“Dark-age thinking” lacks imagination. It is anti-science, anti-art, and anti-exploration. It assures a lack of human progress because it can’t imagine what human progress looks like.
A hundred years ago, it would not have imagined the Internet, smart watches, smart phones, jet planes, GPS, supercomputers, 3-D printing, robotic surgery, antibiotics, genome editing, CRISPR, transistors, solar panels, and DNA structure.
A hundred years ago, Albert Einstein, using “useless” pure mathematics changed science. No one could have predicted what he discovered.
Today, our species faces many dangers to our survival: lack of food, lack of fresh water, air pollution, global warming, ocean rise, nuclear radiation, and new diseases.
Only science, preparedness, and our vision and will can protect us, or like so many species before us, we will disappear from the earth.
When schoolchildren ask, “Why do I have to learn math, art, history, or philosophy?” they exhibit the ignorance of youth. When adults ask, “Why do we spend money on pure science?” they exhibit dark-age thinking.
It is the fatal belief that learning must have an immediate, practical purpose, or it’s useless.
Here is just one example of dark-age thinking by our government:
Congressional approval of the 2024 federal budget earlier this year left NASA with roughly half a billion dollars less than the agency had in 2023 — and Mars science has taken the biggest hit.
Using its drill, NASA’s Perseverance rover (lower left) collected material from a rock nicknamed Rochette in September 2021 as part of a plan to bring back samples to Earth. The agency’s recent budget woes have placed the sample return project in turmoil.
Engineers are scrambling to figure out how a long-planned mission to bring samples back from the Red Planet might still be accomplished.
The dark-age thinker objects, “Who needs samples from Mars? Why waste the money?”
Probes intended for other planets and moons are delayed, and the venerable Chandra X-ray Observatory, which launched in 1999 and has transformed our view of energetic phenomena in the universe, is potentially on the chopping block.
Between 2014 and 2023, funding had increased more than 3 percent on average compared with the previous year.
Three percent is less than inflation, so the realNASA budget has been falling. Now, not just the real, but the numerical budget will fall more rapidly.
NASA’s Mars Sample Return mission had intended to bring rock and soil samples to Earth. The mission is on hold as NASA tries to determine if it can be done at all.
The rocks and soil could answer fundamental questions about the formation of the inner solar system and the history of water on Mars, and perhaps reveal signs of past life on the planet.
The Jet Propulsion Laboratory in Pasadena, largely responsible for designing and building the components of sample return, lost hundreds of millions of dollars functionally overnight.
Uncertainty over the budget had already prompted the center to dismiss 530 employees.
Scientific exploration and progress beget employment and economic growth. The dark-age thinker can’t see that.
A dedicated orbiter to explore the ice giant Uranus has seen its timeline pushed back. Because ice giants are among the most common types of exoplanets being discovered around other stars, researchers are keen to understand those in our own solar system.
DaVinci and Veritas, two missions to explore Venus, are also being delayed, and there’s now more uncertainty about which, if any, other probes on the drawing board — those intending to bring back samples from a comet or fly through the plumes of Saturn’s moon Enceladus — will go forward.
All this will mean less near-term researchon the formation and dynamics of planets and their moons.
“We forget how little we’ve explored the solar system we live in,” Dreier says.
Scientists are crying out to explore it, he adds, and that’s all being pushed back.
Powerful shock waves traveling through the guts of a dead star named Tycho’s Remnant glow brightly in high-energy wavelengths, allowing NASA’s Chandra X-Ray Observatory to take this beautiful picture.
The budget for this year and expectations for next year have prompted NASA to conduct a review of its existing flagship telescopes, the Chandra X-ray Observatory and the Hubble Space Telescope, to see if either can be wound down.
NASA’s Chandra X-Ray Observatory remains healthy but constrained funding at the agency could see it shut down.
Both were launched as part of the first generation of Great Observatories in the 1990s and early 2000s, and they’ve already seen their companions, the Compton Gamma Ray Observatory and Spitzer Space Telescope, shut off.
The dark-age thinkers ask, “What good is all this Mars, Venus, and Uranus exploration? What has Hubble really done for us? Why spend the money?”
There are three answers. First, the money is free. The U.S. federal government, being Monetarily Sovereign, has the infinite ability to create money without collecting a penny in taxes.
The U.S. government never can run short of dollars.
Second, the dollars grow the economy. Gross Domestic Product (GDP) = Federal Spending + Non-federal Spending + Net Exports. The more money the government and NASA spend, the more the economy grows.
Even totally “wasted” dollars, grow the economy, and cost taxpayers nothing.
The third, most important answer is that scientific research brings many benefits we can’t even imagine. It’s why they call it “research” and not just “development.”
Research breeds discovery which breeds more discovery. No one can foresee what useful things will evolve from research. Everything in our current world evolved from earlier discoveries, beginning with the creation of the wheel, flint tools, and the use of fire.
20 Breakthroughs from 20 Years Fundamental disease research:Alzheimer’s Disease. Parkinson’s Disease. Cancer. Asthma. Heart Disease. If any of these conditions has affected your life, so has space station research.
New water purification systems:Unfortunately, many people around the world lack access to clean water. At-risk areas can gain access to advanced filtration and purification systems through technology that was developed for the space station, enabling the astronauts living aboard to recycle 93% of their water.
