitioned the War Department for a brigade command, offering himself for field service, but a new command never came. April faded to May then June and on into the fall, yet Gatlin sat on the sidelines, living at his sister's home in Everettesville near Goldsboro. By October 1862, Gatlin began campaigning for the North Carolina Adjutant General's post. Confederate regulations forbade a brigadier general from holding his commission for longer than a specified period, I believe six months, without actively commanding a brigade. Still, Gatlin held onto his commission until January 1863 when, following personal meetings in Richmond with War Secretary James Seddon, he resigned his commission retroactively to September 8, 1862. So why, in an army that desperately needed experienced generals, did civilians Branch and Anderson actively command brigades while the old pro Gatlin sat on the sidelines? In the absence of evidence to the contrary, I can only speculate with three plausible explanations.

The first is that Gatlin, in his frustrating seven-month battle with the Confederate War Department for troops and ordnance that never materialized, must have kindled the ire of the War Department. On several occasions, he expressed his displeasure and disgust with the Confederacy's failure to adequately arm his North Carolina Department.

The second is that Gatlin was persona non grata in North Carolina following the loss of New Bern. The press had excoriated him (unfairly) and Gatlin was, at least in 1862, a political liability.

The third, and most plausible, is that Gatlin refused to serve outside of North Carolina. Any brigade commander would have been expected to lead his troops in Virginia or Tennessee or elsewhere, yet some reports indicate that Gatlin professed loyalty to only his home state and refused to serve outside its borders. I have not seen the Confederate War Department records, or Secretary Seddon's papers, which could reveal his discussions with Gatlin, so on my agenda is a trip to the National Archives this summer to examine those records for the answer, or at least a clue.

By the way, Branch was killed at Sharpsburg in September 1862. His command went on to become the much-heralded Branch-Lane brigade. Anderson was wounded at Frayser's Farm in June 1862 and resigned his commission to resume his management of the Tredegar Iron Works in Richmond. Chances are good that Gatlin, had he gained a brigade command, might have been killed or wounded as well. Or perhaps he would have become one of Lee's trusted generals - we'll never know of course.

If you order my new book before March 23 you can get it at the discounted pre-publication price. Check it out at Barnes and Noble or Amazon right now!      


Thursday, March 12, 2015

Federal Debt? No, Not Really.

With Treasury spending approaching the debt limit, I will wager that most of you think the federal debt, now $18+ trillion, is a very dangerous thing because:

1) that much borrowing is unsustainable,
2) it represents uncontrolled federal spending,
3) it will take  higher taxes to pay it down
4) our grandchildren will bear the burden of paying it off
5) it will lead to the collapse of the US dollar
6) it will cause our credit rating to be downgraded

All six of these presumptions are tragically wrong, of course, but how could you know that with the press, many economists, and especially the lunatics in Congress and on the campaign trail pounding these threats into you?

The $18+ trillion "debt" is not a credit card bill run up by a free-spending Congress, it is nothing more than the sum of dollars that people, companies, and countries currently own in Treasury security investments housed in the Federal Reserve. The US has not "borrowed" this money, at least not in the consumer sense. Investors have saved it by having bought Treasury securities which are a virtually risk-free investment offered by the US Treasury. You may even have some US Savings Bonds of your own.

The Treasury has not spent that money - it creates new money whenever it spends. Rather, the Treasury simply parks investors' dollars until the securities expire then it transfers the balances from the depositors' securities accounts back to their checking accounts and adds a little interest. Often it rolls the amounts into new securities because the depositors do not want to cash in their securities. The Treasury rolls over some $70 trillion per year, four times the current balance. Thus, the federal "debt" can be described more accurately as private sector savings.

The Treasury sells securities in an amount up to what it has spent above its tax collections or up to the so-called "debt limit" whichever comes first. Why? Not because it needs the money (it doesn't even spend tax dollars - those are destroyed), but because Congress back in 1917 decreed that it must. The mandate to sell Treasury securities is a remnant of the by-gone gold standard days when the US had to make sure it did not create more money than it had gold to back it up. Those days disappeared in 1971, freeing the US to create as much money as Congress wants to authorize, not just up to the amount of gold it can buy.

