Tax does not pay for government spending
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- เผยแพร่เมื่อ 27 เม.ย. 2024
- Probably the biggest challenge to understanding how the economics of governments really works comes from the need to understand that governments of the sort we have in the UK are not funded by taxes. They are funded by central bank money creation. Tax exists to control inflation (and tackle inequality, market failure and other things). Until it's appreciated that spending creates taxation and not that tax funds spending, nothing else about how the government works makes sense.
ABOUT RICHARD MURPHY
Richard Murphy is Professor of Accounting Practice at Sheffield University Management School. He is director of Tax Research LLP and the author of the Funding the Future blog. His best known book is ‘The Joy of Tax’.
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Most rich people stay rich by spending like the poor and investing without stopping then most poor people stay poor by spending like the rich yet not investing like the rich but impressing them
People prefer to spend money on liabilities, Rather than investing in assets and be very profitable
You are so correct! Save, invest and spend for necessities and a few small luxuries relatives to one's total assets ratio.
What level of wealth makes you rich?
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Depressing.
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Government 'taxes' you not because it needs your money to balance the books but to hold you down/pull you back on purpose. In short, They are vindictively burning your time/money/labour just for the sake of it.
Govt do need tax revenue to pay for public services
You are wrong
@@RobinHarris-nf4yv Did you even watch the video bruh?
The video is not really correct. It is tru that government prints money but not to the extend of causing high inflation because we Pay Taxes. But worth noting that inflation is a hidden tax
@@towkukus So 'Govt printing money DOESN'T cause inflation'-are you 13 or something?!
Isn’t the whole point that Richard is saying that Government spending produces inflation unless the money supply is controlled through taxation - and by taxing those who have made most money (ie taking vertical taxation seriously)? Is anyone here disagreeing with that?
This is modern monetary theory in a nutshell and it stinks because it doesn't work once you throw in the Cantillon Effect and understand that it's because of the incredible power to create money out of thin air that we have grifters in government. MMT also completely ignores all the money created by high street banks through fractional reserve banking. The money supply has been expanding for decades. No wonder asset price inflation is insanely high.
Just playing with words.
I was kind of hoping this video would cover government debt. Boomers have repeatedly told me that they have 'paid in' and find it extremely difficult to understand that this is not how it's worked during their working lifetime and that it's future generations who will ge paying the bill.
I will have to watch this again a few times. I just didn't get it the first time!
Year 1 - Government take loan to spend.
Year 2 - Government take loan to spend. Government payback last years loan with tax revenue.
Year 3 - Government take loan to spend. Government payback last years loan with tax revenue.
Year 4 - Government take loan to spend. Government payback last years loan with tax revenue.
Not much else to it.
The Government and Maritime Commerce Contract Law on the land.
Their authority is the waterways ie gutter to gutter on the road so they cannot enter onto private property without being invited or requested to.
In order for the incorporated government authorities to have power over you they have to establish a contract.
Answer questions with questions and don't give them your full name or address.
" If I give you my name will I be entering into contract with you? "Under penalty of perjury
1. The law requiring you to answer their questions.
2. Their regulatory authority and delegated authority to address you.
3. The law which made the police department part of the constitution.
4. The agents oath of office.
5. The contract with both signatures on it.
We are not bound to respond to anyone who has no oath of office.
Always ask for it or issue your own orders.
Hearsay"Well, I do have ID but the info on it is only hearsay; I don't know if it is true, so how would you know?
Is hearsay admissible in court?"
The government and its policing agencies do not recognize any other laws. They operate under commerce contract Maritime law/legislation.
If you are driving a commercial vehicle conducting business or commercial activities then you fall under this legal jurisdiction.
They also print money against new wealth from harvested crops, exploited mineral and energy resources, value-add of manufacturing etc.
This is a poor understanding of market economics.
In fact most printed money happens when value is not made in GDP.
Thanks for the advice! I'm new to financial planning and wasn't sure where to start. Any tips on finding a reliable financial adviser or resource to guide beginners?
As a beginner, it's essential for you to have a mentor that is verified by finra and SEC to keep you accountable. I'm guided by a widely known financial consultant Stacey Macken
Wow...I know her too she is a licensed broker and a FINRA agent she is popular in US and Canada she is really amazing woman with good skills and experience.
Stacey demonstrates an excellent understanding of market trends, making well informed decisions that leads to consistent profit
I remember giving her my first savings $20000 and she opened a brokerage account for me it turned out to be the best thing that ever happened to me.