Drug development using protein crystals: Protein crystal growth experiments conducted aboard the space station have provided insights into numerous disease treatments, from cancer to gum disease to Duchenne Muscular Dystrophy.
Methods to combat muscle atrophy and bone loss: Space studies have contributed greatly to our knowledge of bone and muscle loss in astronauts – and how to mitigate those effects. The knowledge gained also applies to people on Earth dealing with diseases such as osteoporosis.
Exploring the fifth state of matter: 25 years ago, scientists first produced a fifth state of matter, called a Bose-Einstein condensate (BEC), on Earth. In 2018, NASA’s Cold Atom Lab became the first facility to produce that state of matter in space. This achievement may provide insight into fundamental laws of quantum mechanics.
Tissue chips are built from human cells. Also called organs-on-chips, they mimic the structure and function of our heart, kidneys, lungs and other organ systems.
Understanding how our bodies change in microgravity: When humans head to Mars, we need to know what challenges we face. Long-term stays aboard the space station have uncovered unexpected ways that the human body changes in microgravity.
Testing tissue chips in space: Tissue chips are roughly thumb-drive-sized devices that contain human cells in a 3D matrix, representing functions of an organ. Chips have been sent to station, seeking to better understand the impact of microgravity on human health and to translate that understanding to improved health on Earth.
Stimulating the low-Earth orbit economy: From satellite deployment to in-space research, a vibrant commercial space economy has developed, with a value that now exceeds $345 billion. The space station has been a key part of supporting that growth.
CubeSatscan be used to test instruments, conduct science experiments, enable commercial applications and support educational projects.
Growing food in microgravity: The ability to grow supplemental food can help humans explore farther from Earth. Many techniques for growing plants have been explored aboard the space station to prepare for these missions. On August 10, 2015, astronauts sampled their first space-grown salad, and astronauts now are growing radishes in space.
Deployment of CubeSats from station: CubeSats are one of the smallest types of satellites and provide a cheaper way to perform science and technology demonstrations in space. More than 250 CubeSats have now been deployed from the space station, jumpstarting research and satellite companies.
Monitoring our planet from a unique perspective: The capacity to host varying complements of instruments, both internal and external, has evolved the station into a robust platform for researchers studying Earth’s water, air, land masses, vegetation, and more while providing them additional views beyond those of NASA’s typical Earth remote-sensing satellites.
Collecting data on more than 100 billion cosmic particles: The Alpha Magnetic Spectrometer – 02 has provided researchers around the globe with data that can help determine what the universe is made of and how it began.
Discovery of steadily burning cool flames: When scientists burned fuel droplets in the Flame Extinguishing Experiment (FLEX) study, something unexpected occurred. A heptane fuel droplet appeared to extinguish, but actually continued to burn without a visible flame at temperatures two-and-a-half times cooler than a typical candle.
A better understanding of pulsars and black holes: Two tools installed on the outside of the space station, NICER and MAXI, have worked in tandem to advance our knowledge of pulsars and black holes.
Student access to an orbiting laboratory: Companies and professors are not the only ones using the space station for microgravity research. Station has given elementary- to college-aged students access to science in space and the opportunity to study microgravity’s effects.
Capability to identify unknown microbes in space: Having the ability to identify microbes in real time in space without the need to send them back to Earth for identification would be revolutionary for the world of microbiology and space exploration. The Genes in Space-3 team turned that possibility into reality in 2017.
Opening up the field of colloid research: Toothpaste, 3D printing, pharmaceuticals, and detecting shifting sands on Mars may not seem related to each other at all, yet each stands to benefit from improvements made thanks to research on colloids aboard the space station.
The evolution of fluid physics research: Fluids cover our planet, but sending them to space can help us better understand how they flow. The study of fluids in space has progressed from fundamental research into the testing of technology applications ranging from advanced medical devices to heat transfer systems.
3D printing in microgravity:The first item was 3D printed on the space station in 2014. Since then, we have explored 3D printing using recycled materials and even printing human tissue.
Responding to natural disasters: With crew handheld camera imagery as a core component, the station has become an active participant in orbital data collection to support disaster response activities both within the U.S. and abroad.
Dark-age thinking is why our public schools are underfunded, our teachers are underpaid, and millions of our children are poorly educated. All that brainpower is wasted.
It’s why we have hunger, homelessness, and poverty while our government has the infinite ability to fund food production and distribution, home-building and anti-poverty measures.
It’s why millions don’t have clean drinking water while governments have the infinite ability to fund water purification research, development, and installation.
It’s why people can’t afford healthcare, the aged live untended, and many diseases don’t have treatments.
In so many ways, we have little progressed from cave-dwelling savages, worshipping gods while belittling science.
There are those who give their limited funds to religion but oppose the government giving its unlimitedfunds to research.
It makes no sense. It’s blind. And that is the very definition of dark-age thinking.
Seems like a simple question — “When will the U.S. government run out of U.S. dollars?”
Sadly, the media writers, economists, and politicians don’t seem to know. Some claim “soon.” Some claim “eventually.” A few say “never.”
Scott Horsley
For instance, Scott Horsley:
Scott Horsley is NPR’s Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.
Horsley spent a decade on the White House beat, covering both the Trump and Obama administrations.
Before that, he was a San Diego-based business reporter for NPR, covering fast food, gasoline prices, and the California electricity crunch of 2000.
