An Illuminating Discussion with a Grad Student

On Sat, Feb 7, 2015 at 4:33 PM,

Dear Economart,

Thank you for your fascinating email. I am currently a graduate student of economics.

As a libertarian I am very sympathetic to your quest for lower taxation and greater capital discipline in government, but unfortunately I believe that your proposal is flawed. This is not through any fault in your logic (which is perfectly sound), but because of a common misunderstanding of the role of government debt.

Your puzzle was first identified by the classical economists, a group who are rarely studied by mainstream academics today. I’ve attached an article in case you are interested in reading more in depth (which, considering your offer of a large reward, I assume you are), but I will summarise the main points below.

Jean-François Melon wrote in 1738 that ”The Debts of a State are Debts due from the right Hand to the left, whereby the Body will not find it self weakened, if it hath the necessary Quantity of Aliments, and they are properly distribute’’, which I believe is very similar to the point you make on your website. The idea that government debt is not really a burden is not a new one.

A conventional response to your answer would be that the debt eventually needs to be repaid, and this imposes costs on future taxpayers and aids in the creation of a rentier class. But if I understand you correctly, you think that is only a half answer as the debt repayments can always be funded by issuing more public debt.

But if the debt is never paid down by raising taxes, then the stock of bonds accumulates indefinitely. And if the debt is never repaid, your government bonds are effectively perpetual bonds.

The issue is not debt sustainability, as the government can always issue more debt to repay its existing debt. Instead, surprisingly, it is inflation.

As Hume noted in 1752, the freely negotiable and risk-free public debt constitutes a substitute for money. Indeed, zero coupon perpetual bonds are equivalent to currency.

Your solution does not look on the surface to be monetary financing of government spending, because the government ‘takes in’ money by ‘borrowing’ whenever it spends anything. But, in fact, perpetual government debt is money. The reason for this is that a government which sources goods and services and pays using pieces of paper (in this case its perpetual bonds) is resorting to the printing press.

This is the reason why Central Banks are usually banned from purchasing their government’s bonds by printing money. The need to repay bonds limits government’s ability to finance themselves by printing money; if they want to increase spending, they must ultimately fund themselves by raising taxes.

I don’t think that my response identifies a flaw in your logic which, as I mentioned above, is both impeccable and of sound intellectual heritage. Instead it identifies a point where your conceptual framework – what could be called an economic model – misses out certain key features of reality.

Unfortunately, I think this does mean that your solution is not the panacea it appears on the surface. State debt that is never repaid becomes money. Monetary financing can be good under certain circumstances, but on the scale you advocate would be highly inflationary. There is, unfortunately, no free lunch.

The relationship between public debt and money creation is poorly understood, particularly among economists. I have no intention of claiming your cash prize, but if you are interested in discussing this further then please feel free to email me.

Best wishes,
Respondent

On 7 Feb 2015, at 23:58

Hello Respondent,

Your response is about the best I have ever had. You actually took what I said very seriously.

Congratulations.

There is a problem of inflation as you say. There is only one organization on this earth that can create the inflation you speak of, and it is government. It can tax and then borrow as much as it likes, diverting great amounts of resources to erecting nothing much of any value. Yet the money flows freely filling up everyone’s bank accounts. So the amount of money rises whilst the supply of goods desired by all stagnates. The good old communist meat shop. I discuss this in a blog post called the Keynesian Flaw.

You may find it here: http://www.economart.ca/the-keynesian-flaw/

That is why money was worthless in the old Soviet corpse, and in today’s North Korea. And if the west keeps it up, the same here.

The whole idea of perpetual borrowing is to address the very problem you speak of: the great growth of government and inflation. With Taxation or Taxation mixed with borrowing, government may do as it pleases. It can take your money and waste it. But with government forced to actually borrow funds exclusively from those they serve, its a very different world. Financial slaves become public bankers. And it is they who shall determine whether government obtains the funds or not for some needed project. Any hint of corruption, fraud, squander, and the culprits will be found and punished. Otherwise the people will be reluctant to lend and perhaps eager to dump their existing holdings, leaving the government paralysed. So no more windfarms,no National Health disgrace, no BBC, no more welfare or perpetual unemployment payments, no more agricultural subsidies, no more customs and excise, a far smaller government, far smaller university system (sorry), etc. The public will take control of government and limit it to justified and profitable expenditures whilst purging the rest. That should free up a lot of money for investments in goods that we all desire. With a far more productive economy, there will be no such thing as inflation. So unlike the conditions of the present.

