Suggested Discussion Outline

[johnkarls]

.

Suggested Discussion Outline


To facilitate references without repeating the link zillions of times, the following “Participant Comments” materials are available at viewforum.php?f=673&sid=ec5ec5040c9891f ... 4d6bec839b --

Bi-Partisan Utter-Destruction Of The Dollar (And, Consequently, The Economy)
Suggested Answers to the Second Short Quiz
Second Short Quiz – Modern Monetary Theory vs. The Law of Gravity
First Short Quiz & Crypto Currencies
Suggested Answers to the First Short Quiz
First Short Quiz – The Gold Standard vs. The Greater Fool


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Sec. A – Participant Comments on “The Deficit Myth” That Just Can’t Await Discussion Topics B thru I

X – Introduction to the Paperback Edition
X – Introduction: Bumper-Sticker Shock
1 – Don’t Think of a Household
2 – Think of Inflation
3 – The National Debt (That Isn’t)
4 – Their Red Ink Is Our Black Ink
5 – “Winning” at Trade
6 – You’re Entitled!
7 – The Deficits That Matter
8 – Building an Economy for the People


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Sec. B – Stephanie Kelton Regurgitating THE MYTH About What Caused The 2008 Economic Meltdown

On pp 5-8, Stephanie Kelton parrots the LIES of our Pols about what caused the 2008 economic meltdown.

Like our pols, Stephanie Kelton FAILED to ask herself whether the $5 TRillion or so of “offshore funds” from exporting American jobs was “stuffed in mattresses” located outside the U.S. – OR WHETHER IT HAD LONG SINCE BEEN LOANED BY THE MULTI-NATIONAL COMPANIES THAT HAD EXPORTED AMERICAN JOBS (THE PROFIT FROM WHICH WAS THE $5 TRILLION) TO THE “CHUMP” AMERICAN COMPANIES WHICH HAD NOT EXPORTED JOBS.

With, of course, the result that when Congress permitted the $5 TRillion of supposedly “off shore” funds to be “brought home” at a special one-time 5.25% corporate income-tax rate (vs. the normal 35%) by the job-exporting multi-national companies from their tax-haven subsidiaries, they forced the “chump” companies to repay their loans over 2-3 years which meant they had to REDUCE AMERICAN PAYROLLS AND CAPITAL EXPENDITURES by $5 TRillion!!!

Accordingly, when Congress decreed American payroll reductions of approx. 10%, the economy would collapse as the “chump” companies fired employees who saw their homes foreclosed since there were no “new hires” to buy them.

AND THIS WOULD HAVE HAPPENED WHETHER OR NOT THERE HAD EVER BEEN A “SUB-PRIME” MORTGAGE.

For more details, please see our 12/26/2017 Letters to each of the Presidents of the 12 Regional Federal Reserve Banks tutoring them --

(1) on the true cause of the 2008 meltdown (which they had lamented while proclaiming LOUDLY AND OFTEN that the “chump” American companies that had NOT exported American jobs were suddenly in desperate need of loans that they could NOT obtain and PROFESSING IGNORANCE RE WHY THIS WAS HAPPENING!!!),

(2) that the U.S. was poised to do the same thing all over again with Pres. Trump’s Tax Reform Act which included a PERMANENT 0% corporate income tax rate on, what he constantly trumpeted, was $4 - $5 TRillion of supposedly off-shore earnings, and

(3) that the Regional Federal Reserve Banks had the authority to provide replacement loans for the “chump” companies so they would NOT have to fire American employees.

[A copy of our 12/26/2017 Letters tutoring the Presidents of the 12 Regional Federal Reserve Banks (with USPS tracking info) is available at viewtopic.php?f=23&t=1685&sid=7f7971158 ... df2e027ff7.]


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Sec. C – Stephanie Kelton’s LIES About the U.S. Government’s Highest Ratio of National Debt to GDP

On p. 10, Stephanie Kelton FALSELY claims that the U.S. Government’s highest ratio was 120% following World War II.