He also reported from the Pentagon during the early phases of the wars in Iraq and Afghanistan.
Horsley earned a bachelor’s degree from Harvard University and an MBA from San Diego State University.
Mr. Horsley seems to believe the government will run out of money in 2033 or maybe in 2036. I say that because of the article he wrote:
Congress has less than a decade to fix Social Security before the popular program runs short of cash, threatening a sharp cut in benefits for nearly 60 million retirees and family members, according to a government report released Monday.
Social Security (SS) is an agency of the U.S. government. The only two ways SS can run out of dollars are:
If Congress and the President want it to run out, or
If the U.S. government runs out.
Can the government run out of its sovereign currency, which it created from scratch in the 18th century?
For millions of years, there was no U.S., no U.S. laws, and no U.S. dollars. Then suddenly, in the late 1780s, a group of men created a government from thin air.
This government passed laws, also from thin air. Some of the laws created the U.S. dollar, again from thin air.
That government created as many laws as it wished, and those laws created as many dollars as the law-writers wished.
It all was arbitrary.
So, returning to the question, “When will the U.S. government run out of U.S. dollars?”
The report from Social Security trustees predicts the retirement program’s trust fund will be exhausted in November of 2033.
Despit what you repeatedly have been told, it isn’t a trust fund. It’s just a line item in a balance sheet. (See: “The phony trust fund controversy.“) The government can change those numbers to whatever it chooses at any time it chooses.
Congress votes; the President approves; someone presses a computer key; and a one billion dollar “trust fund” instantly becomes a fifty billion dollar “trust fund.”
At that point, benefits would automatically be cut by 21%, unless lawmakers adopt changes before then.
Among the laws the government created were the laws creating Social Security.
As an agency of the government, Social Security is funded the same way as every other agency: Congress votes, and the President approves.
Congress and the President have unlimited freedom to decide how much any agency will receive:
Mandatory spending – funding for Social Security, Medicare, veterans benefits, and other spending required by law. This typically uses over half of all funding. (Congress and the President make the law)
Discretionary spending – federal agency funding. Congress sets funding levels for these each year. This usually accounts for around a third of all funding. (Congress and the President set the levels)
Interest on the debt – this usually uses less than 10 percent of all funding. Congress and the President decide how much interest to pay and tax).
In short, every penny of federal spending ultimately is decided by Congress and the President. It all returns to the fundamental question, “When will the U.S. government run out of U.S. dollars?”
By now, I’m sure you know the answer: The U.S. government cannot unintentionally run short of U.S. dollars.
People don’t realize that FICA doesn’t fund Social Security and Medicare and that those trust funds are fictions.
Even if the government had to pay someone a billion, a trillion, or a billion trillion dollars today, it could do so simply by passing a law and pressing a computer key.
Former Federal Reserve Chairman Alan Greenspan:“A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”
Former Federal Reserve Chairman Ben Bernanke:“The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. It’s not tax money… We simply use the computer to mark up the size of the account.”
Statement from the St. Louis Fed:“As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”
The answer to the question, “When will the U.S. government run out of U.S. dollars?” is a resounding, NEVER, unless Congress and the President make that arbitrary decision.
You and I are limited in our money supply. Your state, county, and city governments are limited. All businesses are limited. Banks are limited. Even euro nations are limited. All are monetarily non-sovereign.
They were not the original creators of the U.S. dollar.
By contrast, the U.S. government is Monetarily Sovereign. It was the creator of the dollar. It cannot unintentionally run short — not now, not in 2033, not in 2036, not ever.
So why do writers like Scott Horsley think SS and Medicare, agencies of the federal government, will run short?
There’s some good news in the new forecast. Thanks to higher-than-expected worker productivity and a decline in expected disabilities, Social Security isn’t burning through cash as fast as trustees predicted a year ago.
Still, the long-term demographic challenges haven’t gone away.
A growing number of baby boomers are collecting benefits, while there are fewer people in the workforce paying taxes for each retiree.
Given today’s low birthrates, that mismatch is not expected to change for decades, although a surge in immigration helps.
Remember what Ben Bernanke said, “It’s not tax money… We simply use the computer to mark up the size of the account.”
The federal government does not use your tax dollars to fund its spending. You (and Mr. Horsley) may be shocked to learn that every dollar you send to the U.S. Treasury is destroyed upon receipt.
When you pay taxes, the dollars come out of your bank account, where they were part of the “M2 money supply measure.”
When the dollars reach the Treasury, they instantly disappear from M2 and are not found in any money supply measure.
They join the Treasury’s infinite money supply. Adding dollars to infinite dollars still yields infinite dollars.
These dollars, which are not part of any money supply, no longer can be found. They have been destroyed.
Why does the federal government collect taxes if not to fund spending?
To control the economy by taxing what it wishes to discourage and by giving tax breaks to what it wishes to reward.
To assure demand for the U.S. dollar by requiring taxes to be paid in dollars.
To make you believe dollars are limited by taxes, so you will not request benefits. (This doesn’t discourage the rich from requesting and getting tax benefits unavailable to you.)
Proposed Fixes Congress could fix the problem by raising taxes that support Social Security, reducing retirement benefits, or some combination of the two. But a politically palatable solution has been elusive.
Mr. Horsley can think of only two fixes: Raise taxes or cut benefits. Both fixes predictably would impact the middle and lower income groups, thereby widening theincome/wealth/power Gapbetween the rich and the rest.
