The I.O.U. in the U.S. Dollar

by J.D. Alt, New Economic Perspectives

One of the strangest things to understand about Modern Money Theory is why, if government doesn’t need your tax dollars in order to spend, does government tax at all? Here is an attempt at a new and “better” explanation. It is based on the insight that the government DOES, in fact, need to collect taxes, but the “taxes” it collects are not your “tax dollars.” This may sound like gibberish, but stick with me a moment and see if the following doesn’t make sense—and cast a new light on OTHER things as well (like, for example, the “national debt”).

A paper dollar, printed by the sovereign U.S. government, is nothing more—and nothing OTHER than—a tax I.O.U. which states, in effect: “The sovereign U.S. government owes the bearer one dollar of tax credit on the day taxes are due.

Because of this I.O.U. pledge, the government is able to use the paper dollar, in the MEANTIME, to purchase real goods and services from private citizens and businesses. The citizens and businesses are willing to exchange their real goods and services for the paper dollars because they will NEED the I.O.U.s (dollars) to present to the government on “tax-day”. The mental “trick” here is to realize that the ACTUAL taxes are collected when the government purchases the real goods and services—those goods and services being, in fact, the actual taxes paid. (This is perfectly logical, when you consider it, because what the government WANTS are the goods and services—NOT its own paper I.O.U.s which it can print up any time it wants.)

What happens on “tax-day”, then,  is the citizens present the sovereign government with the paper I.O.U.s they have earned providing goods and services to the government (and/or to each other), and their taxes are extinguished. Again, the mental “trick” here is to realize that the transaction that takes place on “tax-day” is not actually the PAYMENT of taxes but, instead, is the citizens declaring they have ALREADY paid their taxes (the real goods and services they provided earlier)—and the paper I.O.U.s are the PROOF of that payment.

By logic, then, what does the government do with those I.O.U.s presented as proof of taxes paid? They are simply destroyed because owning a piece of paper that says you owe YOURSELF one dollar of tax credit is meaningless. The I.O.U. is only of value to the citizen who is required by law to pay taxes, and once it is used for that purpose, it is extinguished.

This perspective supports and, I think, clarifies the general Modern Money propositions that:

a)     Taxes drive money—in other words, private citizens are willing to provide goods and services to the government in exchange for government’s paper dollars because they NEED those dollars (government I.O.U.s) to pay their future taxes.

b)    The government must create and then SPEND its dollars in order for the private citizens to earn the dollars they need to pay their taxes.

c)    When the government collects “tax dollars” it is NOT collecting something it “needs” but, instead, is simply collecting back (or cancelling) its own I.O.U.s (The ACTUAL taxes are the real goods and services it had previously received in return for those I.O.U.s).

d)    Because the government imposes a continuous, outstanding tax liability on its citizens and businesses, the paper I.O.U.s (dollars) have value in the private market and become the standard currency of exchange for goods and services between private citizens and businesses.

e)    In order for this private sector economy to grow, the government has to spend MORE I.O.U.s (dollars) than it collects back (cancels) on tax-day. If it does NOT spend more than it collects, the private citizens and businesses will have no “net” dollars for private commerce and, as a consequence, there will be fewer real goods and services for the government to purchase. The more I.O.U.s the government spends, relative to what it collects back in taxes, the MORE net dollars remain in the private sector economy and, assuming the real resources are available to put those dollars to work, the economy will add jobs and produce more goods and services.

f)      Because the government must spend MORE dollars (I.O.U.s) than it collects back (cancels) on tax-day, it appears to be “deficit spending”—spending more than it “earns”. This terminology is logically MISLEADING, however, because the only thing the government can “earn” by collecting “tax dollars” is its own I.O.U.s which cannot be a form of “earning” in any meaningful sense of the term, since it is meaningless to own a piece of paper that says you “owe yourself.”

This brings us, then, to the question: If a paper dollar is a tax I.O.U., what is a Treasury bond? The common understanding is that Treasury bonds represent a “debt” which the government must “repay” in the future. But look how our new perspective requires that view to shift:

Let’s say a private citizen “buys” a Treasury bond. What takes place? The citizen exchanges say a hundred paper tax I.O.U.s for another piece of paper (the Treasury bond) which is…what? It is another government tax I.O.U. pledging to pay, at a specified time in the future, a hundred and SEVEN paper tax I.O.U.s (the original hundred plus 7 percent interest.) What is unique in this transaction is that, while it appears the government is in “debt” to the citizen, what it “owes” the citizen is nothing more than its own promise to accept these I.O.U.s (dollars) as tax payments. There is no logical sense I can think of in which that can be considered a meaningful debt.