THE TRUTH is that the U.S. National Debt currently stands at $29.71 TRillion (per the famous “National Debt Clock”) and GDP is currently only $23.19 TRillion (the “Second Estimate” for the Third Quarter of 2021 which is the latest estimate of the U.S. Commerce Dept’s Bureau of Economic Analysis).

Apparently Stephanie Kelton is unable to perform Elementary-School math, because this is 128.1%!!!

[Even Kelton apologists who might point out that “The Deficit Myth” was first published 6/9/2020, would have to admit that the U.S. National Debt was $26.95 TRillion on 9/30/2020 (per the U.S. Treasury Dept. – NB: 9/30/2020 was the end of FY-2020) and U.S. GDP was only $20.94 TRillion for 2020 per the World Bank – FOR A RATIO OF 128.7%!!!]

MOREOVER, Stephanie Kelton demonstrates her INCOMPETENCE as a historian!!!

First, World War II was called a “world war” because it left in its wake all of the world’s major powers EXCEPT THE U.S. in a shambles – BOTH ECONOMICALLY AND PHSICALLY. Europe (including bombed-out London), the Soviet Union, Japan, China, etc., etc. UNFORTUNATELY, the U.S. is no longer in the position of the ONLY major power that does NOT lie in ruin!!!

Secondly, the reason why the U.S. Government could “get away with” a 120% ratio of National Debt to GDP -- WAS THE PATRIOTISM OF THE AMERICAN PUBLIC IN SUPPORTING THE WAR EFFORT.

In other words, the purchasing power of America’s workers had to be “put on ice” so that our economy could be geared to supporting the war effort. When Yours Truly was young (born Feb 1942, 3 months after Pearl Harbor), there were still zillions of “War Bond Booklets” lying around comprising a place for pasting in “War Bond Savings Stamps” typically sold in 10-cent denominations – when you had filled your booklet with the “War Bond Savings Stamps” you could exchange it for an actual $25 “War Bond.”

Thirdly, American patriotism in support of the war effort succeeded in soaking up with “War Bonds” all purchasing power of American workers that was not needed either for the bare necessities for their survival or for supporting the war effort.

Fourthly, COMPETENT historians record that there was a great fear that immediately following World War II, the U.S. economy would sink back into the Great Depression. [And yes, COMPETENT historians have always recognized that wars stimulate economic activity!!!]

In this regard, COMPETENT historians record that the U.S. economy continued to be robust – primarily because the “War Bonds” represented tremendous pent-up demand AND BECAUSE Congress had enacted “The G.I. Bill” on 6/22/1944 (11.5 months before V-E Day and 14 months before V-J Day) as a result of which 2.2 million World War II veterans had attended college by 1956 and another 5.6 million had received job-training programs.


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Sec. D – Stephanie Kelton TURNING A BLIND EYE to the WORTHLESSNESS of Germany’s Currency in the 1920’s, Russia’s Currency in the 1990’s, etc.

Stephanie Kelton wears horse-race-style blinders!!!

Her logical fallacy is that just because the U.S “got away with” a 120% ratio of National Debt to GDP following World War II, we should ignore all the countries whose currency did become worthless CAUSING STARVATION FOR ANYONE WHO COULDN’T GROW/CATCH/SHOOT HER/HIS OWN FOOD, OR WASN’T LUCKY ENOUGH TO BECOME A WHORE/GIGOLO FOR SOMEONE WHO COULD.”


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Sec. E – Stephanie Kelton TURNING A BLIND EYE to Europe’s 2011 “Problem Children” – Greece, Italy, Spain, Portugal, etc.

As described in Sec. D of the Second Short Quiz Answers, Europe’s “problem children” faced economic collapse in 2011 because each’s ratio of National Debt to GDP exceeded 100%!!!

In September 2011, the U.S. Federal Reserve ILLEGALLY bailed out the European Central Bank with enough freshly-printed dollars to keep Italy and Spain afloat through the end of 2011.

