Even Warren Buffett gets MS wrong. Is it so hard to understand?

Because the populace has been pumped with wrong information about Monetary Sovereignty (MS), what should be easily understood is widely misunderstood. Does even the great Warren Buffett not get it?

He understands federal finance and strongly favors Social Security, yet does even he not know how that program is financed?

We have tried to make the simple even simpler with such posts as:

1. “Airlines are 3 trillion in debt. The Monetary Sovereignty of Airline Loyalty Programs.”  
2. “The genius of the board game, Monopoly®”,
3. “Historical claims the Federal Debt is a “ticking time bomb.” OK, it’s just a week after the last update, but you simply must read the last entry (2/8/2024).”

At its core, Monetary Sovereignty is dead simple. It merely says:

1. The U.S. federal government created an arbitrary number of dollars and gave them an arbitrary value by passing laws.
2. The government retains the power to pass infinite laws, create infinite dollars, and give dollars any values it chooses.
3. Because of these powers, the government cannot run short of dollars. It pays all its obligations with newly created dollars and does not need tax dollars.
4. Even if the federal government didn’t collect a penny in taxes, it could continue spending forever. No payment, however large, is a burden on the federal government or on federal taxpayers.

The posts gave examples of Monetary Sovereignty with airline mileage points, Monopoly dollars, and store coupons.

In each case, the issuer cannot run short of the points/dollars/coupons because all are numbers on computers typed at the creator’s whim.

Yet, despite that simplicity, even great financial brains seem confused:

A shareholder once asked Warren Buffett and Charlie Munger if Social Security is a ‘government-sponsored Ponzi scheme for retirees’ — their answer was received with laughter and applause. Story by Jing Pan

Social Security has long been a subject of intense discussion in America, but investing legend Warren Buffett’s position on the issue is unmistakably clear.

During Buffett’s company, Berkshire Hathaway’s annual shareholders meeting in 2005, an audience member posed a blunt question: “I’m asking for your opinion on Social Security. Shall we call it the government-sponsored Ponzi scheme for retirees?”

Buffett’s answer was wrong.

He explained that, while it was proposed as insurance because that was “the only way [President Franklin] Roosevelt could get it passed,” Social Security is essentially a “transfer payment by the people who are in their productive years to the people who are past their productive years.” 

And Buffett liked that mechanism.

“I think that the obligation for the people who do well in this society is to provide a reasonable level of sustenance for those beyond their productive years,” he said.

No, no, no. Social Security is nothing like “a transfer payment from people in their productive years to people past their productive years.”

And while he may imply there is a moral obligation for the productive people to aid those past productive years, that is not how Social Security operates.

If it did, two things would be necessary:

1. Social Security would have to be supported by more affluent people, which it is not. Even the FICA tax, which ostensibly supports SS, is collected mostly from medium-to-lower salaried people  — and only from the first $160K of salary.

I wonder whether Mr. Buffett collects any salary at all. If he obtains all his income via stock gains, dividends, interest, and other non-salary sources, he doesn’t pay FICA. No “transfer” there.

2. More importantly, and contrary to popular belief, FICA does not fund Social Security (or Medicare.) All federal spending is funded by newly created dollars.

Tax dollars, which begin, in the M2 money supply measure, suddenly disappear from any money supply measure when they hit the U.S. Treasury. They effectively are destroyed.

Ask yourself , “How much money can the federal government spend in any given year? Given that the government has the infinite ability to create dollars, how many dollars can it spend?

Right, it can spend infinite dollars. It never can run short.

What is any number added to infinity? Infinity. Those FICA dollars disappear into an infinite dollar hole, never heard from again.

The fake Social Security and Medicare Trust Funds, which supposedly receive FICA dollars and spend those dollars on benefits, do no such thing. In fact, they aren’t even trust funds.

They are bookkeeping mechanisms that only record inflows and outflows. They aren’t “trust funds” if the federal government can add to them, take from them, or revise them in any way and at any time it chooses?

If you go to any federal finance website, you will see how the government implies or even states outright that federal taxes fund federal spending. Yet, clearly, this isn’t true. Even if the federal government collected zero taxes, it could continue spending forever.

That is the reality of all large Monetarily Sovereign entities.

Consider the European Union, which is sovereign over the euro:

Press Conference: Mario Draghi, President of the ECB, 9 January 2014
Question: I am wondering: can the ECB ever run out of money?
Mario Draghi: Technically, no. We cannot run out of money.

No large Monetarily Sovereign nation can run short of its own sovereign currency — unless it wants to.

Why would it want to? To foster the false belief that benefits to the middle- and lower-income groups are unaffordable and unsustainable without benefit cuts or tax increases.

That is the basis for the Big Lie: “Social Security and Medicare can’t continue unless we cut your benefits or increase your taxes.”

Who benefits from the Big Lie: The rich who run America. They are rich because of a wide financial Gap between them and the rest of us. The wider the Gap, the richer they are.

There are two ways the rich widen the Gap:

1. They increase their net income with tax dodges for which they bribe politicians.
2. They reduce your net income by falsely claiming that benefits are unaffordable and unsustainable. They bribe the media and politicians to tell that lie.

Although Mr. Buffett seems to try to claim the high ground by “complaining” that his secretary pays a higher tax rate than he does, it’s hard to believe he doesn’t understand the realities of Monetary Sovereignty.

Therefore, I believe he intentionally lies about Social Security being a “transfer payment by the people who are in their productive years to the people who are past their productive years.”

Sadly, you receive the Big Lie from three groups the rich bribe: Politicians, news media, and educators. And there are the lies coming from the rich, themselves.

That Niagara Falls of false information drowns out the truth, which is why the simplicity of Monetary Sovereignty is so difficult for many people to understand.

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY