Why Taxes Should Pay for Health Care

By James Kwak

William Baumol and some co-authors recently published a new book on what is widely known as “Baumol’s cost disease.” This is something that Simon wanted to include in White House Burning, but I couldn’t find a good way to fit it in (and it would have gone in one of the chapter’s I was writing), so I it isn’t in there. (Baumol is cited for something else.) But in retrospect, I should have put it in.

Baumol’s argument, somewhat simplified, goes like this: Over time, average productivity in the economy rises. In some industries, automation and technology make productivity rise rapidly, producing higher real wages (because a single person can make a lot more stuff). But by definition, there most be some industries where productivity rises more slowly than the average. The classic example has been live classical music: it takes exactly as many person-hours to play a Mozart quartet today as it did two hundred years ago. You might be able to make a counterargument about the impact of recorded music, but the general point still holds. One widely cited example is education, where class sizes have stayed roughly constant for decades (and many educators think they should be smaller, not larger). Another is health care, where technology has vastly increased the number of possible treatments, but there is no getting around the need for in-person doctors and nurses.

The problem is that in those industries with slow productivity growth, real wages also have to rise; otherwise you couldn’t attract people to become classical musicians, teachers, or nurses. Since costs are rising faster than productivity, prices have to rise in real terms. Note that university tuition and health care costs are both going up much faster than overall inflation. As a consequence, since GDP is measured in terms of prices paid, these sectors take up a growing share of GDP, just as health care is doing throughout the developed world.

But in Baumol’s formulation, that’s just fine. To see why, consider this figure from the Economist’s review of the book:

Look at the right-hand panel. The point is that if you extrapolate from current trends, health care will be a ridiculous proportion of the economy a century from now, even if we do nothing to slow its rate of growth; but because of productivity increases, the non-health care sector will still be much bigger than it is today, so we will still be much better off than today in aggregate.*

But that doesn’t mean that everything is fine and dandy. Unlike a lot of things in the light blue portion of that chart, health care is a necessity. If 60 percent of the economy is health care, health care will be a much larger share of the average family’s budget than it is today; and if it’s a huge share of the average family’s budget, then many families with below-average incomes won’t be able to afford it.

This is the basic problem with market-based approaches to our health care problem: in a free market, poor people won’t get any, and middle-class people won’t get very much. Baumol is right that in the aggregate our society will be able to pay for all the health care we need, and plenty of other stuff besides; but with our current level of inequality, many actual families won’t be able to get the care they need.

Now, Baumol himself realizes this. One corollary of Baumol’s cost disease is that as low-productivity sectors get relatively more expensive, it gets harder and harder to make a profit, so they tend to get taken over by the government. Again, consider health care and education. (Classical music, which cannot make a profit but is not a necessity—much as I love it—has instead been taken over by private charity.) And this is just the way it should be: Everyone needs health care, but the law of productivity increases dictates that it gets more and more expensive, so the only sane solution is to keep prices at an affordable level and let the government bear the losses. And by “bear the losses,” I mean distribute them to taxpayers (since there is no entity called “the government” that exists in isolation from the people) through a progressive tax system.

Guess what? That’s what Medicare does today. (The Medicare payroll tax isn’t progressive, but most of Parts B and D are funded through general revenues, which mainly come from the individual income tax.) By contrast, Romney-Ryan Vouchercare, by capping the growth rate of benefits at an artificially low level, shifts the growing stack of health care costs (dark blue in the chart) directly onto families, many of whom won’t be able to afford it. Vouchercare is an attempt to rein in health care costs through sheer force of will. It won’t work. It can’t work.

This was, in essence, one of the key arguments of White House Burning: health care costs are going to be what they are going to be, and we can pay for them. Yes we can. We can pay for them because we have plenty of room to raise taxes in all sorts of non-distorting or distortion-reducing ways. We can pay for them because productivity increases mean that, in aggregate, our after-tax real income is still going up. This means that tax revenues will grow as a share of the economy, but as Baumol’s cost disease implies, they should rise as a share of the economy. Comparing tax revenues today to tax revenues in a distant past when health care costs were much lower is just not relevant.

* That chart isn’t per capita, but eyeballing it it looks like a fourfold increase in non-health care GDP; with U.S. population growing at a little less than 1 percent, that’s still a big increase in per capita non-health care GDP.

 

86 responses to “Why Taxes Should Pay for Health Care

  1. I am not persuaded by your description of the cost disease. It seems to me that your examples are of things that people do not pay for themselves. If people had to pay for their own healthcare there might be the same sort of pressure for cost efficiencies as there are throughout the consumer market. I don’t think we can find out what a free market in healthcare would cost without trying it.

  2. Two points. Baumol seems to have written another book, which
    I haven’t read, about what has been known for decades as the
    “Baumol effect”. It is important, and explains a lot, but Baumol
    did it first years ago. (Not to blame him for saying it again! I’m
    going to say something again in my next paragraph)

    Mr Kwak seems still to be wrestling with American Health Care.
    A long time ago I reminded him that the U.S. pays 16% of GDP
    on health care, and gets very mediocre results(visit who.int,
    a fun site for the statistically minded). I think Mr Kwak agreed
    with both these points, but didn’t agree with, to me, the obvious
    conclusion: unique among developed countries we have a
    huge private health insurance industry. I even submitted an
    article to Mr K about this, as a guest post; he turned it down.
    But maybe a special article isn’t needed; most people here
    are pretty savvy about this, I believe. And hope!

    Best wishes,

    Alan McConnell, in Silver Spring MD

  3. Very interesting. Although it seems a little historically short-sighted to say that classical music has been “taken over” by private charity. Except for the occasional insurance man who composed on the side, the source of these composers’ support was exactly private charity.

    But if you continue to pull the thread, those other sectors you write about — healthcare and education — were also largely the province of private charity until quite recently.

  4. Progressive taxes aren’t necessary for this explanation. A proportional tax (like the Medicare part A tax) does the job: the rich still pay more dollars, and health care costs roughly the same for everyone. The rest are distributional details; the difference between a realistic progressive tax and a proportional one is much smaller than the difference between a proportional tax and a head tax (or a regulated market price).

  5. “In some industries, automation and technology make productivity rise rapidly, producing higher real wages (because a single person can make a lot more stuff).”

    Actually, no – very bad assumption; just the opposite is more likely the case.

    In the real world, if an employer knows that it’s the technology or automation that’s to be credited for increasing productivity, the people involved don’t get credit for it. So in fact, their wages typically fall, not rise at all. In all effect, people who use technology in their jobs effectively find themselves competing with that technology – because their employer will choose to spend on the technology instead of on wages – and they suffer for it.

    Two things have been happening over the past thirty years: productivity has increased, increasingly due to more productive technology; and wages have been flat. And that can be explained very simply: companies are paying for the more productive technology – consciously: they know where their productivity is coming from – but not any more on wages. They know (or at least believe) that their productivity improvements are not due to better people, but to better technology, so they put their money where the improvement is coming from.