If you go to the website, its all explained on the “Find the Flaw…” post. or here http://www.economart.ca/challenges

I didn’t say that the community could not tax to pay off public debts. I said that it would not because the cost of doing so is immense and the benefit nil. As this shall always be the case, the community would never tax to pay down its public debts. Recall that “extinguishing both an asset and equivalent liability will not alter the wealth of a community.” By reducing the debt, nothing was achieved. The wealth of the community remains the same, however the costs in taxing to collect the funds to pay down the debt was immense.

You did very well with the analysis. I can only hope others do the same. I shall read through the document provided. I don’t know much of those times. I extracted the seed of the idea from a little known tract in a book by an author long dead.

Regards,
Economart

On Sunday, February 8, 2015

Dear Economart,

You’re very welcome. You asked a serious question and deserve a serious answer. I read your website with interest

You seem to be arguing two separate points.

The first is that relying on government debt would reduce government waste as the community would only lend when government spending was productive. This might be true, but it has never been observed in human history. As the market for government debt is dominated by the central bank and the state regulated banking system, both of which can monetise the debt at will, governments tend to be more profligate when they can raise funds by issuing bonds rather than raising taxes. This was what the provisions of the Maastricht Treaty governing ECB purchases of Eurozone government bonds was all about.

Your second point is that we should not raise taxes to reduce the stock of government debt because ‘the cost of doing so is immense and the benefit nil’ is wrong’. This is your ‘logical puzzle’. I’m afraid this is wrong, and misunderstands the process of credit creation.

Credit creation of any type creates both an asset and a corresponding liability. For example, when a bank issues a mortgage to a household it creates a deposit on its books in the households name; it adds an asset (a mortgage) and a liability (a deposit). It doesn’t change net assets, but it is nevertheless a process of tremendous macroeconomic significance. This is a complicated idea, and if you are interested then you should watch the following lecture series by an academic at Columbia https://www.coursera.org/course/money.

The same is true of public debt; it increases both assets and liabilities, but still has other macroeconomic effects. If taxes are not raised at some point, and so debt is issued in such a way that it is never expected to be paid off, the debt effectively becomes monetary financing.

Best wishes,
Respondent

Sun, Feb 8, 2015 at 11:09 AM

Hello Respondent,

The reason that Governments have always lavished public monies whether borrowed or taxed on the most useless of pursuits is because of the existence and threat of Taxation. Government has always reserved and employed the right to confiscate. That is the key to all its power. Without that right, you imagine that a public banker will sit in exactly the same position to a needy organization as a financial slave. I have to disagree. Financial slaves have no choice in remittances. Public bankers do.

Having central banks pick up the bonds and credit the government’s account is a disastrous policy. It greatly enlarges bank reserves, depresses market interest rates, and leaves savers deprived of just returns. It is the prevailing policy of Russia and every third world recess. It is now for the first time in its history the policy of the United States these last 6 years, and Japan’s for 25. These countries have not fared well. And the party once in control of both houses of Congress has been reduced to a minority unseen in 80 years. Such a destructive policy may be an easy resort for a government in need of funds! But even with Taxation, there are consequences. With Taxation abolished, consequences will be lethal.

There are two conditions that must be met, as I have said. Borrow only from resident citizens and borrow only in the national currency. There will be no more third world monetary measures. Violations of those terms will cause the nation financial harm and possibly ruin. When bondholders discern government evading those obligations, there will be massive sales of bonds entailing great losses. Financial markets as we all can see these days are swift, ruthless and remorseless. Thus, violations shall become capital offences and the culprits subject to execution. That is the way that any nation shall ensure rules are followed. All shall be free to purchase bonds, those not employed by government as well as those that are. Police, teachers, the military, etc. And I really do not believe they nor anyone shall stand idle whilst a knot of profiteering felons at the helm of government disregard the cardinal rules and jeopardize the wealth and retirement of all.

Certainly with Taxation the primary source of government revenue, malefactors and misfits have in the past thought themselves exempt from the rules binding public fiduciaries. The financial markets have always esteemed their conduct and the condition of the nation accordingly. And the people have at times registered complaints by way of a noose, sword, or bullet. Without Taxation, the weapons become a yea or nay upon the financial markets.

The Euro is actually a marvelous instrument, and I do foresee a time when the world shall accept a common monetary unit. The Euro is free to move anywhere within those member countries. But in international transfers, funds leaving a Greek bank for a German bank must pass through the Euro bank. And that bank need not accept the worthless paper the Greek Government continues to offer in absence of Euro money to complete those transactions. And others are reluctant to accept the paper save with prohibitive premiums in interest. So its change your ways or perish. Greece has yet to learn that lesson as do so many others.

