The debt hawks are to economics as the creationists are to biology. Those, who do not understand Monetary Sovereignty, do not understand economics. If you understand the following, simple statement, you are ahead of most economists, politicians and media writers in America: Our government, being Monetarily Sovereign, has the unlimited ability to create the dollars to pay its bills.
In the previous post, we saw that federal debt is a bookkeeping number based on an obsolete law requiring the Treasury to issue T-securities in the amount of federal deficits. The “debt” is functionally just the total of outstanding T-securities, not the total of deficits. We saw that, in a Monetarily Sovereign nation, there can be deficits without debt, and there can be debt without deficits.
The major, ongoing news story of the day, is the battle between Tea (formerly Republican) Party members and the Democrats concerning the debt ceiling. You should find this battle amusing:
With rare exception, every speech, every comment, every article, every editorial you read or hear concerning the federal debt is based on ignorance.
Neither those who argue for an increase in the ceiling, nor those who argue against an increase, know what they are talking about. The federal debt is unnecessary, and so, the federal debt ceiling is unnecessary. To argue about modifications to a law that is fundamentally obsolete, is like arguing about the proper number of times a witch should be dunked.
There neither should be an increase, a decrease or a maintenance of the debt ceiling. All the arguments for or against involve discussions of the federal deficit. Those against increasing the debt ceiling argue that it helps prevent excessive deficit spending by the federal government. Those who argue for an increase in the debt ceiling claim increased deficit spending is necessary.
They both are wrong for different reasons. Empirical evidence shows the debt ceiling has done nothing to prevent federal spending. And while increased federal deficit spending is necessary for a growing economy, federal deficit spending does not require the creation of T-securities (aka “federal debt”).
So while the self-proclaimed economics experts in Congress and in the media waste their time and yours, exploring all the reasons to, and not to, increase the debt ceiling, you can sit back and laugh (or cry), thinking “What fools these be. They are arguing over something that could be eliminated with one touch of a computer key and/or one minor change in an obsolete law.”
In short, if you don’t find it hilarious, when the President of the United States gives an impassioned speech about the need to improve a nonsensical law, and the Speaker of the House gives an equally impassioned speech about the need to maintain that nonsensical law, then you are a tough audience, indeed. I, myself, find it comical – and sad.
Enjoy the debates and the clowns.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetarily Sovereign, and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.
Remember that the next time you’re tempted to ask a dopey teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it screwed up the economy.”