The national “debt crisis” which our enlightened politicians and economic pundits flail us with on a daily basis—demanding our obeisance to their schemes of imposed austerity—cannot, therefore, really EXIST. It is a figment of their overwrought imaginations. Simple reason tells us that—so long as the sovereign government has the authority to declare that its citizens shall pay taxes—it is an effortless exercise for that government to continuously and FOREVER issue pieces of paper which simply state the government will accept that paper as payment of taxes due to itself. The implications of this for a TRUE national prosperity are enormous.
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19 replies on “The I.O.U. in the U.S. Dollar”

  1. “it appears the government is in “debt” to the citizen, what it “owes” the citizen is nothing more than its own promise to accept these I.O.U.s (dollars) as tax payments”    
     
    No! It will collect from a child or a grandchild, a tax spending which benefitted the father or the grandfather.

  2. No I can’t agree the logic here. What the paper Dollar is a Government substitute for barter trade, ie. we can transport the paper Worldwide for nothing unless TTR etc.,  But if the coffin maker transfers coffins to buy bread the baker pays freight plus wood and profit and labor value. Then he must pay transport a second time to send the surplus coffins to USA to buy wheat or flour ultimate the wheat farmer can only use a few coffins, so on many he pays freight a 3rd time to buy fertilizer and so on till the miner bringing bird droppings to make fertilizer may be selling coffins at 100 times the real cost of coffins. So other coffin users buy coffins direct from China at a fraction of phosphate miner price. So Government uses import duties and dumping duties and WTO and TPP cunning legal rhetoric to help miner sell coffins against Chinese cheaper coffins.
     
    If the paper dollar is just as here stated prepaid tax, then what is the half billion cash the billionaire has in Bonds and banks? He will never pay $500,000 future tax at 15% (or zero for offshore bank incomers) to pay $1/2 bn tax he has earned taxable in USA $3,000,000,000 and that after $500,000 tax leaves him with another paper $2,500,000,000 prepaid tax.  That sure doesn’t compute.
     
    What the paper $1 represents is our share of pre-earned gold in Fort_Knox (which I suspect may already be gold plated tungsten) or other USA net worth of all Government assets, gold, land, buildings, computers and uniforms, guns and Mars rovers. Now where the trouble of inflation and loss of net worth comes for a nation like USA is that Americans have proselytising to disseminate on an unsuspecting Universe, they have a desire to win more states like new Mexicoo, Texas, Hawaii, Alaska and Israel.  
     
    They don’t understand English language too well so they re-write meaning like “Defence” as meaning 9/11 retaliation, vendetta, and Islam proselytising.  Hoorah for Billy and Frankland Bush buddies.
     
    Or perhaps they believe the old general Zun Zhi or Wu (some 500 BC I think?) adages “The best defence is a good offence” or “when in doubt attack” or from the younger King James Bibles of the evangelists in USA, “do unto others as they might do unto you” or the Harvard version better “do to others as they would do to you, but di it first”. Whatever the $11tr USD paper dollars spent enriching USA Billionaire owners of Lockheed, GEC, and all their clan to Attack poor Islamic Nations like Afghanistan, Iraq, now Iran in support of their buddy Christians and Jews in Israel desire to gain bugger territories first Israel then West Bank Palestine and so on never ending. Far cheaper to migrate Israel jews to their USA relatives in USA as a  new consumers in-lieu of ex-Vietnamese, and other enemies.
     
    Such war waste of precious paper USA carter certificates devaluing they should use that same fund to improve the USA $3.6tr needed to bring their abandoned infrastructure up to date slowly using unemployed Americans not more wealth creating for that dreaded 1% War machine owners?
     
    Well that’s just my version of the barter certificates not merely pre-paid tax, as Corporate America is a biggest business that can generate it’s own income and profits without tax, the tax is just to buy Wars and pay VA cost for the vets brought home awaiting the 22 suicides a day this badly harmed war fodder called human soldiers  “Defending” USA 10,000 miles away in deserts, and Jungles of other Sovereigns.

