tag:blogger.com,1999:blog-27964711412180660322023-11-16T06:23:17.220-08:00Gatlin BiographerJim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.comBlogger49125tag:blogger.com,1999:blog-2796471141218066032.post-54068479950965239502022-02-28T19:36:00.000-08:002022-02-28T19:36:54.254-08:00What MMT Means by "No Financial Risk"<p>Just to be clear, when MMT says that the federal deficit and federal debt pose no "financial risk", we mean simply that federal spending does not lead to federal insolvency or federal bankruptcy.</p><p><br /></p><p>Why not?</p><p><br /></p><p>Because the federal government incurs no financial obligation, that is, it incurs no debt when it spends or distributes US dollars. When it issues US dollars, the federal government creates those US dollars from scratch, brand new. Those dollars carry no promise of convertability to any commodity like gold or silver, no obligation to be converted to some other currency, no obligation to pay anything else. Those dollars ARE payments, in and of themselves, from the federal government to the receivers of those dollars. And the US government, as the sole Constitutionally authorized creator of US dollars, can always create more dollars whenever Congress decrees that it do so. </p><p><br /></p><p>The US dollar is simply a US government issued tax credit. The government promises us nothing more when it spends those US dollars than that it will always accept those dollars back in payment of our taxes. That's it. It's that simple. </p><p><br /></p><p>Now, the federal government's spending more US dollars than there are goods and services available could, conceivably, result in inflation. But that is an entirely different issue than "financial risk", isn't it?</p>Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com1tag:blogger.com,1999:blog-2796471141218066032.post-2074809674439463652022-02-02T11:56:00.002-08:002022-02-02T12:37:54.030-08:00US National Debt Hits $30 Trillion - No Biggie, No Debt<p><span style="background-color: white; font-family: arial;"><span data-offset-key="37oep-0-0" style="font-size: 15px; white-space: pre-wrap;">Did you see that the so-called national "debt' went over the $30 trillion mark this week? Did you feel it? Did the earth shake? Did your </span><span style="font-size: 15px; white-space: pre-wrap;">bank</span><span data-offset-key="37oep-2-0" style="font-size: 15px; white-space: pre-wrap;"> close down? Did you sense the crisis all around you? No? Neither did I. The "debt" reaching the $30 trillion mark was a non-event, kind of like you hitting your 30th birthday. It may make you feel differently psychologically, but you are virtually unchanged from when you were 29.</span></span></p><div data-block="true" data-editor="1gg46" data-offset-key="daekd-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="daekd-0-0" style="direction: ltr; position: relative;"><span style="background-color: white; font-family: arial;">Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said, <i>“This [$30 trillion] is a jaw-dropping number that is a real cause for concern. It is the result of both borrowing for really important crises, most notably the Covid pandemic, but also trillions and trillions of borrowing for no reason other than politicians have stopped being willing to pay the bills.”</i></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="90h6m-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="90h6m-0-0" style="direction: ltr; position: relative;"><span data-offset-key="90h6m-0-0"><span style="background-color: white; font-family: arial;"><br data-text="true" /></span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="eumhi-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="eumhi-0-0" style="direction: ltr; position: relative;"><span data-offset-key="eumhi-0-0"><span style="background-color: white; font-family: arial;">But Maya MacGuineas is wrong. What we call the national "debt" is not the result of politicians not paying their bills. In fact, just the opposite is true. The federal government always pays its bill, in cash, with no borrowing, no credit card, no deferred payment. You see, when the federal government buys something or fulfills an entitlement, it does so by creating brand spanking new US dollars, every time. When the federal government spends, here's what happens:</span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="5m9ra-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="5m9ra-0-0" style="direction: ltr; position: relative;"><span data-offset-key="5m9ra-0-0"><span style="background-color: white; font-family: arial;">
1 - The Treasury authorizes the Federal Reserve Bank to make the payment.</span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="efv8l-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="efv8l-0-0" style="direction: ltr; position: relative;"><span data-offset-key="efv8l-0-0"><span style="background-color: white; font-family: arial;">2 - The Federal Reserve Bank, or "Fed", identifies the payee's bank and credits that bank's reserve account at the Fed where banks' US dollars are kept. By crediting reserves, the government has created new US dollars.</span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="4sfsn-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="4sfsn-0-0" style="direction: ltr; position: relative;"><span data-offset-key="4sfsn-0-0"><span style="background-color: white; font-family: arial;">3 - The receiving bank credits the deposit account of the payee, thus making those US dollars available to the public.</span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="ajt1o-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="ajt1o-0-0" style="direction: ltr; position: relative;"><span data-offset-key="ajt1o-0-0"><span style="background-color: white; font-family: arial;"><br data-text="true" /></span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="8r32h-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="8r32h-0-0" style="direction: ltr; position: relative;"><span data-offset-key="8r32h-0-0"><span style="background-color: white; font-family: arial;">Example: When it's time for the government to make your monthly $1500 Social Security payment, the treasury notifies the Fed, the Fed credits your bank's reserve account for a new $1500, and your bank credits your deposit account for $1500. That's it. Dollars are created by accounting.</span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="720al-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="720al-0-0" style="direction: ltr; position: relative;"><span data-offset-key="720al-0-0"><span style="background-color: white; font-family: arial;"><br data-text="true" /></span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="8mmno-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="8mmno-0-0" style="direction: ltr; position: relative;"><span data-offset-key="8mmno-0-0"><span style="background-color: white; font-family: arial;">When people or businesses or even countries accumulate US dollars, they often decide to put some of those dollars away in savings. If they put those dollars into a banking savings account, there is no effect on the number of bank reserves (US dollars) in the economy. But sometimes they decide to park those dollars safely away into US treasury securities accounts. They do that by "buying" treasuries. </span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="br293-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="br293-0-0" style="direction: ltr; position: relative;"><span data-offset-key="br293-0-0"><span style="background-color: white; font-family: arial;"><br data-text="true" /></span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="at4js-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="at4js-0-0" style="direction: ltr; position: relative;"><span data-offset-key="at4js-0-0"><span style="background-color: white; font-family: arial;">US treasury securities are just accounts at the Fed, special savings accounts that are time-limited and on which the federal government pays interest. When someone "buys" a treasury security, the buyer's (saver's) bank debits his deposit account, the Fed debits his bank's reserve account (thus removing dollars from the economy), and credits the securities account at the Fed. That is what the government, many economists, and the media call "borrowing" as though government is "borrowing" that money from the public. But the government does not spend that money. It sits on it until the security term expires at which time the Fed debits the securities account, credits the buyer's bank's reserve account thus adding those dollars back to the economy while adding some extra for interest, and the bank credits the buyer's deposit account. In no sense can treasury securities be called "debt" because the dollars in those securities accounts continue to be owned, not by the government, but by the buyer.</span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="i641-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="i641-0-0" style="direction: ltr; position: relative;"><span data-offset-key="i641-0-0"><span style="background-color: white; font-family: arial;"><br data-text="true" /></span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="32thi-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="32thi-0-0" style="direction: ltr; position: relative;"><span data-offset-key="32thi-0-0"><span style="background-color: white; font-family: arial;">So, the national "debt" did not go over $30 trillion this week. There is no national "debt". Rather, the good news is that the national "savings" went over $30 trillion this week. So Joe down the street, Ford Motor Company, and China and Japan, among others, just continued to add to their US dollar savings by voluntarily buying treasuries as has been happening since 1787. </span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="c9cms-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="c9cms-0-0" style="direction: ltr; position: relative;"><span data-offset-key="c9cms-0-0"><span style="background-color: white; font-family: arial;"><br data-text="true" /></span></span></div></div><div data-block="true" data-editor="1gg46" data-offset-key="efr7s-0-0" style="font-size: 15px; white-space: pre-wrap;"><div class="_1mf _1mj" data-offset-key="efr7s-0-0" style="direction: ltr; position: relative;"><span data-offset-key="efr7s-0-0"><span style="background-color: white; font-family: arial;">By the way, remember I mentioned that treasuries accounts are time limited? Well, in fiscal year 2021 the US government redeemed $119.56 trillion in expiring treasuries and savers from the US and all over the world deposited $121.04 trillion back into treasuries savings. So, if $30 trillion seems like a lot, consider that four times that much moves in and out of treasury securities accounts every year.</span></span></div></div>Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-25783712645591059302020-01-16T08:54:00.001-08:002020-02-25T04:29:30.402-08:00Ah, That Old Federal Debt Crisis<div style="margin-bottom: 6px;">