Because the federal debt (more aptly called "federal savings") is nothing but Treasury security balances, it is sustainable to whatever amount dollar investors want it to be. There is never a   reason to "pay off" the federal debt. The investors who own that debt do not want it paid off. They would have to find other, less safe, investment vehicles if the US paid off and quit selling Treasury securities. Because the Treasury rolls over T-securities, or redeems them via accounting transfers, taxes do not pay for them. Our grandchildren will suffer only if we eliminate the private sector investment. The dollar remains strong partially because there is a virtually risk free place to park private sector dollar surpluses. If Congress were to cap the amount of Treasury security savings with a hard and fast debt limit, then the private sector would lose one of its best investment opportunities.

So, don't be afraid of the misnamed federal debt. It is one of private sector America's chief assets regardless of what President Obama, Rand Paul, or Paul Ryan tell you. 

Saturday, March 7, 2015

Big Saturday in Kinston!

We, meaning The Farm and Home Band and Mike Parker, played another fun gig this morning on the CSS Neuse II gunboat for the "Breakfast on the Boat" fundraiser. It was 29 degrees when we started playing about 8:00 A.M. which, if you play music you know, was quite a challenge for our fingers. I was warmly clad though in my replica 1840s US Infantry Officer's uniform that, thankfully, for once, is all heavy wool.

 On board the CSS Neuse II

The CSS Neuse II is a full-size replica of the Confederate ironclad, the CSS Neuse that was completed, launched, and scuttled here in Kinston a century and a half ago. Building a full-size replica of Kinston's locally famous Civil War icon was a brainstorm of the late Ted Sampley and was accomplished over several years by local volunteers who learned the hard way to become shipbuilders. With the remains of the original CSS Neuse now safely housed in Kinston's new Civil War Interpretive Center and the CSS Neuse II one block away on a large, dedicated downtown lot, Kinston is becoming quite the Civil War tourist destination. After "Breakfast on the Boat" we went over to see the dedication ceremony of the aforementioned Civil War Interpretive Center. Later we took a great three-hour bus tour of the Wyse Fork Civil War Battlefield just east of Kinston. There were good crowds at all three events despite the cold morning. As is so often is the case in Kinston, the weather changed and the temp skyrocketed to a sunny low 60s.

Since I started my research for the soon-to-be-published biography of Kinston-native General Richard Caswell Gatlin (1809-1896), one question keeps popping up from interested parties: "Was he the guy that invented the gun?", meaning the Gatling Gun? The answer is "No, he is not the guy". Oddly enough, however, the Gatling Gun was invented by another North Carolinian, one Richard Jordan Gatling of Gates County who is no relation to the subject of my research and book. By the way, I heard from my publisher this week that the projected March 23 publish date is still good, that the books are printed and in the warehouse, and that they will be shipped to the various booksellers around March 18. The original publish date was supposed to be February 7 but from what I've heard of publishers' experiences, a one and a half month delay is not bad at all. As a reminder, the book, Richard Gatlin and the Confederate Defense of Eastern North Carolina is already available online at a pre-publication discount from Barnes and Noble and Amazon. Admittedly, a biography of R. C. Gatlin may not be on everyone's radar, but I'm pretty sure, when you read it, that you will find Gatlin's journey through the 19th century to be quite a story.

Wednesday, March 4, 2015

Borrow From China? Not!

Oh the horror of it all!

Standard mantra is that the US government borrows money, lots of money, from China. China forgodssake! Candidate Obama said as much in his 2008 campaign and guys like Limbaugh, Hannity, and virtually every presidential candidate, people who should know better, repeat it. Why shouldn't we believe it? The US has to get its money from somewhere besides taxes doesn't it?

We should not believe it because it just is not true - at all! The United States does not borrow money from China, or from anybody else. The United States creates new money every time it spends. A country that creates its own money has no need to borrow its own money from someone else.

So why does this myth persist you might wonder? I think it persists for two reasons.

First, most people assume the US government is just like a business or household that must live within its means or go bust. Businesses and households rely on revenues or incomes. If they spend more than they take in, they often borrow to cover the difference. The federal government, however, is far different. With its ability to issue dollars it does not rely on or even use revenue at all (although politicians wrongly call taxes "revenue"). The federal government creates money as I said. Some people call it "printing" money, although the government doesn't phyiscally print very much. Mostly it simply instructs banks, electronically or by check, to credit peoples' checking accounts. In addition to crediting peoples' checking accounts, federal spending creates  what are called bank reserves which is what private banks use to back their customers' deposits. The upshot is that there is absolutely no need for the federal government to take out bank loans, run up credit card debt, or borrow in any way.