Now I have not said that the debt could never be paid off. I said that it never would. If you have an asset earning you a 100% return, would you sell it to pay off a debt on which you pay 0%? I don’t think any rational being would. Nor would any rational nation. If the total sum of wealth in a nation is X, adding an equivalent asset and debt to that wealth will not change the wealth of that nation. That is exactly what happens when a community issues a bond to resident lenders. If you extinguish that obligation, erasing both asset and debt by taxing the community, you have changed nothing. Wealth remains the same.

So what was outcome of a nation reducing its debt? The exercise demonstrates there was none. Wealth remains undisturbed. So why would a nation tax, with all it costs in squander and deterrence, to retire a debt when nothing is achieved? The benefit of the exercise was nil, yet the cost was great.

With the abolition of Taxation, liberation from all its deadweight costs and all its nefarious effects in administration, the nation shall enjoy unprecedented wealth. The operation I propose is used by every financial lender. A liability once created endures forever. Have you ever gone to a bank to withdraw funds and had them tell you to sit while they called in a loan? I don’t think so. Standard bank practice is to exchange one lender for another. Once a bank borrows money, its borrows money forever. Any quick examination of bank liabilities through the years will confirm this truth.

If such an organization were able to create $2 or $3 in assets for every dollar borrowed, who would not lend to such an organization?

The public will pass sentence on every government expenditure daily. And how different a world it shall be from what we all must face and cope with now.

Regards,
Economart

On Sun, Feb 8, 2015 at 11:15 AM,

Dear Economart,

In relation to your last point, that ‘Once a bank borrows money, its borrows money forever. Any quick examination of bank liabilities through the years will confirm this truth’ – what you write is true, but only because the banking system monetizes that loan (ie. The bank deposits count as money).

Government liabilities that are never paid down also become money, and so what you are advocating is monetary financing of government spending.

Best wishes,
Respondent

Date: Sun, Feb 8, 2015 at 11:31 AM

Hello Respondent,

Correct. A bond is not exactly like a currency note in that there is an interest component, and the bond’s value shall vary with the prevailing interest rate. Yet, once the bond flies, it flies forever. In the proof, $10 million leaves the bank accounts of lenders and taxpayers, never to return. It is the same result, though with borrowing there is a little more paperwork.

Under Taxation, the public have negligible say in how their funds are spent, often spent poorly. In Borrowing, the public shall have full control over how their funds are spent. No deadweight costs of Taxation, and no corruption and squander, or if there are full penalties imposed.

So do the bonds have value? Well if the assets created exceed liabilities incurred, then like any successful bank, corporation, or proprietorship, they will have value. They will guarantee the security of the lender’s funds.

So why wouldn’t anyone lend with a return in mind to such a successful corporation if it can create $2 or $3 in assets for every dollar borrowed?

Regards,
Economart

Date: Sun, Feb 8, 2015 at 11:34 AM

Dear Economart,

Thank you for your rapid response. If you agree that your scheme is tantamount to monetary financing, then why are you hostile to quantitative easing?

Respondent

Date: Sun, Feb 8, 2015 at 11:46 AM

Hello Respondent,

For the reasons stated. The Federal Reserve is creating massive amounts of bank reserves, greatly depressing market interest rates, depriving savers of their just returns. Lenders will not lend because they cannot get the returns to justify the risks inherent in the loans. Nothing happens. Nothing changes. Government enlarges its spending by idling people and diverting resources to the most useless endeavours, increasing the amount of money without consequent increase in supply of desired goods, aka inflation. Firms will usually just raise prices, so deprived of available resources in money, labour, and material by government.

Had the markets been left to work by Ben Bernanke and all those greatly overrated central bankers, the problems would have been worked through and remedies, painful as they may have been, applied. Bur what bloody politician wants to face a crisis? Better to kick it down the road for the next guy to deal with.
Does that help?

Economart

Date: Sun, Feb 8, 2015 at 11:49 AM

Dear Economart,

Your solution, by expanding the volume of liquidity (your government bonds would be highly liquid), would have very similar effects to quantitative easing.