  3. @brunssd It has no political undertone whatsoever. Just ask yourself who is going to be around to pay a US 20 year bond?

  4. At least with bthe Gold standard behind Sterling as World Currency we had a closer link with reality. Perhaps the Chinese Yuan will get back to basics when they destroy USD as a World Currency base when PRC owns about $1tr now and will have the rest this decade. Bye Bye USD and New World American Order (see back of that same USD paper gold) “Anuit Coeptus, Novo Seclorum Ordum” certified by Masonic Lodge seal of approval. Betterv ask Billy & Frankland Graham these days.

  5. @Per Kurowski Why Ben Bernanke’s magic computer at the Fed will still be around and it will work exactly as it does now.
     
    Politics is, as one V. I. Lenin said, “who does what to whom”.  Taxing is political at its very core.

  6. @brunssd The Chinese appetite might not be the same and they might want to make withdrawings.

  7. Intriguing thought process.
    A missing link not mentioned in that process – fractional bank lending that increases the money supply. Thus – all is not dependent on the gov’t to spend…in order for there to be prosperity. The less the gov’t spends and the more the (innovative/competitive) private sector controls the economy – the more sustainable base of activity. Miss allocation of capital by gov’t (spending, excessive reg’s and controls) is unsustainable.
     
    The concept of extinguishing dollars through taxation is very relevent. Buting gov’t bonds is another form of taking money out of circulation – hence Bernanke’s attempt at goosing the equity market with zerobound rate(s) targets.
     
    An overlooked discussion is the reduced fixed income yields received by traditional bond holders. How much demand and confidence is lost by coercing capital – or attempting to coerce – into a risky sector versus historically safe / reasonable returns on savings. Tears down the fabric of trust in the fiat in my view.

  8. Here is where USA Treasury War budgets go to:- (Today’s RSN News)
    Cheney’s Halliburton Made $39.5 Billion on Iraq War
    By Angelo Young, International Business Times
    20 March 13
     
    he accounting of the financial cost of the nearly decade-long Iraq War will go on for years, but a recent analysis has shed light on the companies that made money off the war by providing support services as the privatization of what were former U.S. military operations rose to unprecedented levels.
    Private or publicly listed firms received at least $138 billion of U.S. taxpayer money for government contracts for services that included providing private security, building infrastructure and feeding the troops.
    Ten contractors received 52 percent of the funds, according to an analysis by the Financial Times that was published Tuesday.
    The No. 1 recipient?
    Houston-based energy-focused engineering and construction firm KBR, Inc. (NYSE:KBR), which was spun off from its parent, oilfield services provider Halliburton Co. (NYSE:HAL), in 2007.
    The company was given $39.5 billion in Iraq-related contracts over the past decade, with many of the deals given without any bidding from competing firms, such as a $568-million contract renewal in 2010 to provide housing, meals, water and bathroom services to soldiers, a deal that led to a Justice Department lawsuit over alleged kickbacks, as reported by Bloomberg.
    Who were Nos. 2 and 3?
    Agility Logistics (KSE:AGLTY) of Kuwait and the state-owned Kuwait Petroleum Corp. Together, these firms garnered $13.5 billion of U.S. contracts.
    As private enterprise entered the war zone at unprecedented levels, the amount of corruption ballooned, even if most contractors performed their duties as expected.
    According to the bipartisan Commission on Wartime Contracting in Iraq and Afghanistan, the level of corruption by defense contractors may be as high as $60 billion. Disciplined soldiers that would traditionally do many of the tasks are commissioned by private and publicly listed companies.
    Even without the graft, the costs of paying for these services are higher than paying governement employees or soldiers to do them because of the profit motive involved. No-bid contracting – when companies get to name their price with no competing bid – didn’t lower legitimate expenses. (Despite promises by President Barack Obama to reel in this habit, the trend toward granting favored companies federal contracts without considering competing bids continued to grow, by 9 percent last year, according to the Washington Post.)
    Even though the military has largely pulled out of Iraq, private contractors remain on the ground and continue to reap U.S. government contracts. For example, the U.S. State Department estimates that taxpayers will dole out $3 billion to private guards for the government’s sprawling embassy in Baghdad.
    The costs of paying private and publicly listed war profiteers seem miniscule in light of the total bill for the war.
    Last week, the Costs of War Project by the Watson Institute for International Studies at Brown University said the war in Iraq cost $1.7 trillion dollars, not including the $490 billion in immediate benefits owed to veterans of the war and the lifetime benefits that will be owed to them or their next of kin.