But by November 2011, European banks had effectively stopped lending to each other because of uncertainty about how much each bank owned of the governmental bonds of Europe's "problem children" countries (Greece, Italy, Spain, Portugal, etc.) which might cause the bankruptcy of that bank -- and, in addition, how much that bank owned of the bonds of other banks that may soon be bankrupt!!!

This disaster was only averted on November 30, 2011, when six central banks [the U.S. Federal Reserve, Bank of England, European (Euro-Zone) Central Bank, Bank of Japan, Bank of Canada and Swiss National Bank] announce "their intention to coordinate action to ease liquidity conditions in financial markets. The Fed will increase its dollar lending to other central banks who will do the same to other financial institutions, and all will reduce the cost of dollar borrowing. The aim is to defuse the growing trouble banks have had borrowing to finance their operations.”

[Once again, the action of the U.S. Federal Reserve was HIGHLY ILLEGAL!!! It did not have legal authority to do what it did.]

STEPHANIE KELTON’S EXCUSE FOR “TURNING A BLIND EYE” TO THIS HISTORY???

She CONVENIENTLY claims MARVEL-COMIC-BOOK “SUPER POWERS” for governments which issue their own currencies!!!

[All of Europe’s 2011 “problem children” used the Euro and only got into trouble because their respective ratios of National Debt to GDP exceeded 100%.]

ALL DECENT ECONOMISTS recognize that a county’s currency is nothing more than zero-interest infinite-maturity debt.

SO WHY WOULD A COUNTY THAT ISSUES THIS KIND OF DEBT HAVE A MARVEL-COMIC-BOOK “SUPER POWER” WHEN ITS RATIO OF NATIONAL DEBT TO GDP EXCEEDS 100% (or whatever “the wall” is that is waiting to “be hit”)???

Such a fatuous claim seems to be nothing more than Stephanie Kelton’s excuse for ignoring Europe’s 2011 “problem children”!!!

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BTW, per the U.S Federal Reserve Bank (https://fred.stlouisfed.org/series/WCURCIR), the amount of U.S. currency in circulation at 12/29/2021 was $2.23 TRillion (vs. the U.S. National Debt currently standing at $29.71 TRillion per the famous “National Debt Clock”).

So what does a mere $2.23 TRillion, WHICH IS LESS THAN 10% OF OUR NATIONAL DEBT(!!!), “have to do with the price of tea in China”??? Or have to do with possessing an alleged MARVEL-COMIC-BOOK “SUPER POWER”???

As we have always posited for years, a nation’s currency is nothing more than zero-interest infinite-maturity debt.

[NB: Even Stephanie Kelton admits (p. 36) that a nation’s currency is zero-interest debt, while failing to acknowledge that it is infinite-maturity debt.]

THE TRUTH???

It’s the $31.94 TRillion of total National Debt (currency plus formal debt) that is producing our current 7% year-over-year inflation – as the market (for our debt) begins to doubt our ability to stagger along under such a debt load.

Because the market knows that raising the interest rate on our national debt to control inflation (AND PREVENT A COMPLETE COLLAPSE OF THE DOLLAR) will wreak havoc – requiring, as noted elsewhere, drastic increases in US tax rates & fees and/or squeezing out other budget items such as the Dept of Defense, the Dept of Education, etc.

Though our pols won’t admit it, the U.S. economy may have “hit the wall.” Or at least stumbled over something MORE SERIOUS THAN a “speed bump.”


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Sec. F – Stephanie Kelton’s REFUSAL to Specify The Ratio of National Debt to GDP At Which The U.S. Currency and Economy Will Collapse

She has “turned a blind eye” to other countries such as 1920’s Germany and 1990’s Russia.

And she has “turned a blind eye” to the 2011 “problem children” of Europe (Greece, Italy, Spain, Portugal, etc.).

And she has SHOWN HER IGNORANCE of THE FACT that the U.S, ratio of National Debt to GDP currently stands at 128.1% (claiming that the post-World War II ratio of 120% is the highest ever).

HOWEVER, her Chapter 8 (“Building an Economy for the People”) implies that Stephanie Kelton thinks we can DEFY GRAVITY with a MUCH-HIGHER ratio!!!