This is exactly what the rich want because the wider the Gap, the richer they are. Increasing your taxes and lowering your benefits makes the rich richer.
And that is precisely what the rich bribe the media, the economists, and the politicians to do.
It’s not that Mr. Horsley himself has been bribed. He may simply be following the “party line” created by others who have been bribed — just going with the flow, and not thinking about the reality that the federal government can’t unintentionally run short of dollars.
“When you see the two major candidates running for president tripping over themselves to promise what they won’t do to fix the problem, you have to worry because those kinds of reforms really start at the top,” says Maya Macguineas, president of the Committee for a Responsible Federal Budget.
Ah, yes, the famous Maya Macguineas, who repeatedly implies that the federal government is running out of dollars — now there is a “reliable” source.
The Biden administration has pledged not to touch Social Security benefits.
“Seniors spent a lifetime working to earn the benefits they receive,” Treasury Secretary Janet Yellen, who leads the trustees, said in a statement.
“We are committed to steps that would protect and strengthen these programs that Americans rely on for a secure retirement.”
Yes, yes, blah, blah, blah. “Committed to steps,” “Protect and strengthen.” And more blah, blah, blah. But what exactly are those steps?
Congressional Democrats have proposed higher taxes on the wealthy to support Social Security.
Congressional Republicans have balked at that, instead calling for reducing the benefit formula and raising the retirement age for younger workers.
The classic Democrat/Republican false choices. The Dems want to soak the rich. The GOP wants to soak the rest of us.
“Those who want to cut Social Security couch it in affordability,” says Nancy Altman, who heads the advocacy group Social Security Works.
“But of course, there’s no question we can afford it. It’s really a question of values. And as polarized as we are, we’re not polarized over this.”
Altman is confident that lawmakers will find a solution before automatic cuts take effect.
“If they didn’t act, not only would they all be voted out of office,” she says. “They couldn’t even remain in Washington. They’d be chased down the street.”
Why aren’t they already being chased? Because the public has been fed so many lies by so many “reliable sources,” the people don’t realize they are being lied to.
On first reading of this post, most people will think, “That can’t be true.” But it’s true.
The federal government could fund a comprehensive, no-deductible Medicare for every man, woman, and child in America and a generous Social Security program for everyone, all without collecting a single penny in taxes.
Yes, there’s no question we can afford it. So? So? AFFORD IT!
But the clock is ticking, and delay has already been costly.
“Every year the trustees warn us we have to make changes and the sooner we make them, the better and easier it will be,” says Macguineas. “And every year we fail to make those changes.”
Medicare and disability solvency While Social Security’s retirement program is in danger of running short of cash, a separate program that supports disabled people appears to be solvent for the long term, trustees said.
Medicare’s finances have also improved somewhat in the last year, thanks to a strong economy and lower-than-expected spending. Still, the program which provides health care for nearly 67 million people, is expected to face its own cash crunch in 2036.
You have been fed lie after lie after lie. Your information sources wring their hands in mock horror that one day soon, the federal government will run short of dollars, perhaps right after the universe runs short of stars and politicians become honest.
Even the densest among us can see the solution: The federal government should pay for Social Security and Medicare, period.
Eliminate FICA. It doesn’t fund SS or Medicare. It doesn’t fund anything. Those FICA dollars are destroyed upon receipt.
FICA serves only as a convenient excuse (convenient for the rich) to limit and cut your SS and Medicare benefits, thus widening the income/wealth/power Gap and making the rich richer and you poorer.
In technical terms, that pisses me off, and it should piss you off, too. What are you going to do about it?
This post may run a bit longer than usual, but it is actually a brief discussion of various issues concerning common conceptions and misconceptions about our economy.
Economics is not a normal science—it may not even be a science at all. A real science relies on proofs, but in economics, there are few, if any.
It is an unholy meld of mathematics, psychology, philosophy, history, intuition, and fortune-telling, with a dollop of pure faith in self-anointed experts.
So, with all that, we are forced to rely on experts — economists, politicians, and the media — to tell us the truth about money.
This is not money.
I. Laws and Dollars Are Not Physical Objects
In 1792, the new United States government passed several laws. One was the Mint Act, which created the U.S. dollar.
At the risk of being obvious, I’ll remind you that the Mint Act, and indeed all laws, has no physical existence. You cannot see, hear, taste, feel, or smell the Mint Act.
A law can be described, not sensed, as it is only a concept, not a physical entity.
Barring self-imposed limits, the federal government, as the creator of laws, could pass any number and kind of laws. Just as laws have no physical existence, the dollars that the laws create exist only as ephemeral numbers on balance sheets. You cannot see, hear, taste, feel, or smell a dollar.
In addition to coins, the Treasury has printed paper versions of currency.
Gold, silver, copper, and paper have never been money. They have always been nothing more than physical material used to create coins and dollar bills.
Gold, silver, and copper coins, and paper bills are bearer titles to dollars, signifying that the bearer is owed a dollar by the U.S. government. Just as a car title is not a car and a house title is not a house, coins and paper currency are not money.
They are government-issued IOUs. Gold, silver, and copper, but not paper, sometimes have been called the “backing” for a dollar in the same way a car is said to “back” a car title, and a house is said to “back” a house title.
But what happens if the car crashes, the house burns down, and the government arbitrarily changes the exchange value of coins and paper, which it has done many times throughout history? There goes the backing.
Despite having no physical existence, dollars have values. The government that created them arbitrarily assigns these values to dollars.
The following list shows the exchange value of the original dollars, values the government arbitrarily has changed many times over the years.
Eagles $10.00 247+4∕8 grain gold
Half eagles $5.00 123+6∕8 grain gold
Quarter eagles $2.50 61+7∕8 grain gold
Dollars or Units $1.00 371+4∕16 grain silver
Half dollars $0.50 185+10∕16 grain silver
Quarter dollars $0.25 92+13∕16 grain silver
Dimes $0.10 37+2∕16 silver
Half dismes $0.05 18+9∕16 grain silver
Cents $0.01 11 pennyweights copper
Half cents 0.005 5+1∕2 pennyweights copper
II.What Backs The Dollar?
Is this coin worth $10 or approximately $1,300?
The real backing for the house title, car title, and dollar bill is the full faith and credit of the signer. In the case of the dollar, the signer is the United States government.
Look at a dollar bill, and you will see that it is signed for the government by the Treasurer and the Secretary of the Treasury.
Coins are signed (engraved) by the United States of America.
It is the full faith and credit of the U.S. government, not gold, silver, or any other physical element, that always has backed the U.S. dollar.
But what is “full faith and credit”?
This may sound nebulous to some, but it actually involves certain, specific, and valuable guarantees, among which are:
A. –The government will accept only U.S. currency in payment of debts to the government (i.e., taxes, fines, etc.) B. –It unfailingly will pay all its dollar debts with U.S. dollars and will not default C. –It will force all your domestic creditors to accept U.S. dollars if you offer them to satisfy your debt. D. –It will not require domestic creditors to accept any other currency E. –It will take action to protect the value of the dollar. F. –It will maintain a market for U.S. currency G. –It will continue to use U.S. currency and will not change to another currency. H. –All forms of U.S. currency will be reciprocal; that is, five $1 bills always will equal one $5 bill and vice versa.
If you trust the government, you accept its coins and paper currency; otherwise, you use some other currency. If you happen to trust gold more than you trust the U.S. government, you immediately will exchange all your dollars for gold.
All U.S. coins have two values — their face value and their material value. For example, what is a $10 gold coin worth?
At the latest valuation, it is worth both$10 in money and approximately $1,300 in barter. As money, a gold coin is worth neither more nor less than a paper $10 bill.
If a dollar has no physical existence, how can it be real? Many real things have no physical existence. Laws, patents and copyrights, sports scores, votes, numbers, poems, stories, etc., all are real but have no physical existence.
Poems and stories are real, but they are represented by books and narration.
Laws are real, but you cannot see a law. You can see representations in books, or hear representations in court, but you cannot see a law.
Numbers are real, but you cannot see, feel, etc. them. Consider the number ten. What does it look like? Is it “ten?” “10”? “5+5”? “X”? “1010” ( in binary)? “12” (in octal)? “5×2”?
The list is literally endless because, like money, the number ten has no physical properties. Why is this important? Because money’s lack of physical properties, allows the federal government to create infinite amounts, unconstrained by any supply considerations.
Even if the federal government had no gold, no silver, no copper, or paper, it still could create infinite numbers of dollars and, as the issuer, give those dollars any value it chooses.
As the holder of a U.S. coin, you are a creditor to the U.S. government, which provided the coin in lieu of providing you with some physical thing. As a creditor to the U.S. government, you have provided a loan, which also is real but has no physical existence.
The fact that the U.S. dollar has no physical existence gives the government the infinite ability to create dollars. If the dollar had a physical existence, the dollar supply would be limited by the supply of the dollar’s “material.”
III. Monetary Sovereignty
You cannot begin to understand economics unless you understand the differences between a “Monetarily Sovereign.” entity and a monetarily non-sovereign entity.
The governments of the U.S., Canada, Mexico, China, Japan, and Australia are Monetarily Sovereign. They created and issued the money they and their citizens use, and they created all the laws regarding their money.
They cannot unintentionally run short of their own sovereign currency, which was created in accordance with their own laws. By writing all their own laws, they control all their own currencies.
So long as the U.S. federal government can create its laws, it can create dollars.
For example, the board game Monopoly purports to have Monopoly money in paper form. But it is not money. It represents money. The game could be played just as well without the paper “money” simply by keeping score. By rule, the “Bank” in the game of Monopoly is Monetarily Sovereign. It cannot run short of Monopoly dollars. (See: Monopoly).
You are not Monetarily Sovereign, nor is your city, county, or state, nor is any business or even a euro nation like Germany, France, and Italy. None can legally control the currencies they use.
Euro nations use euros, and their Monetarily Sovereign entity is the European Union.
Politicians, economists, media writers, or laypeople who claim the U.S. federal government should “live within its means,” like you and I must, falsely compare the federal government’s monetary sovereignty with monetary non-sovereignty.
The federal government has no “means,” or rather, it has infinite “means.”
There is no amount of spending that is beyond the capability of the federal government to create dollars.
IV. Spending
The federal government cannot unintentionally run short of dollars. It creates dollars, ad hoc, by spending dollars. The process is:
A federal agency approves an invoice from a creditor. Then it sends instructions (not dollars) to the creditor’s bank, ordering the bank to increase the balance in the creditor’s checking account (“Pay to the order of _____”_.)
