The Real Economics

This treatise develops the surprising conclusion that Economics, considered by many to be the most prestigious discipline in academia, is actually seriously defective in all major sectors.  The deficiency is rooted mostly in obsolete monetary theory, implementation of which is preventing economies from activating their full productive capabilities.

In the U.S., errors in legislation concerning employer-employee relations, and errors in official concepts about international finance, are parts of the discipline’s deficiency stemming from failure to fathom correct monetary knowledge; i.e., how a nation’s monetary mechanism should be administered by its government; and how taxation that supports a national government is actually financed. In both of these areas, official policies are shown to be at variance with reality. The “real economics” outlined herein relates to today’s conventional economic wisdom in the way that the discoveries of Galileo in astronomy related to contemporary views on the subject at the Vatican.

Economists – from the Federal Reserve Chairman on down, are living in an imaginary monetary world unrelated to reality.  The fact that non-economists do not understand the subject makes it possible for economists to camouflage their incorrect views with scholarly rhetoric that is thought by non-economists to reflect a superior intellect.  During non-recessionary periods, monetary authorities at the Federal Reserve are often given lavish praise in the media for this alleged “superior intellect”.  However, it will be shown herein that their pronouncements about the performance of the economy are often mostly unintelligible nonsense.

In the U.S., most government officials and members of Congress, as well as the general public, are “non-economists”. Thus, the mistaken views of economists, endorsed by both political Parties, have become official economic policies.  Economist members of Congress are presumed by their non-economist colleagues to be expounding valid concepts.  As a result, invalid economic theories are the basis for all legislation relating to the economy, and solutions to the nation’s serious social problems remain unachievable.

Most people in the U.S., including elected officials, do not fully understand the practical workings of the nation’s present monetary system.  This monetary illiteracy is at the root of most of the nation’s serious social problems.  Absent this vacuum of knowledge among members of Congress about the present system, the errors would have been corrected long ago, and the problems referred to above would not have developed.

It is not generally recognized that U.S. dollars are not tangible commodities, but are merely special numbers created by the Federal Reserve or by commercial banks, and then credited to various bank accounts. When the Federal Reserve creates the dollars, they are credited either to the Treasury account at the Federal Reserve, to the account at the Federal Reserve of some foreign government, or to the account at the Federal Reserve of some commercial bank in the U.S. where they become bank reserves in the System (bank lending authority) unless they are later extinguished by Federal Reserve Open Market Operations.  When commercial banks create dollars, they are credited to borrowers’ commercial banking industry has created a net amount of over $4,000 billion, presently in existence, as a result of bank loans since the Federal Reserve System was inaugurated in 1914.  All of this will be explained at length in subsequent Chapters.