Does she ever inkle what she thinks the limit is???

And does she have any evidence to support her “day dream”???


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Sec. G – Stephanie Kelton’s Notion That Exporting American Jobs and “Selling Hamburgers to Each Other” is “Winning at Trade” (her Ch. 5 title)!!!

Yes, we have studied on numerous occasions how “The Establishment” had “Exported American Jobs” 1992-2016.

[Though there are still a “precious few” things we still do in addition to “selling hamburgers to each other” – viz., agriculture (every country protects its own agriculture with trade barriers) AND MANUFACTURING OUR MOST ADVANCED WEAPONS.]

It would appear that Stephanie Kelton is a “member in good standing” of “the establishment” that has exported virtually all of America’s decent-paying jobs!!!

Which she thinks is “winning”!!!


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Sec. H – Stephanie Kelton’s FAILURE to Treat Any Spare National-Debt-to-GDP Capacity (WHICH WE DON’T APPEAR TO HAVE ANYWAY WITH OUR CURRENT 128.1% RATIO!!!) as a “Spare Tire”

Yes, Stephanie Kelton claims that World War II produced a U.S. ratio of National Debt to GDP of 120% -- which she FALSELY claims was the highest ever!!!

And it is interesting to note that the “Debt Ceiling” Limit was created on 4/24/1917 as part of the Second Liberty Bond Act – which became law a mere 18 days after the U.S. Declaration of War against Germany on 4/6/2017 comprising our entrance into World War I.

The Second Short Quiz Answers (“Modern Monetary Theory vs. The Law of Gravity”) and the final “Participant Comment (“Bi-Partisan Utter-Destruction Of The Dollar And, Consequently, The Economy”) outline the consequences of “hitting the wall” – which, indeed, we may be about to do for all Stephanie Kelton knows.

AND HOW INCOMPETENT THE CONGRESSIONAL BUDGET OFFICE (“CBO”) is in making its so-called “estimates” (read "blind guesses”)!!! [Please refer to “Bi-Partisan Utter-Destruction Of The Dollar (And, Consequently, The Economy)” Sec. G entitled “Inaccuracy of CBO Estimates as One Reason for the National Debt Ceiling.”]

But even if we still have some spare capacity to “spend money like drunken sailors,” shouldn’t we preserve it in case another REAL EMERGENCY occurs???

In all fairness to Stephanie Kelton, her book was published at the time that pols were considering whether COVID-19 was such an emergency.

But her Ch. 18 (“Building an Economy for the People”) talks about using any spare National-Debt-to-GDP capacity (which, as noted, she has failed to demonstrate even exists, or that she even has the faintest idea of where the ratio stands at the moment) for social programs and UNECONOMIC global-warming programs (vs. going thorium-fission which we have studied many times is economic AND SAFE!!!)!!!

Wouldn’t it be better to preserve any “spare tire” that may exist and pay for social programs beginning on “Day One” -- since, after all, they will have to be funded at some point by more than “printing more money”???


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Sec. I – Misc. Issues

1. Prosecuting the CRIMINAL-FRAUD LIES of Janet Yellin and Pres. Biden (ref. Sections D and E of Participant Comment “Bi-Partisan Utter-Destruction of the Dollar (And, Consequently, The Economy”).

2. Inflating away the National Debt, which occurs relentlessly at typically a minimum 2% annual rate (ref. Sec. H. of the just-mentioned Participant Comment).

3. Others?

BTW, when we have studied these issues in the past, there was speculation in the media whether the U.S., in order to get creditors to accept its National Debt, had been forced by some major creditors to denominate its debt in more-stable currencies such as the Japanese Yen.

I haven’t had time to “chase that rabbit” – whether denominating U.S. National Debt in foreign currencies is still legal, whether we do so at the moment with certain creditors, etc.

Bottom line IMHO??? When our currency and National Debt (and with it, our economy) “hit the wall,” the post mortem of the currency denomination of our National Debt will only be of interest to wannabe historians trying to conjure an esoteric topic for their PhD theses/treatises.