BS! The federal government cannot possibly run out of money.
In our past, Congress failure to regulate the banks caused harmful inflation. For stability, the government fixed the dollars value at a certain price of gold and promised to redeem dollars at that price with gold from its store. The gold standard worked fairly well except for one serious problem.
Due to frequent budget deficits, the publics money supply grew faster than the governments gold supply. To prevent depletion of the gold supply as wealthy savers redeemed gold with their excess paper currency, the Treasury auctioned enough interest-bearing treasuries to recapture the annual budget deficit from the savers. The debt interest expense became part of the annual federal budget.
But there was another problem. Due to frequent annual trade deficits, foreign exporters with excess US dollars redeemed enough gold to threaten the US gold supply. Eventually, Nixon had to end the gold standard. Since 1973, Congress spends fiat currency but has misunderstood the limit to its spending.
With no need to protect a gold supply, there is no need to recapture the deficit with US Treasury auctions. The Treasury could simply auction enough treasuries to serve our economys need for risk-free interest-bearing instruments. As the only source of private sector savings, federal spending should never be limited by Treasury revenue. Such minimal auctioning would end the unsustainable debt s**m crafted by Wall Street to privatize Social Security and gain a fortune in broker commissions.
That which we call a federal budget deficit is nothing more than the annual savings retained by the private sector when Congress spends more than it taxes. Until we are threatened by harmful inflation, Congress spending is needed for infrastructure. And private savings are essential for prosperity. Absent such inflation, deficits are beneficial.
To explain fiat currency, a counter-factual Pilgrim history, one that could have happened and would have produced a society richer than the real one, is described here:
---------------------------------------------------------------------------------------------------------------------------------------On landing at Plymouth Rock, the governor printed fiat money to pay for the goods and services to be supplied by colonists during the year. The colonists valued the money and worked hard for it because, to avoid serious punishment, they would have to pay taxes at the end of the year.
For each years budget, the governor estimated the man-hours available during the year and multiplied that number by an hourly wage to arrive at the annual budget. During the year, he hired everyone available to build wells, roads, buildings, and other infrastructure. If he underestimated the available man-hours during the year, he simply printed more money.
To avoid inflation and eventual hyper-inflation, the governor estimated, imposed, and collected a household tax that repossessed most of his spending at the end of the year. The governors spending not repossessed by taxes became the colonists savings. Budget deficits = private sector saving which are essential for an economy. Without annual deficits, the colony would have become a bartering economy without a medium of exchange!
--------------------------------
This counter-factual history explains why fiat money allows Congress to fully employ our resources. Like the fictional colony, Congress NEVER EVER asks the Treasury if it has enough money. Congress spends as it wishes and taxes most of it back to avoid inflation. But, by not understanding its spending limits, Congress creates unemployment instead of infrastructure.
Almost all US v**ers wrongly believe that federal taxes pay for federal spending. This myth vanishes in every war and serious crisis, corrupts political dialogue, and promotes austere budgets. V**ers hold this false belief only because they do not understand that, as an issuer of fiat currency, Congress is not bound by the balance the budget logic of a household or a business. Regardless of tax revenue, Congress can always hire resources left idle by private industry. The two fiscal mandates for Congress are exactly the two monetary mandates that Congress demands from the Fed: Avoid unemployment and Avoid harmful inflation!
Ideally, to maximize the nations wealth by avoiding wasted opportunity, Congress must balance two financial goals: (1) spend almost enough to cause harmful inflation; (2) tax only enough to avoid harmful inflation. Congress fiscal target is the onset of harmful inflation. (The Fed cannot reach its 2% target.)
Until we are threatened by harmful inflation, Congress is obliged by our Constitutions preamble to
promote the general Welfare and secure the Blessings of Liberty to ourselves and our Posterity
When private industry does not fully employ the nations resources, it is the duty of Congress to use the nations idle resources to build infrastructure.
An intelligent, rational, informed citizen would v**e to remove the deficit hawks from Congress and replace them with representatives who understand that harmful inflation is the ONLY reason not to build infrastructure and increase private sector savings. Will you? ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The above essay is based on works by: (books cost about $10)
Frank N. Newman, former Deputy Secretary of the US Treasury, author of: Freedom from National Debt (Two Harbors Press);
Francis X. Cavanaugh, US Treasury economist for over 30 years, author of: The T***h about the National Debt: Five Myths and One Reality (Harvard Business School Press);
Warren Mosler, economist, author of: Seven Deadly Frauds of Economic Policy (Oxford U. Press)
Dr. Stephanie Kelton, Chair of the UMKC Economics Department, at NewEconomicPerspectives.org.
--------------------------------------------------------------------------------------------------------------------------------------
©2014 Marvin Sussman All Rights Reserved. Permission granted only to copy entirely.
--------------------------------------------------------------------------------------------------------------------------------------
BS! The federal government cannot possibly run out... (
show quote)