Urging the Methodists to recant their attack on the poor

Here's the passage in the UMC Social Principles to which I object (the link is to the whole thing, the following is a slightly smaller excerpt):

Public Indebtedness

The huge budget deficits produced by years of overspending by governments around the world is of great concern. ... Such wanton carelessness cannot continue. Therefore, we call upon all governments to reduce budget deficits and to live within their means. ...remember[ing] first and foremost obligations that promote the well-being of society such as the funding of schools and other opportunities that foster the growth of the individual, as well as agencies that care for the poor, the elderly, the disabled, and the disenfranchised.

We recognize that, if deficits are not brought under control, future generations will be shackled with a burden of public indebtedness that will force societies to live under the specter of coerced repayments, rising inflation, mass unemployment, and despair. [making this] an issue of justice for those who are yet to be born. ... We call on church leadership throughout the connection to encourage public officials to reduce public indebtedness and to begin the process toward balanced and fair budgets.
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The real meaning of this passage: Methodists do not understand money. You are completely correct in calling this position "typical," too. I'd say there was an agenda in keeping the population in the dark about this.
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What is the real money story?
First, most advanced economies use what's called "debt-based" money. If you gave Alan an IOU in payment for something, then he used that same IOU to pay me for something, the IOU itself becomes a "money thing." That's what "debt-based" money looks like.
Economist Hyman Minsky used to say "Everyone can make money; the problem is in getting it accepted." I doubt Raley's would take that IOU we passed around if we tried to pay for our groceries with it. However Raley's and lots of other stores will take a government IOU we call a dollar. What's owed for a dollar? Relief from an inevitable liability: Taxes. Taxes make money valuable.
But what about that national debt? And the...[gasp!] wanton overspending!

News flash: as a proportion of GDP, U.S. spending ranks 46th among advanced nations. Our government "overspending" is at least modest, if not a piddling tiny amount, especially if you subtract the egregious military--more than the next 14 nations combined, 3 - 6 times our nearest enemy's [China's] military spending. Here's the reference: As a percentage of GDP, the U.S. spending ranks between Argentina and Luxembourg. Reduce the budget by 1/6th to normalize for military spending, and the U.S. is between Laos and Uganda. Notice that clicking the headings sorts the list.

So let's understand what national "debt" is: If you have a bank account, it's your asset. It's money you're owed. A loan would be a liability.

But what is it to the bank? It's money the bank owes you; so it's the bank's liability. So whether the same thing, that bank account, is an asset or liability depends on your point of view. Your loan is a liability to you, but an asset to the bank.
Q: What about the national liability ("debt")? Whose asset is that? A: It's the dollar financial assets of the population. This includes currency, bank reserves and T-bills. That's right, our central bank ("The Fed") carries currency on its books as a liability. So this is what the savings of citizens looks like: an asset to them, but a "debt" to the central bank.
Please note that government is the monopoly provider of dollars, and this "debt" is owed in something the government creates virtually without cost. The idea of future generations ... shackled with a burden of public indebtedness that will force societies to live under the specter of coerced repayments... is frankly ridiculous. Treasury could mint a few trillion-dollar coins and pay the National Debt off next week. Not likely, but possible.


It should also be clear by now that the Federal government is not provisioned by tax money. Where would people get the dollars with which to pay taxes if government didn't spend them out into the economy first? So even a far-out wanton spending program like a Job Guarantee could exist without raising any taxes!
The true "shackling" occurs when government withdraws those dollar financial assets with the Fiscal responsibility™ of balanced budgets. This bizarre sentiment has captured enough popular support to significantly reduce national "debt" in the U.S. seven times since 1776. The last such significant reduction was the Clinton surplus. The time before that occurred in 1929. Andrew Jackson even paid the entire "debt" off in 1835.
What correlates 100% with these fits of Fiscal Responsibility™? A Great-Depression-sized hole in the economy! (here's a footnote for you). In other words, if we heed the UMC call for Fiscal Responsibility™, we'll end up crushing the debtors. That is exactly the opposite message of the Bible with its prohibition of usury, Jubilee years, and sympathy for debtors.



Even the pre-Bible Babylonian civilization knew that interest compounds faster than the real economy can grow to pay it off. They too had jubilees, and prohibited usury.



Not us, though. Oddly enough, the UMC prescription is what keeps the debt peons poor.


One comment about the inevitable inflationista objection: "B...but if you just print money, you'll have [gasp!][hyper-]inflation!"
Let's admit a theoretical possibility exists for the central bank to run amok and bid up prices, competing with the private sector. But the bidding is the critical element here. If the government simply printed lots of money but didn't spend it, no bidding, no inflation.
But what about those trillion-dollar coins, paying off the "debt"? Debt's spending occurs when the debt originates. Paying off debt (private or public) is un-spending. No inflation would result from depositing trillion-dollar platinum coins at the Fed. A similar answer occurs if government provides a Job Guarantee. Who else is bidding for the unemployed? By definition, no one, therefore no inflation would result.


As for the hyperinflation that so worries people--strangely enough, the much larger cost of current deflation doesn't arise in these conversations--the (right-wing, libertarian) Cato institute recently published a study of 56 hyperinflationary episodes during human history. How many were the result of that central bank run amok? Zero. Rhodesian farmers left Zimbabwe, a country that previously fed itself, so a shortage of food, not over-printing of money, led to its hyperinflation. The French took over Germany's industrial Ruhr, so the shortage of goods led to Weimar hyperinflation. Incidentally, it was Weimar's deflation that brought Hitler to power.
And if all of this is just economics-babble to you, ask yourself where was all the

Fiscal Responsibility™ when the topic of conversation was Middle East wars ($3 - $7 trillion, says Joe Stiglitz), or massive bank bailouts ($16 - $29 trillion, says the Fed's own audit)?
Strangely enough, we're only short of money when it comes to housing the homeless, funding schools (Federal support for higher education has diminished 55% since 1972), or grandma's pension (Social Security). It doesn't pass the sniff test.
I'd encourage the UMC bible thumpers to take another look at this. If we don't make money our servant, it will be our master.
And while we're all concerned about Biblical injunctions against gay marriage, abortion, etc., what about this one?: Leviticus 25:23: "The land must not be sold permanently, because the land is mine and you reside in my land as foreigners and strangers"
So...no title insurance either!