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To: PieterCasparzen

All money has to come from somewhere. If the currency issued by the government is not backed with real wealth (borrowed or taxed) then it becomes worthless, the most striking examples being Weimar Germany and Zimbabwe.

11 posted on 02/13/2013 7:04:32 PM PST by Squawk 8888 (True North- Strong Leader, Strong Dollar, Strong and Free!)
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To: Squawk 8888

If you borrowed the money you did not create it.

Get it ?

If fovernment borrows, government has to pay back.

That means government did not create money, it borrowed it.

The U.S. government does not exercise its power to create money. It borrows.

So when it spends $1T more than it takes in in taxes, it has promised to someday pay back the $1T plus interest.

But it is not creating any money ! So it will have to get it from taxes.

“Backing” money is completely unnecessary - it’s meaningless.

Think about it - if the Treasury actually wanted to have 1 ounce of gold for every $1500 it created - it would have to buy the ounce of gold from someone and pay them $1500 they printed.

Just to back the dollars that exist right now, the government would need to acquire an utterly enormous amount of gold at current prices.

Seeing as how the government has no dollars now (most dollars are out in circulation), they’d need a huge amount of gold somehow for free, just to back the dollars out in circulation now. Of course, they wouldn’t get the gold for free. And they could not print new dollars to buy the gold, because they would all need to be backed by the gold they were exchanged for. Necessarily, the price of gold would skyrocket. And the international bankers would profit immensely, to say the least.

Then the government would have to keep its gold on hand, so all spending would have to come from taxation and borrowing anyway.

It would be the same scam as we have now - Treasury needing bankers.

What gives money a stable value is if it is very hard to counterfeit (the orginal purpose of using precious metal for coins), and the supply of money is simply adequate for people and businesses to have the cash on hand that makes it possible to do business without a liquidity crunch and yet also without a lot of excess cash on investor’s balance sheets with nothing to invest in.

We have to bear in mind that population increases, and, if a nation gets wealthier over time, i.e., the amount of “nice stuff” the private sector has, per capita, increases over the generations, the total money supply should stay about the same proportion to total national wealth in terms of assets on the balance sheet.

The more money creation far outpaced or fell short of the need, depending on how much and how it entered the economy, the worse consequences there would be.

But if the money supply increased simply as necessitated by the economy, if government simply spent the new money into the economy that would work fine, like a boost on tax revenue.

If we’re worried about Congress creating too much money, we should consider that right now they’re allowing the Fed to create over $1T per year and the Treasury is spending that into the economy. The only difference from the Treasury simply creating it is that taxpayers have the $1T per year adding to their future tax bills.

IMHO, I don’t think that will be faced by our children and grandchildren, I think our generation will see that debt blow up in our face.

The private sector should never be allowed to create money, of course, because, like counterfeiting, the motivation is then to create money instead of produce and earn the money.

Government should only do the bare essentials, and tax if money creation is not sufficient for it’s spending needs. With how much government spends now, of course, and how slow the economy is growing (or actually shrinking), money creation should be close to zero, which, if government does not borrow, means that spending needs to be cut to tax levels or less.

16 posted on 02/13/2013 8:37:28 PM PST by PieterCasparzen (We have to fix things ourselves)
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