>
> When a government taxes, it takes money that would
> have either have
> been saved, invested, or consumed by private actors
> and puts it to
> its own uses.
No, it doesn't. That's what it seems like, but it isn't. When you or I or GM spend money, we have to get it from somewhere - either cash under the mattress, or a loan, or what have you. When the government wants to spend money, it just does it - the money doesn't "come from" anywhere. Taxation happens after the fact - and it ONLY has to happen in order to give value to the money the gov. creates (people accept government money because they have to pay taxes, and money is the only thing the government accepts as payment).
> But the money is valuable
> because it represents
> a claim on goods and services produced by human
> labor - the money is
> merely a claim on that real value.
Again, no. Money is valuable because the government says it is valuable, and backs it up trough the power of taxation. Everyone has to pay taxes, and the government only accepts it's own money as payment of those taxes. To say that a soverign power needs to collect money (which it has issued) from its citizens before it can spend it gets it exactly backwards - it needs to spend it before it can collect it. Where would it come from otherwise? I know that this seems like pure semantics - but it's crucial, and it seems to me to get to the heart of what Keynes was saying.
It seems
> completely fanciful to me
> that you can avoid messy issues of the distribution
> of wealth and
> income and the allocation of social resources
> through dreamy theories
> like Bell's.
Its not avoiding anything. Taxation still needs to happen - "borrowing" still needs to happen - and those functions have real and messy effects on the distribution of wealth and resources. It's not as if the gov. can just spend an infinite amount of money without ever taxing anyone. But by realizing that what's happening when the government spends money is fundamentally different from what's happening when any other entity spends money, we can begin to really assess it's effect on the larger economy.
> But this sort of
> thing can only work in the short term; if it deficit
> spends forever,
> it's going to have a debt problem. And, as Jim
> O'Connor says
> somewhere, public debt increases capital's power
> over the state; when
> you need to borrow new money just to pay off
> maturing debts, your
> creditors get to call the tune.
Only if you let them. Again, this fundamentally misreads the nature of government "debt". The government NEVER (sorry to shout, but it seems important and I have no access to italics...) "needs" to borrow money. Why would it? If it spends more than it retires in taxation, it just increases bank reserves. As long as those reserves aren't sloshing around the banking system, they have no particular inflationary effect, and you can control how much they slosh around through regulation of interest rates. The selling and buying of bonds, again, is NOT a funding operation: it is the means by which the government regulates interest rates. This is not to say that bondholders don't hold undue power in our system, but their power is one of perception (and campaign contributions), not of reality. Say the govenment wants to sell some bonds and the bond market doesn't want to buy? Again, so what? The government doesn't need the money. As long as there is someone out there willing to take dollars in exchange for goods and services, the government can never "run out of money".
Mat says it better than I can :
http://www.levy.org/docs/wrkpap/papers/272.html
Again, I don't want to be overly contentious here, and I may come off as having something of a "new convert's zeal" problem. But, in my reading about economics in general over the last few years, I've always had some nagging problems with the whole question of governemnt finance and the nature of money. It seemed to be the crucial question, but every time someone seemed to get near an answer, things just got fogged up (incuding, I'm afraid, in your "Wall Street", which I was just rereading last night.) But in my reading of Keynes and his more orthodox followers (as opposed to those who venerate his name without seeming to understand what he was really saying, like Krugman), it seems to me that they actually "get it". This view of money is a tough conceptual hurdle to get over, but once you do things sudddenly make a lot more sense. Of course, I could be missing something really fundamental and probably am), and I'd like to hear about it of I am.
Sorry for being so long-winded - I think it's time for some fresh air...
Jim Baird
__________________________________________________ Do You Yahoo!? Get email alerts & NEW webcam video instant messaging with Yahoo! Messenger http://im.yahoo.com