<span style="font-family: "trebuchet ms" , sans-serif;">Ah, the old false "debt crisis" story arises again. The American people should know by now that the US government has no "debt" in the sense that you and I have debt.</span><br />
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<span style="font-family: "trebuchet ms" , sans-serif;">The only type of debt the federal government has is its promise to us that it will accept US dollars to satisfy our tax obligations. It does not owe money -- it owes just that promise. You see, the US dollar is simply a federal tax credit that the government issues each time it spends. When the federal government spends, it creates US dollars in our banks and in our bank accounts. And those dollars are useful to the US government because in return for its promise that we can use those dollars to satisfy our tax obligations, we provision the US government with the labor and materials it needs to continue to serve us. You and I have learned to use those dollars as a medium of exchange here in the private sector as we swap dollars back and forth as we sell stuff (like labor) and get stuff. Those dollars come in very handy for that. But we only have them because the government issued them.</span><br />
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<span style="font-family: "trebuchet ms" , sans-serif;">So what happens to our dollars when we pay them to satisfy our tax obligations? Nothing "happens" to them. They simply cease to any longer exist. The promise of the dollar will have been fulfilled, all the accounting for the dollar will have been reversed, and the dollar, the promise of the government to accept them in payment of taxes, having been fulfilled, is rescinded. In short, the federal government creates dollars by spending and it destroys dollars by taxing. Until dollars are taxed back, we get to use them.</span><br />
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<span style="font-family: "trebuchet ms" , sans-serif;">So you see, the federal debt is simply not an issue. That $23 trillion in so-called "debt" is nothing more than dollars that have not been taxed back. They are sitting in treasury securities accounts at the Federal Reserve, savings accounts if you will, owned by people, businesses, and counties that happen to have accumulated extra US dollars to tuck away in a very safe savings account. So, the so-called "debt" is really a very large and important private sector asset, one that will benefit, not burden, our children and grandchildren. It is not a crisis. It is simply a number.</span><br />
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Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-74052168159465848422019-03-28T21:23:00.000-07:002019-03-28T21:23:28.797-07:00Money and Inflation<br />
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<span style="font-size: medium;">In the president's and Betsy DeVos's rush to cut federal spending, here's a word about money and inflation.</span></div>
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<span style="font-size: medium;">A lot of people are convinced that government's printing too much money causes inflation. But how much is "too much"? That is difficult to say, but the US money supply has more than doubled in the past few years with hardly a ripple of inflation.</span></div>
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<span style="font-size: medium;">So, how much US money is there altogether right now? It seems like a simple question, but the answer is anything but simple because there are several kinds of US money. There are money categories called MB, M0, M1, M2, and a few other Ms that have meaning only to financiers. As American consumers, we are concerned with only a couple of these, MB and M2.</span></div>
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<span style="font-size: medium;">MB is the monetary base, the number of actual US dollars subject to circulation. US dollars exist in three forms: bank reserves, cash, and treasury securities. The MB money supply consists of only the first two, bank reserves and cash. US dollars originate as the first form, bank reserves, mere account entries created by the Federal Reserve at commercial banks whenever the federal government spends. Some bank reserve dollars are subsequently converted to the second form, cash, when people want to actually hold physical dollars. The third form, treasury securities, are created from reserves when people tuck dollars away temporarily in special federal savings accounts out of the money supply. That third form of US dollars, treasury securities, is also known as the national debt. The monetary base, the MB, currently stands at about $3.3 trillion, broken down as about $1.8 trillion in bank reserves and about $1.5 trillion in paper dollars and US coins, that is, cash. So, total US cash in existence worldwide is only about $1.5 trillion, some of which sits in bank vaults. It sure seems like there should be more. Total actual dollars in existence are that MB of $3.3 trillion plus the $22 trillion in treasury securities for a total of $25.3 trillion total US dollars in existence worldwide. Treasury securities, though, are dollars out of play which is actually anti-inflationary.</span></div>
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<span style="font-size: medium;">M2 is total cash plus the US dollar-denominated total of bank deposits, that is, our checking and savings accounts, the money we use to buy stuff and pay bills. M2 is "money" in the sense that it is what we use for our spending, but except for the cash part, M2 is not US dollars. Instead, it is nothing but bank credit against bank reserves. Reserves are US dollars; deposits are just bank credits against those dollars. Deposits are created by the banks when the federal government spends, in which case deposits are created equal to the reserves created. Deposits are also created when banks lend, but in that case no new reserves are created, that is, no new dollars are created even though deposit amounts increase. Currently the measure of the M2 money supply is about $14.5 trillion. Since $1.5 trillion of M2 is in cash, there are checking and savings deposits of $13 trillion against the only $1.8 trillion in actual dollars sitting as bank reserves. Clearly, banks create money even though they do not create dollars.</span></div>
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<span style="font-size: medium;">So, how much US money is there right now? The answer is that we have $14.5 trillion in deposit "money" (M2), but only $3.3 trillion in US dollars (MB). And what might we conclude from these numbers? First, there are not enough dollars to cash out everyone's deposit accounts, if they decided to do that,without breaking the banks. Second, if creating more money is inflationary, then private sector bank lending, which accounts for a lot more money than there are federally-created dollars, probably is more likely to trigger inflation than is federal spending.</span><br /></div>
<br />Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-52097726386310047532018-09-14T05:02:00.001-07:002018-09-14T05:02:52.232-07:00What Is That Dollar?If I've heard it once I've heard it a thousand times, someone whines that the federal government spends by printing worthless paper money. Worthless...paper...money. Of course, they refer to the fact that the US dollar is not backed by anything, and by "anything" they mean it is not backed by gold. I say "So what?" Do people really think that if it were backed by gold, and that if the currency failed they would be reimbursed with gold? Hah! On the extremely remote possibility that the US dollar were to fail we would all have bigger problems than just getting our money reimbursed. Does a lack of intrinsic value make the dollar worthless? I think not. Is the paper deed to your house worthless? How about that paper title to your car? As for intrinsic value, the federal government doesn't actually spend paper dollars. It creates electronic dollars which have even less intrinsic value than paper dollars.<br />
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So what, exactly, is the US dollar and why does it not need gold backing? The US dollar is a promise to us from the US government that it will accept that US dollar in payment of federal tax. The US dollar is basically a tax credit that the federal government swaps us in return for the goods and services it buys. We, in turn, seek those dollars in lieu of other currencies because no other currency will be accepted in payment of federal taxes. That tax credit gives the dollar value and that value makes it a negotiable instrument that the public finds useful as a medium of exchange, a unit of value, and a store of value or, in other words, money. Those same people who whine about paper dollars having no intrinsic value apparently are simply fooling themselves because whenever I ask them to send me all of their "worthless dollars" they shut up.Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-62062206074258721182018-09-12T18:44:00.000-07:002018-09-12T18:44:08.452-07:00What About That Deficit?If you are a typical American you have been trained to believe that federal deficits are a danger to the American economy. To that I say retrain yourself. Actually, federal deficits are injections of new economy-building dollars from the federal government into the private sector in a fiscal year. Without federal deficits we would not have money growth and we would have to endure economic recessions such as that of 2008-2009 which was largely the result of Bill Clinton's federal surpluses of 1999-2001.<br />
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By definition, a federal deficit is the number of dollars the government spends in a fiscal year minus the number of dollars it takes back in taxes in that fiscal year. Thus, the only way to avoid a deficit is for the government to tax back every dollar it spends. Let me repeat. The only way to avoid a federal deficit is for the government to tax back every dollar it spends. That means no dollars available for saving or investment. No dollars available for growth. Does that sound good to you?<br />
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If you are a Democrat you probably believe that raising taxes is good because raising taxes pays for increased government spending. But you would be wrong. Federal taxes do not fund federal spending. Raising taxes just removes already-spent dollars permanently from the economy.<br />