  9. Absolutely Rob
    too much authority to control larger chunks of the economy will produce winners and losers in collection of Congressional directed purchase orders. Congress spends first and then the ‘fortunate winners’ – primarily of function of crony capitalism – receive EFT credits from treasury to their accounts. Initially in the name of ‘defense’ – of which we do need to be prepared to do from time to time – and then as a construct to ‘maintain economic activity’ whether it’s defense or regulatory beaurocracies…. either way – it’s to obtain votes for re-election – BOTH parties.
     
    The system is broke and strong leadership, based on competitive private sector strength and accountability VS further financialization/ leveraging of the economy, cronyism and favoritism – will lead us to a sustainable economy.

  10. @DigDeep
     The thing is when Government throw away your tax & all your reserve funds on Wars, and 1%’er owned Corporate USA implanted automation to increase productivity whilst replacing man wages and compete on a developing world output, they thought they could substitute export for domestic consumption lost in the layoffs lack of disposable consumerism by unemployed Yankees, by selling to Jungle Monkey fools of the developing World Asia. But over 60 years since WW II the Jungle monkeys woke up left the jungle and USA technical knowhow, machines etc was also exported now the monkeys are the competition with mechanised and better quality often.
     
    So the 1%’ers had all that stored USD loot and what to do for safe returns? Give to Banks to lend Fed as Sovereign Bonds. Not enough Wars (attacking 63 Nations in 60 years) so give more to Banks risky plastic card consumer credit, when they can’t pay back the principal and 28% interest/charges, Bundle the debt and sell to collectors who foreclose on debtor houses, sell and burst the real-estate bubble,  And leave the suckers in rented housing the American Dream in the dustbin and crying poverty of 47% non-worker Americans probably half them are essential and deserving veterans damaged in those USA wars of economic expansionism and fuel for the bloody same automation that took the mans job, it now takes his fuel and food.
     
    Every action has an equal & opposite reaction in economic practical economics and the Krugman poure theorists surely can’t see that.

  11. @DigDeep
     The thing is when Government throw away your tax & all your reserve funds on Wars, and 1%’er owned Corporate USA implanted automation to increase productivity whilst replacing man wages and compete on a developing world output, they thought they could substitute export for domestic consumption lost in the layoffs lack of disposable consumerism by unemployed Yankees, by selling to Jungle Monkey fools of the developing World Asia. But over 60 years since WW II the Jungle monkeys woke up left the jungle and USA technical knowhow, machines etc was also exported now the monkeys are the competition with mechanised and better quality often.
     
    So the 1%’ers had all that stored USD loot and what to do for safe returns? Give to Banks to lend Fed as Sovereign Bonds. Not enough Wars (attacking 63 Nations in 60 years) so give more to Banks risky plastic card consumer credit, when they can’t pay back the principal and 28% interest/charges, Bundle the debt and sell to collectors who foreclose on debtor houses, sell and burst the real-estate bubble,  And leave the suckers in rented housing the American Dream in the dustbin and crying poverty of 47% non-worker Americans probably half them are essential and deserving veterans damaged in those USA wars of economic expansionism and fuel for the bloody same automation that took the mans job, it now takes his fuel and food.
     
    Every action has an equal & opposite reaction in economic practical economics and the Krugman pure theorists surely can’t see that.

  12. Let me re-state the article’s thesis a little more succinctly:
     
    The Government prints money so that it can but goods, services and votes from the people they like.  People they don’t like don’t get paid in “tax credits” for the goods, services, and votes that are paid to others, but are required to pay the same tax rate as those who suck up government goods and services and vote the way the government wants them to vote.
     
    Meanwhile, those who are not favored by the Washington elite continue to use US currency, although it has less value relative to the products they produce and sell.  They should probably ask themselves:  why should I produce and sell more if the money I get is worth less and my taxes are increased to pay for the goods, services and votes purchased by the US Government?
     
    The debt crisis is not the “figment of overwrought imaginations” that is foisted on Main Street by “enlightened politicians and economic pundits”.  The debt crisis is coming from the grassroots of those who have entrusted their financial well-being in a currency issued by a government that is supposed to be of the people, by the people and for the people.  The debt crisis is borne of mistrust in a government that is supposed to be all these things, but has become something a little more self-serving.

  13. Majormike3,
    That’s exactly the Republicans must be destroyed they are of the rich, by the rich, for the rich. Democrats are sucking too much to the rich for the necessary votes, you have to be in power to help your own lower socio/economic people, but you need the rich money and leverage to do much. FDR the longest running President now Obama by fair or surrogate Experts like Weise say he will be 3 to 4 terms in effect, or fact.
     
    So forget GOP Tea Parties they will be cold-waring internally and out of power a long time in memory of 2 proselytising Bushes and 2 Grahams leverages. Dems will of bribe move further right so plan now for 2020 change to 2 party Democrats (Liberal as Aussie party “Liberal”) and get OWS & Avarez types working with new Union power a return to Bargaining for the lower socio/economic worker, be it collective Bargaining as defunct under Bush, or Aussie style Union Power in a “Labor Party Aussie style) for the left. Republicans’ Party will die of self perpetuating greed and infighting with no power leverage to hold their share of liberals.
    QED
    PS: Do it now in Obama with balls years, see he has moved to sucking Israel like the richer WallStreeters and Hollywood brainwashers team.

  14. Long comment submitted by email, entered in two parts.
    From Sig Silber, Part 2
    People mistakenly believe that it is the goal of government to manage growth when in reality the major tool government uses is to manage shortages. Sometimes they end up being too successful and have to reverse course. The housing crisis was a failure to manage shortages of housing and the World has paid a terrible price for that. Productivity is threatening to reduce the shortage of labor so that is our latest problem.  The National Debt is probably the least important thing to worry about. But both Republicans and Democrats do worry about it but Democrats seem to worry about it mainly when they are addressing the income distribution issue. Addressing income inequality may be a good thing to do but it seems that most (not all) of the ideas for doing this essentially and perversely redistribute money from the poor to the rich. Not everyone will agree with my assessment. Obamacare is an example of a social program that may worsen income distribution.  I agree that it is not necessary to read the bills passed by the U.S. Congress. Just follow the trail of campaign contributions. Poor people can provide votes and rich people and corporations can provide money. Those who have the talent to be able to steal from the poor (without them realizing it) and launder the money through the rich are called “elected officials”. Republicans are reevaluating how to improve their flim flam technique to match up better to their opposition. Republicans obsess about the National Debt every waking moment. State debt is a far different issue since States have not received the right to create their own fiat money. If they had that right, it would create a complicated situation since most wallets do not come with 50 compartments. And I think we tried that once in our history and it did not work out very well. In my opinion, one of the reasons why the National Debt is misunderstood is that the relationship between the National Debt and the Money Supply is not well understood. I don’t understand it. They are related but not the same thing. I am sure it exists out there but I do not recall coming across a good analysis of the interaction between those two systems which share in common similar units; they are both expressed in dollars. Stimulating the economy raises the national debt and necessitates an increase in the money supply. In a way it is the intersection of monetary and fiscal policies.  I think a lot of the angst that is expressed on the street is concern that the two systems may not be well integrated and those managing the two systems may not be working together as well as they should be. I have that concern also but am comforted by my belief that monetary policy has pretty much obliterated fiscal policy so that the two systems have essentially merged into one. That is probably not ideal and is not characteristic of a democracy. But it is the way it is.  I would like to see the icons of Modern Monetary Theory address this issue and perhaps empirically rather than just logically show us how the two systems interrelate.

