posted on 25 April 2016
by Rodger Malcolm Mitchell, www.nofica.com
Thank you to reader Zen, for sending us this article from Time Magazine.
Rarely, it's due to stupidity. Often, it's just ignorance of the subject. But sometimes it's blatant lying, and I suspect this is one of those times.
Time Magazine and James Grant have collaborated in publishing the most inaccurate, misleading, wrongheaded article I've seen in many years - and that's saying something.
I mean, I've see stuff by such as Sarah Palin, and Rush Limbaugh, and Sean Hannity, and Michael Savage, and Glenn Beck, so I thought I had seen and heard the worst of the worst. This beats all.
Let me introduce Grant's article with a reminder that a bit more than a year ago, we published, Congress, the media, the economists: The same Big Lie since 1940. What the hell is the problem?
The post reminded us all that way back in 1940, the New York times published an article titled, "FEDERAL DEBT, A TICKING TIME BOMB (Sept 26, 1940, New York Times). Subsequently, through the years, there have been hundreds, probably thousands, of articles using the "Ticking Time Bomb" analogy to describe the federal debt.
At the time of the 1940 article, the Gross Federal debt was in the neighborhood of $50 billion dollars. Today, Gross debt is about $18 Trillion, and that so-called "time bomb" still is ticking. So much for the New York Times accuracy.
That is why I believe Time Magazine and James Grant are not stupid or ignorant, but must be lying. It simply does not require much intelligence to understand that if a $50 billion debt is a "ticking time bomb," and it still has not exploded at $18 trillion, there must be a fallacy involved.
Maybe, just maybe, the debt is not too high after all.
Here just a few of the Time/Grant comments. You decide whether they are lies or just accidental misstatements:
Immediately, with the headline, Time/Grant provides wrong info. If by "insolvency," Time/Grant means the federal government might be unable to pay its bills, then that is 100% impossible for the United States Government to be insolvent.
As a Monetarily Sovereign nation, the world's leading nation financially, a nation whose money is used universally, the United States creates dollars, ad hoc, by the very act of paying bills. It cannot run short of its own sovereign currency to pay bills, because paying bills is the way the government creates dollars.
Even if all tax collections were $0, and all federal lands and all other federal assets also were $0, the U.S. federal government still could continue paying bills, forever.
That is why the Gross Federal Debt was able to increase 3,600% in just the past 75 years, through recessions, depressions, World Wars and smaller conflicts, and still we've had no "insolvency." Not even close.
Here's what Time/Grant said next:
And now, right below the misleading headline, we have the misleading first sentence. Time/Grant wants you to believe that federal financing is the same and personal financing.
Yes, if your personal debt gets large, you might become insolvent. The same is true for businesses and state and local governments, all of which are monetarily NON-sovereign. You and they cannot create dollars by paying bills.
The federal government can and does. Every day.
And no, it is not "better not to incur (debt)" if you're the federal government. Federal debt actually is moderately beneficial, because it forces the government to pay interest into the economy, and that federal interest is stimulative.
And no, it is not "better to pay it off." The federal debt is absolutely no burden of any kind on the federal government, or on federal taxpayers or on anyone else. Neither you, nor your children nor your grandchildren ever will be asked to pay off the federal debt, or will your taxes be increased to pay the debt. Never.
The bullsh*t continues:
How much BS can a writer pack into one tiny paragraph?
First, we do not "owe more than we can easily repay." The so-called federal debt is nothing more than the total of T-security accounts at the Federal Reserve Bank. The (misnamed) "debt" is bank deposits, similar to savings accounts.
To "lend" to the government, you buy a T-bill (or T-note or T-bond). Dollars are transferred from your personal checking account and added to your T-bill account at the FRB. It's as though you transferred dollars from your bank checking account to your bank savings account.
So how does the government "pay off" this so-called "debt"? The same way any bank "pays off" its depositors: It transfers existing dollars in one account to another account. "Paying off" deposits involves simply transferring dollars. No new dollars needed.
Do Time/Grant not know this? Well, in fact, they do know it, because think of the next sentences:
And there, Time/Grant may have proved his article is the result neither of stupidity nor of ignorance, but rather of outright lying. We, in fact, do create dollars out of thin air. We always have.
In 1775, there was no such thing as a U.S. dollar. A few years later, there were millions. Where did they come from? A sovereign nation creates its own sovereign currency by passing laws (which it creates from thin air), and these laws create money from thin air.
So long as the U.S. government does not run short of laws, it never can run short of dollars, for it is laws that create dollars.
By now, Time/Grant's nose must be 10 feet long. He falsely equates Chicago with the U.S. government. But cities, counties and states are not sovereign over the dollar. They cannot create dollars at will, simply by paying bills. The U.S. government can and does.
And as far as the world losing confidence in the dollar, I pray you and your great, great grandchildren live long enough to see that happen, for your family would set all sorts of records for longevity.
