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Coin Seigniorage and the Irrelevance of the Debt Limit

Coin Seigniorage and the Irrelevance of the Debt Limit | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
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Beowulf and Joe Firestone's insight:

 

“But here is the point:  If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good...  If the Government issues bonds, the brokers will sell them. The bonds will be negotiable; they will be considered as gilt edged paper.  Why? Because the government is behind them, but who is behind the Government? The people. Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency… instead of the bankers receiving the benefit of the people’s credit in interest-bearing bonds?”
Thomas Edison, quoted in NY Times, Dec. 6, 1921
http://prosperityuk.com/2000/09/thomas-edison-on-government-created-debt-free-money/

If you think about it, it does seem odd that the US Government is the monopoly supplier of US dollars and yet our politicians go through life thinking the government will run out of money unless it can borrow more.  Of course that’s not true, the coins in your pocket are legal tender and yet were not issued against debt.  They’re minted by the US Government, backed only by the gilt-edged credit of the American people, no one is paid interest on it and they don’t add a penny to the statutory debt.  What’s more, the use of coins as legal tender is scalable, they could replace the use of Tsy debt sales.  No, you wouldn’t have to carry more coins in your pocket.  Nothing would change except Tsy would be credited by the Federal Reserve for the sale of interest-free Treasury coins (presumably of large denominations) instead of interest-bearing Treasury bonds.

The two great powers of a sovereign state are the monopoly of violence and seigniorage, the profits from the creation of money.  If the federal deficit (that is, expenditures in excess of tax receipts) were funded by seigniorage revenue, not only would there be no debt service owed on the money, there’d actually be no deficit.  Seigniorage (whether generated by the Federal Reserve or by the US Mint) is supposed to be booked by Treasury as “miscellaneous receipts”, since the funds can appropriated for other govt uses, it actually reduces the deficit dollar for dollar.  Looking into it, I found that while Federal Reserve profits are counted as a revenue source (larger than estate taxes and customs duties combined), US Mint profits are not.  I sent a couple of emails to the Tsy Inspector General’s office to point this out, but have’t heard anything back.  I’ve copied below what I sent Tsy (changing the formatting a bit to merge the two emails). I go WAY into the weeds legally (“presumably in USSGL account, Acct Title: Seigniorage; Acct No 5795″), so I apologize for that in advance.  Feel free to ask me to translate anything below into the English language.  The bottom line is, the Secretary of Treasury already has the authority to create money without debt so there’s no fiscal reason to raise the debt limit.  What’s more, since the Federal Reserve began paying interest on reserves in 2008, there’s no longer a monetary reason to raise the debt limit either.


Circulating Coinage

Circulating coins are shipped to the Federal Reserve Banks (FRB) as needed to replenish inventory and fulfill commercial demand… Seigniorage is the difference between the face value and the gross costs of coins shipped. Seigniorage adds to the Federal Government’s cash balance, but unlike the payment of taxes or other receipts, seigniorage does not involve a transfer of financial assets from the public. Instead, it arises from the exercise of the Federal Government’s sovereign power to create money and the public’s desire to hold financial assets in the form of coins. The President’s Budget excludes seigniorage from receipts and treats it as a means of financing the national debt… p. 28, US Mint, 2009 Annual Report

My question is whether its accurate, under current law, to state that coin seignorage does not involved the transfer of financial assets from the public and whether the President’s Budget should be excluding  seigniorage from receipts when Congress directed the Secretary to sweep the “receipts… from the sale of circulating coins”  into “miscellaneous receipts” (which is where Federal Reserve seigniorage revenue has long been placed).  I understand that Tsy adopted the “other financing source” definition of coin seigniorage years ago, at least since the time of  President Johnson’s 1967 Commission on Budget Concepts.   Since the time of the Commission (and currently reflected in FASAB SFFAS No. 7) , the US Mint has been on-budget with its seigniorage off-budget while the Federal Reserve System has been off-budget and its seigniorage (reflected in the net earnings refunded to Tsy) on-budget as part of miscellaneous receipts.  Indeed, according to the CBO, in 2009 miscellaneous receipts (which are mostly but not solely Fed profits) were a larger source of federal revenue– that is, reduced the federal deficit by a larger amount– than estate/gift taxes and customs duties combined. (Table T-3).  To put it another way, if the Federal Reserve sends money directly to the Tsy General Fund, it is counted on the budget.  If the Federal Reserve sends money to the Tsy General Fund that stops in the US Mint Public Enterprise Fund first, it is not counted on the budget.  That seems anomalous.
Leaving aside whether the nature of budget concepts changed after President Nixon took us off the gold standard (I’ll outsource that issue to the estimable Warren Mosler), neither he US Mint Annual Report nor the President’s Budget appear to reflect the statutory language in 31 USC 5136 (which in the mid 90s created the United States Mint Public Enterprise Fund).  To backtrack a moment, transactions with the Federal Reserve are not considered intergovernmental transfers by Tsy since the Fed’s deposit of earnings at Tsy are booked as nonexchange revenue received from “the public” and are deposited in miscellaneous receipts.  Analogously, proceeds from the sale of govt property– that is, an exchange of, say, Federal Reserve notes for a govt asset– received by the Mint from the Federal Reserve (or from the public at large, since they too buy coins from the Mint), should be booked in the Mint PEF as exchange revenue received from “the public”.