    I really don’t understand how economists continue to miss this very simple observation.

  6. John: An excellent article and a very helpful graph.
    The administrative costs of Health Care in the US are 4 times those of Canada http://www.newswise.com/articles/view/579267/?sc=dwhn because in Canada there is one payer and one set of rules.
    The second point is that the adult obesity rate is 35% in the US versus 22% in Canada because there is more interest in Canada in prevention while a US HMO is only interested in profits.
    The US likes to look down on tax payer funded health care in Canada because certain treatments requiring specialists take longer. But the overwhelming majority of Canadians are getting excellent public heath service from their GPs and enjoy a better health as a result.

  7. The tax argument might have validity for a monetarily non-sovereign government, where taxes (and taxpayers) do pay for government spending.

    But the argument is meaningless for our Monetarily Sovereign U.S., where taxes (and taxpayers) do not pay for federal spending (though they do pay for state and local spending.)

    If every federal tax — payroll, income, luxury, import, etc. — were eliminated, this would not affect by even $1, the federal government’s ability to pay its bills. While federal taxes may have some purpose regarding inflation and income gap closing, federal taxes do not in any way, help the government pay its bills.

    The state and local governments are monetarily non-sovereign (as are the euro nations), so do rely on taxes to pay their bills. The U.S. government does not.

    Those who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

    Rodger Malcolm Mitchell

  8. John above is correct about wages. The connection between wages and productivity is very murky. If you were to open up a big college basketball gym and invite 20,000 persons whose wages have gone up far more than inflation, who would attend?

    Nurses, college administrators, oil company employees, scap metal dealers, high-grade federal employees, divorce lawyers…………

    One thing these persons do not have in common is higher industrial productivity.

    What they do have in common might be monopoly and regulations.

    Now, is this important? Only in the sense that health care institutions are not really forced to pay higher wages. They pay higher wages because they can.

  9. Technology creates new higher wages for different people. An employer may not want to be someone $40k to manual put things together, but instead hire an engineer,pay him $100k to automate the process through technology.

    This is why education is crucial. People without degrees will be much worse off in the future than it has ever been the case.

    Public/Private partnership for health care services has been used by other countries (i.e. Switzerland) and has worked. Administrative costs are insane in the USA, there are too many systems (Medicare, Medicaid, TriCare, private insurance, etc.). Health of the population is also a huge factor.

    Free market is great, but frankly, we know it’s not working, so let’s fix the problem, embrace health care reform and plan on making ongoing modifications to the system. This is not a one-time done deal, every administration should make changes to the system to enhance it.

  10. Nic,
    “Health care reform” is a euphemism for “cut payments to health care providers, and make people pay more. And it is completely unnecessary.

    Federal taxes do not pay for federal spending, so increased healthcare costs do no impact taxpayers, nor do they impact the government, which being Monetarily Sovereign, can pay any bills of any size.

    The only thing high healthcare cost do is force the federal government to pump more dollars into the economy, which helps grow the economy.

    All this hand wringing about healthcare costs misses the central point: The government easily can pay, and this payment is economically stimulative.

    Rodger Malcolm Mitchell

  11. @Rodger Malcolm Mitchell you wrote “Federal taxes do not pay for federal spending…” what do federal taxes pay for? The federal government brings in a couple trillion dollars in taxes every year. Where does that money go?

  12. couldnotbebetter:

    You asked, “Where does that (tax money) go?”

    Dollars are created and destroyed in two ways:

    1. Dollars are created by banks and other lenders by lending. Dollars are destroyed when loans are paid off.

    2. Dollars are created by the federal government by spending. Dollars are destroyed by federal taxing.

    The answer to your question is: Federal tax dollars are destroyed the moment you pay them. The U.S. money supply is the total of all dollars in the U.S. economy. But when you pay federal taxes, those dollars no longer are in the economy. They are gone. Destroyed.

    You then may ask, “Why do we pay federal taxes?” At one time the U.S. was monetarily non-sovereign, and federal taxes did pay for federal spending. On August 15, 1971, the U.S. government became Monetarily Sovereign. It gave itself the unlimited ability to pay any bill of any size.

    Having the unlimited ability to create dollars, the federal government no longer needed to ask anyone for dollars. It no longer needed to tax or to borrow. However, it still taxes and borrows — relics of its pre-1971 needs.

    Taxing and borrowing do not support federal spending. Both could be eliminated, with zero effect on the federal government’s ability to spend.

    I should mention that the above is not true of the states and local governments or of the euro nations, all which are monetarily non-sovereign, and do need taxes for spending.

    Rodger Malcolm Mitchell

  13. @Alan McConnell – “….I think Mr Kwak agreed
    with both these points, but didn’t agree with, to me, the obvious
    conclusion: unique among developed countries we have a
    huge private health insurance industry….”

    FOR PROFIT private health insurance companies that have no real time DATA about what the real and immediate health care needs people have that people are unable to take care of for one reason or another (access, money). So what are they basing future projections upon, and more importantly, what do they keep saying “no” to partially re-imbursing after they already got 6K in premium payments form the sucker, er, patient?

    Here’s a billion$$ taxpayer funded “homeland security” contraption that went up lickety-split in the middle of polygamy country that has astronomical capacity for data mining and storage and which should be immediately commandeered to provide some useful intel about HEALTH security instead of bs speculation about how quickly a person will die because they bought a Big Mac today after they stood next in line to a person who is on the “anti-semite” secret list – so the two COULD be related, right?:

    http://www.wired.com/threatlevel/2012/03/ff_nsadatacenter/

  14. Andrew_M_Garland

    Kwak: “In those industries with slow productivity growth, real wages have to rise; otherwise you couldn’t attract people to become classical musicians, teachers, or nurses. Since costs are rising faster than productivity, prices have to rise in real terms.”

    By the above reasoning, the wages for store cashiers, waiters, and sales personnel also will rise out of sight, until the poor cannot buy enough of these services, or even shop at stores. Talking to another human in a business transaction will become too expensive for the poor, and a limiting factor for the middle class.

    Mr. Kwak, you argue things both ways.

    (1) Consider industries in which which production per worker rises greatly from automation. You say those workers will receive higher wages because they produce more per worker.

    (2) Consider industries in which which production per worker rises little from automation. You say those workers will receive higher wages because that will be necessary to attract them to employment.

    Actually, productivity and wages per worker are not easily related, but they tend to rise or fall together. Part of the reason is that a person must usually produce more to earn more, and workers benefitting from automation are usually the ones producing and maintaining the automation. Many others are paid less to push buttons, or they lose their job as unnecessary.

    This isn’t a bad process. Consumers (everyone else) can now pay less for an item, and they can spend the savings on something else, on industries which will employ the people who lost their jobs to automation. Thousands of these adjustments lead to higher efficiency, lower prices, more stuff, and more services for everyone, including those who have to change jobs and the poor.

