Tangible things are limited in availability. Intangible things are not. One cannot “run out of” dollars. The last dollar created will have the same value as the first did as long as something exists for sale and its price is denominated in dollars.
One of the stupidest things our nation ever did is place a limit on Social Security defined by a tax paid by every wage earner. The money collected served no purpose except to reduce demand in the economy. It was deleted as soon as it became part of the “fund” and that fund does nothing to provide for payments to retirees. The tax is one of the most regressive to ever exist as it applies to the first dollar earned but has a cap. It literally reduces the value of labor without adding a dime to potential payments.
The only possible reason for taxing labor is exactly to reduce demand to avoid inflation, but we haven’t had a true monetary inflation problem since the early 20th century that would have been mitigated by the tax. It exists simply because of a mistaken concept about the tangibility of money. A Treasury bond is nothing but a promise to replace the cost of the bond at a defined future date with interest. The dollars used to purchase the bond are never “revenue” for the government, as that would have been counter to their purpose in defending the gold reserve.
Treasury bonds became useless in ’71 when we left the gold reserve (’34 domestically) behind as an antiquated process. They now only serve as leverage to increase interest payments on investment above their natural rate of zero and to provide welfare for the investment class. The reserves needed to purchase them are created when the government spends into the private sector, so the bonds don’t provide funding.
They also provide fear fodder for politicians to secure profits for bankers as the unreasonable fear of “debt” perpetuates the big lie of how our government funds itself and limits public spending. Too little public money in the economy drives dangerous, but profitable, levels of private debt. The excess reserves from spending will always drive a desire for bonds as a secure store of value, so there is no reasonable fear of “bond vigilantes” rejecting our debt, but the myths continue nonstop to perpetuate austerity fiscal policy that is killing people, literally.
