I listened to a weird "Planet Money" podcast episode recently that claimed that a better way to do government spending is to eliminate all taxes and instead fund government projects by printing money. Inflation, they said, would not be a problem because prices are not set by the relative amount of money in circulation, but by the relative income level of consumers.
As evidence they cited the way banks currently make loans. When a bank approves a loan of, say, half a million dollars for you to buy a house, they don't actually have half a million in cash reserves to hand out to the seller of the home. They create a negative balance of half a million digitally from thin air, assign it to you, then electronically wire half a million digitally to the seller. There is effectively no limit to the number of times they can do this, except government regulation. "Money" created from debt is indistinguishable from cash outside the bank.
So, why not let governments do the same thing?
Utterly bizarre. Among the various objections I had to it was: eliminating taxes means eliminating the ability to charge or penalize people different amounts based on their different usage of services.
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Date: 29/11/18 00:22 (UTC)As evidence they cited the way banks currently make loans. When a bank approves a loan of, say, half a million dollars for you to buy a house, they don't actually have half a million in cash reserves to hand out to the seller of the home. They create a negative balance of half a million digitally from thin air, assign it to you, then electronically wire half a million digitally to the seller. There is effectively no limit to the number of times they can do this, except government regulation. "Money" created from debt is indistinguishable from cash outside the bank.
So, why not let governments do the same thing?
Utterly bizarre. Among the various objections I had to it was: eliminating taxes means eliminating the ability to charge or penalize people different amounts based on their different usage of services.