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PLEASE JUST STOP THE BLATANT CYNICAL LIES ABOUT DEFICITS AND DEBT

Popularity 1Viewed 147 times 2017-3-20 09:46 |System category:Economy| Federal, Deficits, Debt


I'm so sick and tired of hearing the term "taxpayer funded" I sent the following in a PM to Chuck Todd (Meet the Press). 

Because we are one of many monetarily sovereign nations issuing a nonconvertible, fiat currency with a flexible exchange rate and NO DEBT IN A FOREIGN CURRENCY OR ANY OTHER CURRENCY, the following is irrefutable: 

Mr. Todd, I'm not the only person interested in national economics who finds himself disappointed with your commentary on fiscal policy. As more Americans begin to grasp the historical and operational realities of how our government creates, spends, taxes and destroys its tax and bond sale revenue the sooner we as a nation can begin to eliminate social and economic dysfunction. 

What we mean is that America is no longer on a gold standard.  Our national government is not financially constrained to spend (fund its expenditures.) The domestic gold standard which constrained the issuance of dollars ended in 1933 with FDR's abolition of dollar convertibility to gold.  Then in 1971, Nixon abandoned Bretton Woods and by definition the international gold standard. 

This latter event ushered in global fiat currency standards which govern fiscal and monetary policy today. Nations bond to the Euro , or with a pegged currency, and our fifty states, our businesses, our households, and individuals cannot issue currency but must acquire it to pay  Federal and state taxes. 

Our government cannot and should not be managed like a non-currency issuing household.  Households cannot legally issue their own currency.

Please read "The Seven Deadly Innocent Frauds of Economic Policy" by Warren Mosler

AND PLEASE REFRAIN FROM TELLING ME THAT MY GOVERNMENT NEEDS TO TAX ME SO THAT IT CAN FUND ITS WARS. FEDERAL TAXPAYERS DO NOT FUND THE FEDERAL GOVERNMENT. 

For far too long Americans have been duped into believing that the Federal Government needs to tax to fund its expenditures.  It does not.  It needs to tax to manage inflation, income distribution, and acceptance of the currency which is the only currency with which to pay Federal taxes.

Tax policy today does not fund Federal government expenditures. First, the Federal Government issues currency, the dollar, ad hoc. It can fund anything denominated in dollars and for which there is an authorization/appropriation. 

For example, the Bernanke Fed, issued, cumulatively, more than $29 trillion to bailout banks and other industries between 2008-2009.  Not one penny of that came from tax receipts as Bernanke explained to Scott Pelley in a "60 Minutes" interview in 2009. Nor did it enter the money supply.

This supports history and means that 'taxpayer funded' is an obsolete term/reference. 

Yet, you and thousands, indeed hundreds of millions of American persist in the lie that a fiat currency system requires tax receipts and bond sale revenue to fund the Federal Government.

Former Chairman of the Federal Reserve Bank of NY, Beardsley Ruml reminds us, in his,1946, article, "Taxes for Revenue Are Obsolete."

Our second concern is your screeds against deficit spending and what it does to national debt.  Any nation with three sectors; public, private, trade must run public sector deficits and or trade surpluses when faced with stagnant demand and unacceptable levels of unemployment.  

Third, public sector deficit spending is equal to the penny to non-public sector net financial assets. We in the private sector always gain from public sector deficit spending which increases our ability to consume, save, invest where else would those public sector dollars go? We get them in our paychecks. Just think what would happen to our economy if Congress refused to appropriate funds for Defense? Our economy would lose $500 billion plus annually.

Lastly, it follows that a nation sovereign in the creation of its currency never accumulates real debt or faces insolvency.  There are unfortunately, accounting records which conflate balance sheets with operational reality.     

That "public debt" spreadsheet means absolutely nothing in the real world of America's ability and willingness to pay its bills.   All financial centers understand that while Japan has a debt to GDP ratio of 200plus it's bonds are absorbed as soon as offered because purchasers know Japan like the U.S. has the unlimited ability to pay its bills.  

The same is true of Canada, Australia, England, China and other monetarily sovereign nations. These nations understand they are safely saving their dollars, yen, pounds, etc.  There is no debt.  We have $20 trillion in savings. (T-securities stacked up in millions of checking accounts at the Fed)  There is no rational way this can be defined as debt.

(Opinions of the writer in this blog don't represent those of China Daily.)


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Reply Report HailChina! 2017-3-20 18:06
I think that a lot of what you are saying here is wrong.

Only USA has the reserve currency status and that gives USA the ability to print money and while ever the rest of the world continues to accept the USD and to have faith in USA to maintain its status as leader state and reserve currency holder then USA can seemingly run up as much national debt as it pleases but this is not the case for other nations. The reason Japan is such a 'widow maker' is because the Japanese are a conquered protectorate of the USA and as such they are protected by USA controlled ratings agencies and by the rest of the Bretton Woods analogues that thew USA put in place to dominate the world after WW2 ( USA did not win WW2 by the way, they were just the strongest ally left standing due to the fact that they entered the war against the Nazi late and allowed Russia and the allies to do all the hard fighting before swooping in and claiming that we would all be speaking German if not for them ). So what do you think happens to nations that are not protected by the USA and their credit rating agencies and Bretton Woods institutions? What happens if a nation like Brazil overspends? USA ratings agencies and Bretton Woods systems will say that Brazilian debt is not a good investment wont they? And Brazil will be forced to take a loan from IMF that makes debt slaves of the Brazilian people. Even a nation like Australia cannot just run up ridiculous amounts of debt through public spending and then just print our way out of it and this was the case long before USA controlled reserve currency status - see the episode in history when NSW Premier Jack Lang withdrew all of NSWs money from the bank and hid it so that the English could not get their hands on it. The Australian economy relies on capital inflows you see. Our money isnt worth a thing if the controller of reserve status says that it isnt and this is the case with all nations apart from USA. National debt can only be described as 'savings' so long as rating agencies consider the debt to be safe. The reason US debt is safe is not because of your fantastic economy - the reason US debt is considered to be safe is because the USD and US debt is backed by the US military. If someone threatens the status of the USA and its reserve currency status, like Iraq selling oil for food or Euro, or Libya threatening the same and a gold backed African currency, then USA will invade them. If a nation does not do what USA tells them to do then USA will use military hard power to sanction and isolate the rebel nations - or USA will overthrow that government and install an 'NTC' that bows to America. The USD and US debt and the US bretton Woods systems are backed by the US military. But even so, a nation like Australia must have competent elites that are capable of managing their populations because it is the 'taxpayer' that backs the loans that are given to these elites to fund our governments that have been put into deficit. Government bonds are backed by the 'taxpayer' and if elites allow nationalists that want to nationalize things left right and centre then they will not get any loans from the IMF will they? No.