    This doesn’t imply anything about teachers salaries, amounts spent on education, doctor’s salaries, and amounts spent on medical care. Those are areas under direct government regulation, subsidies, and meddling, where competition is regulated away. Of course those prices are going up, with decreased absolute or relative efficiency.

    A free market allows millions to apply their knowledge to raise production at lower unit costs and higher efficiency. The markets controlled by government are under a directive to “Do it my way”. That reduces discovery and competition, retaining higher costs and lower efficiency.

    EasyOpinions.blogspot.com

  15. Simple empirical question: have real wages risen at the same pace in fields where productivity rises slower than average? That is, have the wages of classical musicians, teachers, and health care workers risen apace with other fields? This seems a possible way of testing whether Baumol’s syndrome bears out in practice.

  16. Rodger Mitchell wrote:
    Dollars are created by the federal government by spending.
    If this were true, the government would have enormous power, by virtue of its ability to impact the private sector.
    It could favor one industry over another, or even one business over another, simply due to whoever is fortunate enough to receive those created dollars.
    In addition, I have a logical and theological contention with the government’s ability to create something out of nothing.
    First of all, this ability to create something out of nothing has no relevance in today’s material world.
    Second, this is a power that is reserved only in the spiritual realm to God or one who has God-like powers.
    To suggest there is one God is somewhat believable.
    To suggest there are 2 Gods is absolutely foolish.

    Rodger wrote:
    Dollars are destroyed by federal taxing.
    Yes, I would buy into number 2, if I bought into number one.
    It would be the same as saying God created the world, including humanity.
    If God manufactured a tsunami which destroyed 3 billion people, then yes, these people would be destroyed by God’s infinite power.
    Don Levit

  17. James: You make some sense when you discuss the “productivity” of medicine and education. Both are intensely labor-driven.
    Until we can get robots to teach and to perform surgeries, we will have that productivity versus wages issue to contend with.
    It is relevant to note that the cost of a college education has risen faster over the last 20-25 years, than the premiums for health insurance – although both are rising at unsustainable rates.
    This is true, even though much public and even private education is supported by taxes or charitable contributions.
    In addition, loans have made college more “affordable,” at least in the short run.
    And, the employer exclusion for health insurance premiums has made coverage more affordable. In fact, that exclusion is the largest revenue loser for the federal government, far surpassing retirement and home interest deductions.
    I was talking to my 20 year old daughter recently about the potential subsidies for health insurance premiums for families making $88,000 a year or less.
    I asked her how she thought those subsidies might affect the premiums.
    With no hesitation, she said “It will raise premiums even more!”
    My daughter is a pretty smart lady, but I think an 8 year old would know the impact just as well.
    Don Levit

  18. “Comparing tax revenues today to tax revenues in a distant past”
    James, isnt this what is done today for the future of SS and Medicare? Persons state that in 40 years, we can only pay out 70% of benefits. But who knows what tax revenues will be in 5, 10, 40 years. We can only pay what bills we have due today, as a govt. the govt can’t save money for a rainy day.

  19. Taxes are truly necessary for the peoples health benefits and needs.

  20. Don Levitt

    I don’t have as much inside info regarding God as you seem to have, but the facts are:

    1. A Monetarily Sovereign government has the unlimited ability to create its sovereign currency, which it does by paying bills (i.e. instructing creditors’ banks to mark up creditors’ accounts.)

    2. For the above reason, the federal government does not need to ask anyone for dollars — not taxpayers and not other nations.

    Until you take the trouble to learn the differences between Monetary Sovereignty and monetary non-sovereignty, don’t bother to respond.

    Rodger Malcolm Mitchell

  21. @EP3
    “But who knows what tax revenues will be in 5, 10, 40 years. We can only pay what bills we have due today, as a govt. the govt can’t save money for a rainy day.”
    With $16 Trillion in National Debt today, you can guess that tax revenues will decline because of the wet blanket that interest on this debt will put on the economy for the next 40 years.
    New York is trying to get consumers to drink less sugar and to eat fewer calories through info on menu boards.
    We can get all wound up in complex economic thinking but if the US does not do something about its National Debt and about its obesity, it can kiss its backside goodbye.

  22. “Until we can get robots to teach and to perform surgeries, we will have that productivity versus wages issue to contend with.”

    Don: I am not sure about applying automation to Health Care. But education in many universities has not changed in the last 50 years and we don’t need to wait for robots.

    My daughter-in-law just completed a course in accounting. She has 3 small children and did not need have to leave her home. The computer delivered the lessons over the internet and tested her at the end of each chapter. Where she had trouble with the answers the computer would help her until she got a proper understanding. She had a number she could call for live support but she never had to use it.

    I think there is great potential here but most universities don’t really care about making improvements so we get more of the same and the government accepts this.

  23. Over the long run, Mr Garland is correct. Automation brings lower prices, and so consumers can buy more of other things. The industries that make other things will in the long run hire the workers who were laid off by automation.

    But that damned long run! Part of the Great Depression was millions of ex-farm workers who were unemployed by technology and drought, and wandered the country looking for work until WWII could hire them.

    Thanks ironically to modern medicine, people now live through many formerly fatal illnesses. That is part of why America has so many unemployed and discouraged 50+ workers. In the past they would be dead in much greater numbers.

    A great many families have been able to stay in the middle class by getting a decent paying job in the unproductive health care and education fields.
    We are hitting a job crisis now because even those bloated industries are becoming unaffordable to consumers.

    If anyone knows how this will end, let me know too.

  24. “If anyone knows how this will end, let me know too.”

    Bob: I am gradually coming to the conclusion that Ben Bernanke may be doing the right thing with the quantitative easing.

    Basically he is devaluing the $US. This is the reason that China and others are doing our manufacturing. As the dollar devalues, jobs will come home.

    Now prices at Wal-mart will go up but we will have fuller employment. Now the downside is the National Debt. China, India, Saudi Arabia and others could start calling in their holdings of US Bonds and this could be a problem. The US would have to lean on the US Corporations and top 1% to buy the debt and I personally don’t think they would bite.

    It could be a very rocky road but overall it might be the best way out.

  25. Good points, but you imply that a more active manufacturing sector will cure American unemployment. I am not sure that is true. I sometimes think that we have an emotional attachment to manufacturing, because it feels like the right way to stimulate an economy. All those newsreels about WWII airplanes coming off the assembly line are kind of in our mind,

    But The sales clerks at Walmart and ticket agents at airlines who have lost their jobs to kiosks and websites will not be rescued by an uptick in American manufacturing…..and so on.

    The number of Americans who want and need a job just keeps growing.
    The disappearance of many pensions forces older workers to keep plugging.
    The mass education of women has helped society, but that too has enlarged the labor force.

    My view is that the gap between the number of job-seekers and the number of available jobs will just keep growing. Hospitals alone have been in effect a jobs program in many cities, but that too is coming to an end

  26. wow – not one freakin’ word about sustainability – maintenance! – or living within a REAL man to land ratio…

    Just put a target on the back of 50 year olds now? Education left to 20 year olds taught by Jim Jones in the internet Jonestown?