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If you are a Republican you probably believe that cutting federal spending is good because less federal spending allows for lower federal taxes. But you would be wrong. Federal spending is not funded by federal taxes. Cutting federal spending just reduces the number of economy-growing dollars available to the private sector.<br />
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So, rather than raising taxes or cutting spending to reduce the deficit, why not rejoice in the deficit, be glad the government is there to fund the private sector economy, and demand greater federal spending and lower federal taxes -- that is -- just the opposite of what you have probably been taught to think? The only question concerning deficits should be was the money created and spent for the highest public good, not will the deficit bankrupt the government. It won't. The politics of deficits should concern how they can best be used, not how they can best be eliminated.Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-39484230463644328152018-09-03T09:33:00.000-07:002018-09-03T09:45:41.377-07:00How US Dollars Are Created<br />
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<span style="font-size: medium;">How US Dollars Are Created</span></div>
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<span style="font-size: medium;">Okay. Some of you believe the federal government prints money and hands it out. Most of you think the government stockpiles your tax dollars and spends them, and if it falls short then it borrows money or charges things on a Chinese credit card. Forget all that junk. None of it is true.</span></div>
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<span style="font-size: medium;">The fact is, the federal government creates money in the form of US dollars each time it spends, simply by spending. Let me repeat, US dollars come into existence as a result of federal spending. Further, federal spending is the only way that US dollars come into existence. </span></div>
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<span style="font-size: medium;">Follow closely -- here's how it happens.</span></div>
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<span style="font-size: medium;">1. Congress allocates spending via legislation. Example: Congress authorizes an $81 billion increase in defense spending.</span></div>
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<span style="font-size: medium;">2. The Treasury pays a bill. Example: The Treasury receives a $2 million bill from United Technologies for a fighter jet engine and directs the Federal Reserve Bank (the central bank) to pay United Technologies $2 million at the First Bank of Hartford.</span></div>
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<span style="font-size: medium;">3. The Fed pays the bill by simply crediting (marking up) the receiving bank's account at the Fed (its "reserve account") by the amount of the payment. This action, this credit to the reserve account creates new US dollars because reserves are dollars. Example: The Fed increases the First Bank of Hartford's reserve account balance by $2 million via a simple accounting transaction. When it does that, it has increased the MB Money Supply (the monetary base) by $2 million and new US dollars have come into existence. The monetary base (MB) includes reserves, cash in bank vaults, and cash in circulation.</span></div>
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<span style="font-size: medium;">4. The receiving bank then credits the receiving entity's deposit account by the amount of the payment. This acknowledges that the receiving entity is entitled to the number of US dollars (reserves) equal to his deposit account balance. Example: The First Bank of Hartford credits United Technologies' deposit account by $2 million, United Technologies now has $2 million it did not have before, and United Technologies marks its bill to the government as "Paid". By crediting United Technologies' deposit account by $2 million, the Bank of Hartford has increased the M1 Money Supply (highly liquid bank deposits plus cash in circulation) by $2 million.</span><br />
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<span style="font-size: medium;">Note 1: Private sector checking and savings deposits are measured in dollars but they are not dollars. They are a record of how much of the bank's reserves the deposit holder is entitled to. The reserves themselves, cash in vaults, and cash in circulation are the dollars. When a depositor gets cash from his bank's ATM, the bank reduces the depositor's deposit balance and hands over cash to the depositor. The bank got the cash from the Fed in exchange for lowering its reserve account balance by the amount of the cash it got.</span></div>
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<span style="font-size: medium;">Note 2: Banks also increase the M1 money supply by marking up deposit balances when they make loans. Such markups of deposit accounts indicate an increase in the number of US dollars to which the depositor is entitled. However, banks cannot create reserves (US dollars). Only the government, via the Fed, can do that. Therefore, bank loans cause deposit increases (the number of dollars the depositor is entitled to) but bank loans do not create US dollars (reserves). Example: If I borrow $1000 from First Citizens Bank, my checking account balance is increased by $1000, and the M1 Money Supply goes up by $1000, but no new reserves (US dollars) are added to the Monetary Base (MB). And yes, the result is that depositors are entitled to more US dollars than there are US dollars in existence</span></div>
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<span style="font-size: medium;">Summary:</span></div>
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<span style="font-size: medium;">Dollars are created by federal spending thusly:</span><br />
<span style="font-size: medium;">1. Congress authorizes spending.</span><br />
<span style="font-size: medium;">2. Treasury authorizes the Fed to pay someone.</span><br />
<span style="font-size: medium;">3. The Fed responds by increasing a bank's reserve account thus creating new US dollars and thereby increasing the MB Money Supply.</span><br />
<span style="font-size: medium;">4. The bank responds by increasing the payee's deposit account thus increasing the M1 Money Supply.</span></div>
<br />Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-13529534015713808472017-12-22T06:33:00.000-08:002017-12-22T06:33:02.838-08:00The Tax BandaidSo what's the big deal over this tax plan? I think we have just been sold an overly bally-hooed, suspender-snapping boast by the Republican congress.<br />
<br />
If the estimate that it will add $1.5 trillion to the so-called national debt over a ten year period is true, then the thing saves the taxpayers very little. $1.5 trillion over ten years works out to only $150 billion per year. With recent deficits running in the $400 billion to $600 billion range, the addition of another $150 billion per year to the deficits is hardly anything to write home about, especially if those deficits are composed primarily of corporate and upper 10% earners' tax breaks which contribute little to the needed consumer demand that drives American production. An additional $150 billion added to the annual deficit averages only about $461.00 per US citizen. That's not much money in the big scheme of things. It certainly is not cause for any alarm about inflation nor federal bankruptcy (which, by the way, can never involuntarily happen).<br />
<br />
Now, if the tax plan were adding $1.5 trillion per year to the deficit, that would be adding $15 trillion to the so-called (but not really) national debt over that ten year period. Even that would not be disastrous. It would just mean that an extra $15 trillion would have been used by the private sector before being stashed away in those private savings accounts called treasury securities.<br />
<br />
All this concern over deficits and debt is just so much "the sky is falling" rhetoric. The tax cuts could have been and should have been much larger, especially for those making under, say, $125K per year. This thing, as it stands, is little more than a tax bandaid applied over an imaginary tax cut.Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-64046754893168239992017-07-13T18:14:00.000-07:002017-07-13T18:14:12.898-07:00The Stupid Debt Limit<div dir="ltr">
<span style="font-size: medium;">The federal so-called "debt" consists almost entirely of unexpired treasury securities. The debt limit is an artificial constraint on the allowed dollar amount of unexpired treasury securities. Once that limit is reached, the Treasury is not permitted to sell more T-bills and such. So?</span></div>
<div dir="ltr">
<span style="font-size: medium;"><br /></span>
<span style="font-size: medium;">Well, recording treasury securities sales amounts is an artificial mechanism for crediting the balance of the Treasury General Account, the "checking account" from which the Treasury supposedly spends. Another artificial mechanism for crediting the TGA is to record the amount of tax collections there. The Treasury sells T-bills (securities) equal to the amount of government spending over and above tax collections in order to to not overdraw the TGA. So?</span></div>
<div dir="ltr">
<span style="font-size: medium;"><br /></span>
<span style="font-size: medium;">If outstanding securities hit the debt limit and the Treasury is no longer allowed to sell securities, then the TGA cannot be credited enough to cover federal expenditures. So?</span></div>
<div dir="ltr">
<span style="font-size: medium;"><br /></span>
<span style="font-size: medium;">So technically, the Treasury can't spend.</span></div>
<div dir="ltr">
<span style="font-size: medium;"></span><br />
<span style="font-size: medium;">The trouble is -- all these constraints, the TGA itself, the rule that the TGA cannot be overdrawn, the crediting of the TGA with tax dollars (which actually cease to exist once collected), the crediting of the TGA with T-securities sales, and the debt limit itself -- these are all artificial, self-imposed constraints that have no practical purpose except to discourage congress from spending frivolously. They are carryovers from the long ago abandoned gold standard. The federal government does not need to tax and borrow in order to spend.</span></div>
<div dir="ltr">
<span style="font-size: medium;"><br /></span></div>
<div dir="ltr">
