Re: The budget deficit creates wealth
- From: "The Trucker" <mikcob@xxxxxxxxxxx>
- Date: Wed, 8 Nov 2006 16:56:45 -0800
"Arthur Dent" <fd4scy@xxxxxxxxxxx> wrote in message
news:1163013023.195511.252930@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
.. Doo wrote:
On Tue, 24 Oct 2006 08:25:36 -0400, "Jacques Gambu"Ø have $1,000 cash to pay for it.
<123jgambuxyz@xxxxxxxxxxx> wrote:
The budget deficit creates wealth
Such nonsense ideas never stop circulating.
The public debt is a liability for Uncle Sam but it is an asset for the
people who own Treasury bonds. If they feel rich they go out and buy stuff.
Let's see. To buy a $1,000 Treasury bond from Uncle Sam one must first
This is not really true.
It works kind of like this. The US government is not allowed to create
money. To raise money the governmentt collects taxes or issues bonds.
(BZZZZZZZZZZZZZZZZZZZZZZZZZZZZZT!!! As a matter of fact
the US government is the only institutuon in the USA that _can_ create
money. It simply does not do so an instead assigns that function to
the Fed. In the initial stages the Fed buys bonds from the Traesury
with money created from thin air. The Treasury spends the money
into existence and THEN ISSUES T_BILLS TO THE PUBLIC OR
LEVIES TAXES TO KEEP INFLATION AT BAY. Ask yourself
where the money came from that was used to buy the T-bills and
bonds that now represent the naional debt. You can't "borrow" money
that does not yet exist.)
A bonds issued by the govt is a form of debt. A bond is a government
promise to pay the money back with at a fixed rate of interest. Bonds
are backed by taxes.
(The money removed from the economy in step 2 is used to retire
the original loan from the Fed that came first. And yes, this is a loan
from the bond/T-bill owner to the government)
Here's the magic. The Federal Reserve buys these bonds with money it
creates entirely out of thin air.
(yes. And it does so in such a way as to control the money supply and/or
to fund the original spending of oney into the economy by the elected
government).
If the Federal Reserve had no money at all it would just print some on
a printing press.
(normal proceedure)
The Fed uses its magic money to buy govt bonds. It can say govt bonds
back the money the fed has fabricated. The good people of the Federal
Reserve Bank then pocket the interest on the bond.
(that interest is refundedto the Treasury)
The process is described right here on the Fed's own web site
http://www.federalreserve.gov/monetarypolicy/reservereq.htm
This is also the reason that income tax was introduced at the same time
as the federal reserve act. Before the fed there was no income tax. As
long as you have privatly issued notes you will always have tax
increases.
(that does not compute)
--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org
.
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