Second is the Treasury's own misleading terminology. The Treasury sells Treasury securities in an amount roughly equal to the government's deficit spending. Why? Not to finance its spending, but simply because way back in the gold standard days Congress decreed that it must. The Treasury, for some inexplicable reason, refers to its sale of securities as "borrowing". The Treasury doesn't borrow the money spent on securities any more than a private bank borrows the money you deposit in a CD. And the Treasury does not spend the money it receives for the sale of securities. That money stays on account until time to redeem the security, at which time the Treasury just debits the purchaser's Treasury security account and instructs the purchaser's bank to credit his checking account by the same amount plus a little bit of newly created interest money. Now, here's the source of the confusion - China is one of the entities that buys Treasury securities. China has lots of dollars to invest because we buy so much stuff from China. China could stuff those dollars under its collective mattress, or it could, and does, invest them in US Treasury securities to safely park them and draw interest. That, my friends, is not lending. That is savings!

Oh, by the way, that $18 trillion federal debt? None of that debt is money borrowed from a lender or charged on a credit card. By definition, the federal "debt" is the current amount of unredeemed Treasury securities. In other words, the amount people, companies, and countries have saved through the US Treasury. The $18 trillion in debt is more accurately described as $18 trillion in private savings.

So, I rest my case. The United States does not borrow from China, or from anyone else, because it has no need to.

Sunday, March 1, 2015

Okay, So Why Gatlin?

I've been asked, "Why did you write about Gatlin?" The short answer is because nobody else has. There are myriad biographies about other Civil War generals, North and South, but none about Gatlin, so I figured somebody should write one. However, there is more to it than just that.

Back in 1999 I ran across a thumbnail sketch of Confederate general Richard Caswell Gatlin in a one-volume Civil War encyclopedia and was surprised to read that he was from Kinston and Lenoir County where I now live and where some of my family lines go way back to colonial days. Naturally, I became curious about him, but there was no biography and no one around here had even heard of him. Geez, I thought, that's just not right. So my search for R. C. Gatlin began.

Most of what I found over the years I had to dig out a sentence at a time. Incessant internet searches yielded precious little, a snippet here, a piece there, but nothing longer than two or three paragraphs. I bought all the books I could find and afford on the Black Hawk War, the  Indian Territory, the Seminole Wars, the Mexican War, and surprisingly, for I had never heard of it, the Utah War; and, of course, the Civil War. Gatlin's West Point classmates and his fellow 7th Infantry officers were fodder for authors and some of those mentioned Gatlin. Over the years, I have come to know Gatlin better than probably anyone else alive today, although Gatlin's personal life before and after his military career still presents some unresolved challenges for me.

These days, in the aftermath of tobacco's demise and the disappearance of the textile industry, Kinston and Lenoir County are trying to rebuild their image and economy. A large part of that rebuild centers around Kinston's Civil War experience. Kinston was impacted big time by the Civil War. After the town of New Bern fell and the North Carolina coast was lost to the Yankees, Kinston became the front line of the Confederacy. Then twice in the late 1800s the court houses burned and most of Kinston's early records were lost, along with memories of its history. As its native son, its lifelong sterling ambassador, and its only Confederate general, Gatlin's legend today belongs to Kinston and Lenoir County. I had to get his story into the infosphere. There must be a book about him, there certainly must be. And now there is.

Wednesday, February 25, 2015

Oh Those Taxes!

It is income tax time again so I want to follow up my previous post with this question - where do our federal tax dollars go? Silly question you say. I suspect most of us assume that our federal taxes go into the Treasury's own bank account and that the Treasury uses that money to pay federal bills, expenses, benefits, and giveaways. That is what it looks like on the surface, but looks can be deceiving.

Recall from my previous post that US dollars are simply federal government IOUs, redeemable in nothing but other dollars. When the federal government collects your tax dollars from you, it retrieves from you some of its own IOUs that have found their way into your pockets. So, let us do a little analogy. You sell me your old pickup truck for $500, but instead of giving you cash or a check, I hand you my signed personal IOU for $500. You expect to redeem that IOU later, at which time I would hand you $500 US dollars and you would hand me back my IOU. My IOU is worth $500 to you when you have it. What is my IOU worth to you when I have it? If you said ZERO then you can see where I'm going with this.