The point is, in section 5136, Congress  characterizes the exchange of coinage produced ex nihilo by the US Mint for the face value equivalent in Federal Reserve notes (or more typically, by marking up the balance in Tsy’s reserve account) as a “sale”–  “Provided further, That the Fund may retain receipts from the Federal Reserve System from the sale of circulating coins at face value for deposit into the Fund“.  What’s more,  the statute also says, “at such times as the Secretary of the Treasury determines appropriate, but not less than annually, any amount in the Fund that is determined to be in excess of the amount required by the Fund shall be transferred to the Treasury for deposit as miscellaneous receipts“.  Unless Congress  intended “receipts… from the sale” to not mean exchange revenue and for “the public”, “miscellaneous receipts” and ultimately “seigniorage” to have each have two different meanings depending on whether we’re referring to the US Mint or to the Federal Reserve System, my suspicion is that Mint seigniorage and Fed seignoirage were intended to be treated the same for budgetary purposes.

If, in fact, Mint seigniorage is legally indistinguishable from Fed seigniorage as miscellaneous receipts revenue, it does offer an escape hatch (or more like a subway tunnel really) if Congress refuses to increase the statutory debt limit this spring. The Secretary has rather broad authority to mint coins, Congress was apparently feeling generous when it authorized platinum coins in 31 USC 5112(k) (“with such specifications, designs, varieties, quantities, denominations, and inscriptions and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe…”).  If deficit spending was paid for (eliminated actually) with miscellaneous receipts revenue generated by selling the Fed jumbo denomination coins, and since the Federal Fund Rate can now be pegged with Interest on Reserve payments in lieu selling Treasuries to drain excess reserves, Tsy could fund govt operations indefinitely without ever raising the statutory debt limit.  

Coin sale proceeds received by the Mint Public Enterprise Fund seem to fall squarely into the category of  “exchange revenue received from public”.  To quote from FASAB FSSAB No. 7:

“Exchange transactions with the public: revenue 270. Sales of goods and services.–The cost of production for goods and services such as electricity, mail delivery, and maps is defrayed in whole or in part by revenue from selling the goods or services provided. The sales may be made by a public enterprise revolving fund (such as the Bonneville Power Administration)…”

Like the Bonneville Power Administration, the Mint Public Enterprise Fund is a “public enterprise revolving fund”. I’d note that The President’s FY 11 Budget, Sect. 11 Budget Concepts defines “seigniorage” as:

“The profit from coining money. It is the difference between the value of coins as money and their cost of production. Seigniorage reduces the Government’s need to borrow. Unlike the payment of taxes or other receipts, it does not involve a transfer of financial assets from the public. Instead, it arises from the exercise of the Government’s power to create money and the public’s desire to hold financial assets in the form of coins. Therefore, the budget excludes seigniorage from receipts and treats it as a means of financing other than borrowing from the public.”

However Sect. 11 also defines “public enterprise funds” as:

“revolving funds used for programs authorized by law to conduct a cycle of business-type operations, primarily with the public, in which outlays generate collections.”

Presumably these “business-type operations” involve the collection of “financial assets from the public”.  Where this discrepancy arose , I think, was when in 1995, Congress passed (and the President signed) the Mint Public Enterprise Fund statute.  Under that statute, the funds generated by coin sales to the Federal Reserve and public can be in one of two places, 1. The coin sale earnings can stay in the Enterprise Fund where it will be apart from the Treasury General Fund (presumably in USSGL account, Acct Title: Seigniorage; Acct No 5795) ; or later, 2. The  Secretary can sweep the revenue ex costs out of the Mint PEF into miscellaneous receipts (presumably FAS Account Title: Receipt from Monetary Power; Acct No 0600);  where it becomes part off the General Fund.  There is a FAS Acct No 0610 also titled “Seigniorage”.  But it is for “other financing” deposits which, at least since the PEF Statute, would not apply to Mint earnings since sales proceeds that go into a public enterprise revolving fund are, in fact, exchange revenue.