The instant the bank does as instructed, new dollars are created and added to the M2 money supply measure.
The bank then balances its books by clearing the transaction through the Federal Reserve, another federal government agency.
Thus, the federal government is in the enviable position of approving its own transactions. That is its superpower—the infinite ability to instruct banks to increase balances and thereby create new dollars.
That superpower means no amount of federal spending, debt or deficit can be “unsustainable,” as many people falsely claim.
V. Taxes
Notice something else important: In steps 1 through 3, above, the word “tax” never is used.
Because the federal government has the infinite ability to create dollars, which it creates ad hoc by spending dollars, it does not use tax dollars for spending. In fact, your tax dollars are destroyed the moment they reach the U.S. Treasury.
When you pay taxes, you write a check. Your dollars come out of the nation’s M2 money supply measure.
But when the dollars reach the Treasury, they instantly disappear from the M2 money supply measure and are not found in any money supply measure.
In short, they disappear. They effectively are destroyed by joining the Treasury’s infinite money supply. Adding dollars to infinite dollars still yields infinite dollars. That addition of your tax dollars to the Treasury’s supply of dollars does not increase the Treasury’s infinite supply of dollars.
Your federal tax dollars, which are not spent and are not part of any money supply, no longer exist. They have been destroyed.
VI. Why Levy Taxes?
State and local governments and euro-nation governments levy taxes to provide themselves with spending money. But the U.S. government creates its own spending money. So, what is the purpose of federal taxes?
1. To control the economy, the government taxes what it wishes to discourage and gives tax breaks to what it wishes to reward.
2. To assure demandfor the U.S. dollar by requiring all tax payments to be made in dollars.
There is a third “secret” purpose to U.S. taxation:
There is an income/wealth/power Gap between the rich and the rest of us. Without the Gap, no one would be rich; we all would be the same. Widening the Gap makes the rich richer.
Politicians, virtually all of whom are bribed (via campaign contributions and lucrative jobs), have designed federal tax laws at the behest of the rich to widen the Gap.
FICA, for instance, is not collected on salaries above $160K. Why? The rich don’t want it.
Long-term capital gains are taxed at lower levels than salaries. Why? The rich receive much of their income via long-term capital gains.
Many tax breaks are available only to the rich.
That is why someone like billionaire Donald Trump paid less in federal taxes than you probably did for the past ten years. For some years, he paid $0 while earning millions.
VII. Borrowing
If the federal government neither needs nor uses tax dollars for spending, why does it borrow dollars?
Earlier, we said that U.S. dollars are “government-issued IOUs.” While that might seem to indicate borrowing, it doesn’t. Borrowing requires a lender, and no one lends dollars to the federal government.
The “IOU” refers to the federal government owing full faith and credit to every dollar user.
Often, the issuing of Treasury Securities (T-bills, T-notes, T-bonds) incorrectly is termed “borrowing.” But the purpose of T-securities. like federal taxes, is not to supply the government with spending money but rather:
1. To provide a safe place to store unused dollars, which helps stabilize the dollar and
2. To help the Federal Reserve control interest rates by providing a base rate for the world’s safest investment.
The misnamed, and thus misunderstood, “federal debt” is the total of outstanding deposits into T-security accounts. These accounts resemble bank safe deposit accounts in that the government does not touch the contents.
When T-security accounts mature, the government pays them off simply by returning the contents, unused, exactly as it does with safe deposit boxes. In neither case has the government borrowed the contents.
By a quirk in the law, “federal debt” also refers to the net total of all previous federal deficits (the difference between taxes collected and spending). Here, too, the word “debt” is wrongly applied because the federal government does not owe its deficits.
It already has paid those bills. The government doesn’t owe what it already has paid. The word “deficit,” in this case, refers to the net number of growth dollars the federal government has sent into the American (and other) economies.
Running deficits is necessary for economic growth. Mathematically, we would have recessions without federal deficit spending. Gross Domestic Product – Federal Spending + Non-federal spending + Net Exports.
Because the U.S. traditionally has negative Net Exports and Inflation, the only way to generate real GDP growth is to increase economic spending, and that requires adding dollars to the economy — exactly what federal deficit spending does.
So, those who decry federal deficits and debt are simply wrong. Sadly, some of those people have been influenced by the very rich, who understand that most deficit spending narrows the income/wealth/power gap by benefiting the average American.
Reduced deficit growth (red) leads to recessions (gray bars) which are cured by increased deficit growth.
Those who do not understand Monetary Sovereignty claim the federal government, like businesses and individuals in the private sector, should run surpluses. This is diametrically wrong.
U.S. depressions tend to come on the heels of federal surpluses.
1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807. 1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819. 1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837. 1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857. 1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873. 1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893. 1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929. 1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.
As the money supply (blue) grows, the economy (green) grows. Federal deficit spending increases the money supply, while federal surpluses reduce it.A wheelbarrow filled with paper currency. Did the currency cause the inflation, or did the inflation cause the currency?
Federal surpluses take dollars out of the economy. By formula, removing dollars from an economy is recessionary.
VIII. Inflation
When the facts are explained, most people come to understand that the federal government does have the infinite ability to create dollars (incorrectly termed “printing” dollars.)