So how about we change this up a little and instead of my giving you $500 US dollars and taking my IOU back, I hold a gun to your head and simply take my IOU back? Now in my possession, how much is my IOU worth? Zero because you no longer have it, and because I cannot owe myself.

My point is this: an IOU in the hands of the issuer has no value. Thus, a dollar in the hands of the federal government has no value. It is gone, destroyed, out of existence. When the federal government takes your tax dollar, that dollar is gone for good. When the federal government spends, it issues new IOUs (aka: dollars) and it can issue those IOUs (aka: dollars) in unlimited quantities, subject of course to Congressional authorization. Federal taxes are unneeded to pay for federal spending. Income taxes pay for nothing. Payroll taxes pay for nothing. Inheritance taxes pay for nothing. Gasoline taxes pay for nothing. Federal tax dollars pay for nothing. They cannot because they are zapped, destroyed, out of existence as soon as they come into federal possession.

So then, why does the federal government levy taxes? It has its reasons, but those are for a later post.

(Oh, by the way, if you think about what I just said, you should conclude that Social Security is always solvent and that it can never suffer a shortfall. Again, that is fodder for another post.) 

Monday, February 23, 2015

A Word About the Economy

Kick this notion around and see if it registers with you. When it comes to finances, North Carolina is just like your family, and your family is just like Radio Shack, and Radio Shack is just like the Town of Kinston, and the Town of Kinston is just like Greece. No, I don't mean they are all broke. I mean that each of the aforementioned entities must find a way to rake in as much, or more, revenue than they spend or each will eventually end up insolvent and maybe in bankruptcy court.

Did you notice that I included a household, a business, a local government, a state government, and a country? All households, businesses, local governments, state governments, and countries like Greece share a common financial constraint - they are users of money, not issuers. Notice too that I did not mention the United States among this group. Not all countries are subject to the financial constraints of Greece and the other entities I named. The US government, like Japan, China, Brazil, Australia, and some others, but unlike Greece, is the sovereign issuer of its country's currency, the US dollar, and despite artificial debt limits and the (mostly hollow) threat of inflation, the US government can always create as many dollars as Congress desires. The upshot of that simple notion is that the US government can always pay any debt, regardless of size, as long as that debt is denominated in US dollars. It also means that a federal deficit is not in the least bit scary. It also means that federal taxes and federal borrowing are not necessary for funding federal spending, not when the country has the ability to create and issue dollars. In fact, the US does not actually borrow, but that's a topic for another post.

A US dollar, you see, is nothing more than a federal government IOU, payable not in gold or silver or a fresh-killed chicken, but in only another federal IOU. Unlike your IOU or your neighbor's IOU, everybody in the USA and in many other countries gladly accepts federal IOUs (that is, dollars). What does it cost the federal government to issue an IOU? Nothing. Sure a dollar is a federal liability, but guess what else it is - an asset to the holder. In fact, all US dollars are private sector financial assets. If the government did not spend, or if it took back in taxes all its spent dollars (otherwise known as a balanced budget), then we in the private sector would have no money to spend, save, and invest. Thus, for the sake of a growing and healthy private sector economy, especially in times of money shortages, low demand, and high unemployment, the federal government should consider spending more and taxing less. Federal debts, remember, are also private sector dollars. Without one, we would not have the other.    

Wednesday, February 18, 2015

Gatlin Was No Stranger To Tragedy

Richard C. Gatlin (1809-1896), former US Army officer and Confederate general from Kinston, NC was a man of the 19th century, an age when personal tragedy was commonplace and childhood death visited many families. During his long and fulfilling life, Gatlin endured his share of low points and heartbreak as outlined below.
o    After graduating from West Point in 1832, Richard C. Gatlin reported to Fort Gibson, Indian Territory as a brevet 2nd lieutenant. In his first month on active duty, a percussion cap from his gun exploded into his left eye leaving a metal shard that surgery could not dislodge. He went on medical leave in New Orleans then back in Kinston until October 1833 when, after the "inflammation subsided", he returned to Fort Gibson. He appears to have never regained the sight in his left eye.

