This is approaching the point where I normally bow out of a discussion as hopeless, but I sense you have the capacity to start with a perspective free from what you “think” you know, so I’ll take one more shot. This is not my personal contribution, but the product of some of the brightest economic minds around the globe who have been doing deep dives into our monetary system, as well as many others. To date, the only opposition to the theory from establishment economists has been to throw up strawman arguments, and this group is the only ones who predicted the ’08 crash when everyone else was predicting surplus budgets as far as they could see.
Why doesn’t the government tax out, what it currently borrows, as this is apparently surplus wealth to those who have it. The response would be to quickly find other ways to store value, than as public debt.
Again, you are hung up on the concept of “debt” without looking at it logically. I know you can avoid knee-jerking if you put your mind to it. The federal government is the monopoly issuer of our nation’s currency, so who would it borrow from even if it wanted to? And why would it want to borrow its own currency that it creates on demand? Who did it borrow the first dollar from to purchase the first bit of gold to comply with the gold standard, and would that really be compliance if it did have to borrow?
The debt is an accounting entity that allows an accurate accounting of all currency created by Congress remaining in the economy. When creating money from thin air in the private sector there must be an opposing entry in the government sector that tracks that creation, and that is the “true” debt, not the Treasury bonds sold. When dollars enter the government sector to settle a federal tax obligation they are balanced by the debt entry to zero, so they can’t survive to “fund” anything. All government spending is with new dollars created and new debt. However, only those dollars spent in excess of taxes collected are considered “deficit”, and that is only a snapshot in time as both spending and collection are continuous operations.
The government never “has’ money because it doesn’t need it and it holding money that had canceled a portion of the debt when it was deducted from the bank of the taxpayer would screw up accounting terribly, especially when it also held the gold the money represented. Spending creates money and the debt, and taxation destroys money/debt. This complies with dual entry spreadsheet accounting used to track money worldwide and avoids many complications. Should the government be foolish enough to “balance” its budget again the people would figure out that leaving nothing in the economy to store value is synonymous with 100% taxation and the theft of the real resources the government requires from the private sector.
It also forces people to obtain bank debt to fund their lifestyle and commerce, which is about where we are at now. This makes the economy dependent on growth to roll over private debt as no currency is available to retire it, which is a very shaky foundation for any modern economy. At the first downturn in the business cycle, it all falls down like dominos. The automatic stabilizers and safety net serve more to inject currency and preserve markets/supply chains than they serve the needs of those harmed.
The government doesn’t “fund” the economy. To fund something is to bring some outside value, like an investor to a company.
The government imposes taxation that can only be paid in the denomination it can create at will. This creates a need for that denomination and draws real resources into the economy to be available to provision the government. Everyone effectively becomes unemployed until they can secure sufficient dollars to satisfy the tax man. This is why progressive economists believe the government owes the people access to meaningful employment to avoid discontent.
By spending in excess of what it taxes the government provides a medium to store value and denominate commerce/contracts. Bringing in any outside investors that didn’t obtain the money Congress created would involve giving up monetary sovereignty to accommodate those investors and their medium of exchange. That has proven deadly to economies throughout history and as recent as the formation of the EU, as Greece, Italy, Ireland, and others, have found out. Once again, the issuer of the currency has no need to “get” currency from anyone to fund anything.
It is a contract. That tax credit is an obligation.
Partially correct. It would make little sense for the government to impose a tax and not supply the currency it demands in payment. In fact, the spending of currency into the economy must precede the collection of taxes or borrowing or there is nothing to collect or borrow. Every dollar is a guarantee that the government will accept it as payment for one dollar of tax credit, nothing else. Think of them as “get out of jail free” cards.
“ the only way to “pay” such a debt is to impose a tax that “cancels” the currency.”
Which is necessary when the money flowing through the pipes is bursting them.
Be careful what you wish for. Many politicians are touting the benefit of a balanced budget mandated by an amendment to our constitution. The ignorance of anyone who believes that would be a good idea is so profoundly hopeless that they shouldn’t be allowed to vote, much less represent the people.
Removing every dollar spent into the economy via taxation would condemn the economy to the worst depression ever seen, and the authority of the Constitution would make it impossible to reverse in less time than it would take to bring America to its knees. It would take less than a year to tank the economy and every bank in the system just to satisfy the people’s ignorance. Perhaps this is what will bring down the massive threat the US presents to the world. Its own ignorance.