Yes I can believed that, I got victory with her, was so sad after receiving the first pay knowing I invested so low with fear
What came first, the chicken or the egg? Same principle for spend and taxation.
Does it go into tories private bank account
Yes just like all the brown smarties and left hand socks you loose.
Yes straight up we are slaves and the colonization has screwed many many communities over by not asking questions.Im in the throes of restarting my nomdeplume inv company because of the fuel taxes at the pump which is manipulated by the corporate structures government here new Zealand.hello KIAORA from New Zealand naziland lol is this worthwhile reestablishing again Richard I
I don't see how that would apply to state/province/local government. They don't control the money, they only get it from direct tax or federal grants (or loans)
A state government in say the US or Australia they do face insolvency, thay do not own their own central bank. The ECB, which issues the currency in the eurozone, like any other central bank, can never run out of euros nor become insolvent but, the governments of such as Greece, Portugal Spain etc gave that ability up on acceptance of the euro. They effectively use a foreign currency. The Fed is the central bank of the US, the Fed can never run out of Dollars or become insolvent.
You're videos are so clear and easy to understand.
And wrong
@@RobinHarris-nf4yv Like so many things that are "clear and easy to understand".
It might be the "real financial world" that we live in ... but it is not the real *economic* world.
Economics is not money. Economics is about economic activity. Whereas "Finance" is about money.
And money is not actually real.
Wow, Richard! Thank you for educating me. I have never thought about it like that before.
the chicken or the egg I think
Insane GOVERNMENT spending that induces huge TAXATION.
THEFT to keep you poor............................
@@terryhigson434 In my case it is working really well.
The result of hundreds of good or admirable decisions that culminate in an overall failure, rather than a specific plan to do so.
System confluence injustice rather than targeted.
@@Youchubeswindon xD naive, child like mentality.
So the Government owe themselves money? So why not just write it off?
I bet this bloke is fun down the pub🤣🤣
Could you do a video describing the legislative underpinning that enables Government to house children of seperated parents (via a bedroom "entitlement" when one of the parents become homeless)?
I know you're keeping the videos short, but id have liked to have seen brief mention that this is one of the levers of control they have, with others being how that new money is distributed and hoarded/taxed via various political policies
How do you mean hoarded? That's pretty intresting. Because I interpret it as tax money is basically deleted from the system. So you mean that the money that is created is 'spent' into the accounts of certain entities to maintain wealth?
@@COTOBlock hoarded, as in savings.
The Bank of England (and other central banks) can only create money by buying government debt ( and sometimes mortgage and corporate debt in the US). Except for recent years they do not do this on a large scale. Government spending is indeed taxes which of course are never enough so the rest is borrowing money by issuing debt('Gilts' in the UK). Money is also printed by the commercial banks because they can lend out far more money than they have in equity, share capital and deposits, the 'fractional reserve system'.
Nope
You are confusing quantitative easing with MMT
A fiat currency like the U.K. can create money without buying govt debt.
So the Government (i presume most Governments) monetize the citizenry?
In the same way banks do through loans. Which means that the narrative that "people borrow the hard earned savings of workers", in relation to high street banking; and "benefit claimants are living off the taxes of hard working individuals" is untrue...its more that saving and taxation are predicated on monetizing people...?
Thanks. Good of you to offer. 😊
Yes, as a revenue officer I was educated that tax simply destroys the money created for public spending. And that public spending can be divided into two streams - general and investment with general alone influencing inflation. Maybe I remember it wrong. The 2017/2019 Labour manifesto re state investment bank got it right. As did a lot of its policies. The only "tax" that is purposefully spent from receipts is NIC outflow to state pension - what comes in is used to pay out - and that is what defines it as not a tax. In fact there is currently a £70 billion carry forward pot in the NI Fund which the government borrows and returns annually with BoE interest.
💯👍
Plus, the state only needs to tax back out of the economy, money that has not become an asset (that is unproductive) Take, a hospital building, the value of that build is now a permanent fixture in the economy the currency spent on that and other needed infrastructure (housing, schools, police stations, even childrens parks) can sit on the states accounting books for ever without causing inflation as the asset counterbalances the spend. This is why All needed services and infrastructure should be on the states books (nationalised). Another thing, most people don't understand is, the wages that are needed to run state assets, right down to park keepers, (remember them) for the public good can be a state accounting right off. Simply cancelled deleted by the state,because that spend was covered under the public good act.