    The lights are going to go out, the water will turn to poison, and people will continue to be thrown in jail for planting a seed on a spit of un-used land somewhere by the Jem Hadar mercenaries (currently getting RICH RICH RICH off STEALING from our SS and Medicare kitties).

    Gee, I can’t wait to vote for a ReThug – LOVE that Mad Max “vision” – ’bout time you guys came up with a “vision” (from god, maybe?).

    Just War.

    Keep wasting time blathering about what will never come to pass…

  27. In 1975 the cost per person for Medicare was $2000. In 2010 it was $10,000. And it just keeps increasing must faster then inflation. Meanwhile the number of american’s receiving Medicare is skyrocketing. Cost per person is skyrocketing and the number of people is skyrocketing. Sustainable? Nope…

    Medicare costs are eatting a larger and larger portion of our spending and thus increasing our deficit/debt. So we are borrowing money from future generations to pay for seniors today. Money should only be “borrowed” as an investment…medicare is not an investment.

    The Romney/Ryan plan will force higher income americans to pay more for their medicare benefits but the poor pay nothing. Is that really unamerican as the President would have you believe? Regarding this, the article states “many of whom won’t be able to afford it.” – that’s just not true as Romney/Ryan have indicated. They estimate ~$800B in savings which then is used to extend the life of medicare for future generations.

    Obama’s plan finds $800B in savings but then uses that money for Obamacare. You can’t suck $800B out of medicare pay schedules without consequences. The CBO has already listed many results of this such as a large number of hospitals being forced to close. But the key point is that they use this money for Obamacare when Medicare is in crisis mode.

  28. This is a preposterous analysis. Doctor and teacher wages have not skyrocketed, administrative, end of life care, and other costs have. Doctors are being driven out of practice by administrative costs. There are many examples of labor-intensive service providers whose wages have not kept up from engineers to artists to barbers.

    What education and healthcare have in common is buyers are not exposed to marginal costs, and government provides exponentially growing funding. There hasn’t been any labor productivity pricing power in effect since the 1970s, except for government lobbyists. Baumol’s idea is another example of an economic theory that sounds theoretically plausible but doesn’t happen in the real world.

  29. I believe our fanatic belief in the workings of the ‘free market’ has created a number of problems. If markets were so efficient, we would’nt have air-fares go up the way they have, or the telecom costs go up the way they have, given that both of them are privatized and un-regulated (for the most part) as far as routes and fares are concerned. The problems are many fold and NOT everything is best provided by the private sector, with healthcare a necessity being one of them. Can one provide any example of a privatized healthcare system where costs/prices have not risen significantly faster than GDP?

  30. KENIH,

    You said: “we are borrowing money from future generations to pay for seniors today.” That is a common myth.

    Actually, a Monetarily Sovereign government doesn’t borrow. It has the unlimited ability to create its sovereign currency, so does not need to ask anyone for that currency. The U.S. became Monetarily Sovereign on August 15, 1971.

    What is misnamed “federal borrowing,” merely is the issuance of an investment security known as T-securities. So called federal “borrowing” is the total of outstanding T-securities.

    To “lend” to the U.S., you instruct the Federal Reserve Bank to debit your bank checking account and credit your FRB T-security account. The process is identical with you telling your bank to move dollars from your checking account to your savings account.

    To “repay the debt,” the FRB merely transfers dollars back from your T-security account to your checking account.

    At no time are future generations involved. The whole process is nothing more than a transfer of funds between two bank accounts, both of which are owned by you. It does not supply the federal government with funds.

    To understand the process requires understand the difference between Monetary Sovereignty and monetary non-sovereignty.

    Rodger Malcolm Mitchell

  31. “I believe our fanatic belief in the workings of the ‘free market’ has created a number of problems. If markets were so efficient, we would’nt have air-fares go up the way they have, or the telecom costs go up the way they have, given that both of them are privatized and un-regulated (for the most part) as far as routes and fares are concerned. ”

    I believed in the free market until the collapse of Enron in 2002. For the first time I realized that companies operating in an apparently competitive market could jimmy the system to charge whatever they wanted.

    We since seen the same thing in Banking, in the Drug Companies, in the Oil Companies and the HMOs.

    The only reason we keep these organizations is because they control the government.

    Government and tax provided health care would be far cheaper than the HMO system but the US will have to live with it because they have no choice. Obama tried to introduce the government option but the Republicans said no because they were so beholden to the HMOs for their campaign and superpac contributions.

    The other issue of course is preventative heath care. It took 40 years to introduce legislation to curtail smoking because of the tobacco lobby. It will take another 40 years to control the food lobby that is pushing sugar, salt and fat down our throats. I commend New York that is limiting sugary drinks and making restaurants show calorie and sodium levels on their menus and menu boards. Already the food lobby is taking New York to court.

  32. Gee Rodger:
    It sounds pretty simple. What nations besides the U.S. are monetarily sovereign? What does it require for a country to go from non-sovereignty to sovereignty?
    What does it require to go from sovereignty to non sovereignty?
    Seems like this is a big advantage. Any downside to it?
    Choosing between the 2, even my neurosurgeon said it was a no-brainer.
    Don Levit

  33. “This is a preposterous analysis. Doctor and teacher wages have not skyrocketed, administrative, end of life care, and other costs have.”

    Its true that admin and end of life care costs have skyrocketed but I don’t understand how the same has happened in education. I guess there is more report writing but I would not say it has contributed to huge cost increases.

    You can get rid of the admin costs in Health Care by getting rid of the 150 different HMOs that each have their own way of keeping track of things.

    End of Life is more complex. Doctors now can give you a pacemaker that extends your life by maybe 10 years when you can’t remember who visited you yesterday. These types of things are creating enormous costs and very few benefits.

  34. “In 1975 the cost per person for Medicare was $2000. In 2010 it was $10,000. And it just keeps increasing must faster then inflation. Meanwhile the number of american’s receiving Medicare is skyrocketing. Cost per person is skyrocketing and the number of people is skyrocketing. Sustainable? Nope…”

    Someone mentioned earlier that “End of Life” costs are a big factor in the increases. I believe this is true. If it is true, then what do we do about it?

    I have been close to three people who died in their 90s with fits of depression because they could not enjoy life any more and were fervently praying to God to take them.

    I think we have to address this. It will be impossible to address if the Republicans controlled any part of the government. And even if the Democrats controlled all 3 parts of government it would be hard to even get the conversation going.

    But I think it is something that must be done to stop Health Care from completely consuming the national budget.

  35. “Good points, but you imply that a more active manufacturing sector will cure American unemployment. I am not sure that is true.”

    Bob: I guess we can’t stop progress. But maybe we could give an incentive to corporations to use people rather than computers or robots.