<span style="font-size: medium;">There is no real constraint on how much the federal government can spend because it does not spend existing "money". It, through its agent the Federal Reserve, spends by creating bank reserves and deposits in commercial banks and there is no real limit on how many reserves and deposits it can create. Remember, the TGA is an artificial, self-imposed constraint, so any shutdown of federal spending related to shortages in the Treasury General Account, especially one caused by reaching the debt limit, is totally optional.</span><br />
</div>
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com11tag:blogger.com,1999:blog-2796471141218066032.post-37139567168261607182017-06-22T08:19:00.000-07:002017-06-22T08:19:55.621-07:00The Old "Socialism Card!We as a country are so screwed up by our misunderstanding of how our economy works. We all use and need money, every day, yet most of us have no clue about where our money comes from or how it gets into our pockets. Well, here's a capsule description. The US government creates every dollar in our economy and inserts those dollars into circulation by spending them into the private sector. Although banks create credit against those dollars, the US government is the sole issuer of our US dollars, not the private sector, despite what many people want to believe. We have a system. It works, although today's fiscally conservative political preference seems geared toward breaking it. Our private sector well-being depends on a functioning federal government doing its part in supporting our economy by providing the private sector with the medium of exchange that it has been constitutionally mandated to do.<br />
<br />
There are too many people whose rancor toward government in general has blinded them to the federal obligation and authority to create US dollars. They seem to think that the private sector itself rightly creates US dollars and that by "printing" money the federal government is overstepping its bounds. Ultimately, many of those people believe that federal participation in the economy is nothing short of the dreaded "socialism".<br />
<br />
Here is an exchange I had the other day that demonstrates the absurdity of so much of today's conventional thinking about our country:<br />
<br />
Jim : What I am describing is the way our economy and monetary system works ... the private sector creates the value and the federal government supplies the money by buying into private production.<br />
<br />
Respondent: That's just socialism you describe Jim... The government buying into or supplying the money is nothing more than subsidizing private interest or corporate welfare.<br />
<br />
See what I mean? The respondent, in his eagerness to bash the federal government, pulls out and plays the old "socialist" card. By doing so, he basically contends that we, now and in the past, have a socialist form of government. Really? Really?Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-64859075648360504682017-04-12T16:21:00.000-07:002017-04-12T16:21:09.518-07:00Politicians Lie? They Fooled You Didn't They?Much bad politics thrives on a simple lie -- that the federal government might go bankrupt. That tidbit of misinformation is the basis for many an unnecessary federal spending cut and for many an unnecessary federal tax hike. The federal government is monetarily sovereign, which means that it, and it alone, creates the US dollar, can do so at will and in any amount necessary, and can always pay any bill or debt denominated in US dollars. When a politician tells you that Social Security is running out of money, that federal spending is out of control, or that your grandkids must pay for our current spending, you can be assured that that politician is either lying or is woefully misinformed about federal finances. Could federal spending cause national inflation? Possibly, but highly unlikely when we have unused productive capacity.<br />
<br />
But do not take my word for it. Here are some expert views on this topic:<br />
<br />
"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." Alan Greenspan, former Federal Reserve chairman.<br />
<br />
"There is 0% chance that the US will be forced to default on the debt." John T. Harvey, PhD, Texas Christian University.<br />
<br />
In the case of United States, default is absolutely impossible. All U.S. government debt is denominated in U.S. dollar assets.” Peter Zeihan, Vice President of Analysis for STRATFOR.<br />
<br />
“In the case of governments boasting monetary sovereignty and debt denominated in its own currency, like the United States (but also Japan and the UK), it is technically impossible to fall into debt default.” Erwan Mahe, European asset allocation and options strategies adviser.<br />
<br />
“There is never a risk of default for a sovereign nation that issues its own free-floating currency and where its debts are denominated in that currency.” Mike Norman, Chief Economist for John Thomas Financial.<br />
<br />
“There is no inherent limit on federal expenses and therefore on federal spending…When the U.S. government decides to spend fiat money, it adds to its banking reserve system and when it taxes or borrows (issues Treasury securities) it drains reserves from its banking system. These reserve operations are done solely to maintain the target Federal Funds rate.” Monty Agarwal , managing partner and chief investment officer of MA Managed Futures Fund.<br />
<br />
"As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational." Federal Reserve Bank of St. Louis.<br />
<br />
“A sovereign government can always make payments as they come due by crediting bank accounts — something recognized by Chairman Ben Bernanke when he said the Fed spends by marking up the size of the reserve accounts of banks.” L. Randall Wray, Professor of Economics at the Univertsity of Missouri-Kansas City and a Senior Scholar at the Levy Economics Institute.<br />
<br />
(Thanks to John T. Harvey for providing some of these quotes).<br />
<br />Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-29307724717603175112017-01-06T19:40:00.000-08:002017-01-06T19:40:30.047-08:00Let's Talk SavingsLet's talk about savings. We can all agree that savings are a good thing, or at least I think we can. Whether you are an Ayn Rand libertarian or a Lyndon Johnson liberal you undoubtedly consider putting some money aside for retirement, college, a new car, or a rainy day a characteristic of all good Americans. Saving some of their money is what responsible people do. Savers are hardworking, industrious, smart, and foreward-thinking. Savers are planners and doers. They are the backbone of the American economy. We should all save our money and build up as much of a financial surplus as we can - right? Right! Of course. And many, many of us do, both liberals and conservatives.<br />
<br />
There are so many ways to save money, from stuffing it under the mattress to keeping a bank savings account, to contributing to an IRA or 401K account. But one of the most popular ways for Americans to save, not to mention the safest way to save, is to buy US Treasury securities. The US Treasury has a voluntary public program by which it holds peoples' US dollars in savings for varying lengths of time. At the ends of those times the saver can get his dollars back with interest, very much along the same principle as a bank Certificate of Deposit (CD). The savers' deposits are called "securities" and the Treasury refers to taking in savers' deposits as "selling securities". US Treasury securities are super safe because they are held in accounts at the Federal Reserve Bank and are guaranteed by the good faith and credit of the US government. American individuals are not the only ones who save by buying Treasury securities. American businesses, pension funds, banks, the Federal Reserve itself, plus foreigners, foreign companies, and even foreign governments save their US dollars in US Treasury securities. Treasury securities currently amount to nearly $20 trillion. That is nearly $20 trillion out of circulation, not exerting any inflationary pressure on the economy. $20 trillion neatly and responsibly tucked away in savings by people who voluntarily sought out and found a safe vehicle for the extra money they have chosen to save. So, I think we can agree that US Treasury securities are a national asset, a good thing for the mature, adult people among us who have opted to live within their means and not spend all their money frivolously. So, there you have it - savings - the signature of a responsible nation, provided and serviced by the US Treasury. It is a very good thing.<br />
<br />
Oh, one other word about the $20 trillion in US dollars saved in Treasury securities. They have another name. They are also known as the "national debt", you know, that same horrendous national debt that so many of us and our political representatives are so afraid of and so anxious to eliminate. Cognitive dissonance anyone? Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-21393512157542367252016-12-24T13:54:00.000-08:002016-12-24T13:54:33.859-08:00Paying Off the National DebtThe national so-called "debt", all $20 trillion of it, will belong to the Republicans about four weeks from now. It cannot happen, but let's suppose they follow through on their neoliberal ideology and decide to pay the "debt" off. Just suppose. First, how would they pay it off and second, what happens to all that money when they do pay it off?<br />
<br />
First, the easy part, paying the debt off. The national "debt" consists almost entirely of US Treasury securities held by individuals, businesses, retirement funds, and governments from around the world. All it would take to pay off the so-called "debt" is to cancel all the Treasury securities, transfer the $20 trillion out of the security accounts at the Fed, and give the money back to the people who invested in those securities. Poof! Debt gone. Balance zero.<br />
<br />
Then what?<br />
<br />
Well, all of a sudden the world would be full of extra US dollars on the loose and millions of people who must figure out what to do with them. People had those $20 trillion in Treasury securities because they wanted their extra dollars protected in a safe, secure, virtually risk-free investment. Now, they must place those dollars elsewhere, but where? Very little of it would be spent because these were investment dollars, extra dollars that people chose to hang on to for various reasons. Some of it probably would go into other, more risky non-federal savings accounts. A trickle might be repurposed to more risky business ventures. But my guess is that the bulk of it would go into relatively secure foreign government bonds. Remember, the $20 trillion was "safe" money, no risk, small return money because people wanted it that way. They likely will look for another safe haven, even if overseas.<br />
<br />
