A fellow named John in the post below linked us to a blog, Mike Norman Economics, that linked to a Bloomberg piece on “MMT,” or Modern Monetary Theory. Economics has never been my thing, but I did at one time follow Australian economist Steve Keen, who wrote the book Debunking Economics, which I enjoyed. I loved seeing the dreary science torn apart, as even without expertise I noticed that economists are usually wrong about all things, all the time. As JFK is said to have said, when his economic advisers screwed up he had to take the fall while they merely moved on to new advice. Since presidents are just actors, that is BS, but still a nice quote.
Steve Keen also runs the blog Debtwatch, which I visit on occasion, but still, it is economics. I just don’t absorb it well enough to claim anything more than a passing interest. I sat through threee quarters of Econ 101, 102 and 103 as a freshman in college. It was like having nails pounded in my forehead, ever so slowly.
Anyway, I mentioned in the comments a conversation I had as I sat next to a banker at a luncheon back in the 1980s. He told me, just making conversation, that during the war the government issued war bonds and there was advertising everywhere getting people to invest in them. He said that the reason had nothing to do with paying for the war, but rather to get people to spend less on consumer goods, which were in short supply. It was done to keep prices under control by easing up on consumer demand.
This is where John chimed in: “The U.S. federal government is monetarily sovereign: It can issue it’s own currency for spending, it never has to borrow money. Ever. And it can never go bankrupt.”
I followed the links above. Here is, in my view, the money quote from the Bloomberg piece:
“The reason the government doesn’t need to sell treasury securities, or levy taxes, to spend money is that the central bank, under the control of the treasury, can pay for everything by conjuring up electronic money. In MMT’s ideal world there would still be taxes, but their main purpose, aside from lessening inequality, would be as “offsets” to keep inflation under control. Taxes would drain just enough money from consumers and businesses so total spending in the economy won’t be excessive.”
That is the best explanation (and justification) for taxation that I have ever come across.