But then, doubters invariably fall back on the “Federal Spending (or Federal Deficits) Causes Inflation” idea bolstered by misleading photos of people lugging wheelbarrows filled with printed currency.
This belief comes from the false mantra, “Inflation is too much money chasing too few goods and services.”
There is no doubt that inflations, and especially hyper-inflations, go hand-in-hand with ever-higher denominations of increasingly worthless paper currencies.
At one time, Italy printed a 500,000-lira note. But that did not cause inflation. It was the Italian government’s misguided reaction to inflation.
When you hear there is a shortage of “X” (which can be anything from oil to wood to computer chips to bananas), what do you expect to happen to the price of “X”?
You’re right. The price of “X” will rise. It’s an example of supply and demand. When supply doesn’t meet demand, prices rise. So the real question concerning inflation is: Does federal money-creation cause demand to increase more than supply?
Adding dollars to the economy unquestionably increases both the demand and supply for some products and services. But for there to be inflation, overall demand would have to increase more than supply.
That is not what happens in the real world.
Here is a comparison of inflation vs. net federal spending (spending minus taxes), the net amount of money the federal government pumps into the economy.
There is no relationship between inflation (blue) and net federal spending (red).
The above graph demonstrates that, contrary to popular wisdom and contrary to what you have been told, net federal spending does not cause inflation. The red net-spending line does not correspond to the blue inflation line
So, what causes inflation?
The price of oil is closely related to supply and demand. When oil is scarce, its price rises.
The price of oil affects the prices of nearly every product or service because oil is universally used, not only for transportation, heating, and other energy needs (which most products and services need) but also as an ingredient in many products.
Here is a graph showing the relationship between oil scarcity and inflation:
Oil prices, i.e. scarcity (green) parallel inflation (blue).
Because oil is ubiquitous in our economy, a scarcity of oil causes an increase in virtually all other prices, aka inflation.
What causes oil scarcity? Is it federal spending? No, as the following graph demonstrates, net federal spending does not cause oil shortages.
Net federal spending (red) does not cause oil scarcity (green).
Oil scarcity is caused by many factors. OPEC and Russian production cuts are the single biggest drivers of rising oil prices. Thus, the warning that federal spending leads to inflation is widely believed and claimed by some media, economists, and politicians, but it is not supported by historical fact.
What cures inflation? Additional deficit spending to increase the supply of scarce items — especially oil and food — while also supporting research and developments of substitutes.
IX. What About Interest Rate Control?
Your information sources, economists, media, and politicians tell you that raising interest rates helps prevent/cure inflation. The Federal Reserve certainly believes this or claims to.
Part of the Fed’s logic is that interest rates strengthen the U.S. dollar by increasing the demand for dollars. When interest rates rise, more people want to make deposits into interest-paying T-security accounts.
To do so, you need dollars. You can’t deposit any other currency.
When the demand for dollars goes up, the value of the dollar rises, and that “stronger” dollar can pay for more imports from nations whose currency is “weaker.” In short, raising interest rates lowers the dollar price of imports, which works against inflation.
Imports only account for approximately 14% of the economy (Gross Domestic Product). What happens to the other $86%?
Nearly all costs increase when interest rates go up.For instance, a 1% difference between a $200,000 home with a $160,000 mortgage increases your monthly payment by almost $100. Although the difference in monthly payment may not seem that extreme, the 1% higher rate means you’ll pay approximately $30,000 more in interest over the 30-year term.
But it gets worse. Interest affects the cost of building a house because material costs and transportation costs rise with interest rates. Interest also affects the cost of food, not only because of increased transportation costs but also farming costs.
Farmers generally borrow during planting season and pay their loans back when they sell their crops. Higher interest rates increase the cost of food, and of course, farm machinery prices increase.
Raising interest rates to cure high prices is like applying leeches to cure anemia.
In short, the Fed views inflation as a demand problem (people eat too much, buy too many cars and houses, and buy too much of what they don’t need).
In Fed language, the economy is “too hot” and needs “cooling.” Said another way, the economy is too healthy and needs to be recessed a little. That is why the Fed always fears its actions might cause a full-blown recession.
It’s a ridiculous proposition because the Fed raises interest rates to cure the “demand problem.”
The Fed tries to cure inflation by raising prices, which is identical to trying to cure anemia by applying leeches.
Inflation is, and always has been, a supply problem, most often caused by shortages of oil and/or food.
What is the cure for shortages? Not recession. The cure for shortages is federal spending to acquire and distribute the scarce items.
Rather than blaming people for buying too much and the federal government for spending too much, the Fed should do nothing about inflation.
Congress and the President are responsible for shortages. Unfortunately, they have avoided responsibility by shifting the blame to the Fed and interest rates.
The current inflation was not caused by people buying too much or by too low interest rates.
The current inflation was caused by COVID-related shortagesof oil, food, computer chips, lumber, steel, shipping, and many other products and services, along with a shortage of labor.
Raising interest rates to cure those shortages is foolish. It exacerbates the problem. Instead, the government should have helped oil producers find, drill, and refine more oil, farmers grow more food, and manufacturers create and ship more of what we lacked.
In the long term, federal spending to increase the usage of oil substitutes will help prevent inflations.
SUMMARY
Money is not a physical thing. It is a number on balance sheets. You cannot see, hear, taste, smell, or feel a dollar.
Gold and silver are not, and never have been, money.
The U.S. government is Monetarily Sovereign. It cannot run short of its own sovereign currency, the U.S. dollar. It’s finances are nothing like the finances of state and local governments, businesses, euro governments, you, and me.
A dollar is a debt of the federal government, backed not by gold or any other physical thing but rather by the full faith and credit of the federal government.r
A dollar bill is not a dollar. It is a bearer title for a dollar, similar to a printed IOU.
The federal government has the infinite ability to create the laws that create dollars.
The federal government creates dollars by sending instructions (not dollars) to banks, instructing them to increase the balances in creditors’ checking accounts.
Federal taxes do not fund federal spending, but state/local taxes do fund state/local economies. Federal tax dollars are destroyed upon receipt at the Treasury. The purposes of federal taxes are to control the economy and assure demand for the dollar.
The federal government never borrows dollars. The purpose of T-bills, T-notes, and T-bonds is to provide a safe storage place for unused dollars.
Federal spending doesn’t cause inflation, and currency printing is a misguided response to, not a cause of, inflation.
All inflations have been caused by shortages of goods and services, usually oil and food. Federal spending cures shortages by obtaining and disseminating scarce goods and services.
Inflation is not caused by an economy being “too hot” or consumers buying “too much.” Raising interest rates increases prices, exacerbating inflation, and is recessionary.
For those of a Libertarian bent who invariably opt against federal spending, the following article from the South Florida Sentinal outlines exactly what the federal government can, should, and has the unique ability to fund without concern about profitability.
Thousands of such experimental projects could be pursued if not for private sector concerns about future payout. The federal government needs no such concerns.
Progress is made via failure, which the federal government can tolerate, but the private sector cannot.
No federal spending is wasteful because even the most far-fetched, failed projects still add growth dollars and jobs to the economy.
A bigger sibling for 3D printer
The world’s largest 3D printer, which can create houses, is revealed Tuesday at the University of Maine’s Orono campus. Robert F. Bukaty/AP
University demonstrates how recyclable affordable housing can be built quickly, cheaply
By David Sharp and Jennifer McDermott Associated Press
ORONO, Maine — The world’s largest 3D printer has created a house that can cut construction time and labor. An even larger printer unveiled this week may one day create entire neighborhoods.
The machine revealed Tuesday at the University of Maine is four times larger than the first one — commissioned less than five years ago — and capable of printing ever mightier objects.
That includes scaling up its 3D-printed home technology using bio-based materials to eventually demonstrate how printed neighborhoods can offer an avenue to affordable housing to address homelessness in the region.
Thermoplastic polymers are extruded from a printer dubbed the “Factory of the Future 1.0,” said Habib Dagher, director of UMaine’s Advanced Structures & Composite Center, home to both large printers.
It combines robotics operations with new sensors, high-performance computing and artificial intelligence.
And there could be even larger printers after the University of Maine breaks ground this summer on a new building.
“We’re learning from this to design the next one,” he said.
Those attending the unveiling included representatives from the Departments of Defense, Energy, and HUD, as well as other stakeholders who plan to utilize the new technologies made available by the printer.
Heidi Shyu, undersecretary of defense for research and engineering, said the printer exceeded her expectations and “stands as a beacon of innovation.”
Shrouded by a black curtain, the printer was on and whirring behind the speakers. At the end, the curtain opened, revealing that it was working on a test project for a boat.
The unit can print objects 96 feet long by 32 feet wide by 18 feet high; its frame fills up the large building in which it’s housed.
It has a voracious appetite, consuming as much as 500 pounds of material an hour.
The original printer, christened in 2019, was certified by Guinness World Records as the world’s largest polymer 3D printer, the university said.
It was used to create a 600-square-foot, single-family house made of wood fiber and bio-resin materials that are recyclable. Dubbed BioHome3D, it showed an ability to quickly produce houses.
To meet the growing demand for housing, Maine will need 80,000 more residences over the next six years, according to Maine Housing.
Dagher said there’s a shortage of affordable housing and workers to build homes. The university wants to show how homes can be constructed nearly entirely by a printer with a lower carbon footprint.
According to the United Nations Environment Programme, the buildings and construction sector accounts for 37% of global greenhouse gas emissions, largely due to the production and use of cement, steel, aluminum, and other materials with a significant carbon footprint.
Such printed buildings can be recycled. “You can basically deconstruct it, you can grind it up if you wish, the 3D-printed parts, and reprint with them, do it again,” Dagher said before the event.
The Army Corps of Engineers provided most of the funding for the new printer, which cost several million dollars, said Dannel Malloy, chancellor of the University of Maine System.
When politicians and others complain about expensive federal projects without obvious payouts, like going to the moon and Mars, they have no idea what their complaints cost America in terms of lost knowledge.
According to the mathematical formula (GDP = Federal + Nonfederal Spending + Net Exports), federal deficit spending is absolutely necessary for economic growth.
Even the infamous Gravina Island Bridge, commonly referred to as the “Bridge to Nowhere,” the ultimate in what is commonly called “pork barrel politics,” added dollars and jobs to the economy at no cost to any American taxpayer. (Federal taxes don’t fund federal spending.)
And of all federal spending, support for research and development may have the most short- and long-term value. We need much, much more of it.
#Monetary Sovereignty - Mitchell 