So, paying off the national "debt" does nothing for the US government except to remove its major inflation-fighting tool, put dollars into foreign accounts, strip the Fed of its major interest-rate setting tool, and probably force the Treasury into changing its accounting procedures and issue dollars strictly as a debit to a spending account with no incoming credits.<br />
<br />
One thing for sure, it would prove to the debt-hawks that the so-called national debt really is a private sector asset and not the tax curse on our grandchildren that they think it is. Many would probably soon wish we had it back.<br />
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-60901235348588748882016-12-19T18:55:00.000-08:002016-12-19T18:55:35.924-08:00The Secret Language of ConservativesMy US Congressman, Walter Jones (R-NC), loves to claim that federal spending is "out of control" and that the federal debt will spell financial disaster for our kids and grandkids. Congressman Jones has voted against every stimulus bill and every debt ceiling increase that has come up during his tenure in the House of Representatives. You could be forgiven if you accused Rep. Jones of being tight-fisted or niggardly. You might even confuse him with Ebenezer Scrooge.<br />
<br />
But I have noticed that Rep. Jones has no problem voting for expenditures for expanding the military presence in North Carolina, or for improving veteran care, or for protecting North Carolina fisheries, or for stabilizing the beaches along North Carolina's shore. He does, however, want to defund Planned Parenthood, cut welfare, privatize Social Security and Medicare, and pass a balanced budget amendment, all of which are deeply rooted in right-wing ideology.<br />
<br />
Well, I have decided that Rep. Jones and his so-called "conservative" cohorts in Congress and the Senate are not really stingy at all. Rather, they are devious. They are not really worried about "out of control" spending, deficits, or federal debt at all. They just want the public to worry about those things. Why? To cloak their ultra-conservative ideological agendas from the public.<br />
<br />
Jones and crew know that many constituants may not be as rabidly conservative as they are. In fact, many of their constituants are beneficiaries of the federally funded programs that he and his cronies despise, programs like SNAP, the Affordable Care Act, Medicare Disability, and many others. While there may be disagreement on the ideologies behind various federal funding initiatives, Jones and company are pretty safe in assuming that nobody wants the government to go bankrupt. So these devious politicians have developed a very effective code language that they drag out when their ultra-conservative ideologies are challengable. If a bill promises to garner too much liberal support for Rep. Jones to bear, all he has to do is say that the bill will increase the deficit and send us deeper in debt with out of control spending. That rhetoric brings out the fiscal conservative in even the most left-wing constituants. It's a very effective code.<br />
<br />
Of course, we know from studying monetary sovereignty and modern monetary theory that the federal government cannot involuntarily overspend or go insolvent because it alone issues the free-floating US dollar and can do so with no limit as long as there are goods and services available for it to spend dollars on. If Jones knows this, he is not fessing up to it. To do so would, in fact, break the code.Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-64579005368546310112016-12-16T19:13:00.000-08:002016-12-16T19:14:59.627-08:00Social Security Increase! Yay! Er....The good news is that Sue and I each got a Social Security cost-of-living raise for 2017. Wonderful! The bad news is that the Medicare premium that is deducted from our checks went up by exactly the amount of the raise. So our SS checks will not change at all. Basically, the increased Medicare premium accounts for the full increase in the cost of living.<br />
<br />
This is especially egregious to me because I know, unlike most of you, that the Medicare premium is not a premium at all but a tax. The federal government does not need money in order to spend money, even on Social Security and Medicare. Every dime of Social Security and Medicare outlay is brand new money created by the federal government as it is spent. That's how it works. A dollar is simply a promise from the federal government to you. It cannot recycle that promise (money) any more than you can recycle a promise because the promise (tax dollars), once collected, ceases to exist. But the people who run the government, Congressmen, do not know this. They are dumbbells. They still think taxes pay for federal spending. The Treasury people know that's not the case, but they aren't saying anything because they are afraid of inflation and they think that by extracting dollars from the money supply and destroying it via taxation there will be less inflationary pressure on the economy. They too are dumbbells. And we are all dumbbells for letting both those groups continue to think that way.<br />
<br />
SS and Medicare explained <a href="http://itsthepeoplesmoney.blogspot.com/2014/04/money-myth-7-social-security-and.html" target="_blank">here</a>.<br />
<br />
Taxes explained <a href="http://itsthepeoplesmoney.blogspot.com/2014/03/money-myths.html" target="_blank">here</a>.<br />
<br />
With thanks to Geoff Coventry for the links.<br />
<div>
<br /></div>
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-44160103044580699652016-12-15T17:26:00.000-08:002016-12-15T17:26:40.463-08:00News Flash! The Government Is Broke!OMG! The federal government really is broke!<br />
<br />
At least in the sense that it does not have any money. That's right, the federal government does not have any money. Nothing in a bank account, nothing under the mattress, no stacks of paper money idling away in vaults. The federal government has no money!<br />
<br />
But what about all those taxes we paid? Oh, those are just destroyed and disappear once they leave your bank account. Federal taxing just drains dollars out of circulation and destroys them. The government does not, in fact cannot, save and respend those.<br />
<br />
But what about all the money it has borrowed from China and elsewhere? It's surely not all spent already? Actually, none of it was spent. What hasn't been returned to the "lenders" is sitting in securities accounts under the lenders' names at the Treasury. Those don't belong to the federal government but to the people who have asked that their extra dollars be stored away as interest-bearing savings at the Treasury. That's what is known as the "national debt".<br />
<br />
So, does the government being broke mean we now have tipped the scales of disaster that the politicians always warn about? Are we headed for depression and doom?<br />
<br />
No, no, no. Get over it. The federal government has no money because, by definition, money is not money unless it is in the hands of someone other than the issuer. In our case, money resides only in the hands of the private sector. And that's okay because the federal government doesn't need money. It creates money in the form of US dollars whenever it spends. And conversely, the federal government does away with money by un-issuing, or taxing, US dollars out of existance.<br />
<br />
So, the federal government is broke in the sense that it has no money. But the entire country is rich in the sense that the federal government provides the private sector with the medium of exchange it needs in order to produce, sell, and save. In that sense, we are rich because the government is broke.<br />
<div>
<br /></div>
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-30474722520389533042016-12-14T17:18:00.002-08:002016-12-14T17:18:47.702-08:00So You Don't Like Welfare, Huh?1935 - A time when the USA still promised to redeem dollars in gold (internationally but not domestically). It was critical then for the government to limit the country's money supply to an amount that did not exceed by too much the amount of gold it owned. Defaulting on its promise to redeem dollars with gold could have brought the entire monetary system down and taken the economy and the country with it. To limit the money supply, the government systematically destroyed dollars by taxing the people.<br />
<br />
In that year, 1935, President Roosevelt and Congress concocted a federal welfare program called Social Security (actually it was called The Old-Age, Survivors, and Disability Insurance Act) in which people of retirement age, and some others, could recieve money from the government in an amount based on what their working salaries had been. But Roosevelt and Congress had a problem. They knew that Social Security expenditures would increase the money supply well beyond the amount of gold on hand. They knew that they would have to raise taxes to drain enough money from circulation to keep the money supply in check. But they also knew the people of the US would not stand for higher taxes. Then one of them had a brilliant idea. He said "Hey. Instead of just raising taxes, suppose we taxed a percentage of payroll dollars and instead of calling it a tax, let's call it a contribution. Then the people will think they are actually paying for their own retirement plans. Ha, ha, ha, ha, ha." "Good one!" said Roosevelt. "Let's go with that." And they did. Ever since then we have been thinking that the payroll tax we pay is not a tax at all, but a contribution to our Social Security accounts.<br />
<br />
In 1971 the US abandoned the gold standard and it has not been necessary or advisible to limit the money supply so severely. Even though taxes have not been necessary since 1971, the payroll tax has remained and continued to drain dollars from the people and the economy. People have continued to be fooled that they were actually contributing to their Social Security accounts and they stand ready to fight if told that their Social Security is, in fact, a form of federal welfare..Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-63162204125038303642016-03-22T13:21:00.000-07:002016-03-22T13:21:28.908-07:00Backward Thinking Americans<div class="MsoNoSpacing" style="text-align: justify;">
You know what's funny to me?
Well, not exactly funny, but odd. Well, not exactly odd, but annoying. Yes,
annoying. <o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
What's annoying to me is that
probably most Americans are convinced, totally convinced, that our federal
government gets its money from the American people. You see it when people
talk about the government spending taxpayer money. You see it when certain
politicians and their disciples complain about out-of-control federal spending.