    Lets say a company decides to spend $10 million on a computer that will eliminate 150 people and this is close to breakeven. i.e. if they could only lay off 130 people it would not be cost effective. Maybe the government adds a penalty of its own on the corporation to reflect the unemployment benefits and lost taxes it would incur.

    The Republicans would not hear of this of course. But the US is in serious financial shape and new approaches must be found to get this country back on its feet.

  36. All of which only changes the question to who should pay the taxes?

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  38. So long as income keeps pace with rising costs, healthcare would remain affordable for an average family (and no more unaffordable in future than they are today for the bottom quintile). However, three conditions must be satisfied for this to be true. GDP per capita (productivity) must continue growing. Workers’ share of the value added must not fall. And income disparity must not widen further.

  39. To Don Levit,

    “What nations besides the U.S. are monetarily sovereign?”
    Canada, Japan, China, Australia, UK, Mexico and more than 100 other nations are Monetarily Sovereign.

    “What does it require for a country to go from non-sovereignty to sovereignty?”
    It depends on the reason why the country is monetarily non-sovereign. For the euro nations, it requires re-adopting their sovereign currencies. Some nations are monetarily non-sovereign because they have chained their currency to the dollar.

    “What does it require to go from sovereignty to non sovereignty?” You mean, from Monetary Sovereignty to monetary non-sovereignty. Go on a gold standard, silver standard, dollar standard, or in the case of the euro nations, a euro standard. In short, give up control over your sovereign currency in exchange for non-control over a currency over which you are not sovereign.

    Seems like this is a big advantage. Any downside to it?”
    No.

    Choosing between the 2, even my neurosurgeon said it was a no-brainer.”
    Your neurosurgeon is correct. Actually, switching to the euro was a literal no-brainer, meaning it was done without brains. It is the disaster for Europe I predicted way back in 2005 (http://rodgermmitchell.wordpress.com/2010/05/12/the-meteorology-of-economics-speech-at-umkc/)

    Rodger Malcolm Mitchell

  40. @Slackmo, “What education and healthcare have in common is buyers are not exposed to marginal costs, and government provides exponentially growing funding. There hasn’t been any labor productivity pricing power in effect since the 1970s, except for government lobbyists. Baumol’s idea is another example of an economic theory that sounds theoretically plausible but doesn’t happen in the real world.”

    Two of the daily functions which parents are LEGALLY responsible for (as individuals) when RAISING their children is their “education” and “healthcare”. Can parenting be replaced with computer automation and mechanization so that profit taking can go to the top 1%?

    They’re working on it through the majik of chemistry, Step One – keep them all *in the zone*:

    http://www.pharmalot.com/2012/10/children-says-adhd-meds-help-them-study/

    Lobbyists educating children – theoretically, of course….

  41. “Canada, Japan, China, Australia, UK, Mexico and more than 100 other nations are Monetarily Sovereign.”

    Roger: Its guess its true that a country with its own sovereign currency can manage it any way they want. But that country is effected by how other countries value that country’s currency.

    The US is free to apply quantitative easing but if it devalues the currency through1) excess foreign exchange 2) reduced buying power of the foreign exchange or 3) a psychology that the country’s money is not being managed properly, then the currency can devalue in the minds of the foreign countries.

    So imports cost more and the standard of living could go down. And the foreign countries holding US bonds will ask for higher interest rates to reflect the expected future inflation.

    So sovereign countries cannot make their decisions in a bubble.

  42. The assumption that productivity hasn’t gone up on health care is totally wrong. Productivity has gone up tremendously due to the way in which we pay for health care in this country. Doctors have found ways to see more patients, refer more tests and maximize profit per unit (patient or disease) that is productivity in a business sense – each worker treating more patients, creating more prodecures. It’s also faulty to assume that technology will not improve productivity in health care, we don’t really know that. Industrial productivity stayed pretty consistent until the assembly line was introduced and then it went up exponetially for decades. Who’s to say there isn’t a development in stem cell research where everyone just gets a cellular reboot every seven years and it staves off all cancer, hearth disease and other chronic disorders and all of medicine basically goes back to treating colds and injuries? Not saying that’s going to happen, but we don’t really know especially when you using a chart from a century ago. Health care was much cheaper in 1912 not because of productivity issues, but simple inability to treat almost anything.

  43. I meant a chart that goes a century out, not from a century ago – sorry.

  44. Right Michael,

    IF a currency is devalued, a nation will have inflation. And if a nation has inflation, imports will cost more (though exports would be stimulated, which is why some countries intentionally devalue their currencies).

    And if countries become worried about U.S. inflation, they might demand higher interest rates from T-bonds (which the U.S., being Monetarily Sovereign, would have no difficulty paying, and which currently are at all-time lows.)

    Meanwhile, during each of the past four years, our federal deficit has exceeded $1 trillion, and inflation is so low deflation is a prime concern for the Fed.

    So exactly what point are you making? That federal spending causes inflation? (It never has) That federal deficits are too high? (They are too low.)

    Not sure what data you’re referring to.

  45. Well lets look inside.

    And decide for yourself.

  46. “So long as income keeps pace with rising costs, healthcare would remain affordable for an average family.”

    But incomes have not one up for the middle class in the last 20 years. The only people seeing real income gains have been the top 1% and their gains have been enormous, even for the ones who should have been put in jail.

  47. Rodger:
    I have a lot of concern that you believe there is no downside to being monetarily sovereign.
    If the financial elites felt the same way, could that lack of discretion and discernment lead to negative financial results?
    I agree with Michael that our currency is valuable, only in the perception that others view it.
    For example, how does one measure the full faith and credit backing our country’s financial promises?
    Are there any historical precedents that could alert us to potential financial landmines?
    And even if you are correct, that the U.S. can always fund its promises, what does that “advantage” mean to the average American that another citizen of a non monetarily sovereign nation does not have?
    Don Levit

  48. “The assumption that productivity hasn’t gone up on health care is totally wrong. Productivity has gone up tremendously due to the way in which we pay for health care in this country. ”

    It could be by some measurements that productivity has gone up but the total cost of health care per person has gone up. (numbers are at the top of the thread)

    Technology does not always lead to cost savings. Sometimes technology introduces costly diagnostics to replace a simple look with a tongue depressor or a listen with a stethascope.

    Also, people are sicker now because the obesity rate keeps climbing. If we don’t get people eating and exercising properly, all the technology in the world will not save Health Care.

  49. Don,

    “If the financial elites felt the same way, could that lack of discretion and discernment lead to negative financial results?”
    More negative than the current financial results of recession and increasing gap between the rich and the middle, both of which result from lack of Monetary Sovereignty “discretion.”

    “For example, how does one measure the full faith and credit backing our country’s financial promises?”
    For a list of what comprises full faith and credit, how it’s measured, see: http://rodgermmitchell.wordpress.com/2010/02/23/understanding-federal-debt/

    “Are there any historical precedents that could alert us to potential financial landmines?”
    The “financial landmines” all are on the monetarily non-sovereign side, one of which is bankruptcy, another of which is a descent into poverty, as the euro nations now are demonstrating.