You are on the right track but you need to do a lot more reading and thinking before you understand how the world works. And I think you need to be a bit less naive/trusting.

Another thing is that governments can also fund themselves by bring in revenue from state owned enterprises. As you see with China this works very very well and it had always worked well in pretty much all non-US western nations up until the 1990s when the fall of the USSR led to a privatization bonanza. Pretty much all utilities were owned by the state and they brought in a great amount of revenue but Americanization has changed all of that for the most part. Modern capitalist thinking is that governments and central planning do not work ( they do is not sabotaged by capitalist privatization fanatics ) and that private competition brings down costs - but it becomes clearer with each passing day that this is utter nonsense - privatization only results in monopolized markets and price fixing collusion - not a better deal for consumers. Just look at the US health system - sure it is great for the wealthy but for everyone else it is terrible and costs a fortune. Americanization has led us away from single payer systems that always worked well and before long we will all have disasters of health systems like you have in USA than are run and controlled by insurance companies for profit. But yeah, governments can also be funded with revenue from SOEs - not just taxes.

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    • PLEASE JUST STOP THE BLATANT CYNICAL LIES ABOUT DEFICITS AND DEBT 2017-3-20 18:06

      I think that a lot of what you are saying here is wrong.

      Only USA has the reserve currency status and that gives USA the ability to print money and while ever the rest of the world continues to accept the USD and to have faith in USA to maintain its status as leader state and reserve currency holder then USA can seemingly run up as much national debt as it pleases but this is not the case for other nations. The reason Japan is such a 'widow maker' is because the Japanese are a conquered protectorate of the USA and as such they are protected by USA controlled ratings agencies and by the rest of the Bretton Woods analogues that thew USA put in place to dominate the world after WW2 ( USA did not win WW2 by the way, they were just the strongest ally left standing due to the fact that they entered the war against the Nazi late and allowed Russia and the allies to do all the hard fighting before swooping in and claiming that we would all be speaking German if not for them ). So what do you think happens to nations that are not protected by the USA and their credit rating agencies and Bretton Woods institutions? What happens if a nation like Brazil overspends? USA ratings agencies and Bretton Woods systems will say that Brazilian debt is not a good investment wont they? And Brazil will be forced to take a loan from IMF that makes debt slaves of the Brazilian people. Even a nation like Australia cannot just run up ridiculous amounts of debt through public spending and then just print our way out of it and this was the case long before USA controlled reserve currency status - see the episode in history when NSW Premier Jack Lang withdrew all of NSWs money from the bank and hid it so that the English could not get their hands on it. The Australian economy relies on capital inflows you see. Our money isnt worth a thing if the controller of reserve status says that it isnt and this is the case with all nations apart from USA. National debt can only be described as 'savings' so long as rating agencies consider the debt to be safe. The reason US debt is safe is not because of your fantastic economy - the reason US debt is considered to be safe is because the USD and US debt is backed by the US military. If someone threatens the status of the USA and its reserve currency status, like Iraq selling oil for food or Euro, or Libya threatening the same and a gold backed African currency, then USA will invade them. If a nation does not do what USA tells them to do then USA will use military hard power to sanction and isolate the rebel nations - or USA will overthrow that government and install an 'NTC' that bows to America. The USD and US debt and the US bretton Woods systems are backed by the US military. But even so, a nation like Australia must have competent elites that are capable of managing their populations because it is the 'taxpayer' that backs the loans that are given to these elites to fund our governments that have been put into deficit. Government bonds are backed by the 'taxpayer' and if elites allow nationalists that want to nationalize things left right and centre then they will not get any loans from the IMF will they? No.

      You are on the right track but you need to do a lot more reading and thinking before you understand how the world works. And I think you need to be a bit less naive/trusting.

      Another thing is that governments can also fund themselves by bring in revenue from state owned enterprises. As you see with China this works very very well and it had always worked well in pretty much all non-US western nations up until the 1990s when the fall of the USSR led to a privatization bonanza. Pretty much all utilities were owned by the state and they brought in a great amount of revenue but Americanization has changed all of that for the most part. Modern capitalist thinking is that governments and central planning do not work ( they do is not sabotaged by capitalist privatization fanatics ) and that private competition brings down costs - but it becomes clearer with each passing day that this is utter nonsense - privatization only results in monopolized markets and price fixing collusion - not a better deal for consumers. Just look at the US health system - sure it is great for the wealthy but for everyone else it is terrible and costs a fortune. Americanization has led us away from single payer systems that always worked well and before long we will all have disasters of health systems like you have in USA than are run and controlled by insurance companies for profit. But yeah, governments can also be funded with revenue from SOEs - not just taxes.

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