@@maria8809ttt The biggest issue is voters demanding lower taxes, and next election cycle sighted governance deciding to sell the state assets to offset the taxes.
Also state monopolies run for the benefit of the users tend to be on razor thin margins as anything else is seen as wasteful greed, and so no money is available for investment to upgrade beyond minimal maintenance and no outside investment is available as the margins cannot pay that loaned money back.
You also get the issues of one side requesting less overall tax, and the other side requesting more spending for their thing, so the 'common good' of parks get their funding cut as seen by the loss of Park Keepers as they are deemed less essential than whatever crises made Lorraine this week..
I believe in public good being run for the public, e.g trains, water, national parks, and assets kept within the public purse, but the single shareholder or golden share model is a much better model in my opinion rather than pure public ownership.
'Tax destroys the money created for public spending' - I have no way to parse the sentence, the words make sense, the combination of those words don't.
The government pays for public services and works to the furtherance of the public based upon public sentiment, or politician filtered public sentiment. Tax well spent reduces drag on an economy and can stimulate it in times of need.
Anything can affect inflation, and generally the inflation is as a result of sentiment of the economy. The assumption in the economy was that gas and oil would be more expensive over the winter after the Russian invasion, so those with money bought in the traditionally lower cost period in the summer to hedge against the costs, and due to increased demand prices went up. As oil is a fundamental to all areas of the market, costs rose, and as such inflation sky rocketed. The ironic thing is that if the hedging hadn't of happened then it would have been fine, there would have been inconsequential price and supply blips.
If a country is dragging along the bottom, and a government is in austerity its likely that further contraction will happen. If the government became customer of last resort and loosened the purse strings by investing in worthwhile services or capital projects it could put a fire into an economy.
There is NIC income, and Social security out goings, and if they match that's lucking coincidence. The budget tries to balance the two with policy change, but if it ever did its pure fluke. If the fund is in deficit, the government adds money to it, in years with a surplus, it uses it to reduce future borrowings, therefore having the look of reducing the total debt load.
If RFL in equalled road spending out, there would be some very weird financing going on, there can be no real direct tax because there are many taxes that have no direct spending equivalents, and many spending departments with no taxable sources. Or budgets and tax sources with values so out of alignment they wouldn't happen.
There are some very weird financial comments going on in this comments section.
Notice I didn't say anything about excess taxation. That is a matter of your priorities within an economy and your politicians being held accountable for the policies you voted for. Both right and left politicians vote for public spending, just spending on 'their' thing.
@@Youchubeswindon The IMF Fiscal Monitor 2018 covers all this. Also, I would be less worried about direct government spend using OMF, and more worried about private bank unlimited use of OMF gifted by government on financial deregulation. Taxation changed its remit on the perminent implementation of Fiat globally.
surely this has only been true for the last hundred years or so? before that, Governments were once restrained by some sort of metal standard, gold or silver, in treasury. The paper money was issued in reference to that metal held by government (but I think paper money was originally issued by banks who held the metal as deposits). I remember hearing that some governments on a metal standard used to debase the metal by mixing it which less valuable metal, but that is another story. The metal standard helped keep governments in check, as gold and silver were in limited supply due to being rarer metals. The modern system has thrown all restraint to the wind.
Can you explain the role of interest rates vs tax in tackling inflation.
Taxes are Fiscal (Govt) and Int rates are Mon pol (Central bank). Mon pol can only really affect Demand driven inflation , income tax for example is non discretionary (automatic stabilizers) . Taxes deprive the private sector of purchasing power to allow the state to spend in a non inflationary way.
According to Neoclassical ecnomics, raising interest rates control inflation be increasing the cost of borrowing (bank created money via credit expansion). According to MMT, interest rates increase inflation due to increased payments to debt holders (government created money to service bonds)
They both remove circulating money from the system.
Effectively a brake on a inflation.
When they feared deflation in 2009 and 2017 they printed money in huge dollops. £850 billion in the UK. $5.5 trillion in the US. £3 trillion in the EU £2 trillion in Japan and China.
@@stephfoxwell4620 They thought additional reserves which were a swap of assets (Bonds for Reserves, which effectively drove the base rate to 0 ) would mean that this would encourage economic activity, but irrespective of where the int rates are, if there is too much uncertainty , then banks will always find it hard to get credit worthy individuals to borrow. Misplaced idea that reserves can be lent out when they cant as they are a liability of the CB and an asset of the Banks , so on the wrong side of the balance sheet
Increased interest rates slow capital investment.