    “And even if you are correct, that the U.S. can always fund its promises, what does that “advantage” mean to the average American that another citizen of a non monetarily sovereign nation does not have?”
    It means the U.S. could afford to cut its taxes — including FICA and income taxes — while increasing support for Social Security, Medicare, Medicaid, the military and thousand of other initiatives that benefit the average American.

    Since every advantage is on the side of Monetary Sovereignty, why not question monetary non-sovereignty, which each day proves its damage to citizens of all monetarily non-sovereign nations?

    Rodger Malcolm Mitchell

  50. @Don, “And even if you are correct, that the U.S. can always fund its promises, what does that “advantage” mean to the average American that another citizen of a non monetarily sovereign nation does not have?”

    Good question, Don. Should have been answered before the whole “global” thing got rolling.

    USA Citizen has no advantage now that they have been slammed – forever when 480 are worth 2.08 TRILLION – financially below Global War/Drug/Slave Lords. Was that the plan of the *sovereigns* all along? Take away the “advantage”?

    Rhetorical question since what we have are the results, whether intended or unintended.

    No one has the data to expertly pontificate about *cost*. Which is why I recommend that we shanghei the spanking brand new billion $$ NSA data center in Utah and send out an IM to everyone connected to the “internets” and ask them what they need – TODAY – in the way of “health care”. I’m pretty sure the money WAS in SS and Medicare kitties (RodgerMM?) to cover the maintenance needs of human beings. I’m also pretty sure it’s not there now – trillion $$$$ *global* wars of choice and all that jazz….and no USA Middle Class person with a job can ever cough up the “taxes” to pay off the interest on that kind of fiat usury.

  51. Annie,

    There are no SS or Medicare “kitties.” That is the whole point. A Monetarily Sovereign nation neither keeps nor needs kitties. It creates dollars, ad hoc, by paying bills.

    The very act of paying a bill is what creates the dollars. When the federal government pays a bill, it sends instructions to the creditor’s bank to increase the numbers in the creditor’s checking account. Increasing the numbers is what increases the number of dollars.

    That is why federal taxes do not pay for federal spending. If all federal taxes fell to $0, or tripled, neither event would affect by even $1 the federal government’s ability to pay its bills. The government doesn’t send dollars to pay its bills; it just sends instructions.

    That is the fundamental difference between Monetary Sovereignty and monetary non-sovereignty, and is why understanding Monetary Sovereignty is a prerequisite to understanding economics..

  52. If all that is true, why then instruct the congress to raise the debt ceiling? Why bother with the debates at all, when federal spending doesn’t use dollars to pay its bills?? Well because it does matter, when money for those bills is sent overseas, they [the same dollar which was boosted by instruction] then compete for goods and services, which if enough dollars are sent over time, will raise price inflation here at home with any random straw that breaks a camels back. The real shame of the federal gvt, is their ability to force mandates on the States. And then step back financially, as the local budget breaks what is left of the middle class, and the feds go on with huge military instructions designed to bring the ape out of justice as it uses its tools for the worst of purposes. Gvt STILL can’t get anything right, in my eyes.

  53. “and the feds go on with huge military instructions designed to bring the ape out of justice as it uses its tools for the worst of purposes.”

    Actually the interest on the national debt ($500 B and rising) will seen is greater than the military budget ($683 B and falling).

    Pretty soon military, social security, health care will have to take a back seat to interest on the debt which will consume the entire budget.

  54. “That is the fundamental difference between Monetary Sovereignty and monetary non-sovereignty, and is why understanding Monetary Sovereignty is a prerequisite to understanding economics..”

    Roger: I have gone to your web site and looked at the book about “Free Money”.

    Has any of your work been published in a well know journal of any kind?

  55. Sounds like a great plan, I don’t know how well you can keep up with efficiency factor at that rate. But we will leave that one for down the fiscal road when the #’s straw gets weighing heavy, on the minds of local accountants.

  56. Probably not. Never submitted. Never saw the need, because much of it is quite similar to Modern Monetary Theory (MMT) except for the treatment of inflation and a few other details. MMT is in economics publications all the time.

  57. <i”. . .interest on the debt which will consume the entire budget.”

    In a Monetarily Sovereign government, the size of the budget is wholly arbitrary, limited only by inflation. So if anything “consumes” the budget, Congress merely has to increase the budget.

  58. . . . .why then instruct the congress to raise the debt ceiling?”

    The debt ceiling not only is meaningless, but obsolete. Meaningless, because It limits the Government on what it can pay for what it already has spent! Obsolete because federal debt could be eliminated tomorrow, while deficit spending could double. There is no functional relationship between the two.

    . . . if enough dollars are sent over time, will raise price inflation here.
    If that were true, we should see a relationship between federal deficit spending and inflation, but we do not. See: http://rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/

    Part of the reason that increased money supply doesn’t cause inflation is because value is a function of both supply AND DEMAND. Too often, people forget about demand when making inflation predictions. The Fed increases money demand (i.e. fights inflation) by raising interest rates.

    Today, despite trillions of deficit spending, the Fed is more worried about deflation than inflation.

    Rodger Malcolm Mitchell

  59. @RodgerMM – Okay, so why are Federal “taxes” taken out of people’s paychecks if there is no savings “kitty” and they can just decide not to pay?

  60. The debt you talk about can only be obsolete when you are forced to raise interest rates to accumulate money. Not like in the early 80′s when it was done for the love of money. Yours is a temporary fix, based on a strategy of growth in the past can be simply achieved by using the same formula’s. Which is not similar to today’s fiscal problems, the interest on the debt is real and only increases as interest rates rise. Which is precisely why the Fed can’t raise rates. But should the mkt force rates to rise, the debt snowball would increase exponentially, as the only thing left to financially leverage it {the land} decreases in value from supply and demand forces, along with increasing taxes. It’s not a pretty picture, and I have seen many a juggler such as yourself, fall by the wayside as deficits do matter.

  61. Annie,

    Federal taxation and “borrowing” (obsolete term) are relics of the monetarily non-sovereign days, which ended on August 15, 1971. Today, neither taxes nor “borrowing” are necessary.

    If all federal taxes and federal “borrowing” were eliminated, this would not reduce by even $1, the federal government’s ability to spend.

    There are several reasons why these unnecessary activities continue — having to do with votes and the desires of the upper 1% income groups. You can read a bit about this at http://rodgermmitchell.wordpress.com/2012/10/08/the-most-hilarious-concept-in-economics-or-the-most-frightening/ and other posts on the same blog.

  62. @Rodger MM – I would like your thoughts on what caused the hyperinflation in sovereign Germany in the early 1920′s?

    Your theories, put into practice, would scare the crap out of me.