I’d add that it is to the same destination, General Fund as miscellaneous receipts  (Acct No 0600), that the Federal Reserve transfers its earnings (which as noted above, make “miscellaneous receipts” one of Tsy’s largest sources of revenue on the federal budget).  Since the courts have held both the the Fed and the Mint to be nonappropriated fund instrumentalities, transferring the earnings from either of their separate and distinct funds into Treasury general receipts would presumably be nonexchange transactions from the public.

In AINS, Inc. v. United States, 56 Fed. Cl. 522 (2003); affm’d. 365 F.d 1333 Fed Cir. (2004),  the Court, in the course of finding the Mint was a “nonappropriated fund instrumentality”, noted that the revenue was generated (Bonneville Power Administration-like) from sales by a public enterprise revolving fund, and identified the destination of both Federal Reserve earnings and Mint earnings. 
“Congress has clearly expressed this intent through its authorization of the Mint’s Public Enterprise Fund. By directing that all receipts from the Federal Reserve System and the public from the sale of circulating coins at face value must be deposited into a special fund, Congress has made clear that the Mint’s funds are to be kept separate and distinct from the general Treasury fund…

“The Board of Governors of the Federal Reserve Board, established as a NAFI in Denkler, has since 1947 established a policy to transfer excess earnings to the Treasury. See 33 Fed. Res. Bull. supp. app. 1-2 (May 1947). Congress in 2002 expressly required the Federal Reserve Board to transfer any surplus for fiscal year 2000 to the secretary of the Treasury for “deposit in the general fund of the Treasury.” 12 U.S.C. § 289(b)(1) (2000)….Therefore, that excess funds are to be deposited in the Treasury as miscellaneous receipts has no bearing on whether the Mint, or any other agency, is a NAFI.”

What’s more, two years ago the Mint, in the course of issuing a federal regulation authorizing civil fines for infringement of the Mint’s trademark, stated that Mint “seigniorage and profits” are deposited in the General Fund as miscellaneous receipts: “Pursuant to the United States Mint Public Enterprise Fund (PEF) statute, 31 U.S.C. 5136, all receipts from fines assessed under the regulation would be deposited in the PEF and the Secretary of the Treasury would transfer these amounts, along with regular United States Mint seigniorage and profits, to the General Fund as miscellaneous receipts. As miscellaneous receipts in the Treasury—the drawing of funds from which are subject to appropriation by Congress—neither the Secretary of the Treasury, nor the Director of the Mint could be subject to “possible temptation * * * when [their] executive responsibilities * * * may make [them] partisan to maintain the high level of contribution” from the assessment process provided for under the regulation. Cf. Ward v. Village of Monroeville, 409 U.S. 57, 60 (1972). Moreover, the amounts involved would nonetheless render any ostensible temptation inconsequential because the relatively small amounts that the United States Mint could be expected to receive in fines payable under 31 U.S.C. 333 would be de minimis when compared to the recent amounts ($600-800 million) that the United States Mint annually has transferred to the General Fund.“  72 FR 60771 (2007) (emphasis added).

Seeing as the Mint stated in the Federal Register that 31 USC 5136 allows the Secretary to deposit Mint seigniorage  “as miscellaneous receipts in the Treasury, the drawing of funds from which are subject to appropriation by Congress”, I would argued that it should be counted on the federal budget as revenue in like manner as Federal Reserve seigniorage, which as you know, is deposited as miscellaneous receipts in the Treasury, the drawing of funds from which are subject to appropriation by Congress.