You see it in Tea Party and Republican and even some Democrat platforms to cut
federal spending in order to reduce taxes. You see it when people rant about
the federal deficit and how the resulting federal debt will impoverish our
children and grandchildren and in how the federal debt amounts to $55,000 per
person.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Why do I find it annoying for
people to complain about federal spending? Why do I not fall in and join the
complaint about the federal government spending too much of my money, wasting
it on people who don't work, on countries that don't like us, on initiatives
that are counter to my beliefs?<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
I find it annoying because I
know, and you should know, that the federal government does not get its money
from the American people. In fact, just the reverse is true. The American
people get their money from the federal government. Only the federal government
is authorized to create and issue US dollars. No one else can. The federal
government issues those US dollars every time it spends into the private sector
to acquire the goods, services, and goodwill that only the private sector can
produce. It produces those US dollars out of thin air when it spends because
each US dollar is nothing more than a federal government IOU backed by the good
faith and credit of the US government. In short, the government creates money
and injects it into our pockets, the private sector pockets. The private sector
does not create dollars and inject them into the government sector. We get our
money from the government, not the other way around. Isn't that ironic, since
most of us think it works the other way?<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Taxes? Taxes at the federal
level do not fund the federal government. The taxes we pay, whether income
taxes, payroll taxes, estate taxes, corporate taxes, or whatever, simply drain
dollars from the money supply. The taxes we pay disappear from this earth when
we pay them. After all, we are simply returning to the federal government a
bunch of its own already-issued IOUs. An IOU back in the hands of the issuer is
meaningless. It is no longer an IOU. It is nothing but history.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<br />
<div class="MsoNoSpacing" style="text-align: justify;">
So, rather than the American
people funding the US government, it is clear to me that the US government
funds the American people - just the opposite of what most Americans think. It
is funny, odd, and annoying to me that the American people can be nearly
unanimously, almost 100 per cent, backwards on this issue. <o:p></o:p></div>
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-9683818995712267202016-03-21T19:41:00.001-07:002016-03-21T20:25:32.491-07:00Here's To You Debt Phobes<div align="center" class="MsoNoSpacing" style="text-align: center;">
<b><span style="font-size: 24.0pt; mso-effects-shadow-align: none; mso-effects-shadow-alpha: 50.0%; mso-effects-shadow-angledirection: 18900000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: black; mso-effects-shadow-dpidistance: 4.0pt; mso-effects-shadow-dpiradius: 5.0pt; mso-effects-shadow-pctsx: 0%; mso-effects-shadow-pctsy: 0%;">GOVERNMENT MONEY
ISSUES?<o:p></o:p></span></b></div>
<div align="center" class="MsoNoSpacing" style="text-align: center;">
<b><span style="font-size: 24.0pt; mso-effects-shadow-align: none; mso-effects-shadow-alpha: 50.0%; mso-effects-shadow-angledirection: 18900000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: black; mso-effects-shadow-dpidistance: 4.0pt; mso-effects-shadow-dpiradius: 5.0pt; mso-effects-shadow-pctsx: 0%; mso-effects-shadow-pctsy: 0%;">NO…<o:p></o:p></span></b></div>
<div align="center" class="MsoNoSpacing" style="text-align: center;">
<b><span style="font-size: 24.0pt; mso-effects-shadow-align: none; mso-effects-shadow-alpha: 50.0%; mso-effects-shadow-angledirection: 18900000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: black; mso-effects-shadow-dpidistance: 4.0pt; mso-effects-shadow-dpiradius: 5.0pt; mso-effects-shadow-pctsx: 0%; mso-effects-shadow-pctsy: 0%;">GOVERNMENT ISSUES
MONEY!<o:p></o:p></span></b></div>
<div align="center" class="MsoNoSpacing" style="text-align: center;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<b><i><span style="font-size: 14.0pt;">National
debt...<o:p></o:p></span></i></b></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Those two words scare people,
way too many people, because they needlessly conjure up images of federal
bankruptcy, failed government, and bank failure. Even worse, national debt angers
many people who are convinced that government spending means big, irresponsible
government, massive tax increases, and strangulation of private sector business
and freedom. <o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Here is a quote from one such
person: <o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<b><i>"The government takes as
much as they can, spends it all and then borrows more and blows that too. And
now we have a tremendous debt that has to be paid back."</i><o:p></o:p></b></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
There is so much wrong with
that statement, in fact, everything is wrong with that statement, but it is probably
how most people think the federal government must operate. Conventional wisdom,
sadly all too common, is that "government is just like a household or business". People act like the national debt is their personal debt. This paradigm could not be more wrong. Why? Because the federal government
issues US dollars while households and businesses cannot. And by "issue",
I mean that the federal government creates US dollars. Households and businesses cannot create
dollars. That makes all the difference. The issuer of the US dollar has absolutely
no need to take tax money or to borrow dollars from someone else in order to
spend. Yet the federal government does take tax money and it does sort of
"borrow", which makes it difficult if not impossible to convince
people that it does not spend those taxes and "borrowed" dollars. <o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
When the federal government
spends, it orders the receiving bank to insert a deposit into the recipient's bank
account. At the same time, the Federal Reserve Bank credits the receiving bank
with a like amount of dollars called "reserves". Reserves represent
actual US dollars while the recipient's deposit amount is a credit against
those dollars. At that point in time the federal government has created and issued
brand new US dollars. It is that simple. To spend tax dollars and borrowed
dollars would be redundant and the government does not spend them. In fact, tax
dollars go out of existence altogether and "borrowed" dollars go on
the shelf, so to speak. The federal government "borrows" dollars by
selling Treasury securities to investors worldwide who seek a safe and secure interest-bearing
place for their extra dollars. Both taxing and selling Treasury securities are
artificial constraints the Congress has placed on itself along with the
"debt ceiling", an artificial limit on the amount of Treasury
securities the government can sell. <o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Now, what about that
"debt"? The national debt is merely the sum of unexpired Treasury
securities. It is "debt" only in the sense that the federal
government holds someone else's money that it must give back at some point in
time. The government does not take out loans or use a Chinese credit card to
fund its expenditures. Why should it? It issues US dollars. Taxing and
"borrowing" are not funding mechanisms; they are mechanisms for
draining dollars from the money supply to reduce the likelihood that federal
spending will cause inflation. Dollars not in circulation are not inflationary.
The fact is private sector lending is far more likely to cause inflationary
pressure than is federal spending because private lending adds credit to the
economy equal to three times the amount of federal spending. <o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Because the federal government
does not spend Treasury securities and merely holds dollars like a bank holds
savings accounts, and because the federal government can always create US
dollars by issuing them, there is absolutely no way that the US government can
go insolvent or bankrupt, unless the Congress decides to artificially limit or put
an end to federal spending. So the threat of federal bankruptcy is a myth, a
bogeyman, a bad joke. It will not happen. No taxes will be raised to pay for
it. No heavy burdens will be laid on our grandchildren. You can read all about
how the US "borrows" by selling Treasury securities in many books and
blogs, and one of the best explanations can be found <a href="http://www.amazon.com/The-National-Deb-i-T/dp/1457528177">here</a>.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Finally, there are a couple of
standard quips that people always utter when confronted with the above
revelation. The first is that <b><i>"only the private sector creates
wealth".</i></b> Well big whoop. Everybody knows that, and what does that
have to do with anything anyway? People who like to say that do not seem to
realize that <b><i>"Only the federal government creates US dollars, and only the
private sector creates wealth."</i></b> The two go hand in hand.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
The second quip is this <b><i>"federal
spending costs taxpayers money."</i></b> That too is wrong. Federal
spending supplies the US dollars that people spend, save, and give back in
taxes. Federal spending is private sector revenue, your revenue directly or
indirectly. Federal spending does not cost taxpayers money - federal taxes cost
taxpayers money and as we saw earlier, federal spending does not rely on or use
taxes.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
To summarize, the federal
government does not have money issues because the federal government issues
money. Federal "debt" is private sector savings. Federal spending
creates US dollars. Federal taxes destroy US dollars. We need federal spending.
We do not need federal taxation. Taxpayers foot the bill only for taxes, not
for spending and not for paying off any federal "debt".<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<br />
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-25049342318069605822016-03-15T14:20:00.000-07:002016-03-15T14:20:45.217-07:00Democrats vs Republicans - Both WrongThe problem with Democrats is that they think we have to tax more to spend more. The problem with Republicans is that they think we have to spend less to tax less. Both are dead wrong! Federal taxes are not revenue. They are never respent. They simply drain dollars out of the economy.<br />
<br />
The federal government is in no way like a business or a household. It is the source of all US dollars, not just a mere user like a business or household. It does not need or use income to fund its spending, it creates new dollars each time it spends. The sooner we all realize that, the sooner we can quit all the stupid bickering about harmless federal deficits and debt and get on with rebuilding our failing physical and social infrastructures.<br />
<br />
Virtually all politicians either don't get it, or are profiting from our ignorance. We need to get real and create a politic based on spending more and taxing less at the federal level. A balanced budget just means that the federal government will no longer provide the money that the private sector economy needs for spending and saving. And if you disagree for financial reasons, then you do not understand the US economy.Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-33012094951046025452016-03-06T16:39:00.000-08:002016-03-06T16:40:25.975-08:00What Photographers (and the Rest of Us) Should Know About Federal Spending<div class="MsoNoSpacing" style="text-align: justify;">
Do you remember how photography
used to be a very different activity than it is today? Because you needed film
in your camera to take pictures, and because each picture used up some of that
film, you had to be very sparing and judicious with the pictures you took. You
missed the opportunity to get some of your best shots because you had to be
frugal with your film. The danger of taking more than a few pictures was that
you would run out of film. Because you had to put new film in the camera to
take more pictures, you were constrained in the number of pictures you could
take by the amount of film you had at your disposal.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Then along came digital
photography. Suddenly the film constraint was gone. Since then, you have been
able to take as many photos as you like with no worry about running out of film.
The only constraint with digital photography is that you might run out of
storage capacity to hold all the pictures. At that point, you could delete some
pictures or add more storage.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
One might argue that unlimited
picture taking is wasteful, but why? Each film photo expended some amount of a
limited supply of film while each digital photo costs nothing.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
* *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Do you remember how federal
spending used to be a very different activity than it is today? Because the
government needed gold to back its dollars, and because expenditures tied up
some of that gold, the government had to be very sparing and judicious with the
amount of its spending. The government missed the opportunity to do what was
best for the country because it had to be frugal with its dollars. The danger
of spending more than a few dollars was that the government would run out of
gold. The government had to take back some dollars to free up gold so it could
spend again. It was constrained in the number of dollars it could spend by the
amount of gold in its vaults.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Then along came the end of the
gold standard in 1971. Suddenly the gold constraint was gone. Since then, the
government has been able to create (spend) as many dollars as it needs to with no
worry about running out of gold. The only constraint with federal spending now is
that the economy might some day run out of capacity to hold all those dollars. At that
point the government could remove some dollars from the economy or the economy
could expand to absorb those dollars. <o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
One might argue that unlimited
dollar creation is wasteful, but why? Each gold-backed dollar expended some amount
of a limited supply of gold while each unbacked dollar costs nothing.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNormal">
* * *
* * * * *
* * *
* * *
* * *
* * *
* * *
* * *
* * *
* * * </div>
<div class="MsoNormal">
<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
When President Nixon took us
off the gold standard in 1971, he eliminated the risk of federal bankruptcy or
insolvency. Since then the government has had the ability to create unlimited
quantities of dollars without needing to recover dollars by taxing or borrowing
(yet it inexplicably continues those activities). Federal spending no longer transfers
money to some by taking it from others. The federal government has been freed
to spend on the things America really needs, such as better health care, better
education, better roads and infrastructure, safer environments, and medical and
technological advances.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<br />
<div class="MsoNoSpacing" style="text-align: justify;">
For some reason, ignorance I
think, we continue to act as though we are still on the gold standard. We act as
though the next dollar spent will send the federal government into bankruptcy.