Respondent

Date: Sun, Feb 8, 2015 at 11:59 AM

Hello Respondent,

No. It occurs in the same way that Taxation does, solely on the liability side of the Federal Reserves balance sheet. Money leaves the bond buyers’ bank accounts of the Fed’s member banks, thence from the members’ bank accounts to the Federal Government’s account. Interest rates to reflect the declining bank reserves. When the government spends, the reverse happens. Similarly, with Taxation although no bonds are issued in the exchange. Big difference.

Economart

On Sun, Feb 8, 2015 at 12:06 PM,

Dear Economart,

I’m afraid that is mistaken. Money creation doesn’t just take place at the Fed. Short term government debt (bills) is equivalent to central bank reserves, and the banking system will create deposits against them.

I know that you don’t propose to use short term debt, but the principle still stands.

Respondent

Date: Sun, Feb 8, 2015 at 12:10 PM

Hello Respondent,

You mean that banks will buy short term TBills?

Economart

Date: Sun, Feb 8, 2015 at 12:13 PM

Hi Economart,

That is one possibility, but whatever happens your financial alchemy only takes place because the government debt is monetised at some point.

Respondent

Date: Sun, Feb 8, 2015 at 12:38 PM

Hello Respondent,

Well, what are the others? If the banks or their customers buy Tbills from the Federal Reserve, the Fed cedes Tbills and banks cede reserves, removing an asset and liability from the Fed’s balance sheet. If from the Federal Government, bank reserves move into the Government’s bank account, leaving Fed assets and liabilities unchanged. What money creation occurs? An instrument was created that draws down bank reserves, putting upward pressure on interest rates.

The bonds will be sold and sold again. They will hold a value because the corporation that created them holds value in the expanding property, incomes, assets of the people and firms, owned by people, of that land. The bond is a financial instrument. People do buy them. Corporations do issue them. The debts of IBM today are far greater than they were 50 years ago. Similarly with banks and nations. The liabilities of banks always grow through time. They only recede when the bank is in trouble. Their bonds are always circulating in ever greater amounts. The US Government has never paid a debt off in its history. It liabilities have grown through its existence. Same with Britain’s, France’s, Canada’s. Alchemy it may be, but it seems mine is an imitation of reality.

You may argue all you like that the bonds must be retired. I don’t disagree. I just argue that on that day, the cost of settling those debts must be less than the benefit. Such a case I cannot conceive of. Nor can you.

If the general practice is that once Government or bank bonds circulate, they circulate forever, then why not follow it to its rightful and most profitable conclusion?

Government is not the source of its funds. The property, assets, incomes, financial instruments, of its citizens are. The proof demonstrates that it makes no difference whether the citizens fund government by taxing or borrowing. Its the same except for a little extra paperwork.

Regards,
Economart

Date: Sun, Feb 8, 2015 at 1:06 PM

Dear Economart,

Your mistake is in assuming that the only relevant money creation is at the fed level. If the banks buy Tbills from the government, they can do so buy creating deposits in the government’s name, expanding the supply of broad money (M1). The ‘multiplier’ from this works in the same way as it does with reserves at the central bank. That is the monetary problem with your proposal.

With regards to your point about the stock of bonds growing indefinitely; it is certainly true that a stock of debt need not be repaid, but it does need to be refinanced. And investors will only refinance the debt if they believe that they can ultimately be repaid. The stock of bonds outstanding issued by the US Treasury, IBM, Apple, the UK or France is ever increasing, but that is because investors . But their debts cannot increase materially faster than the increase in those organisations earning power. In the case of a corporation, that is its ability to earn profits or cash flow. In the case of a country, that is the ability to seize property, assets and incomes from its citizens (or others) through its coercive powers of taxation.

Where a country issues more bonds than it can possibly repay through its powers of taxation (for example, Greece), investors cease lending to it. That is why government borrowing cannot replace all taxation; because investors eventually want to be repaid in something other than government bonds. That something has to be raised either through taxation or money printing.

I am enjoying our correspondence, but I am very curious as to how you came to be interested in this topic? What is your professional background? Have you ever studied economics? And why have you offered such a large reward for the person who finds a flaw in your thesis?

Respondent

Date: Sun, Feb 8, 2015 at 2:10 PM

Hello Respondent,

Yes, banks do perform those operations. They make loans. They can certainly add to their assets and liabilities with such operations as long as they meet the capital requirements. And if it helps to resolve some momentary problems or issues, good for them. I would assume that if a government is borrowing money, it also has some use for it. And when that money leaves the account and transfers during the life of the TBill, some of it may end up in other banks. As long as the money transfers remain internal, fine. But the moment it leaves the bank, then it becomes external and Fed territory.

