>This seems like high-end crankery to me. Taxes and
>bond sales represent a diversion of resources (in
>monetary form) from the private to the public sector.
>A society facing resource constraints - and what
>society doesn't? - has to choose between SUVs and
>childcare, projection TVs and cruise missiles. A
>government can create money out of thin air, but it
>can't create real resources, which have to produced
>using a limited supply of capital and labor.
>This stuff just seems dreamy.
>Doug
Well, I've spent the last few days going over some of the stuff on the website Mat pointed to. (One of the hidden advantages of unemployment...) Seems to me what she's saying is that ALL goverment spending creates money - money that is destroyed by taxation and "borrowing". (This is proved by the hoops the fed has to jump through to manage the money supply on a day-to-day basis as geovenment spends money ond takes in taxes) In this view, taxation is merely the means by which the government creates a debts which it is owed - debts which can only be paid in the units ot issues when it spends. The process is "masked" somewhat by having the fed act as the Federal Government's "banker", so all new reserves seem to come from the Fed. But as she says, the Treasury could just issue bonds at 0% interest, which the fed would "buy", crediting the Treasury's account.
Her larger point (as I see it): Taxes and bonds don't "fund" anything (even though they seem to, and everybody in and out of government thinks they do), because the money they are paid in doesn't exist until it is issued by the treasury. Taxes and bonds are simply alternate ways of managing the money supply, which in their absence would grow to inflationary levels.
And as for governement not being able create "capital and labor" out of thin air: if the the government, through deficit spending, is reducing the unemployment rate, isn't it "creating" labor merely by "making it so"?
I'm not an economist, just an out-of-work computer nerd with waaay too much time on his hands...
Jim Baird
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