Taxes change the value in the pocket.
Lower capital investment, less ability to increase investment to capture rising prices.
I cant afford a mortgage to buy a house at 100k which will be worth 150k in a year
Less cash in pocket, less ability to accept increasing prices reducing demand.
Lets go to lidl in the Dacia.
Neither are specifically changing inflation, as inflation is a sentiment response, but both can change how you respond to the inflation.
Thanks for these videos I have to save them all and watch when I can. Very interesting thanks :)
Finally you to need to sell new debt to pay off old debt, later default. Now you know why Central banks are buying gold.
It may very well be a money go round.
But this has no bearing on the massive inflation of recent.
Try fathoming that one out.
Very easy. Inflation caused by emotional response. Money go round because world go round.
The mathematical term is symmetry. The system you think it is, is symmetrical to the system it actually is.
The value of a unit of currency depends on the real output of the economy (the total of goods and services produced), if the Government creates too much money the value falls and you need more money to buy the same good or service (inflation). There is no way round this however you dress it up or explain it.
So, as to the point of the video and what I think you are hinting at, the Government could actually just print the money it needs to fund public services and not take a penny in taxes, but and it's a big but, everyone would have to be paid less, more or less the same amount they are now left with after paying tax. If not you would just get hyper inflation.
There is no magic trick to get a higher level of public services and maintain the same living standards, the only way is to grow the real output of the economy.
The GDP is a driver of currency value, but not the only one. GDP change will drive long term change, but the sentiment about GDP and other economic indicators are a stronger indicator in currency value change.
The value of Sterling / EUR changed significantly prior to the Brexit vote with no GDP change.
GDP dropped significantly in the pandemic, with no significant currency value adjustment.
I can't see printing money as a way to fund public services. If the government used a different currency to pay for public services to avoid funny money issues, then it wouldn't cause the private sector currency to have an issue, but every single public sector employee or department has a private sector supplier.
The government has and does print money (through the BofE) to ease short term issues, but provides a legitimate justification which mostly works to manages market sentiment.
I do agree that more cash in the pocket is an inflationary pressure, but cannot see the wholesale agreement to lower incomes in the way you suggest.
Inflation only matters to items purchased from outside of your economy or services provided as such. If income increased in alignment with inflation, and I get paid in a way that keeps track with inflation, then a £1 item for my £1 of income, is a £1,000,000 item for my £1,000,000 income.
The issue is that only a couple of countries are not intertwined with at least their neighbours, so currency devaluation by printing above sentiment allowance would mean massive inflation.
If you’re deficit spending then by definition you’re not taxing enough to offset inflation. You’re trying to rationalize debasement which has never worked no matter what you call it
Richard, like a lot of socialists loves to use the MMT myth, because it seems like a utopian solution.
But it’s not true, you can’t just make endless money with no effect
Does the tax get destroyed once the BOE gets repaid ?
Government takes loan, government gets tax to pay back loan.
Sometimes more tax than loan, which is lowering value of next loan, or less tax than loan, which increases next loan (national debt)
Tax is neither created nor destroyed.
What an odd question.
@@Youchubeswindon loans are created from thin air and once repaid, the money is destroyed. So I don’t think it’s an odd question to ask if the same thing happens when the government repays its debt.
@@backpackwithburt5385 This month, with reduced expenses you decide to pay off the rest of your loan.
Your £1000 income and £200 left on the loan means you have enough left to pay the rest of your liabilities.
The loan is paid off.
It is not destroyed.
The line item on the ledger that created the loan is zeroed out, but the fact you took the loan is still a matter of fact.
You may have little disposable income after paying the loan, but your wage was not destroyed, it still existed.
Tax is a profit and generally luxury goods legal liability for the government to earn a wage.
If expenses exceed income the income (tax) wasn’t destroyed, it still came in.
The liabilities of a loan being paid off or the disposable income maybe destroyed but neither the loan it’s self nor the tax that came in where destroyed, and to think so leads to the same semantic failures that generate MMT which is what the video presenter is talking about.
Is this Modern Monetary Theory (MMT)?
MMT is the only academic branch of macroeconomics that takes a realistic view of government financing. This is because mainstream economics ignores accounting and surprisingly ignores money. So Richard's explanation is consistent with MMT. The accounting matters.
