Stand On One Foot

Government and Money - (1998)

Economic thinking is still mired in gold standard principles. The money with which government buys things is thought worthless because government buys worthless goods. The historic solution was to require that government tie the money in circulation to the amount of gold or silver (any commodity would do) on hand. Taking on unsecured debt would simply flood the country with still more worthless money, "monetizing the debt" and causing inflation. Thankfully, we now live in a world of fiat money, an ugly label for a wonderful system still hampered by gold standard thinking.

Government now creates money and puts it into the global economy by spending it. Government must spend at least as much as it takes in if those who pay taxes will be able to pay them. Basically, monetary policy should be understood as logically driven by the need to pay taxes. If government spends less than it takes in, those who owe taxes will have to liquidate holdings and take losses in order to pay, a depression-type activity. The same problem exists for those across the world who must repay any of their debts in dollars. The ability to pay taxes rests upon deficit spending. Along with many others, Greenspan often claims that government deficits push up interest rates, another leftover from gold standard days. In so arguing, he chooses to forget that he constantly raises and lowers interest rates according to his interpretation of what is needed. If he raises rates as deficits increase, and if the deficits are the actual cause of inflation, why does he raise the rates if it is a useless action? These are important questions because higher interest rates cause inflation by increasing the cost of doing business.

Government spending cannot damage the economy by "crowding out" (factories) by putting money into "worthless" government functions, sometimes labeled "necessary but wasteful," as in the case of the military. With fiat money, there cannot be a shortage of savings available for new investment. The capital is created when it is needed because savings are the accounting record of investment. Economists, including Keynes, have erroneously denied the possibility of "over investment" along with overproduction, but they are twins. A "low savings rate" indicates that deposits have been moved from banks into the stock market to take advantage of inflated share prices. A "low savings rate" may also indicate that in a world of glut, there is little need for immediate new investment in factories and equipment.

Only government spending can safely solve the problems of recessions and depressions. Because all government spending is, by definition, meeting some of the needs of society as a whole, \all government spending should be officially considered an investment in the nation’s future. Those who would list only spending on capital goods as investment fall short in their analysis. The health of citizens, for example, is as important as bridges.

When government is customer, it promises to buy what it orders people to produce, a stabilizing factor that cannot exist in a free market. While the IMF and others still do not accept the notion that government deficit spending can halt economic downturns, there is less hesitation than there used to be. The problem is that there used to be. The problem is that recessions cannot be clearly seen until a year or more after they begin. And, if deficits can end depressions and recessions, they can prevent them as well. The evidence of history shows that when deficits end recessions, but are then cut back during a recovery, the stage is set for the next downturn. Deficits should not be used only as overdue "jump starting," but are constantly needed as stabilizers. The "business cycle" is not an Act of God beyond human control, but only another by-product of theoretical economic nonsense.

Every part of the public economy, with perhaps the partial exception of the military, has been starved for years. Roads, bridges, and schools are national disgraces, and the complete list is far too long to include here. Taking money out of the military and putting it into other programs helps not at all with respect to the list of deficiencies, especially when there is no economic reason whatsoever for refusing to meet such needs. The old, the disable, the poor, the mentally ill, and even the young are targets of economic concepts that push leaders into condemning single parents for taking care of children instead of walking factory-to-factory looking for jobs. If "welfare reform" is a comic opera, our dominant economic concepts are a long-running theater of the absurd. Ignoring the cause of 50 years without a depression, we now resolutely move once again to create another great collapse.

Excerpted from A Theater of the Absurd Creates Global Collapse

by Frederick C. Thayer  

You Got to Know What Money is For

There is nothing new in creating "money to distribute wealth. It's a story that is 3,000 years old story, but it helps one to understand what money is and what it can do.

In B.C. 1766, the Emperor, Tching Tang, opened a copper mine and issued round coins with square holes and gave them to the poor, and this money enabled them to buy grain from the rich.

Most men have been so intent on the single "piece of money", as a measure, that they have forgotten its purpose...

Money, that is to attain abundance, it's NOT in itself abundance, but may well be an incentive to grow, or fabricate more grain, goods and even services.  

A nation that cannot obtain enough food for its people, that nation is poor...

But when enough food exists and people cannot get it by honest labor, that nation is rotten.

The aim of a sane and decent economic system is to fix things;

There're people who want to work, there're things that need to be done!

--  Gold?
---  A single commodity base for money is not satisfactory.

A few eggs are worth a great deal to a hungry man on a raft...

Big Private interests HIDE the most vital task of your constituency:  
--- a sovereign, legitimate government (by definition!) defines the value of its money.

Having determined the size of your "dollar", your government's next job is to see that "MONEY" is properly printed and that it gets to the people.  

Money is a broad sort of "ticket" -- which is its only difference from a theater ticket.  

When your government tells you that the country cannot do this, that or the other because it lacks "money", that's a lie.  

It (the government) disguises, dodges the problem of having enough "tickets" to serve the people, and of keeping those "tickets" moving.

It's like saying we cannot build roads because we have no miles.  

Would you call it inflation if the theater prints a ticket for every single seat in the house?

Content of this post assembled by a brilliant guy named Alberto Veronese.  Follow him on youtube at fistfullproduction 

Sequestration is Stupid & Wrong!