To date, not only does the world have confidence in the U.S. dollar, but it has confidence in Canadian, Australian, Japanese, British, Mexican, and Brazilian sovereign currency, plus the currencies of dozens of other nations. The threat that somehow the world would lose confidence in the American dollar is silly.
The first paragraph is false, because as we have discussed, your finances are different from federal finances.
Then, in the last paragraph, the misstatement is admitted. Yes, the government is different from you and me (and Chicago). And that is the whole point.
And now Time/Grant begins to walk back all the bullsh*t we have been fed in the first part of his article:
Exactly correct. Dollars exist as computer digits, under the control of the federal government. They indeed are Monopoly money.
Now tell us again how such a nation that creates dollars merely by tapping computer keys can be unable to pay bills denominated in those same dollars.
Just as the government creates dollars by paying all bills, it creates dollars by paying interest. No problem. Just push some computer keys.
Yes, not only does the federal government create dollars out of thin air, but it controls inflation. In all respects, the federal government is sovereign over the dollar. So to all those folks who warn that the U.S. will turn into Zimbabwe or pre-War Germany, hyperinflation here never has happened, never will happen and can't happen.
Contrary to popular myth, hyperinflation is not caused by "money-printing." Hyperinflation is caused by shortages of goods, especially oil, and to a lesser extent, food. The "money-printing comes as a result of the hyperinflation, not as a cause.
And now comes the inevitable gold pitch:
Ah, that good old, reliable gold. Every depression in U.S. history has come while we were on some sort of gold standard. Allowing the value of one's currency to be determined by the amount of gold mined, is foolish at best and suicidal at worst.
Remember, gold has very little intrinsic value. It's a metal whose utility is less than that of copper, iron, aluminum or any other metal you can imagine. It is expensive to store, expensive to ship, expensive to guard, difficult to use for paying bills, and it pays no interest. And the price varies wildly, so it is not safe in any sense of the word.
It is common for the same people who lie about federal debt also to lie about gold.
And thus, we are treated to yet more bullsh*t.
Fact: Recessions tend to come on the heels of reductions in federal debt/money growth. U.S. depressions tend to come on the heels of federal surpluses. See: Here.
In short, a growing economy requires a growing money supply. For a Monetarily Sovereign nation, a balanced budget is the absolute worst financial program, guaranteed to result in recessions and depressions.
And those are bad things??
It's bad enough that Time/Grant confuses federal debt with federal deficits (We can have deficits without T-securities, and we can have T-securities without deficits), but again, Time/Grant confuses state and local financing with federal financing.
Should we have grown accustomed to that kind of dissembling by now?
My teachers didn't say that, though I wish they had. Most schools ignorantly teach that Monetary Sovereignty and monetary non-sovereignty are the same thing.
The Great Recession was cured by increased deficit spending, which because of misstatements by the like of Time/Grant, was dramatically reduced with harmful debt ceilings, fiscal cliffs and the notorious sequestration, all pushed by the Time/Grants of the world.
In other words, the "limpest on record" recovery was caused by the Time/Grants et al, who succeeded in forcing cuts to federal deficit spending. Money is the lifeblood of our economy, but at a time when the nation needed more blood, the Time/Grants of the world were applying leeches to our economic body.
Then, as the patient suffered from blood loss, they claimed not enough leeches were applied.
And now, we come to the real reason for this article. Remember that Time is published by Time Inc. a big corporation, owned and operated by rich people. It publishes such magazines as Time, Fortune, and Sports Illustrated. It's big money. And Grant not only is paid by these rich people, but his own clientele tends to have wealth.
Here is what the rich want you to believe:
Ah, the lies just keep on comin'. Notice how all our "problems" would be solved if only we would cut Social Security, cut Medicare, cut Medicaid and cut Obamacare - you know, the stuff that's meaningless to the rich, but important to us not-rich.
As for defense spending, we dare not cut that. All those military supplying companies, owned by the rich, are too important, which social spending apparently is not (because it benefits the not-rich).
And finally, the most mysterious line in this whole shameful article:
What!!! Time/Grant spends an entire article telling us how awful the federal debt is, and then, at the very bottom of the piece, we are told that federal debt is "neither good nor bad"???
No, it won't. You won't pay one cent to repay the debt. The dollars already exist in the T-security accounts at the FRB.
Anyway, the rest of the article continues in that vein - confusing Monetary Sovereignty with monetary non-sovereignty - pretending that federal financing is like personal financing, and falsely claiming that federal taxes pay for federal spending.
Time/Grant ends with another shot at Social Security, Medicare, and Medicaid, hoping you will ask to receive lower benefits and pay higher taxes on the benefits you receive. The purpose is to widen the Gap between the rich and the rest.
It is the Gap that makes the rich rich, and the wider the Gap, the richer they are..
It would be frightening if the article's goal merely were to enrich the already rich, but no, the objective of this disgraceful article is to impoverish the not-rich.
I wish the Time/Grant folks ill.
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