o    On December 28, 1835, Gatlin's older brother, Assistant Surgeon John S. Gatlin was one of the last of 106 men killed in the infamous Dade Massacre in Florida. Seminoles ambushed a column of 108 men under Major Francis Dade near present-day Bushnell, Florida. Only two soldiers survived and one of them died just days after the attack. John S. Gatlin fell in a hail of bullets after firing all four shots from his two double-barreled shotguns. Six months later, Gatlin's father died, reportedly despondent over the death of his older son.  

o    On September 23, 1846, while leading his 7th Infantry Company F in house-to-house, hand-to-hand combat in the streets on Monterrey during the Mexican War, Gatlin took a bullet through the shoulder. The wound knocked him out of action for several months. Gatlin did however earn a promotion to brevet major and a commendation for "meritorious service".

o    In July 1849, Gatlin married for the first time, at age 40, to 22 year-old Scioto Sandford. Their first child, Johnny, was born in July 1850. On December 27, 1851, while Gatlin commanded the post at Fort Smith, Arkansas, Scioto gave birth to the couple's second son, Alfred, but a week later on January 3, 1852 Scioto died followed by the newborn baby on January 11, 1852. Scioto and Alfred were interred in a single crypt at Fort Smith.

o    On February 16, 1854 in St Louis, Gatlin and 3 1/2 year-old son Johnny boarded the steamboat Kate Kearney for a short trip upriver to Alton, Illinois. As the big boat backed out of its slip, a boiler exploded spewing steam and shrapnel. The explosion slightly injured Gatlin but severely scalded Johnny who, after a ten-day hospital stay, died from his burns.

o    Gatlin's career low point came on March 15, 1862 when, as a Confederate general, he was relieved of command of the North Carolina Department, ostensibly due to "illness", following a Union invasion of the North Carolina coast and their occupation of the town of New Bern in Gatlin's department. The local press excoriated Gatlin, falsely accusing him of drinking and cowardice when an illness prevented him from leading his troops at the Battle of New Bern. The press later recanted and absolved him from blame.

o    The 48 year-old Gatlin married for the second time in January 1857 to 20-year-old Mary Ann Gibson at Fort Smith. During their 39-year marriage, the couple had seven children of which five died before reaching the age of ten. One-year-old Sallie died in Raleigh in 1864, while in Arkansas infant Robert died in 1866, nine-year-old Richard died in 1869, three-year-old Louis died in 1871, and nine-year-old Bettie died in 1880. Scarlet fever and respiratory diseases appear to have been the cause of all the deaths. Only their oldest daughter Susie (1857-1904) and youngest daughter Mary (1875-1973) lived to adulthood, but neither had children of their own. The youngest child, Mary Knox Gatlin, was born in 1875 when Gatlin was 66 years-old. Mary died in Chapel Hill, NC in 1973 just shy of her 98th birthday.

While perhaps not entirely typical, Gatlin's experience with death and tragedy was certainly harsh. The deaths of his children were particularly distressing to Gatlin, but he seems to have taken each experience in stride, and he did not succumb to depression nor immerse himself in strong drink as did so many of his contemporaries. 

 Richard Caswell Gatlin Richard C. Gatlin Jr Tombstone, Fort Smith, AR

Tuesday, February 17, 2015

Who Was Richard Caswell Gatlin?

Richard Caswell Gatlin was a Confederate Brigadier General noted for commanding the Confederacy's North Carolina Department from August 19, 1861 to March 15, 1862. Major Gatlin resigned a laudable 29-year army career on the day North Carolina seceded from the Union, May 20, 1861, to serve his home state as a militia general. When the Confederacy took responsibility for North Carolina's military defense in August 1861, Gatlin became a brigadier general in the Provisional Confederate Army and assumed command of the newly formed North Carolina Department. Despite planning a solid strategy and enlisting the aid of Generals J. R. Anderson, D. H. Hill, and Lawrence O'Bryan Branch, Gatlin was unsuccessful in garnering from the Confederate War Department enough resources to ward off a Union invasion and occupation of the North Carolina coast. Union attacks on Hatteras Island in August 1861, Roanoke Island in February 1862, and New Bern in March 1862 resulted in Gatlin's dismissal from command. Eventually, Gatlin was absolved from blame for the Union occupation and he went on to serve as North Carolina's Adjutant General under Governor Vance from August 1863 until the end of the war. Gatlin, a grandson of North Carolina's first governor, Richard Caswell. was born January 18, 1809 at the Red House Plantation in Lenoir County, NC, near the town of Kinston, to John Gatlin and Susannah Caswell Gatlin. After the war, he retired to his wife's family farm in Fort Smith, Arkansas where he had commanded an army post in the 1850s. He died at age 87 in Mount Nebo, AR on September 8, 1896 and is buried at the Fort Smith National Cemetery beside his two wives and two of his children.

