The measure of an economy is
money. A large
economy needs a larger supply of
than does a small
Therefore, a growing economy needs a growing supply of
All money is a form of debt. Therefore, a growing economy requires a growing supply of debt.
U. S. Federal Debt is the safest, most controllable form of debt. The federal government, alone among borrowers, never will default.
Thus, there is no
federal debt or deficit problem, and a
balanced federal budget leads to a
recession or a depression.
Balanced Federal Budget
To learn the implications of a balanced Federal Budget, read
FREE MONEY by Rodger Malcolm
Click the cover to see excerpts from FREE MONEY
What exactly is a
balanced federal budget,
how do we achieve a
balanced federal budget,
and what are the economic implications of a
balanced federal budget?
occurs when the
Federal deficit = $0.
paid to the government = government spending. A
means the government does not add
to the economy.
Review Rodger Malcolm Mitchell's book, FREE MONEY.
If state and local goverments, businesses and private individuals do not add
to the economy, the total amount of
in the economy remains static. When the total amount of
in the economy remains static, the smallest inflation reduces the real value of
in the economy.
Assume the total amount of federal
in an economy is $50 trillion and inflation is only 3%. If no new
is added via deficit spending, the total real value of federal
in the economy will fall $1.5 trillion.
If the balanced federal budget continued, and 3%
remained, after ten years, the real value of federal
in the economy would be only $37 trillion -- a $13 trillion drop!
Those who believe in a balanced federal
would have to explain how an economy can grow while the
Associated Press - January 13, 2008
"Lawrence Summers, one of President Clinton's treasury secretaries, said the odds of a
recession this year went up after the dismal employment report. He advocates temporary
cuts and emergency spending."
cuts and increased spending are good for the economy, why are they "temporary" and "emergency." Why not "permanent" and "ongoing"?]
History shows that when the real value of
in our economy falls, the economy experiences a
recession or a depression. And in fact, every
in U.S. history has immediately been preceeded by a reduction in the Federal Debt. (See below)
A persistent 3% inflation (which is not particularly high), combined with a persistently balanced federal
would cut the real federal
supply in half in 20 years!
Assume we would like the GDP to have a real growth rate of 3% annually. To accomplish this, we would need real
to grow at least fast enough to account for
population growth and that 3% GDP growth.
is growing at a 3% rate and the population is growing at 1%. To achieve a GDP growth of 3%, the growth of debt
would have to be 1.03 (for
x 1.01 (for population growth) x 1.03 (GDP growth) = 1.07 annual total debt/money growth. In ten years, the total necessary debt/money will have doubled while GDP increased 35%.
This assumes the nation's current account (sometimes referred to as the "balance of trade") is not in deficit. If the current account is negative -- meaning more dollars flow out of the country than flow in -- the amount of debt
growth to achieve 3% GDP growth will increase further.
Over a ten year period, achieving a 35% increase in GDP requires a 100% increase in debt/money.
that is, total debt, is the fuel that runs our economic engine. But all
is not equal. Personal debt has a high degree of risk. People go bankrupt with troubling frequency. Corporate debt usually is less risky, and most state and local debt is less risk-prone yet.
But the least risky
is federal debt, with a risk factor approaching zero. No federal check ever has bounced, not even during the worst days of the
Therefore, the safest way to assure economic growth is to create federal
and the safest way to assure substantial economic growth it to create substantial federal
Rodger Malcom Mitchell is a "turnaround specialist", a businessman who comes in to save troubled
companies. He looks at each company with fresh eyes. His task requires him to ignore the company myths and corporate common knowledge, and to determine the reality of each company's situation. In
he uses the same techniques to investigate the commonly held beliefs about our economy. What he
discovers will amaze you.
To learn more about a balanced federal budget, read
FREE MONEY: THE ANTIDOTE TO POPULAR WISDOM
ABOUT SOCIAL SECURITY, MEDICARE, THE FEDERAL DEFICIT AND DEBT,
TAXES AND THE ECONOMY.
.When the obvious answers don't work, the real answers
will be counterintuitive.