Mainstream Economists Do Congress' Dirty Work

In his February 23 Las Cruces Bulletin column, "Government debt means more influence by foreigners", economics professor Chris Erickson repeats several alarming economic narratives that we regularly hear from politicians and the media. These themes, having to do with the government deficit, debt and foreign control of our economy, are straight out of orthodox economics, and they are wrong.

One blatant error comes in this statement--"The fundamental problem is that the ballooning government deficit means less domestic savings". On the contrary, since government "deficits" are exactly balanced by private sector surpluses, (the government is spending into the private economy) the larger the deficit the more money is in the hands of the domestic economy, to be saved, spent or invested. Over the entire history of our country government deficit spending has been the normal state of affairs. It is a non-issue.

In a nation whose economy and politics have been taken over by a cabal of wealthy individuals and corporations, it is not surprising to hear politicians and corporate media outlets disseminating economic disinformation. Congress knows how the money works, and they use that knowledge to allocate extraordinary sums to the oligarchs. All the while telling us made up stories about the deficit and the debt to explain why they "can't" find the money to take care to the people, the environment and the infrastructure.

It is, therefore, very unsettling to realize the authorities we look to, professional economists, are telling the very same story. Unfortunately, most continue to subscribe to macroeconomic operations that have not been in effect since the US went off the gold standard in 1971.

Everything changed at that point. As the sole issuer of the dollar, the government was no longer constrained in how much money it could create by having it pegged to a material commodity. As long as goods, services and labor are available, the government can create money and spend into the private economy without risk of inflation.

Today, Modern Money economists are revealing the truth about how money works at the federal level. The essentials are:

1. New dollars are created in the process of the government paying its obligations;

2. The government must first spend, so you and I and businesses have money to pay taxes with;

3. Taxes received by the IRS are deleted from the money supply once your account is credited;

4. It follows, therefore, that our taxes do not fund federal spending, meaning that the "deficit" is a myth, since there is no functional relationship between taxes collected and the spending budget Congress authorizes;

5. The government has the ability to create any amount of money Congress authorizes it to spend. Hence, it never has a need to borrow the currency it, itself creates. No nation with a sovereign currency has ever "bounced a check", in all of history;

6. Consequently, the US has no debt. What is commonly referred to as the national debt is not debt at all. It is the total amount of savings individuals, businesses and foreign governments have invested in Treasury securities. This is not money the US uses for any purpose. It is simply numbers on spread sheets.

Not China nor any other country has control over our economy. As an example, the money China has in US securities is money they earned on exports to our country. Since they have little use for dollars at home, they leave it here in an account at the Fed until they need it to pay for American goods. Since they are not dummies, they invest it in US Treasuries to earn interest. The US could pay China the full amount of their investment at any time with no difficulty. We are not slaves to foreign "debt" holders. End of story. No foreign entity can influence US interest rates. The Federal Reserve has total control over determining rates.

Yet Erickson insists that Trump's "…. policy of large government deficits will result in an inflow of foreign capital into the United States. Foreigners will.... buy up government debt". "…..the end result will be more control of the US economy by foreigners".

All of these fact about money operations apply only to the federal government. All the rest of us, states, counties, cities, businesses and families are users of the currency, not its issuer, hence we do need a source of income to pay our bills with.

These money facts revealed by Modern Monetary Theory economists are readily available online. This website is a great resource: http://wecanhavenicethings.com/