We cry and moan about the government taking dollars from hard workers and
giving them to lazy shirkers. We are too stupid to realize that we have moved
from film to digital with respect to federal finances. The capacity constraints
have, if not lifted entirely, been altered to the extent that any limit on
federal money creation is not in running out of money, but in creating too much if the economy
itself is at full capacity. Federal insolvency is not in the picture, so to speak. <o:p></o:p></div>
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-21386815601941301482016-03-04T19:48:00.000-08:002016-03-04T19:48:08.409-08:00If the Federal Government Creates Dollars, Why Borrow?If you believe that the federal government truly must borrow and tax to be able to spend, then quit reading and move on because you won't accept what I'm about to tell you anyway. But if you acknowledge that the federal government creates US dollars and wonder why, with that ability, it taxes and borrows as well as spends, then listen up.<br />
<br />
But first, let me acknowledge that there is some truth to the common assertion that "printing" too much money could, under conditions of full production, cause inflation. So for you folks who like to talk about the US turning into the Weimar Republic or Zimbabwe, this is for you.<br />
<br />
Now, as I have said many times, federal spending creates US dollars while federal taxing destroys US dollars. The federal government's ability to create dollars gives it the ability to spend however much Congress wants to spend, even if there were no such thing as taxes. The purpose of taxing, then, is not to respend those dollars. Taxes do not produce revenue. There is no operational need for revenue. There are a few reasons for having taxes, all pure policy, but the main purpose for having federal taxes is a policy decision to reduce the supply of US dollars in order to prevent inflation. Taking dollars out of circulation helps prevent there being too much money and theoretically helps thwart inflation. It may not really be necessary to tax in order to check inflation, but policy is policy.<br />
<br />
Okay. But why does the federal government borrow?<br />
<br />
The same reason - to prevent inflation.<br />
Each year the government spends about $4 trillion and taxes back about $3+ trillion. That leaves about $1 trillion or so more spent than destroyed. That $1 trillion or so is called the federal deficit and could be inflationary, or so Congress thinks. In order to remove that $1 trillion deficit from circulation and keep it from being inflationary, Congress has mandated that the Treasury offer the public very safe savings accounts in which to hold those extra dollars. Thus, the Treasury "sells" Treasury securities which means the Treasury accepts and holds onto peoples' current dollars in exchange for a promise to give those dollars back later with interest. And each year they do it in the amount of the deficit. Over the years those Treasury security savings accounts add up and now have reached $19 trillion, otherwise known as the federal debt. Imagine that. The combined private sector savings at the Treasury is called the federal debt and considered by many to be a big problem of some kind. I'm still trying to figure out why savings is a problem.<br />
<br />
So with all the newly created and spent US dollars taken out of circulation by taxes and "borrowing", we can safely say that federal spending is not inflationary.<br />
<br />
Yet, we still have inflation to varying degrees. Why? Not from federal spending. Taxes and "borrowing" have seen to that. But the federal government does not control all spending. The private sector creates "money" (although not US dollars) by bank lending and credit creation. All the debt money created by the private sector amounts to about $12 trillion a year compared to the $4 trillion actual dollars created by the federal government, it's easy to see that any inflation pressure (which hasn't been much in recent years) comes from the private financial sector, not federal spending.<br />
<br />
So there you have it. The federal government has reasons for taxing and borrowing, but those reasons have nothing to do with its ability to spend. That makes any accusations of the government taking money from some people in order to give it to some other people inherently false.<br />
<div>
<br /></div>
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-48950418133427660622016-01-31T15:42:00.000-08:002016-01-31T15:42:01.333-08:00Why Did Gatlin Resign His Confederate Commission?<div class="MsoNoSpacing" style="text-align: justify;">
<span style="font-size: 12.0pt;">On
March 19, 1862, five days after the Union Army gained control of much of North
Carolina's coastal plain with its victory in the Battle of New Bern, the
Confederacy dismissed Brigadier General Richard C. Gatlin from command of the Department
of North Carolina. Gatlin, ill with fever in Goldsboro, was unable to lead his
troops in New Bern, leaving Brigadier General Lawrence O'Bryan Branch to suffer
the battlefield loss. The local newspapers excoriated Gatlin for the loss,
claiming he had neglected New Bern's defenses and his Department in general,
and that he was drunk during the battle. The papers soon recanted their stories,
but for some reason Gatlin never was assigned another command in the
Confederate Army. After spending a full year trying to determine why the Confederate
War Department, a War Department that was in desperate need for experienced
military leaders, overlooked him for another command position, he gave up and
resigned his commission on March 23, 1863, effective September 8, 1862. We do
not know why Gatlin became persona non grata. Bad publicity may have kept him
from receiving another command, he may have refused to serve in Virginia, away
from his beloved North Carolina, or there may have been other reasons. We may
never know, but here is Gatlin's resignation. It was accepted and made official by Special Order No. 85 from the Confederate War Department in April 1863.<o:p></o:p></span></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<b><span style="font-size: 12.0pt;">Gatlin's Resignation from the
Provisional Army of the CSA<o:p></o:p></span></b></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<span style="font-size: 10.0pt;">The
following is a true and full transcription of a photocopy of a document written
by Richard Caswell Gatlin, such document on file with the National Archives.
The photocopy was sent to James L. Gaddis Jr from the National Archives upon
his request for military records of Richard Caswell Gatlin July 5, 2001.
Transcription by James L. Gaddis Jr, January 31, 2016. <o:p></o:p></span></div>
<div align="right" class="MsoNoSpacing" style="text-align: right;">
<i><span style="font-size: 12.0pt;">1<o:p></o:p></span></i></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<i><span style="font-size: 12.0pt;">On the 19th Mar. 1862, Brig. Gen'l
Gatlin was relieved from duty in the State of N. Carolina in consequence of ill
health. On that day he addressed a note to the War Dep't asking an
investigation into his conduct while in command of the Dep't of N.C. provided
it had not met with the approval of the government, and this request was
further urged in a note dated the 27th of March. The reply of Sect'y Randolph,
though unsatisfactory from its neither exonerating or condemning, or promising
investigation could only lead to one conclusion, viz that Gen'l Gatlin had been
relieved for the reason stated in the order and from no other. Hence when he
reported for duty on the 23rd of May 1862, he confidently expected to be at
once assigned to a Command. This was not done however, and he continued to make
the stated monthly reports until the month of September when he received Asst
Adj't Gen'l Whiting's letter notifying him "that having no assignment, his
appointment of Brigr Genl in the Provisional Army was vacated under the 2 par:
of Genl Orders No 48." Soon after, Genl Gatlin proceeded to Richmond, and in an
interview with Secty Randolph on the 24th of Sept, it was stated that the order
was designed to be an exponent of the law, but if Genl Gatlin did not think
that it applied to his case, he might protest, and the matter would be referred
to the law Officer of the Government for his opinion.<o:p></o:p></span></i></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div align="right" class="MsoNoSpacing" style="text-align: right;">
<i><span style="font-size: 12.0pt;">2<o:p></o:p></span></i></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<i><span style="font-size: 12.0pt;">The protest was then made, not with the
vision of forcing his services upon the country, but to place himself in a
position to again repeat his request, to have his conduct investigated by a
proper tribunal, which could not be done so long as his appointment of Brigr
Genl was not acknowledged by the Government. The investigation was the more to
be desired, in as much as the Secty had stated that certain reports, rumours
or allegations - not specified - prejudicial to Genl Gatlin had reached the War
Dept. He had expected a speedy reply to his protest, as he did not presume but
that the Secty had referred it according to promises. Up to this time however,
nothing has been heard from the War Dept on the subject.<o:p></o:p></span></i></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<i><span style="font-size: 12.0pt;">In as much as so much time has elapsed
since the protest was made, that if an answer favorable to Genl Gatlin was now
returned, he could hardly hope to have his conduct investigated, without which
he would not willingly serve in the Army, he desires that the letter of Asst
Adjt Genl Whiting be withdrawn or cancelled, and his resignation of the
appointment of Brigr. Genl in the Provisional Army - which he believes he still
holds under the law - be accepted to take effect on the 8th Sept. 1862, the
date of Major Whiting's letter.<o:p></o:p></span></i></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<br />
<div class="MsoNoSpacing" style="text-align: justify;">
<i><span style="font-size: 12.0pt;">March 20th 1863. <o:p></o:p></span></i></div>
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0tag:blogger.com,1999:blog-2796471141218066032.post-89470935729299918652016-01-14T18:35:00.002-08:002016-01-14T18:35:48.048-08:00Are US Dollars Really Federal Debt?<div class="MsoNoSpacing">
Here is how dictionary.com defines debt:<o:p></o:p></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing" style="line-height: 150%; margin-left: .5in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]-->1.<span style="font-size: 7pt; font-stretch: normal; line-height: normal;"> </span><!--[endif]-->Something
that is owed or that one is bound to pay to or perform for another: <i>a debt of
$50.</i><o:p></o:p></div>
<div class="MsoNoSpacing" style="line-height: 150%; margin-left: .5in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]-->2.<span style="font-size: 7pt; font-stretch: normal; line-height: normal;"> </span><!--[endif]-->A
liability or obligation to pay or render something: My debt to her for advice is not to be discharged easily.<o:p></o:p></div>
<div class="MsoNoSpacing" style="line-height: 150%; margin-left: .5in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]-->3.<span style="font-size: 7pt; font-stretch: normal; line-height: normal;"> </span><!--[endif]-->The
condition of being under such an obligation: <i>His gambling losses put him deeply
in debt.</i><o:p></o:p></div>
<div class="MsoNoSpacing" style="line-height: 150%; margin-left: .5in; mso-list: l0 level1 lfo1; text-indent: -.25in;">
<!--[if !supportLists]-->4.<span style="font-size: 7pt; font-stretch: normal; line-height: normal;"> </span><!--[endif]--><i>Theology.
