Old News: The Secret Fox Lefties

(c) by Mark Dempsey

In going through some old files, I came across this writing that I've updated. You can tell it's old because it refers to "Radio Shack," a now-defunct shop, at least in our neighborhood. But...the more things change, the more they stay the same.

I’m still reeling from an encounter in my local Radio Shack with a public-spirited citizen (“Paul”), who, after discussing smartphones, entirely out of the blue, informed me that Fox news was really too far to the left of the political spectrum. Out of politeness, I did not ask him if the ceiling was “down,” but, with the same kind of fascination one experiences witnessing any disaster, asked what he thought about the destiny of the country.

“We’re going the way of Greece [i.e., bankruptcy], because of the debt,” he said. Now I had to stop him. “That’s baloney," I replied, "The Greeks don’t control their own currency, so they can’t fund their own debt as we can.”

I did not tell him--but it's true--national 'debt' is like bank debt. Your bank account is your asset, but to the bank, it's a debt. Reduce the bank's debt and you'll reduce the size of your account. Reduce national 'debt' and you'll reduce the dollar financial assets of the population.

In contrast to Greece, which now uses euros, not a currency they issue themselves (drachmas), the U.S. is a monetary sovereign, with a fiat currency. "Fiat" means dollars are not backed by any commodity. We don't have to wait for our gold mines to produce to make more dollars.

The U.S. Central Bank (“The Fed”) knows this perfectly well, too. The first-ever Fed audit, legislated by the congressional odd couple--Bernie Sanders and Ron Paul--disclosed it issued $16 - $29 trillion in credit in 2007-8 to keep financial markets from collapsing in the wake of Lehman Brothers’ bankruptcy.

For a follow-up question: “If the Fed can put that kind of money into the financial sector, why is Social Security ‘in crisis’ for lack of money?” Answer: Because the entire debt kerfuffle is baloney contrived to kill social safety net programs with the added agenda of getting the government to privatize the public realm.

Everyone (well, OK, at least Paul) knows publicly owned things are terrible. Please ignore the fact that publicly-owned SMUD provides electricity 35% cheaper than privately-owned PG&E, and unlike PG&E, SMUD executives are not consulting criminal defense attorneys because they may face negligent homicide charges because they short-changed maintenance and caused explosions and forest fires.

So...Greece is not a monetary sovereign. That's why, until the European Union's (EU) actual monetary sovereign, the European Central Bank, stepped in to buy Greek bonds, Greece was paying 35% interest on its national debt. To solve the Greek debt problem, unelected EU technocrats proposed the Greeks mortgage the Parthenon and their ports.

Paul then sternly warned me that issuing fiat currency was at the root of the [pre-2015] inflation. I answered that the economy was in deflation, not inflation. “Oh yeah, what about the price of gas since Obama became president?” First of all, food and fuel are volatile enough that they often under- and over- indicate core inflation. Secondly, no matter what you think of the government’s official figures, the Treasury Bill and Bond market remains very sensitive to inflation, and the yields then were at record lows.

As far as I could tell Paul was unconvinced and changed the subject.

Radio Shack filed for bankruptcy in 2015, so this conversation is at least seven years old. Since that conversation, inflation has begun to appear in earnest, and Paul is no doubt congratulating himself on the insight that fiat currency is at the root of it, although inflation took its sweet time to appear, and appeared not at all when the Fed bailed out Wall Street with those trillions in credit.

I'd suggest the real root of current inflation is COVID, jammed ports, Russian sanctions, and supply chain problems. What the U.S. is experiencing is a shortage of goods, not a surplus of dollars. In other words: "cost-push," not "demand-pull" inflation. Incidentally, despite what you may have heard, shortages of goods preceded hyperinflation in both Zimbabwe and Weimar Germany, too.

Even though supply, not demand, is the problem, one indication of how bankrupt is the pseudo-science of economics, the Fed is raising interest rates in hopes of creating unemployment and quelling demand. Yep, that'll cure COVID and unjam the ports!

In any case, I write this in hopes of debunking the widespread perception that U.S. debt is a “problem.” It’s not. I’m not saying “We should issue infinite dollars tomorrow,” but we could. Reducing national debt sucks money out of the economy, and a wave of asset forfeitures and foreclosures--as in the Great Depression--follows each such significant 'debt' reduction in our history. (See here for the footnotes.)

In any case, the debt “crisis” has enough banksters promoting it to gain some credibility with the inattentive public. And don't forget, Paul believed Fox News is a bunch of lefties, so literally anything is possible.