THE UNIVERSAL ECONOMY UNIT X: THE SECOND STEP IN FIGHTING THE RICH CLASS WAR – QUIT ACCEPTING THE LIE
We, as working citizens of America, are led to believe a great deal of misinformation about the monetary functioning of our nation. It serves the rich class waging economic war on us. To understand this, we must take a moment to review the operation of the United States as a sovereign nation utilizing a sovereign fiat currency:
- The U.S. Government, through the U.S. Treasury and Federal Reserve Bank (the Fed) is the creator of all of the nation’s money.
- The U.S. Government can never run out of money. Subject to controlling inflation/deflation, there is no limit to how much money the government can create.
- The U.S. Government never has to borrow money.
- The U.S. Government never needs to collect taxes to pay for its own operation. It created the money people and corporations use to pay their taxes in the first place. Taxes enforce the legitimacy of the dollar, control inflation, and reduce inequality if applied progressively.
- The U.S. Government never has to default on its “debt.” Government “debt” doesn’t actually exist. It is a misleading use of terminology. Government “debt” is private sector operational funds and savings.
- The “deficit” never needs to be repaid. Indeed, it must not be repaid or the economy will go into recession for lack of money. Like government “debt,” government deficit is private sector operational funds and savings.
- The budget of a sovereign nation using a sovereign fiat currency is not like a household budget. The government creates the money. It does not need to take money in before it can spend money out.
It is critical we internalize these concepts, make them our natural way of thinking. Because the rich know full well this is how the U.S. fiat monetary system works. They use it to great personal advantage, but where spending for the common good is concerned, deliberately mislead the public into believing the government is like a household budget. Some examples are in order:
In 2008, after years of fraud and corruption, the Wall Street banking and financial industry collapsed. Huge cash infusions were needed from the U.S. Treasury to prevent total national and global economic implosion. Not a single legislator asked, “how are you going to pay for it?” The rich class controlling our politicians knew exactly how the government was going to pay for it. They clearly understood points 1 through 4 above.
In the months following the collapse the U.S. Treasury and Fed created in the neighborhood of 16 trillion dollars to bail out Wall Street. Not a dime was borrowed nor a penny of taxes collected to “pay” for this. This is a sovereign fiat monetary system. The U.S. Government simply created – out of nowhere – 16 trillion dollars to save the uber-rich.
We, the general public, must get this through our heads. This is not a household budget. The United States Government doesn’t need an income to spend. It is the creator of the nation’s money. It can never run out of money.
A second example of how the wealthy use our fiat monetary system to their advantage is the U.S. military and military-industrial complex. In 2003 the George W. Bush administration lied us into the war in Iraq. Not a single legislator asked “how are you going to pay for it?” The money appeared out of nowhere while at the same time taxes were actually cut.
Clearly, the rich class benefiting from the arms and war industries know how our fiat monetary system functions. The U.S. military budget is now over 700 billion dollars each year and our “forever” imperial wars run into the trillions. Those profiting from this military and war spending know full well it increases the government “deficit,” but they also understand point 6 above – government deficit is private sector funds and savings. Massive military deficit spending goes directly into their pockets.
A third example of how the wealthy use our fiat monetary system to their advantage is the ongoing tax cuts passed under the Bush, Obama and Trump administrations. Legislators, knowing beyond a shadow of doubt these cuts will increase the deficit, never ask “how are you going to pay for it?” They are clearly aware increased government deficit is money in the wallets of their rich political donors.
But now let us look at any attempts to use our fiat monetary system for the common good. Try suggesting our roads, our bridges, our airports and seaports, our lead tainted community water systems or our public schools need rebuilding and legislators rise in orchestrated union – – – “How are you going to pay for it?” “The government is broke!” “Government spending is out of control!” “The deficit will bankrupt us!” Try suggesting national public healthcare and the same congressional chorus erupts. Try suggesting anything benefiting average people rather than the rich and you will hear the same, expertly crafted, deliberately misleading sound bites.
The moment you hear “how are you going to pay for it?” know that you are being led into a trap, know the discussion is being deliberately framed to deceive, know you are being manipulated into “household budget” thinking. Because the moment the general public can be misled into this simplistic thinking, the rich are in control. Austerity can be imposed.
If the working masses can be deceived into thinking their government is broke and has overspent, the Treasury and Fed can be stopped from creating public fiat money for the public good. The public can then be forced to borrow interest-bearing debt from the private banks, use “middle man” insurance corporations for their healthcare, and watch as the public sphere is lost to privatization. This is what the student loan crisis is about, what the so-called public/private partnerships for infrastructure are about, and what the privatization of our public schools and prisons is about. This is what the attacks on social security, Medicare and Medicaid are about, this is what the refusal to create a publicly funded universal healthcare system is about.
The very same banks and financial institutions so recently given trillions of public dollars in bailout funds now do everything in their power to prevent the same public fiat monetary system from being used for the common good. The same parasitic banks and financial institutions we so recently and unfortunately made whole again, now prey upon us all. We need to quit accepting the lies.
Unit XI will discuss: The Rich Class War on America – The Misleading Use of the Terms “Deficit” and “Debt”
Please take the time to read or watch the introductory statement by Professor Stephanie Kelton: Money Matters! Why Monetary Theory and Policy Is a Critical Terrain For the Left. We must educate ourselves.