</i>An offense requiring reparation; a sin; a trespass.<o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Because we are not discussing
theology, forget about #4. Let us, though, discuss the US dollar and its
relation to debt. <o:p></o:p></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<b>The US Dollar is a Federal Debt<o:p></o:p></b></div>
<div class="MsoNoSpacing" style="text-align: justify;">
<br /></div>
<div class="MsoNoSpacing" style="text-align: justify;">
Clearly, a US dollar satisfies
both definitions 1 and 2. When the federal government spends, it issues US
dollars. Each dollar is a federal IOU, that is, an accounting liability to the
government and an asset to the holder. That IOU (the dollar itself) signifies
that the US government owes something to the holder of that dollar. That
something is simply a credit for one US dollar, not 1/35th of an ounce of gold,
nor a chunk of silver, but only another US dollar. That is because the US
monetary system is a fiat monetary system with a currency not pegged to any
commodity or to any other country's currency. It seems evident that the US
dollar is, in fact, a debt of the US government and that, consequently, the US
government is in debt to the holder of that dollar.<o:p></o:p></div>
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<div class="MsoNoSpacing" style="text-align: justify;">
<b>How Ae Debts Discharged?<o:p></o:p></b></div>
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Paying a debt discharges the
debt. Example: I owe you $5.00. If I give you $5.00, the debt is paid. I no
longer owe you $5.00. By giving you $5.00, I have transferred my $5.00 asset to
you, thus reducing my assets. I also have reduced my liability by $5.00. Even
though I may be cash-poor now, I no longer am obligated to pay you. My side of
the transaction is in balance because both my liability and asset have been
reduced equally. You, on the other hand gained a $5.00 cash asset but you lost
a $5.00 loan asset. You are better off cash wise, but you no longer have a loan
due you. Your side of the transaction is in balance because you have gained and
lost equal amounts of assets. The crux is that the debt is eliminated by paying
it back.<o:p></o:p></div>
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<div class="MsoNoSpacing" style="text-align: justify;">
<b>How Does the Government Discharge Its Dollar Debts?<o:p></o:p></b></div>
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Okay, this is going to sound bizarre,
but there is no way the federal government can discharge its US dollar debt to
you by paying it. Think about it. If you have $5.00 (a $5.00 bill, $5.00 in
your checking account, or whatever), it means the federal government owes you $5.00.
Remember that US dollars are a form of government debt. If the government then pays
you another $5.00, it does not discharge the original debt; it simply means
that the government is now in debt to you for $10.00. This is because US
dollars are IOUs, that is, federal liabilities. Paying money to you does not reduce
the federal liability - it increases it. Consequently, the federal government
cannot discharge or reduce its debt by issuing more money. No. The federal
government can reduce its debt (at least the debt inherent in the US dollar)
only by taking those dollars back! Stop now. Think about that. Only by taking
those dollars back can the government pay its debt to you. Stated another way,
the federal government can discharge its US dollar debt to you only by your
paying it! Got that? The government owes you money and the only way it can stop
owing you that money is for YOU to pay that money back. <o:p></o:p></div>
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How does it take money back?
It taxes you. By taxing you the government removes your asset, removes its
liability, and voila, the liability, the asset, and, thus, the US dollar are all
gone. Once back in the hands of the issuer the IOU no longer exists. The debt
is gone, accounted out of existence. Taxes can be viewed as the government
reneging on its debts. Federal taxes simply remove money from your pocket and
from the money supply.<o:p></o:p></div>
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<div class="MsoNoSpacing" style="text-align: justify;">
<b>So Are US Dollars Really Debt?<o:p></o:p></b></div>
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If the person to whom the debt
is owed must pay off the debt to the debtor, as with federal taxes, is it
really debt to begin with? Is the US dollar, although clearly a federal liability,
really a federal debt to you the holder? You can decide that for yourself. If US
dollars are not debt, then does the federal government actually accrue any debt
by spending? You can decide that also.<o:p></o:p></div>
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com1tag:blogger.com,1999:blog-2796471141218066032.post-51823849634171211292016-01-12T21:10:00.001-08:002016-01-12T21:13:41.879-08:00Please Do Not Bite That Apple<div class="MsoNoSpacing" style="text-align: justify;">
I keep hearing phrases like
"our country is broken", "government intrusion on our
lives", "we must take the country back", "this country is
on the wrong path", and so on. I do not know about you, but these
observations, or mindless bitching or whatever they are, fail to resonate with
me. My life is certainly no worse than it was say, ten years ago, and in many
ways, it is better. Americans as a whole are certainly in better shape than
they were following the economic debacle of 2008. Employment has rebounded, gas
prices are low, our military presence has wound down in far off war zones,
inflation is nearly non-existent, good health care is at my disposal, no one
has taken my gun, and I have not had to cough up anything to the federal
government other than more taxes than I think are necessary. Consequently, I
fail to appreciate the growing din of people sounding off about an
out-of-control federal government. <o:p></o:p></div>
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I am angry with the federal
government, however, not for being overbearing on me or for spending my
taxpayer money. I am angry with the federal government for continuing the
charade that it must borrow and tax in order to have money. The federal
government does not need or spend our tax dollars and it can never go broke thanks to the flexibility of its fiat monetary system. Welfare queens are not living off my income. The federal debt, the annual
deficit, and warnings that we owe billions to China are about as true as the
Uncle Remus Tales and as dangerous as dust-bunnies under the couch. Really, the
federal government continues its "poor-mouth" charade as an excuse to
avoid doing for the American people what the American people most need,
providing the infrastructure basis for people to make decent livings and to
avoid becoming helpless victims of the economy. In no way do I fear that the
federal government is coming after me or that it wants to run my life.<o:p></o:p></div>
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Many folks in this country
seem to have gotten meaner over the past few years. So many appear to have lost
track of the fact that we live in a society rather than in a loose amalgamation
of individuals. I often think this may be a subconscious response to our having
a black president although, if presented with such an assertion, people would
vehemently deny it. The rise of the Tea Party and what I call the "Minutemen
for Christ" mentality, that is, evangelical, gun-totin', tough-talking,
Bible thumping folks who disdain the public good in favor of what they consider
to be individual rights, is far more troubling (and irritating) to me than
notions of ours becoming a "socialist" or "communist"
country. Neither of those adjectives is realistic. No, I am more afraid of the
dark side - the side that disdains doing public good for fear of losing individual rights. The growing love affair with private anarchist, totalitarian,
corporate, plutocratic leanings that see swelling all around me, especially
here in the South but also overtly within the Republican Party and covertly
within the Democratic Party looms far more dangerously in my thinking. From a
couple of acerbic, loudmouth dinks in our own local county commission; to Nazi-looking
federal legislators, some running for president and some not; to an irreverent,
bombastic, charismatic like Donald Trump; our statesmen are becoming less like public
servants and more like public serpents. <o:p></o:p></div>
Jim Gaddishttp://www.blogger.com/profile/14568068675014089642noreply@blogger.com0