Re: Refuting supply-side economics

royls_at_telus.net
Date: 09/26/04 

Date: Sun, 26 Sep 2004 18:52:12 GMT

On Sun, 26 Sep 2004 16:49:56 GMT, William F Hummel
<wfhummel@comcast.net> wrote:

>The government doesn't borrow because it _needs_ the money.

Correct. It borrows in order to shift the burden of taxation off of
those who currently have the money and onto those who will pay the
future taxes.

>It is the
>public that needs base money in order to pay its taxes and to back the
>credit money used in daily commerce. The government has unlimited
>spending power in its own base money (currency and credits at the
>central bank). It borrows only to recapture what it deficit spends,
>the purpose being to maintain the purchasing power of the currency.

The purchasing power of the currency is maintained for the benefit of
those who own currency and currency-denominated assets. It could be
accomplished just as well by raising funds by taxation rather than
borrowing. But unlike the rich individuals and corporations that buy
government bonds, people who pay taxes don't get the money back at
all, let alone with interest.

>In its own self-interest, the public lends to the government when it
>has acquired more non-interest-earning base money in the aggregate
>than it wishes to hold.

IOW, when the rich can't think of anything productive to do with their
money, the government will force taxpayers to pay them interest for
the privilege of guarding it for them...

>Investing in risk-free, interest-earning
>bonds offered by the government is the only way the public can earn a
>return on its excess base money.

A guaranteed return on excess money that one can't think of anything
better to do with than let government spend may be called many things,
but "earned" is not one of them.

-- Roy L

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