My proposal would no longer permit such exchanges. The Government would have to borrow solely from the people. This will ensure that the people judge the expenditures of government on their merits. I do not prohibit banks seeking such government securities, but such operations would only be permitted rarely.
People do not lend to the US or any other country based upon the revenues of Taxation. When recessions come and revenues falter, do lenders disappear and others demand immediate repayment of former loans?

They lend to the US based upon their ability to repay the loans, and that ability rests upon what nation’s assets are and what their liabilities are. Banks have incurred losses from time to time. Did everyone immediately demand their money back? Sometimes, yes. But always because the question concerned assets and liabilities, not income statements. Similarly with any corporation. Do lenders depart en masse when a loss shows up? Companies are wise to report losses. It keeps their assets intact and away from predatory tax collectors.

The problem of Greece has nothing to do with Tax revenues. It has to do with the Government collecting, through Taxation or Borrowing, huge sums of money and wasting them. Greece is free to borrow, but the rates given reflect their outrageous stupidity and mercenary behaviour. It has nothing to do with the revenues of Taxation. It has to do with the assets, property, incomes, financial instruments that must support these immense obligations created by inveterate wastrels, their friends and associates. Detroit, once the wealthiest city in America, is overrun with 60 years of corruption. It now is a shambles.

So, if by Borrowing, the assets of a nation that serve as the security of the loans rises by $2 or $3 for every dollar invested, is the public credit enhanced or diminished?

That is what will happen if Government abolishes Taxation and begins borrowing every penny expended. Would you invest in or lend to a company if such were the returns? To a bank? Then why not to a nation or community?
Public finance has always been an area of interest because of a small tract read in book written long ago by an author long dead. Other than this, I have little to do with economics. I offer the reward because I have done as much as I can with the idea. The rest is up to people like yourself to give me an answer as to whether the effort was worth it.

Regards,
Economart

Date: Sun, Feb 8, 2015 at 2:23 PM

Dear Economart,

Nobody is saying that a government’s (or a company’s or bank’s) creditworthiness is solely a function of tax revenue (or profits) in the present period. You are right that people still buy government debt during a recession, but if a government’s failure to put its books in order means that it has no chance of repaying its debt in the long run, then they do stop refinancing it. Bank incur losses from time to time without people demanding repayment, but when a bank is clearly insolvent (and thus unable to return to profitability) people do refuse to lend to it.

Your proposal is interesting because it is more than an economic one. You effectively believe that the government should be replaced by a board of works, which only approves expenditures when the IRR is above a certain threshold. This is a commendable idea, but is one that it i.) unlikely to be popular and ii.) isn’t much related to modern economics.

I am happy to help with your theory, but as things stand I think it is unlikely to be taken seriously by many people. Your desire to radically shrink the state already puts your scheme on the fringes of politics. Your argument that public debt in any case isn’t a burden is only true if that debt is effectively monetised.

Out of interest what was the book by an author long dead? And how long have you spend working on this scheme? Again, what is your professional background?

Best wishes,
Respondent

Date: Sun, Feb 8, 2015 at 2:40 PM

Hello Respondent,

Government does not have any books. It has no money. It has no income. It has no assets. It confiscates the property of others to pay the bills incurred for public expenditures that benefit the public. It has done so since its inception.

The community will have its government wade into the financial markets offering competitive rates. If the project be worthy, it shall receive the required funds. If not, it won’t. There is no board of works unless one considers the government apparatus as one. This way the public shall have full control over the expenditures of government. BBC – no. Windfarms operated by the PM’s closest friends – no. Interminable welfare cheques – no. Good roads – yes. Good educators – yes. Rotten educators – no. Publicly funded universities – no or much reduced. Trades colleges – much enhanced. That is how it shall work.

I did ask a question in there.

###
So, if by Borrowing, the assets of a nation that serve as the security of the loans rises by $2 or $3 for every dollar invested, is the public credit enhanced or diminished?

That is what will happen if Government abolishes Taxation and begins borrowing every penny expended. Would you invest in or lend to a company if such were the returns? To a bank? Then why not to a nation or community?

###
The idea will be taken seriously by most when one party gets out there, promises massive tax cuts, wins an election and then abolishes Taxation. As the economy thrives, as foreign investment floods the place, as government is restricted to beneficial expenditures and forced to discard the rest, perhaps the academics will put their heads together and come up with the always entertaining declaration that such cannot be.

Now you answer my question and I shall answer yours.