@@davidcann8788 Thanks David. I'm not an economist but I've read Stephanie Kelton's book which at the time made a lot of sense however since then I've discovered a couple of things which don't seem to fit the picture. The first is the idea that when we pay tax what happens is that our tax debt simply just gets cancelled. She implies that the government does not have a big bank account where all our tax get's paid into and from which government spending is taken. In fact the government has an account with the Bank of England called the Consolidated Fund and according to the government's website it receives all tax revenue (and some other incomes) and it is the pot where all government spending comes from. The second thing is that she says that the government puts money into the economy. This is the thing that the putting money into the economy comes first. However according to the Bank of England it's commercial banks which create money not the government. The bank of England has published several articles and papers on this subject which you can download from their website.
@@steveelliott9746 Hi Steve. Thanks for taking it seriously and I hope you continue reading. Yes, you will hear that "taxes delete money from the economy" or "taxes destroy money". That's a shorthand way of describing the net effect. From an accounting point of view what's going on when you pay a tax or other fee to the national government is that your tax liability is reduced, and the government's liability to you is also reduced. Your payment reduces the government's overall liability or debt to the private sector (that's all of us holding currency). This is because, as Richard says, all money is debt. It is the liability of the issuer. The government's money can never sit on the asset side of their balance sheet - that would be absurd. It would mean the government owes itself. Try writing an IOU for a million pounds to yourself - that doesn't make you a millionaire, does it?
The mental trick is to stop thinking of money as a commodity, as something tangible. Rather, money is relational. Who owes whom?
@@steveelliott9746 All banks create money, but the most powerful bank is the central bank - the Bank of England for the UK. It creates currency. That is, the State's money. This money is used as cash (notes and coins) and as money for interbank payments.
@@davidcann8788 I'm currently reading Terry Pratchett's Making Money. I hope to learn something from that.
Great explanation. The President of El Salvador also talked about this and more 're. the US government. If you can find this speech watch it. Very interesting.
One word accountant first learns is effectively.
Thank you.
What he is saying is potentially transformative. The old idea that you raise taxes in order to spend on public good has led to massive inequality, the idea that we can’t afford public good and that we can’t tax the wealthy too much or we will harm the economy.
His analysis - that government spends to create desirable outcomes then taxes that money to curb inflation therefore raising further money to spend on further desirable outcomes - as he says, answers the question how do we pay for this’, stops the concentration of wealth towards a very few, and is the answer to the ‘boom and bust’ cycle.
This guy is on to something that could transform financial reality. The first step though is electing politicians who are intelligent enough to grasp the idea and who care about the welfare of the country and the people who voted for them rather than feathering their own nests.
That means getting rid of the Conservative Party who for 14 years have dismally failed on every economic test available and are totally committed to keeping everything the same so that they and their cronies can continue to benefit at the expense of everyone else.
Where has the trillions of pounds of real wealth that the workers have paid the socialist welfare state gone?
Why is it that accountants like Richard don't report it?
Just what type of accountancy is he teaching people? IT's the Bernie Maddoff example. At least Bernie ripped the rich off. Richard and co are screwing the poor.
Modern Monetary Theory and Keynesian economics
Richard has been saying this since the Credit Crunch in 2008.
Government and Media do not want people to know this.
Richard has been banging this drum for 15 years to move avail.
"Electing politicians who are intelligent" That's the problem, the people who want to be politicians are doing it to better their own lives, not ours plus it would be difficult to change a system so rooted in our culture. The whole of the Western Democratic societies are using the same system, so the banks set the rules.
Neither does welfare benefits
Tax Under penalty of perjury
(Birth certificate monetized on stock exchange as a corporation (last name capital letters) where by governments borrowing against said entities future labour. Everything is prepaid.
1. The law requiring you to pay tax.
2. Their regulatory authority and delegated authority to address you.
3. The law which made the tax department part of the constitution.
4. The agents oath of office.
5. The contract with both signatures on it.
We are not bound to respond to anyone who has no oath of office.
Always ask for it or issue your own orders.
First name Dip, second name SHIT, I did do that right didn't I? Not sure really because it never really makes sense.
How do you know that someone's a Sovereign citizen?
Don't worry, their childish misunderstandings will be out of their mouth within moments of meeting them.
Are Sovereign citizens the new Vegans? No, because vegans actually have some knowledge on their side.
Modern Keynesianism, modern monetary theory MMT.