  63. Rodger:
    I understand what you are saying about the difference between monetarily sovereign and non-monetarily sovereign.
    The problem I am having is that I cannot relate to it, logically or emotionally.
    Even with increased understanding through rigorous study, I still would have to deal with this type of a scenario: “If anything consumes the budget, Congress merely has to increase the budget.”
    I would assume some of these monetarily nations have done this over a period of years, increasing the budget and increasing the deficit.
    I am not familiar with any, but my knowledge of foreign affairs is pretty sparse.
    Logic tells me we are not the first monetarily sovereign country to run deficits for virtually 40 out of the last 43 years.
    If so, what has been the consequences of those results in the past?
    Logic also tells me we are not the first monetarily sovereign country to run deficits and debt as high as we have.
    Logic also tells me , since we are not self sufficient as a country, that we depend on other countries for our livelihoods (monetarily sovereign and non sovereign) , that no partner of ours would tolerate our advantage to arbitrarily raise budgets and their inability to do so to compete. We will see non monetarily sovereign nations, like the EU, attempting to be monetarily sovereign, and/or we will see monetarily sovereign nations convert to a gold-type standard in order to self regulate these excesses we (and they) are unable to control.
    Don Levit

  64. @RodgerMM – great – then can I expect a refund check for all federal taxes someone, somewhere, got to use since 1971 to become a 1%…?

    Didn’t think so.

    Suck up machine is still on in full force and JUST WAR plans are being made to shut it off. That, too, is the predictable reaction of history to this level of chaos caused by usury and “economic theories”.

    Rethugs are just trying to close another NATIONAL deal where people buy too much house….

  65. @DonLevit – sorry, Don, you are wrong about USA not being self-sufficient. The current situation of defragmentalization is man made stupidity.

    USA has a man to land ratio that is SUSTAINABLE and self-sufficient and this is scientifically provable on so many levels, it’s ridiculous.

    Easiest way to get people to SEE the truth is look at how many “countries” USA has been bled dry to support.

  66. Annie,

    Actually, the federal government COULD send you a refund check, if it wished to. But, still believing that deficits are too high and unsustainable, the federal government won’t do what it is able to do for the economy.

    You sound very angry at the U.S. I don’t blame you. But rather than mere griping, how about trying to educate people about economic reality, i.e. the federal deficit is too small, and the government should provide Medicare for everyone.

    That’d be a better course than just stomping around in a snit.

  67. @RodgerMM – I prefer stomping around in a snit, thanks.

  68. Don,

    The great majority of nations are Monetarily Sovereign, with the principal exceptions being the euro nations. So the great majority of nations already “tolerate our ability to arbitrarily raise budgets,” and have been tolerating it since August 15, 1971. They have the same ability.

    I understand your finding Monetary Sovereignty to be counter-intuitive, since it is not the way you handle your personal finances, nor is it the way your state, county and city handle theirs.

    For you, a dollar is a scarce, physical thing. But for the federal government, a dollar is just a number — a number over which it has complete control. If the federal government wishes to give you $1,000, it doesn’t transport any dollars to you. It merely increases the number in your checking account by 1,000. Presto, you now are $1,000 richer.

    Think of Warren Mosler’s scoreboard. The Chicago Bears score a touchdown. You are sovereign over the scoreboard’s points. How do you give the Bears 6 points? You merely add 6 to their score. The government is sovereign over the dollar.

    Points are scarce to the Bears, but not to you, the scoreboard operator. You don’t need to borrow points or tax any team points, in order to award points. You just push a button and add numbers.

    I suspect part of your resistance is due to your feeling it sounds too easy and too obvious, and somehow it can’t be that simple. Right?

    Because, Monetary Sovereignty is relatively new (since 1971), it still contains a lot of unnecessary, monetarily non-sovereign baggage like taxing and borrowing, that make what should be dead simple, look complicated.

    Think simple, and you’ll start to get it.

    Rodger Malcolm Mitchell

  69. Germany was monetarily non-sovereign, and was forced by the Allies to make unsustainable WWI reparations. Now ask me about Zimbabwe, since that is the other favorite of people who fear the U.S. could fall into hyper-inflation (something the U.S. never has had, despite many depressions, recessions and yes, even inflations).

    I always am puzzled by people who know we are, and have been, suffering from a recession-close-to-deflation, yet are more afraid of an inflation. It’s like you’re drowning in the warm Caribbean, but you refuse to be helped out of the water, because you’re afraid you might freeze to death in a blizzard.

    Rodger Malcolm Mitchell

  70. It all seems like make believe, Rodger, now, doesn’t it, that monetary theory thingy. But, send the digits to my account, if possible.

  71. The Subject of this post is Economic Certainties!!

    For we’ve had a substantial discussion around the posts of
    a gentleman, RMM, who has give us quite copiously of
    _his_ economic certainties. Without commenting on
    Mr Mitchell’s ideas, the thought came to me: how many of
    us have our own Economic Certainties: ideas/concepts/
    positions we’ve arrived at that we hold to super-firmly and
    believe that no one can possibly disagree with?

    I have a couple; here they are!
    1. Every entrepreneur will employ as few people as (s)he
    possibly can. For every new employee is a bother, and
    a potential trouble-maker, a possible thief. So the only
    thing that will increase employment is to _strongly_
    increase demand. Only if there are so many people
    coming in the door that the present floor salespeople
    can’t handle it, will a new salesperson be hired; only
    if the demand for the product increases substantially
    will a new assembly line be opened.

    2. Competition. Everyone praises it, especially the
    consumer, who likes to see a bunch of firms panting for
    her/his business. But the entrepreneur likes competition
    only in her suppliers. She will do whatever is
    possible/legal to strive to have a monopoly position
    in her business niche. (Pronouns chosen for political
    correctness only!)

    Of course no one here will argue with the above!!!!
    But my point in giving them is to start the ball rolling.
    I’m sure all have their own Certainties, and I’m urging
    that you give them. If they are Read Good I’ll add ‘em
    to my own.

    Hoping for copious input, I remain

    Very truly yours,

    Alan McConnell, in Silver Spring MD

  72. The way I can send digits to your account is by sending you my check. A check is not money. It is a set of instructions to your bank and my bank, to debit my checking account and credit yours. So I have no trouble sending you digits.

    My problem is that I am monetarily non-sovereign, so I do not have the unlimited ability to send these instructions. The Federal Reserve Bank won’t clear my checks endlessly, though it will clear federal checks endlessly.

    That’s why federal checks never bounce.

    Rodger Malcolm Mitchell

  73. @RodgerMM, “….Because, Monetary Sovereignty is relatively new (since 1971), it still contains a lot of unnecessary, monetarily non-sovereign baggage like taxing and borrowing, that make what should be dead simple, look complicated….”

    Money is a public utility that flows daily in a HUMAN BEING’s life. People who were 20 years old in 1971 are now 62 years old and they’ve been carrying around the non-sovereign baggage their whole working lives.

    A massive heist no matter how you look at it – and the MORAL consequences are even worse when you know how “simple” it should have been…

    @Bond – seriously, one big fairy tale when 480 people are worth a collective 2.08 TRILLION digits because the FRB DIRECTLY GAVE THE 480 those digits – not to USA Treasury to flow out to state budgets and to citizens of USA.