Regards,
Economart

Date: Sun, Feb 8, 2015 at 2:46 PM

Dear Economart,

The issue is that you are conflating the government with the nation. Borrowing $1billion to spend on good roads which increase national wealth by $2-3billion is clearly a good investment. But it doesn’t necessarily make the government more creditworthy unless the new roads generate new government revenues, for example through tolls or petrol taxation. I know that the government has no income or assets of its own- that is why it has to seize them from the citizenry in order to repay its debts.

So no, the public credit is not enhanced.

Respondent

Date: Sun, Feb 8, 2015 at 2:53 PM

Hello Respondent,

What does the government rely upon now to ensure it is creditworthy? Does it rely upon sales of its own products? The wages for labours employed in making desired goods?

So you freely admit that it is the property, income, and assets of the citizens that fund government. So, I shall repeat the question with a slight change. If the source of government funds is enhanced by $2 or $3 for every dollar in expended on public investments, is the public credit enhanced?

Economart

Date: Sun, Feb 8, 2015 at 2:55 PM

Enhancing the source of funds is necessary but not sufficient to enhance public creditworthiness. For the investment to enhance public creditworthiness it is also necessary for the government to be able to recoup some of the funds through taxation.

Respondent

Date: Sun, Feb 8, 2015 at 2:58 PM

Hello Respondent,

So I shall repeat the question with a slight change, if the source of government funds is enhanced by $2 or $3 for every dollar expended upon public investments, is the ability of the government to recoup greater revenues from Taxation not enhanced also?

Economart

Date: Sun, Feb 8, 2015 at 3:00 PM

Yes! But nobody denies that- what people deny is that you don’t need taxation at all

Respondent

Date: Sun, Feb 8, 2015 at 3:03 PM

Hello Respondent,

Yes. One would expect that a wealthier people will furnish greater tax revenues. Now, would one not also expect that a government’s ability to borrow is also enhanced with augmented wealth?

Economart

Date: Sun, Feb 8, 2015 at 3:04 PM

Clearly

Respondent

Date: Sun, Feb 8, 2015 at 3:07 PM

Hello Respondent,

So if the source of government funds is enhanced by $2 or $3 for every dollar invested in public expenditures, is not the public credit, the ability of government to borrow, also enhanced? I say public because the subject is Public Finance, not government finance.

Economart

Date: Sun, Feb 8, 2015 at 3:08 PM

Yes, but only if you allow for the existence of taxes.

Respondent

Date: Sun, Feb 8, 2015 at 3:12 PM

Hello Respondent,

Great. A wealthier society means a larger public credit. I didn’t say that government could not tax. They may tax all they wish. Just as I say that one may not reduce their personal debts. What I argue is that a person will never reduce their debts when the cost of doing so is immense and the benefit nil. To pay off a debt in such an instance is madness. It lowers one’s wealth. It does not add to it. And that is all I have said regarding Taxation. The tool is there. It will never be employed because it does not augment the public credit, it subtracts from it.

So why would you personal finances great harm? Why would a nation?

Economart

Date: Sun, Feb 8, 2015 at 3:15 PM

I see where you are coming from, but I am afraid it is also necessary to consider government finance alongside what you call public finance.

Respondent

Date: Sun, Feb 8, 2015 at 3:22 PM

Hello Respondent,

There is no subject called Government Finance. It is called public finance because the public must finance all things Government. Government is not a Tesco’s.

The sole purpose of Government is to fund public expenditures that enhance the health, well-being and wealth of a nation. It can be done by Borrowing, an inducement, or Taxation, a penalty. With Borrowing one sheds all the costs inherent in Taxation. That’s it.

I can’t tell you where the idea came from. That is a personal thing. 1 day I shall, but not now.

Economart

Date: Sun, Feb 8, 2015 at 3:19 PM

Dear Economart,

I also believe that we are also arguing at cross purposes. I hope that this discussion was useful to you, but in future I will take longer to reply to your emails. If you want to help the public finances/investment in human capital etc I will send you my bank account details.

Best wishes,

Respondent

Date: Sun, Feb 8, 2015 at 3:25 PM

Hello Respondent,

I don’t think so. The problem is that government is a growing enterprise with nothing to stop it attaining its unavoidable end in another Soviet State. Taxation had some value in that it kept expenditures down. Mixed with Borrowing, it is now useless. There is only 1 other way. And its almost here.

I’d love to send you the money, but if the flaw should arrive, someone’s got to pay.

Economart

End of Discussion

 

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *