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.
I didn’t think it was possible for the editors of the Chicago Tribune, to exhibit more ignorance about our economy, but they now have outdone themselves. Consider the editorial dated May 11, 2011, and titled, “Of course it’s perilous.” Here are some amazing excerpts:
. . . the danger from continued (federal) free-spending is an America so deep in hock that it truly does look to the world as if it will be unable to pay its debts.
The “debt” to which the Tribune refers is composed of outstanding T-securities (T-bills, T-bond, T-notes, etc.), all of which are denominated in dollars. So, to service its debt, the U.S. government uses dollars, which by law, it has the unlimited ability to create.
Though the Tribune is ignorant of that fact, one assumes the rest of the world is not deluded into thinking our federal government somehow will lose its ability to create its sovereign currency.
If credit markets ever flip to that pessimistic view, the Chinese and other big holders of U.S. paper really will race for the exits.
The Tribune never explains what “race for the exits” means. We are left to guess it means nations will refuse to buy our T-securities. Ooo-ooooh how frightening. T-securities became obsolete in 1971, when we went off the gold standard. Prior to then, the federal government was not Monetarily Sovereign. It did not have the unlimited ability to create dollars, since dollar creation was limited by gold reserves, so we had to borrow dollars (i.e. create and sell T-securities).
Today, nothing limits dollar creation except inflation, which we are nowhere near, and easily is prevented/cured by the Fed’s interest rate control. Ask yourself, why would a nation having the unlimited ability to create dollars, need to borrow dollars it previously created? The Tribune editors not only offer no answer for that question, they don’t even think about it. With zero thought and zero research, they merely parrot the Tea Party’s anarchist mantra. And this is one of America’s leading newspapers? Lord help us.
The federal government could eliminate all T-securities (i.e. eliminate all federal “debt”), simply by pressing a computer key and exchanging one form of U.S. money (dollars) for another form of U.S. money (T-securities). Think of it: Tomorrow there could be no T-securities, no “debt” and nothing for the Tea Party to parade about. And all it would take is the press of a computer key.
Our guess is that finance ministers in places like Greece, Ireland, Portugal and Spain would erect statues of this guy Boehner if they magically could turn back the clock and embrace his brand of fiscal austerity. Instead they’re struggling to simultaneously stabilize their shaky economies, reduce their runaway debts and persuade global investor to trust that they’ll be able to make their interest payments in coming years. Whew.
Do you see the ignorance in this? Greece, Ireland, Portugal and Spain are monetarily non-sovereign. They do not have the unlimited ability to create euros. They can — and have — run out of the euros needed to service their debt instruments. The U.S. is Monetarily Sovereign. It does have the unlimited ability to create the dollars needed to service its debt instruments.
So the Tribune does not even understand the difference between monetary non-sovereignty and Monetary Sovereignty — the fundamental concept in modern economics. It’s like preaching about mathematics, yet not understanding arithmetic. Yet the Tribune editors have the gall, not only to preach about economics, but intentionally to avoid learning. Talk about hubris.
For once, Democrats and Republicans are seriously debating how, and by how much, this debt-riddled nation needs to reduce spending. A companion debate on cutting unsustainable entitlements also needs to combust, and the sooner the better. . . we need to slash the indebtedness that already has put this nation’s future prosperity in danger.
I’ll tell you what will put this nation’s future prosperity in danger: Cuts in Medicare, Medicaid, Social Security, infrastructure, food safety, drug safety, research of all kinds, the military, air safety, education and all the other federal programs we rely on for our lives and our children’s futures. Oh yes, there is one more thing that puts our nation’s future prosperity in danger: The Tribune editors and others of their “I-see-NOTHING; I-know-NOTHING,” Sergeant Schultz ilk.
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 Monetary 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 my future.”