  15. Long comment submitted by email, entered in two parts.
    From Sig Silber, Part 1
    What a sensationally great article which I have separately forwarded to a small number of friends and some who I just enjoy poking fun at who tearfully and passionately drone on and on about how the National Debt is stealing from our children and grandchildren. This article provides one more piece of the puzzle for those interested in substituting knowledge for emotion. No matter how soberly it is expressed, the National Debt is not going to take the US down. It is not like private debt. It is more like the private sector selling goods and services to the Federal Government on credit. The private sector gets paid with IOU’s and the Federal Government has obligations to pay off those IOU’s for that which they have purchased ….or even given away. Since even when the Federal Government gives something away, the purchasing power has been moved into the private sector.  Expenditures outside the US not to US citizens create more of a problem if the U.S. has not gotten back something worthwhile in return. But even then the money was put into the US Private Sector to provide foreign giveaways or money was given to foreign countries or individuals and they have only one way of benefiting from the money and that eventually moves it back into the U.S. So when the National Debt increases, the ability to service and even repay the debt is also created in the Private Sector to be called upon to service the debt and reduce the debt if and when lowering the National Debt becomes the goal. More debt means more ability in the private sector to service and pay off the debt. A person can borrow money and squander it and be in trouble hence the natural concern about being in debt. Even a State can do that. But an entire economy can not do that. The ability to repay the debt moves around but it remains in the private sector. What one person spends ends up in the pockets of someone else.  Wealth is a bit different as the value of assets can disappear into thin air. When that happens we have a crisis and there is no point in confiscating that which no longer has value so the strategy is to re-inflate asset values so that they can then be confiscated. There are a lot of ways to do this. They all involve reducing supply and increasing demand. That is how we manage water in New Mexico and taxi licenses (medallions) in NYC. States cannot issue currency but they can issue water permits. Cities and counties can issue building permits. If they issue too many, the value of assets goes down and tax receipts go down. If they issue too few, there are fewer potential taxpayers. So figuring out the optimal level of shortage to maintain is the counterpart to the way the Federal Government manages the overall economy.

  16. John this livefyer This counter wrong I enter 400 lined by 100 characters and it calls that over 8000 characters?

  17. JohnLounsbury   said ~ Long   comment submitted by email, entered in two parts. From Sig Silber, (olessn than 4,000 characters)
    What a sensationally great article which I have   separately forwarded to a small number of friends and some who I just enjoy   poking fun at who tearfully and passionately drone on and on about how the   National Debt is stealing from our children and grandchildren.
    Rob Carter   will attempt to reply to this point first.
    In essence   it’s the answer to suggest the very academic Professor Krugman  type argument:-
    I have warned   many people many times as I have merely run a Local Government Treasury   Committee of the elected Councilmen, I have contributed to State &   National Treasury Practicalities via Party committee and merely rely on 40+   years of Economic theory as applicable in practice in Government &   Business for good effect. I have uncovered as many economic theories that   merely promise what they can’t deliver in practice. Here goes
    Why is it   permissible in economic reality to reverse the idea of Next Generation merely   getting all their inherited FOC assets of Nation Building, to then support   the retired generation till death. Firstly it encourages euthanasia and other   negative parent feelings in the next gen. Also because it encourages greedy   youth to waste during their development stage as Mummies love to pamper the   product of their own sex pleasure and reproductive system, they gie their   kids more than they had as youths, and fathers in power love giving what   mummy demands for her sexual and domestic service to husbands. In the   training era kids play drugs, casinos, fancy clothes and cars and a tone of   negative phenomenon of human perversion learning, that merely feeds “Trickle   Up” profit hoarding to the miser 1% problem makers.
    However to   charge future generations with debt to service at say 30% cost of the Assets   they get in good repair when that next gen get them, discourages euthanasia   “mum & dad can pay their own debts, why should we as the law   requires we get their leftovers as out starting bankroll.”
    The of next   generation fail to see what Mum & Dad suffered and went without to leave   them such great infrastructure and other kick start, early defense   capability, scientific advancement and fort Knox gold hoards for emergency,   long with UN for a better World and IDRD for problem evaluation, governance   and repair emergency. Above all a Monetary system rather than mere barter and   fiscal head scratching band aids.
    On the credit   side they the youth may wish for more luxurious assets but what they get is   more than adequate and free save whatever debt they must now service and I   consider a 30% debt as a very cheap acquisition of those assets a cheap cost   from our disposable incomes to service the debt 30% considering to buy new in   today wage/currency parity would be at least double, 100% more and we pay   only say 20% of value parity interest and our wage improved say 15% is most   of that cost then the materials today are more rare and in greater demand by   the now developed World Sectors, are costing 60% more so we are buying 100%   depreciated or amortized to say 60% when we get it and we save 60%-5% more   net worth in today’s value ie the residual after depreciation worth is 60% +   saving 55% on replacement cost to same depreciated value means we the youth   won a FOC Gift start of some 115% of buying new values we would paying off   for 5 generations otherwise. 
    So lets look   at economics from Practical management not theory academia when their   theories are mostly not even sufficiently matured to repeat in a clinical   laboratory of real life.
    Sig Siber says:-This article provides one more piece   of the puzzle for those interested in substituting knowledge for emotion.
    Rob Carter as   I say sure forget Mummy’s emotional blackmail for favoring daddy and daddy’s   interim satisfaction urges, be practical by all means knowledge will serve   better I promise.

