The Debt Myth and Confusion about Money

February 28th, 2012
in Op Ed

by Guest Author Rodger Malcolm Mitchell,

In a previous post, I complained that the mistaken beliefs about the federal debt, seemed to touch so many facets of our lives. I gave the example of New York Times’s article about the auction of public airwaves now used for television broadcasts, to create more wireless Internet systems. While the Times’s article should have focused on the scientific need for more airwaves, and how this auction would benefit Internet users, instead it focused on helping solve federal budget problems.

Today, my village newspaper, the Wilmette Life, published an opinion piece by Paul Sassone, titled “Changing dollar will weigh us down.”

Follow up:

I have nothing against the dollar bill. My only complaint is that I don’t have anywhere near enough of them. But the government doesn’t share my fondness. It wants to eliminate dollar bills.

On Jan. 31, a bipartisan bill (S 2049) was introduced in the U.S. Senate to replace the dollar bill with a dollar coin. There is complementary bill (HR 2977) in the U.S. House of Representatives. So, it could happen that the dollar bill is on the road to extinction.

Getting rid of the dollar bill is touted as a cost-saving measure. Being made of paper, dollar bills wear out a lot faster than metal coins. The General Accounting Office estimates using coins instead of dollar bills will save the government $5.6 billion over 30 years.

The thing is, we Americans have not shown a fondness for dollar coins. Remember the Susan B. Anthony dollar? First issued in 1979, it was issued for only four years. People didn’t like it, confused it with quarters, for one thing. And nobody wanted to lug around a pocketful, or pocketbook full, of coins.

The latest such attempt ­— the Presidential Dollars — hasn’t done so well either. The government suspended issuing these dollars last year for lack of public interest. It has in storage $1.4 billion Presidential Dollars and, it is estimated, would have had $2 billion piled up by 2016, the year there were no more presidents to commemorate.

With bipartisan bills in both houses of Congress, dollar coins may become a reality whether we citizens like them or not.

In short, Americans don’t want dollar coins, but Congress and the President, in their infinite ignorance, will foist them on us — to save money. Never mind that the federal government never needs to save money. In fact, it literally is unable to save money, because it never has any money to save. It creates dollars, ad hoc, by paying bills.

Which brings us to perhaps the most interesting sentence in Mr. Sassone’s article: “It has in storage $1.4 billion Presidential Dollars . . .”

First, keep in mind, those coins are not dollars. They are evidence for the ownership of dollars.

Think of all those sheets of $1, $2, $5, $10, $20 and $50 bills at the government printing office. They aren’t dollars either. They are nothing until the federal government sends them out, at which time they are proof the holder owns a dollar. They resemble the title to a house. The title is not a house, nor is a dollar bill a dollar. There is a company that prints form house titles. They aren’t houses, and not even evidence. They are nothing until used.

So now think about this: What would happen if the government decided to melt those 1.4 billion coins it has in storage? Would the government be any poorer? Would it suddenly be unable to pay its bills?

Or what would happen if there were a fire in the Government Printing Office, and a few trillion ones, fives, tens, etc. were destroyed? Again, would the federal government be poorer? Of course not. It simply would print up replacement pieces of paper, which would become TITLES to dollars when they are distributed to the public.

Neither coins nor paper bills are money. They merely are receipts representing money, which itself has no physical existence. And because money has no physical existence, the government never can run short. In fact, the government, contrary to popular usage, does not print money. It can’t. You can’t print something that does not exist in the physical world.

Because of the universal belief that the federal government is “broke” (Thank you Mr. Boehner), or cannot “afford” to pay for the various things Americans want, Americans must be inconvenienced (heavy coins in the pocket) or worse (lack medical care, retirement funds, etc.) I see that false belief touching every facet of our lives, just like the most restrictive religion you can imagine.

Everything you do, and everything you want to do, and everything you want, is colored by that massive superstition. It influences what you eat, what you wear, where you live, how you live. That false belief affects everything in your world.

And you think religious extremists are nuts???


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About the Author

Rodger Mitchell, MBA is a "turnaround specialist", who saves troubled companies. He is the author of the book, "Free Money, Plan for Prosperity" and founder of his own blog, Rodger M

Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

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  1. roger erickson says :

    Thanks for all your effort. Encouraging to see this message spreading, even if ever so slightly.

  2. stan says :

    What nonsense.

    The government can't spend what isn't produced, no matter how much money it creates. As Zimbabwe found out. If the economy stopped producing wealth tomorrow, we would see what the money the government creates is worth very quickly. Wheelbarrows, anyone?

    All these MMT types never address the question of how much money to create. Because their understanding doesn't extend that far. No matter how they deny it, at heart they are "something for nothing" advocates. Oh, they dress it up in fancy rhetoric, but something for nothing is their message.

    I suspect it comes out of their faith. No, not their religious faith, but their faith that the future will always be better than the present. It will be cheaper to pay back debt in the future than it is now. It is so ingrained in them, they don't even notice the assumption. So, spending created money now to have what we want is free, because it will eventually be free to pay it back.

    If energy cost of things, of production, isn't cheaper in the future, this assumption no longer holds. And we seem to be in such a period. At least for oil and coal. Perhaps we can bring back the assumption with natural gas for a while.

    But it is an assumption, and needs to be explicitly understood, so we don't fall into fallacious logic like the above.



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