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Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong
Its about time that we take care of our own! On Nov 6 2012 Americans rejected the Conservative "Fend For Yourself" religion. In a Monetarily Sovereign Nation there is no need for a balanced budget. Actually Government does not need revenue to spend, it can collect it later as a way to give value to the currency it creates. Spending > Revenue expands the economy, Spending < Revenue contracts the economy, Spending = Revenue is irrelevant and unnecessary. Fiscal Monetary reform is an important agenda for ethical, economic, and political reasons and to undo the privatized franchise by which our economy has been based upon a debt based currency. The deficit terrorism by Fiscal Conservatives threatening austerity and even deeper privatization is based upon the Gold Standard model when dollar was backed by gold and limited, thanks to Nixon, this is no longer the case since 1971, and is thereby false, fraudulent and clearly a fear tactic based upon disinformation. When we align the nature of our economics and the capacities of modern money with the policies of governance as a socializing agenda significant changes will be possible. Based on understanding how sovereign fiat money actually is used can impact Fiscal Policy allowing the Federal government to extend funding for the construction of roads, mass transit, bridges and other "hard" infrastructure to put people back to work which would increase demand for products. This same process can be applied to social infrastructure such as national health care, education, and pensions. Further, an employer of last resort (ELR) process could be established, whereby individuals who wanted to work could be provided a living wage for advancing any number of needed projects toward building communities. Modern Monetary Theory > MMT AND A GOVERNMENT FOR THE PEOPLE | <a href="http://sco.lt/8zdEO1" rel="nofollow">http://sco.lt/8zdEO1</a>; government is not a wealth taker. It is a wealth maker. What’s more, the wealth it makes is not just its own. Generally speaking, people create much more wealth with the aid of government than they do without it. We don’t first become rich and then decide to form a government. First we form governments.  Then and only then can we become rich. Without a strong government that works for all, it is not possible to have a strong economy that works for all. They go together. This important insight is actually inscribed in the preamble of the US Constitution, where “to promote the general welfare” is listed as one of the principal purposes of our federal government, along with establishing justice, insuring domestic tranquility, defending the nation and securing the blessings of liberty."
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114 Congress - 1st Confederate Congress of the 21st Century

114 Congress - 1st Confederate Congress of the 21st Century | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it

Anyways, here is the current Conservative- Libertarian, TEAPARTY CONFEDERATE view..on what the US Constitution should be as they claim in this article Articles of Confederation was preferable http://batr.org/view/122602.html

"We continually hear about restoring the meaning, intent and spirit of the Constitution. Few know that we had a far preferable blueprint for a federation before the 1789 U.S. Constitution. It was called the Articles of Confederation. Have you ever read it? If not you should. At the outset it’s opening declaration has - Articles of Confederation and Perpetual Union Between the States. Some may want to misconstrue that perpetual means subordinate. In Article II, the basis for union is stated with total clarity - Each state retains its sovereignty, freedom and independence, and every power, jurisdiction and right which is not by this Confederation expressly delegated to the United States in Congress assembled.

Concern for national defense, diplomacy and treaties, assumption of war debt, extradition to state courts, unencumbered travel and commerce, coinage and adjudicator of disputes between states are subjects of mention. Prohibitions on specific areas for states are listed, while the few sections of administration by "a Committee of the States" are noted.

No doubt the U.S. Constitution, added valuable protections against a tyrannical central government in the Bill of Rights. But, the nature of the expanded roles for the executive and judicial branches in that same - U.S. Constitution - elevating them to a theoretical and dubious co-equal status, created the inevitable usurpation of the legitimate power of the independent states. We all know the tragic history of the unimpeded executive despotism in America. Far fewer understand the catastrophic precedent in the decision of Chief Justice John Marshall in Marbury vs Madison - placing the Supreme Court as the arbiter of the constitutionality of congressional legislation. The mere restoration to the constraints in the 1789 U.S. Constitution will not revive the Republic from its demise into an absolutist oppressor. Only a systemic dismantling of that central government, returning primacy back to individual states will restore the vision of the American Revolution." SARTRE - December 26, 2002 http://batr.org/view/122602.html

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https://www.facebook.com/groups/114congress/ ;

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Why Should We Support the Idea of an Unconditional Basic Income?

Why Should We Support the Idea of an Unconditional Basic Income? - Working Life - Medium
An answer to a growing question of the 21st century
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Understanding Monetary and Fiscal operations> essential for progressives

Would Democrats and Progressives find common ground among themselves by embracing a premise defining just one fundamental and indisputable principle of...
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Would Democrats and Progressives find common ground among themselves by embracing a premise defining just one fundamental and indisputable principle of fiscal and monetary policy? History suggests they can and have done so as champions of Federal funding for social safety net programs, the environment and renewable energy, education, health care, etc. However, cohesion dissipates when they ask themselves, “How will we pay for IT?”

Their options are limited by their understanding of how Federal spending operates; either increase taxes (preferably on the rich) and/or rob Peter’s budget to pay for Paul’s, sell Treasury securities and/or issue direct transfers. All of these options except one flow from a premise which is outdated and the primary cause of America’s economic and social dysfunction beginning with Nixon, when on August 15, 1971, he abandoned the international gold standard and ushered in global non-convertible currencies and flexible exchange rates. “Before 1971, the federal government needed to obtain money from outside sources, because it did not have the unlimited ability to create money.

Its ability to create money (actually, to credit accounts), was limited by its supply of gold. In August, 1971, the federal government gave itself the unlimited ability to credit accounts. It became Monetarily Sovereign.

This meant, from a fiscal sense, it no longer needed to “borrow” nor did it need to tax. It could credit accounts at will. "Borrowing and taxing have no effect on the federal government’s ability to credit accounts. If borrowing fell to $0 or rose to $100 trillion, neither act would affect by even one dollar, the federal government’s ability to credit accounts. The same is true for federal taxes. If taxes fell to $0 or rose to $100 trillion, the federal government’s ability to credit checking accounts would remain infinite."

Borrowing is a relic of the gold standard days, and while taxing does have anti-inflationary purposes, it no longer funds federal spending. Thus, taxpayers do not pay for federal spending. The federal government credits accounts ad hoc, regardless of taxes.” http://goo.gl/EWBDAr R. M. Mitchell

Democrats, as well as Republicans, Independents, Progressives, Libertarians, etc. appear to have completely rejected the inescapable fact that America and the rest of the world are no longer bound by convertible currency and fixed exchange rate principles. By implicitly and explicitly clinging to gold standard rubrics America’s elected (and many appointed) fiscal and monetary policy makers, are unable to design public spending/investment policies for medium and long term economic and social development for all Americans.

At best, short-term palliatives dominate fiscal policy thinking, debates and outcomes. There is no other alternative when the entire appropriations process has as its foundation the premise that the Federal Government faces solvency constraints and must, therefore, tax and borrow to fund federal spending.

Democrats and Republicans are unfortunately offering tax plans to address this issue. Republican plans such as Rep. Paul Ryan’s represent the “tried-and-failed” trickle-down policies of the past. Democratic proposals to expand child care credits or to create a secondary earner tax break could help families in the short term, but fail to address the actual dynamics of wage stagnation, and high unemployment among vulnerable sub populations.

The left, in particular, would relish opportunities for long term planning accompanied by corresponding appropriations. However, when both sides of the aisle believe in some version of the canard that America faces a solvency risk and, therefore, must manage its finances like America’s households there will never emerge authorizations/appropriations addressing a long term perspective.
The inevitability of this is but a continuation of our national fiscal policy failures since Nixon.

Nixon ushered in the paradigm shift in domestic and international monetary policy by unilaterally forcing the world into fiat currency issuance. His Treasury Secretary, Arthur Burns initially opposed but later agreed with his decision to default on the Bretton Woods Agreement to convert dollars to gold. At that moment the U.S. would no longer need revenue per se to spend. It would, going forward, never, involuntarily face solvency constraints.

What needs to happen now is that Democrats and Progressives disabuse themselves of the outdated notion that our government can go broke.

It can’t.

Nor can Japan, China or many other nations enjoying the status of being monetarily sovereign. For example, if debt/GDP served as an indicator of a nation’s economic sustainability, why isn't Japan insolvent? Its debt/GDP ratio is above 200%. Yet, investors purchase its Yen denominated securities by the tens of millions every day. Investors understand monetary sovereignty. They know that Japan issues its own nonconvertible, fiat currency and owes all of its “debt” in Yen and can meet any obligation denominated in Yen.

Just like us.

Investors who understand modern national income operations buy American, British, Canadian, Japanese securities fully aware of the fact that they will be paid their interest and principle by the sovereign issuer of the securities they buy since all that’s needed is a computer keystroke to mark up their checking accounts.

The exact process holds for Federal government purchases of goods, services and to make transfer payments. For most it is counter intuitive when confronted with the reality of government spending without first having to tax or borrow. Logically, any currency issuer must first issue/spend its currency into the market place before it can take some of it back through taxation or selling treasury securities.

So, in the real world of federal spending all that's needed is an appropriation. The revenue spreadsheet will show deficits and surpluses as appropriate but they will have no bearing on the ability of the Treasury to credit accounts. These are two separate and distinct operations neither constrains the other.

When Democrats and Progressives understand these as unrelated money management operations they will then be in position to legislate for public purposes.

They will have as there unifying premise the indisputable fact that America cannot involuntarily go broke, run out of money, face bankruptcy, become insolvent or any other of the ‘debt-fear monger’ canards to constrain fiscal policies benefiting the majority of Americans.

How many Americans would, once they have been educated about monetary sovereignty, reject proposals for free universal education from pre-K to post graduate? What would be the downside to single payer health care with finely tuned controls for costs at all levels of the system? Who would oppose repairing our infrastructure and transportation which would create millions of short and long term jobs? Who wouldn’t support the elimination of bankruptcy now threatening or occurring in our towns, cities and states? However, because elected officials don’t understand and legislate using the principles of monetary sovereignty millions of Americans will suffer unnecessarily.

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Critiques Of Libertarianism: A Non-Libertarian FAQ. My take>Libertarianism is nothing but Opium for the low info voter

Critiques Of Libertarianism: A Non-Libertarian FAQ. My take>Libertarianism is nothing but Opium for the low info voter | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
For people who are critically exploring libertarianism, whether they are long-time libertarians or investigating this political philosophy for the first time.
Mahilena Dianz's insight:

Libertarianism is nothing but Opium for the low info voter

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EconoMonitor : Great Leap Forward » Zimbabwe! Weimar Republic! How Modern Money Theory Replies to Hyperinflation Hyperventilators (Part 1)

EconoMonitor : Great Leap Forward » Zimbabwe! Weimar Republic! How Modern Money Theory Replies to Hyperinflation Hyperventilators (Part 1) | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
Economics for the 21st Century and Beyond
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Looming Ahead -- Finance & Development, September 2014

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George A. Akerlof, Paul Krugman, Robert Solow, Michael Spence, and Joseph E. Stiglitz - Five Nobel Prize winners discuss what they each see as the biggest problem facing the global economy of the future
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Why Democrats Can’t Win the House

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Thanks to demographics, the Republicans have a virtual stranglehold on the House of Representatives.
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Monetary Facts Conservatives do not want you to know and its hard for them to understand

Monetary Facts Conservatives do not want you to know and its hard for them to understand | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it

Monetary Facts Conservatives would not want you to know

Mahilena Dianz's insight:

Some Monetary Facts that Conservatives would not
want you to know, actually they are too dumb to understand
they think we are still under the Gold Standard and that Federal
Money is limited...this is bullshit of the greatest kind

 

China is NOT the USA's banker.
The US is net exporter of aggregate demand to China. China net exporter of goods


The Federal Reserve is the USA banker and the World's


The Federal Government never borrows from anyone, it sells
treasury notes and pays its interest, this creates money
for the private sector. The US Treasury, not the Fed is the
one that has the authority to prints money when there is need for paper currency.
However most money creation happens on electronic
accounts.

 

Our monetary system is FIAT, meaning it is
not tied to any metals. Money is only a promise to pay
by the Treasury an IOU, but our money is the World's
reserve currency.

 

There is not “collateral” on government debt.
The only security is the full faith of the U.S. gov.

 

OPEC won't drop the dollar. Even then. The US won't go bankrupt.

 

The US dollar is just a tax-credit. Gov spending finances taxation

 

The purpose of taxation is to create constant demand for the gov's money

 

Payments on the former debt will happen as they do right now
with the money coming from fiscal deficit, not taxes

 

That before the government can tax and or loan its own money,
it must first spend it into existence

 

The government deficit = the private sector surplus

 

The US dollar is an IOU a promise to pay backed by the
treasury

 

All dollars in the world, which is the World's Currency
is FIAT money, IOU's

 

There is no relation of Dollars to any metals, we
went off Gold Standard in 1971 by Nixon

 

The US Government can issue a check for any amount
at anytime without causing inflation

 

Government Spending increases Aggregate Demand
since it is new money to the private sector, it has to happen
before Taxes can be collected, Taxes are not needed
for government to spend

 

Actually as such, our Government has the ability to guarantee
an income to every citizen, and manage its effect thru taxes
and the Federal Reserve interests, therefore preventing
inflation or deflation

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Conservative Blah Blah Blah, do nothing and austerity breeds nothing but dysfunction

Conservative Blah Blah Blah, do nothing and austerity breeds nothing but dysfunction | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
It's time for the right wing to stop lying about the minimum wage, taxes, global warming and more
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Republicans “fiscally conservative” is when it comes to spending on the poor. Then it’s “money we can’t afford.”

Republicans  “fiscally conservative” is when it comes to spending on the poor. Then  it’s “money we can’t afford.” | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
A line many liberals hear from their conservative counterparts is, “Liberals never use facts.” Which I find ironic because it’s usually said towards something I’ve written that contains not only facts, but the sources to those facts.  It’s also humorous because often the individuals who say this never provide any kind of facts to counter …
Mahilena Dianz's insight:

"The only way Republicans are “fiscally conservative” is when it comes to spending money on the poor. Then suddenly it’s “money we can’t afford.” Of course, that’s only until the next tax break for the wealthy comes up for a vote, or they can increase our already bloated defense budget, then suddenly those deficit increases are “vital for the health of our nation.”

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The CONSERVATIVE Foolish AND DANGEROUS Gold Standard model for government

The CONSERVATIVE Foolish AND DANGEROUS Gold Standard  model for government | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
Having money linked to a Gold Standard is an idea that almost every economist opposes. It is described as the economic equivalent of creationism and a major cause of the Great Depression. It is ign...
Mahilena Dianz's insight:

"The gold standard belongs to another era and it is testament to how backward looking the Republican party is that it supports it. There are good reasons why no economist supports it. The gold standard lead to financial instability and recession. It deprives government of the ability to fight recessions, instead leaving the economy stuck in recession. It would separate the money supply from the fundamentals of the economy."

 

At the moment and since 1971 the  Treasury and the Central bank can create as much money as it wants without limit. "However in a gold standard the central bank can only print as much money as gold it has. For example if the government has one billion dollars in gold, then it can only print one billion dollars. Or the country might not have any paper notes but instead just use coins. From the late 1800s until the 1930s all the developed countries were on a gold standard. Its proponents argue that a gold standard avoids inflation and instead has stable prices. It is claimed it avoids the central bank destroying the economy through hyperinflation. The gold standard is described as a model for fiscal responsibility that prevents trade deficits and budget deficits."

 

 

'The thing about the gold standard is that most of its advocates base their arguments on morality rather than economics. Ron Paul criticises the “debasement” of the dollar which he claims amounts to “theft”. Gold is seen as something real and solid, whereas paper is seen as almost fake or only an illusion. Nostalgic references are made to how much a dollar used to be able to buy. Gold is intrinsically valuable whereas paper is not. Paper money is controlled by the government which many would oppose on principle. Paper money is associated with hyperinflation and chaos (Ron Paul has been predicting imminent hyperinflation for the last 30 years). Gold is “responsible” and the opposite of wasteful government.

However in a survey of economists, zero supported a gold standard. There are many reasons for this. The main advantage or problem (depending on your point of view) of the gold standard is that is severely constrains the actions of the government. It cannot use monetary policy to influence the economy. A common response to recession is to print money which a gold standard prevents a government from doing. This means it must use fiscal measures, but a gold standard limits these as well. This means a government cannot do much to combat a recession no matter how severe it is. Instead it must stand idly by and let the recession take its course. While some hardcore free marketers would agree with this, most economists recognise that if the government doesn’t intervene the recession gets worse.

Interest rates are normally set according to the state of the economy. If the economy is booming and inflation is rising, then interest rates will be raised to stop the economy overheating. If the economy is stagnant and unemployment is high, then interest rates will be lowered to give the economy a boost. Under a gold standard, interest rates would be set according to the supply of gold. This is unrelated to the state of the economy which can cause serious problems. So if gold reserves are low then interest rates will be risen even if the economy is in a recession."

 

GOLD STANDARD  IS PURE CONSERVATIVE GARBAGE AND FRAUDULENT THINKING, ITS THE EQUIVALENT OF THE CONSERVATIVE REACTION TO SCIENCE AND THE BELIEF IN CREATIONISM...it is the conservative obsession with morality even when it is a morality invented by them which leads to the corporatist nation. 

 

This is why it is important to KNOW MODERN MONETARY THEORY AND THE ACTUAL SOCIAL VALUE OF FIAT MONEY ...

 

WHY NOT GIVE GOVERNMENT THE LIBERTY TO CREATE AS MUCH MONEY AS THE SOCIETY NEEDS TO ENSURE THE LIFE LIBERTY AND PROSPERITY OF ALL OF ITS CITIZENS....this can happen if we put the Central Bank as a Public Bank under the control of the Treasury, that way there would not be a national debt or deficit

 

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Socialism (Public Banking) Key to North Dakota's Propspertiy and 3.3% Unemployment Rate - Mahilena's Debunking Libertarianism/Conservatism ...

Socialism (Public Banking) Key to North Dakota's Propspertiy and 3.3% Unemployment Rate - Mahilena's  Debunking Libertarianism/Conservatism ... | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
Socialism Key to North Dakota's Propspertiy and 3.3% Unemployment Rate The Bank Behind the North Dakota Miracle North Dakota is the only state to be in continuous budget surplus since the banking crisis of 2008. Oil is certainly a factor, but it is not what has put North Dakota over the top. Alaska has roughly the same population as North Dakota and produces nearly twice as much oil, yet unemployment...
Mahilena Dianz's insight:

These are the same principles involved in the other articles here regarding modern monetary reform #modernmonetarytheory #mmt

 

Our Federal Government borrows from who? well itself, and it pays interest to other private banks to manage this...if we put the Federal Reserve under the treasury or make it a public bank we would not need to pay interest on the money we borrow from ourselves and we would not have a National Debt

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F. A. Hayek, Liberal | Bottom-up

F. A. Hayek, Liberal | Bottom-up | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
Mahilena Dianz's insight:

HAYEK, NOT THE CONSERVATIVE OR LIBERTARIAN, YES AUSTRIAN ECONOMIST, BUT ACTUALLY A TRUE LIBERAL AT HEART AND STATIST see >

click on image to enlarge

 

http://pic.twitter.com/Shr8fQap88


LINK TO A LARGER PICTURE OF THE ABOVE PICTURE

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The Decline of (old)Socialism and the Rise of the Welfare State (new Socialism)

