While scouring the internet for a scoop, an independent news journalist who shall remain nameless is said to have stumbled upon a secret communique apparently issued by an inner grouping of the 1 percent to others in the same cohort. What follows, it seems, was never meant for our eyes, but only supposed to be read by those with the right connections. Yet, here the document is, in all its incriminating splendor, for all with internet access to see. Let us hold on to our hats as we take a rare glimpse into the inner ruminations of the rich and powerful.
What we in the 1 Percent don’t want the 99 Percent to know
We don’t wish to be rude, but if you are not one of us – part of the 1 Percent, that is – you are not meant to be reading this message. You should go back to whatever it is you have been doing. If you happen to be some kind of troublemaker, inclined, say, to question things or work toward change – a terrorist, to be frank – be assured that we know what you are doing. Thanks to our creeping surveillance apparatus we will soon put an end to your efforts, whether by misrepresenting your position, holding you up to public ridicule, sending you to jail, or making war with you. If you are not a terrorist, then we don’t much care what it is you have been doing. But be comforted in the knowledge that you must be doing it well, because you have not inconvenienced us in the slightest. We thank you for your cooperation. Now kindly destroy this missive and never speak of it again.
We take it, at this point, that the 99 Percent have departed and gone back to whatever it is they do, and that it is therefore safe for us – the 1 Percent – to cut the niceties and be candid. The fact is that, in recent times, certain elementary truths usually known only to ourselves have seeped out to small sections of the 99 Percent. This process was most recently aided by the platinum coin saga– a fiendish proposal to make a complete mockery of Operation Great Delusion through the issuing of a single trillion dollar coin – which, if it had been allowed to carry on unimpeded, would have exposed to more of the 99 Percent the existence of these simple truths, some of which are not even comprehended by the dimmer members of our own, uppermost percentile, and brought our decades-long propaganda effort crashing to the ground. Fortunately the President, who is on the same side as the Treasury, Fed, and GOP on this issue – our side – frowned on the proposal. For now, at least, any light that might have been revealed remains concealed. Good o.
A few in the 99 Percent are beginning to cotton on to the fact that for societies in which the government issues its own currency and allows the currency’s external value to float, such as the US, the UK, Japan, Canada, and many others (though, happily for us, not the member nations of the European Monetary Union), a number of basic truths apply. For these governments – the currency sovereigns – the following points hold.
1. Money, as most of us know, need not constrain economic activity below potential, since it is created out of thin air. It is resources (including labor resources) that matter and that present the only real constraint on what we do.
As long as the supply of goods and services can be expanded along with any extra monetary demand the government might create, there will be no threat in terms of inflation.
We pretend otherwise, of course, because we don’t want the government to create money for the benefit of the 99 Percent. It should only be done for appropriate purposes, such as rescuing banks, redistributing wealth upwards, or engaging in wars with those who threaten our economic interests.
So, for example, when there are unemployed workers, it is obvious that more goods and services could be produced for the benefit of the 99 Percent. Or, at least, it would be obvious if we had not done such a great job of clouding the issue! The real cost of such employment would simply be the time and effort expended by those willing and able to do the work along with the raw materials they fashioned into output. The money needed to pay them is no object, because it can be created out of thin air.
We can see how dangerous this aspect of reality is. If it were widely understood, everyone who wanted a job would be enabled to find one. The 99 Percent would feel a greater financial security, have less fear, and be more difficult to control. They might start demanding stuff, like higher pay, better working conditions, or more entitlements, rather than being resigned to having less of all these things.
Similarly, since there is currently idle capacity in factories, warehouses, restaurants, motels, theme parks, and the list goes on, there is obviously the capacity to produce more goods and services at current prices. All that is lacking is the ability of consumers to pay for more goods and services, and this ability is easily solved by providing them with more of what can be created out of thin air: money.
Here, too, you can see how undesirable this would be. That’s why we pretend the government can run out of money. It is in the hope that the 99 Percent will believe us. (So far, so good!) That way, output that could easily be produced is not, and entitlements that could easily be provided are taken away. LOL!
2. The government’s deficit equals, by definition, the non-government’s surplus. By logical extension, the national debt mirrors, by definition, the accumulated financial wealth of non-government. This means that an attempt to reduce the government’s deficit is actually an attempt to prevent the non-government sector from spending less than its income, and an effort to reduce the national debt is at the same time an attempt to annihilate non-government financial wealth.
Some of us may wonder, then, why we do this. The truth is, we don’t. We are not really trying to reduce the deficit or the national debt. Rather, we want to use the deficit and national debt as a pretext for cutting entitlements, social services, and implementing other austerity measures designed to undermine the living standards of the 99 Percent. This can work so long as the 99 percent believe that fiscal deficits need to be reduced (which, when some resources are idle, is not the case) or that the national debt imposes a burden on future generations (which it doesn’t).
The beauty is that, in imposing austerity based on the fiction that the fiscal deficit and national debt need to be reduced, there will be negative effects on demand, output, employment, income, and therefore tax revenue, limiting the impact of any cuts in government spending on the deficit and allowing further additions to the national debt.
If, at the same time, the taxes on ourselves are cut further, or government spending or central-bank operations can be used to extend more privileges to ourselves, the scenario repeats itself quite exquisitely. A year from now the government will still be in deficit and the national debt larger than now, enabling us to convince the 99 percent of the need for still further austerity measures.
All this can continue for as long as the 99 Percent buy our story, which, for going on four decades, they have. ROTFL!
3. The interest owed on the national debt is at the discretion of the central bank, since it sets the terms on which the government issues its own liabilities.
Unfortunately for those of us in the 1 Percent, there is no hope of bond vigilantes forcing higher interest rates on this debt against the will of the currency issuer (for newcomers, see here and here). It is unfortunate because interest on debt is our main form of corporate welfare. For doing absolutely nothing productive, we stand to receive interest payments from the currency issuer whenever debt is issued!
Now, if the 99 Percent ever caught on, they might question why government issues debt at all. There is no real need to do so. The laws that currently require it have been retained to disguise our corporate welfare as a return on supposedly necessary lending. Rather than issuing debt, it would be much simpler if the government permitted itself just to spend money into existence, as appropriate, without issuing bonds to anybody. Bank reserves could simply be left to mount, with no need at all for them to attract positive interest unless the government deemed it appropriate.
Needless to say, any such move must be prevented from happening at all costs! Otherwise, reality would be easily perceived even by many in the 99 Percent, making it more difficult to justify our corporate welfare as legitimate income.
For an awkward moment, during the platinum coin debate, these simple truths threatened to slip out. Thankfully, the danger has now been averted. For the foreseeable future, it promises to be business as usual.