FDR took America off the gold standard in 1933 for domestic settlement. Since then, neither taxes nor borrowing have funded federal government spending for domestic purpose, as explained by Fed Chair, Beardsly Ruml, in 1946:
neweconomicperspectives.org/…
Yet DKos continues to cling to gold standard thinking, and continues to think that taxes and/or borrowing fund federal government spending for domestic purpose.
In 1972, Nixon took the world off the gold standard, thus severing any ties to world gold reserves for international settlement.
Yet DKos continues to cling to gold standard thinking, and continues to think that taxes and/or borrowing fund the federal government, including thinking China is our bank, even though China does not create dollars and we never borrow in a foreign currency.
Until we understand how our monetary system works, we will never be able to adequately fight for a progressive political economy.
Those who claim they are either centrist or left of center Democrats will continue to claim that having the federal government fund The General Welfare is “purity trolling”, including having the federal government fund a full employment policy, which was removed from The Democratic Party platform in 1988:
www.usnews.com/…
Gold standard thinking paved the way for government bailouts of the banks while failing to bail out mainstreet, because most of the bank bailout was achieved by the federal reserve — whose issuing of reserves is not included on “the debt clock” while Treasury spending of the reserves we create out of thin air must, by law, be included on “the dead clock” because, by law, for every dollar Treasury spends, it must issue a treasury bond out of thin air of equal value.
We call treasury bonds “debt”, while cash is not included as “debt”.
We could rewrite the law and stop issuing treasury bonds tomorrow and still be able to issue dollars out of thin air, and like magic: We’d have no “debt”.
We would, however, still have double entry accounting, where every dollars is both a public liability and private asset.
Dollars are an IOU from the government to you. What does the government owe you when you return its’ IOU?
Well, it doesn’t owe you gold, so it doesn’t matter if it runs out of gold.
It owes you two fives for your ten.
It owes you tax relief when during tax season.
And, morally, it owes you public goods and services because we have a national currency in order to provision our nation with public goods and services, including protecting our civic life from market logic, the dangers of too much private debt, and the whims of the profit motive.
The government allows private banks to exist, and stands behind them to ensure their credit/debt is accepted at par with government created dollars, in order to fund the markets — not our civic life.
The idea that governments should use their power to issue the national currency only to fund broad public purpose goes back to Adam Smith, “Father of Capitalism”.
Yet today, this idea is considered by vast numbers of The Democratic Party to be “radical left wing purity trolling”.
It saddens me every day to see this happening.
We are without the intellectual tools to combat the march of privatize everything because we think we need the wealthy to save our civic life by funding it through taxing the wealthy.
As though our ability to pay tax doesn’t come from the government issuing the dollars we use to pay tax in the first place.
Neither the poor nor the wealthy issue our national currency when they pay tax.
We have been off the gold standard a long time now, and not join forces with Ron Paul.
A word for the inflationistas: Inflation is caused by spending more money than the real economy can produce in new goods and services.
New money chasing new goods and services does not cause inflation, much less hyperinflation.
And it doesn’t matter if people spend government created dollars or bank created credit/debt, either can cause inflation. For a variety of reasons, it is difficult for the central government to create inflation in a modern capitalist economy — witness Japan.
Some of the reasons are:
1) We have an endogenous money system, not an exogenous one. Most money is created by your demand for private bank credit/debt, not buy government spending.
2) Modern capitalist economies are good at increasing production to absorb new money.
3) People like to save: Government created dollars = Private net savings — taxes — private debt — foreign trade.
How a sovereign currency works:
alittleecon.wordpress.com/...