    FACT FACT FACT!

  74. Ryan and cohorts are preaching the exact opposite……a tightening austerity. We need more DIGITS! Yeah, baby.

  75. Now that the A students have completely failed in their mission, plus, the Fed can’t raise rates. The b ready or not students have tried, and also failed at about the same mission. So the remainders, the C students, will have to pick up the slack for the ailing ones before and above them. This is no big deal, as I have published all the information you need to know about efficiency, achievers, arrogance, and hypocrisy, though you may not have found it, yet. So juggle away you A students, and wonder where it all went wrong. B ut the list goes on and on.

  76. Alan posed an interesting question of our economic uncertainties, and how firmly we hold on to them in spite of any logic or credibility thrown our way?
    Here is my problem with Rodger’s thesis of unlimited dollars.
    He says the average person will benefit, for there will be plenty more money for Social Security, Medicare ,Medicaid, you name it.
    Well, that sounds very tempting Rodger, and there is only one thing I cannot handle: temptation.
    It reminds me of the Garden of Eden story.
    Like that story, you are describing a power which seems God-like, supernatural,, and thus hard to relate to, or for many agnostics and atheists, hard or impossible to believe in.
    On the other hand, who wouldn’t want more money for everyone, if there was no downside, as you seemed to allude to.
    Bottom line: once a person starts bringing up this infinite dollar mechanism, there is very little one can say to that.
    Apparently, it exists,
    If so, it makes no sense for a power that has such an upside to not have a correspondingly dangerous downside.
    It is the natural law of life.
    Don Levit

  77. @Bond – we’re in total lalaland – RodgerMM’s “thesis” is real except for who got the “digits”. Seems to me, 1 in 6 people NOW living in poverty got a flash of the hand’s middle digit from the banksters…

    http://theeconomiccollapseblog.com/archives/have-you-heard-about-the-16-trillion-dollar-bailout-the-federal-reserve-handed-to-the-too-big-to-fail-banks

    Some real sick f’s who schpeel “policy” for the 480 true blue “Deliverance Boyz”….watched the debate on PBS – took the poll afterwards that asked who do you think won the debate – 91% responded that President Obama was the winner – 9% – yes, NINE PERCENT – said it was Romney. Man, that’s gonna be a real OBVIOUS stealth algorithm to launch in the e-vote count – basically that 100 to 1 leverage algorithm – every 1 dollar I’ve got to the 100 dollars of yours I’ll be using to f’k you over with – the TBTF math…

    Every human being has the RIGHT to make their lives less miserable through HONEST WORK. The LAW referred to as GOD-GIVEN in the Declaration of Independence.

    JUST WAR.

    (stomping around in a snit – that’s what the DOI was, right? A “snit”?)

  78. Perhaps not God-like. Maybe closer to king-like, as in Monetarily Sovereign. The U.S. federal government is sovereign over the dollar.

  79. The gvt is corrupt, and will have to answer the consequences of that corruption one day sooner than you would prefer. They believe money is their god, and politicians are the kings. And that dollar annie will soon be worth a dime, and that ain’t gonna go to far in a war against people like the roger here. God blessed America the land of plenty, there is no mention of the inhabitants of that land, and weather or not they were as blessed. By taking a look around, I would say, no.

  80. “Perhaps not God-like. Maybe closer to king-like, as in Monetarily Sovereign. The U.S. federal government is sovereign over the dollar.”

    Ah yes, the addled incompetent *king* (Bush the II) as the puppet of the money lenders…that power-sharing never ends well…

    Reduced to selling that lemon of a used car that can only trickle around, and not being able to close the deal….perfect end to VULTURE capitalism…

    Kwak is quacking about “taxes” again – that MORAL baggage that lets the Deliverance Boyz gene pool commit GENOCIDE –

    snit on – check out the date this blog started and the “evolution” of thought since – exactly, there hasn’t been any…

    so much for *science*….

  81. Rodger MM – I do not believe that we are going to have a problem with inflation. I am in alignment with your belief that we are going more towards deflation at the present time. I was referring to a period of the early 1920’s as an argument against your loose money policy comments and suggesting that nothing bad can happen with this policy.

    Germany WWI 1914 – the German Central Bank suspended redeemability of its notes in gold. There was no legal limit as to how many notes it could print after that. The government didn’t want to upset the people with heavy taxes. Instead, it borrowed huge amounts of money. Much of the borrowing was discounted and monetized by the Central Bank. This amounted to issuing straight printing press money.

    Yes, reparation payments needed to be made. Also, Germany promised people all sorts of social benefits, etc. Eventually confidence in the mark weakened and billions of hoarded marks came out of hiding.

    In the early 1920’s, billions of marks were being printed to finance heavy costs. Inflation was caused by the government issuing a flood of new money. When governments need more money than its people are able or willing to lend it, it monetizes (printing presses) the debt.

    But the main force that gave inflation its momentum was the steady decrease in the true value of money in circulation. Once people lose confidence in a currency, they try to get rid of it. Marshall stated, “The total value of an inconvertible paper currency cannot be increased by increasing its quantity; any increase in quantity which seems likely to be repeated will lower the value of each unit more than in proportion to the increase.”

    To stop the rampant inflation, Germany issued a new currency that was backed by land and industrial plant originally, and then by a 30% gold backing. New taxes were also imposed.

  82. @bhans – Germany was not doing all that currency issuing and manipulation without a major goal in mind, now was it? It had BIG SECRET PLANS.

  83. “There was no legal limit as to how many notes it could print after that. The government didn’t want to upset the people with heavy taxes. Instead, it borrowed huge amounts of money.”

    It had the unlimited ability to create money, so it borrowed money? Think about that.

    Anyway, we are so far from hyperinflation that we never have had it, and we are right in a recession. So which do you worry about? Hyperinflation. Strange.

  84. Another purposefully misdirected statement from the Rodger. We have been experiencing hyperinflation since the summer of 08. Hyperinflation is when too many of your country’s notes are in other country’s possession. All that oil money to the mid east for all those years, then ramp up the manufacturing money to China, and now the financial world has some 745 trillion dollars floating around half on the sidelines and the other half speculating on commodities. Now since so many others have so many more dollars to compete for things like oil, gas and food, it makes the cost of those items more, simply from the supply and demand equation. At the same time the US is in a monetary deflation, meaning many citizens do not have enough of it, at the same time that prices rise. Ben has shot his last arrow in propping up real estate prices artificially, keeping the banking system from utter collapse during the same time we have had our largest money supply statistics ever. And just think, the underground economy has yet to be heard from and added to the money supply statistics.

  85. http://www.weather.com/weather/videos/news-41/top-stories-169/painful-jump-onto-ice-31714

    @bhans – the internet can assist in engineering a sustainable global economy (man to land ratio) – the attached video is perfect for middle school physics and math teachers as an example for how math can make things less “painful”.