  18. Sig Siber says:-This article provides one more piece of the puzzle for those interested in substituting knowledge for emotion.
    Rob Carter as I say sure forget Mummy’s emotional blackmail for favoring daddy and daddy’s interim satisfaction urges, be practical by all means knowledge will serve better I promise.
     
    Sig Siber says:- No matter how soberly it is expressed, the National Debt is not going to take the US down. It is not like private debt. It is more like the private sector selling goods and services to the Federal Government on credit. The private sector gets paid with IOU’s and the Federal Government has obligations to pay off those IOU’s for that which they have purchased ….or even given away. Since even when the Federal Government gives something away, the purchasing power has been moved into the private sector.
    Rob Carter as I say sure good news we can now sell more automated over-productivity to the 47% unemployed thereby, rather than have to use legal WTO and FDA tricks to export and destroy other Nation’s economies.   
     
    Sig Siber says:-Expenditures outside the US not to US citizens create more of a problem if the U.S. has not gotten back something worthwhile in return. But even then the money was put into the US Private Sector to provide foreign giveaways or money was given to foreign countries or individuals and they have only one way of benefiting from the money and that eventually moves it back into the U.S. So when the National Debt increases, the ability to service and even repay the debt is also created in the Private Sector to be called upon to service the debt and reduce the debt if and when lowering the National Debt becomes the goal. More debt means more ability in the private sector to service and pay off the debt.
     
    A person can borrow money and squander it and be in trouble hence the natural concern about being in debt. Even a State can do that. But an entire economy can not do that. The ability to repay the debt moves around but it remains in the private sector. What one person spends ends up in the pockets of someone else.  Wealth is a bit different as the value of assets can disappear into thin air. When that happens we have a crisis and there is no point in confiscating that which no longer has value so the strategy is to re-inflate asset values so that they can then be confiscated. There are a lot of ways to do this. They all involve reducing supply and increasing demand. That is how we manage water in New Mexico and taxi licenses (medallions) in NYC. States cannot issue currency but they can issue water permits. Cities and counties can issue building permits. If they issue too many, the value of assets goes down and tax receipts go down. If they issue too few, there are fewer potential taxpayers. So figuring out the optimal level of shortage to maintain is the counterpart to the way the Federal Government manages the overall economy.
    Rob Carter as the Nation runs out of welfare cash, for the 47% new unemployed welfare recipients, as the automats tke over eating only fuel and power, the cash replacement need can’t be taxed on the 47% with zero non-welfare cash income? It can’t be taxed higher on the SME middle class as thier businesses are running on low profit with domestic consumption so heavily limited by low wage workers and no wage 47% welfare drainers. Democrats never have full control of 4 levels of government at same time, President, Senate, Representative House and Judiciary so the 1% who control them prevent the democrats from borrowing more to lend the poor, then at the same time those vultures get even richer by lending to the general public via plastic cards at just 28% interest and charges on unreliable debt, we spend it to consume that SME and Upper-class super rich 1% machined products and pay more competing for their machine fuel & power. So they shift the debt to sovereign loan more secure Treasury Bonds and still reep the system gains as more hoarding.  Oh yes and the system they filibuster or block-vote out Democrat plans, of “Robynhoodism” but welcome their own bailouts. Then we mustn’t forget they move to offshore ways leaving at best a 15% tax for our treasury fund, we can’t change that. They then steal back (Foreclose on our American dream, the security for the plastic card loans we have zero wage and low welfare to pay back with, now we have rent of their homes to profit the 1% even further.  Where for Christ’s sake where are we ever to catch up without the USSR Minister jailed Professor Kondratiev Wave theory 80 years ago forecast revolution in the West? The Un-industrial Revolution before the 2029 depression and 2040 war then 2050 revolution?

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