The Decline of (old)Socialism and the Rise of the Welfare State (new Socialism) | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
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Libertarianism Is A Fundamentally Flawed Ideology

Libertarianism Is A Fundamentally Flawed Ideology | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
"Rejecting government...is like rejecting food."
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KOCH'S CONFEDERATE #CONGRESS TELL WORLD "DO NOT TRUST #USA" UNLESS IN GOP HANDS

KOCH'S CONFEDERATE #CONGRESS TELL WORLD "DO NOT TRUST #USA" UNLESS IN GOP HANDS | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
WASHINGTON (Reuters) - The Obama administration's plan for U.N. climate change talks encountered swift opposition after its release Tuesday, with Republican leaders warning other countries to proceed with
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Exposing the Racist History Of Libertarianism And Murray Rothbard

Exposing the Racist History Of Libertarianism And Murray Rothbard | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
The dark side of libertarianism is revealed.
Mahilena Dianz's insight:
Exposing the Racist History Of Libertarianism And Murray Rothbard Murray Rothbard was the student of Ludwig Von Mises and a friend of Ayn Rand. Rothbard was a racist, and believed in the "voluntary" separation of the races. I have argued that his teacher, Mises, was an elitist with fascist tendencies. This part of libertarian history is a part that the libertarians would like to cover up. It slips out at times and has done so with Ron Paul, Rand Paul and others. But we need to take a look at what these guys believed, circa 1990 because that was not so long ago. We know that Rothbard spoke kindly of David Duke, the KKK office seeker. One disaffected libertarian was dismayed that Rothbard would seek to align himself with a pure racist just because he believed in limited government. The only reason that Rothbard did not back a separate state for blacks was because he was afraid it would cost too much in "foreign aid". It should be noted that Ron Paul distanced himself from Rothbard's racism, in stating that racism is a collectivist view. Still, there is a strong racial tension in libertarian thought. Ron Paul's newletters had racist thoughts in them, although Dr Paul stated they were put in his publications without his knowledge. I have no reason to doubt that. But these were mistakes that are significant. But even Rand Paul made a racial gaff right after he won the senate seat, that he regretted, when he said he was for the repeal of the 1964 civil rights act. It would seem that this racial/libertarian theme continues. Read more: http://www.businessinsider.com/exposing-the-racist-history-of-libertarianism-and-murray-rothbard-2011-10#ixzz3EOKScLjE
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Top Ten Lies and Mistakes of Austrian Economics

Top Ten Lies and Mistakes of Austrian Economics | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
In the face of Austrian Economics' ongoing onslaught through Ron Paul, the Mises Institute and Gold Dealers parading as the 'Alternative Media', we present the next installment in our series of art...
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Federal Reserve: Redistribution of Wealth in the US Is Going Upward to the Rich

Federal Reserve: Redistribution of Wealth in the US Is Going Upward to the Rich | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT (Photo: See-ming Lee) Who knows, maybe journalists at CNNMoney are reading BuzzFlash? On August 8, we pos...
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Another 'fact-checker' gets Social Security wrong > politifact

Another 'fact-checker' gets Social Security wrong > politifact | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
The rise of fact-checking websites, which aim to run the statements of politicians through the truth wringer, should be a positive development for the Republic. In theory.
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Social Democracy for the 21st Century: A Post Keynesian Perspective: Debunking Austrian Economics 101 (Updated)

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Nobody Understands Debt

Nobody Understands Debt | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
The obsession with deficit reduction is wrongheaded and ill-informed.
Mahilena Dianz's insight:

Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

This is, however, a really bad analogy in at least two ways.

First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.

Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.

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Fiscal Rectitude and Rectum are intimately related

Fiscal Rectitude and Rectum are intimately related | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
Yes, the campaign to Fix the Debt has its share of self-serving plutocrats. But their demands and their campaign's traction with some in the lower tax brackets cannot be explained by vulgar Marxism...
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A Fiscal Hawk With Expensive Taste

A Fiscal Hawk With Expensive Taste | Conservative Liberty and Freedom is nothing but an empty box wrapped in the flag that helps no one. The land of the free for only those fit to survive, the rest can and should perish for the benefit of the strong | Scoop.it
In an 14-count indictment, prosecutors tell the tale of the bizarre, years-long relationship that former Virginia governor Bob McDonnell and his wife Maureen had with Jonnie Williams, the CEO of a ...
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