Gatlin is one of the unheralded Confederate generals and 19th century stories. Besides being the first Lenoir County native to graduate from West Point (1832), he, with the US Army, helped open the American west, and he is the only Confederate general from Kinston and Lenoir County. A privately funded commemorative highway marker erected at the Kinston/ Lenoir County Visitor Center in 2014 and an exhibit of some of Gatlin's possessions, soon to be displayed at the CSS Neuse Civil War Interpretive Center in Kinston, indicate a growing recognition for his place in history. My new book, Richard Gatlin and the Confederate Defense of Eastern North Carolina, is essentially a Gatlin biography covering his early days in Kinston, to his army life in the wilds of America, to his Civil War experience, to his death in Forth Smith. If you read it, I think you will find Gatlin to be quite a likeable fellow and a man for his times.

Next time we'll talk about the many tragedies in Gatlin's life.

Monday, February 16, 2015

Welcome To My Gatlinbiographer Blog

My name is James L. Gaddis, Jr, better known as "Jim" Gaddis. I am a new author, an old musician, and a would-be economist in keeping with my BA in Economics from NC State. This blog will be open to whatever interests me and whatever I feel like discussing at any given time. Initially though, the blog is intended to publicize and promote my first book, Richard Gatlin and the Confederate Defense of Eastern North Carolina, now available for pre-order from amazon.com and barnesandnoble.com. Feel free to visit those sites and check out the book cover and the promo blurbs. 

Gatlin (1809-1896) was a Kinston, Lenoir County, NC native who was the first from his home county to graduate from West Point (1832). He went on to a distinguished career in the US Army before resigning in 1861 to lend his services to his home state which had seceded in May 1861.  I've studied his comings and goings since about 1999, learning bits and pieces about his intriguing trek through the history of the 19th century. The turbulent 19th century carried Gatlin to Indian Territory and Texas during Indian Removal,to upstate New York for the Patriot's War, Florida for the 2nd Seminole War, New Orleans in a brief peacetime, Mexico for the Mexican War, St Louis and Fort Smith for the 1850s, Nebraska and Utah Territory during the so-called Utah War, and finally back to North Carolina as the ill-fated commander of the Confederate Department of North Carolina. Along the way he was blinded in one eye, was wounded in action, buried his parents and siblings, was praised and excoriated by the press, and married twice and lost a wife and seven of his nine children to illnesses. Gatlin's career is historic in its own right, but around here, in Kinston, NC, his biggest claim to fame is being Kinston's own Civil War general. I'll be telling you more about Gatlin as time goes by, but you will get to know him fairly well by reading my book.

I am also intensely interested in the US monetary system which I believe is one of the least understood, or most misunderstood, topics of our times. I have come to believe that federal taxes destroy money and do not fund federal spending, that the federal "debt" is better viewed as private sector "savings", and that federal deficit spending is responsible for any and all aggregate private sector net savings and financial assets. You can file those ideas under the headings of Monetary Soverignty and Modern Monetary Theory. 

So join me if you will. Let's talk about Gatlin, Civil War, monetary and fiscal workings and policy, and, oh yes, Ian Tyson music. 81 year-old Ian will be flying east for a one-time concert up in Alexandria, Virginia in May and I already have my tickets.

Hope to see you along the way.

And check out these two booksellers:

amazon: http://www.amazon.com/Richard-Confederate-Defense-Eastern-Carolina/dp/162619842X/ref=sr_1_1?ie=UTF8&qid=1424140299&sr=8-1&keywords=richard+gatlin

barnes and noble: http://www.barnesandnoble.com/w/richard-gatlin-and-the-confederate-defense-of-eastern-north-carolina-james-l-jr-gaddis/1121010525?ean=9781626198425