Both disastrous theories
@@rodneyfungus8249 He says, without a credible explanation or a shred of evidence. Someone told me that John Lennon is alive and working in an Amazon warehouse.
@@rodneyfungus8249Theories are proposals to be debated. MMT simply describes what actually happens in the real economy, so it's not really a theory. But given your claims about it, would you care to debate?
@@rodneyfungus8249 HOW so? 😏 Keynesian economics presided over our most prosperous postwar period in the West!
@@oneoflokisBut that wasn't a success of the theory, it was an outcome of energy from fossil fuels. It strikes me that in a contracting economy, the idea put forward in the video is a recipe for disaster.
Maybe tell our politicians this Richard as they seem to think otherwise
Tell the politicians what?
That tax revenues in year 2 from income in year 1, pay the debt created in year 1 spending.
Such new news, must tell the world that how the world works is how the world works.
Put another way taxes are not a burden, anymore than breathing is a burden, it just the price we pay for civil society and rule of law.
social dysfunction and corruption more like
Do we actually have 'civil society' and 'the rule of law' though? They both seem to be shrinking into the distance fast. Taxes higher than ever but Stabbings are out of control in London, shoplifting not seen as a 'crime', police won't attend a burglary but will send the goon squad to bash your door down for hurty words and 'wrongthink'.
Wrong.Taxes are a control lever to keep the masses fearful and controlled,just like inflation.
Taxes and Inflation are two grindstones between which society is squeezed to create Communism.Not my words but Mr. Lenin !!!!.
Yey, finally some common sense in a whole swill pit of 'no tax is the only good tax' nonsense.
The only question that people need to answer in the voting booth, is how much of my money should be used to help others, for education, for poverty, for rule of law, for health. That is the moral and political question and that is what should be debated.
Standard MMT approach. First and foremost: there is no „first this and that“ and then „second this and this“ in economic reality! Its all simultaneous and interdependent.
Thanks Richard. Highly recommend that people read your books for a further simplified insight to economics. I've certainly been educated by yourself. Please keep up the good work
Doesn't this, in effect, amount to the same thing?
I dont doubt what you say is true, but not to mention the fact that high street banks create money from nothing when they make loans is unhelpful.
He did talk about that last video, clarifying that the banks are "under licence" to create money
Banks don't lend money they have. They lend money they will have in the future, by creating a debt with the BofE. They don't 'make' money out of thin air.
The same thing as government, it creates a debt with the BofE and the 'bond' market (investors) (aka gilts) against future tax revenues. The credit rating of a country affects the percentage charge of these future debts.
The BofE has to be careful about how much money is created, as excess beyond an unpredictable probably mainly sentiment based figure increase inflation higher than manageable (it used to be a 2% or lower inflation goal).
Tax does pay for government spending, but he is also 'technically' right that the spending happens before taxation income. Government spending goes into the economy to stimulate the transfer of wealth, and hopefully an economy with more performance returns the spending (through value added tax, payroll tax, etc) enough to cover the spend.
Spend too much or spend badly and the tax cannot pay back the spend, and you go down the credit spiral.
People who work for the government don’t pay tax, people who work for the government consume tax.
The main argument against (OMF) Overt Monetary Financing and expansionary monetary and fiscal policies in general, is that they inevitably lead to inflation or hyperinflation, in the case of OMF. However there is no reason to believe that a monatery financing programme would inevitably result in excessive inflation, let alone hyperinflation. The oft-quoted hyperinflation examples such as 1920s Germany and modern day Zimbabwe do not support the clain that monetary financing and/or large government deficits cause inflation. In both cases, there were major reductions in the supply capacity of the economy prior to the inflation episode. There is no inherent technical reason to believe that OMF would be more inflationary than any other policy stimulus or that it would produce hyperinflation, since the impact on nominal spending and thus potentially on inflation depends entirely on the scale of the operation: There is no risk of hyperinflation as long as the total spending growth in the economy does not exceed the productive capacity of the economy.
In the context of the legitimate goals of a currency - issuing government, OMF would facilitate sufficient net spending to allow the economy to sustain full employment, which means that it would be irrational for such a government to push spending beyond that productive limit deliberately.
Even though historical data on monetary financing is somewhat limited, there are a number of case studies that illustrate the positive effects of OMF. Various analysis show that in the 1930s Japanese finance minister Korekiyo Takahashi was able to jump start the Japanese economy by allowing the central bank to create money to fund public works. Korekiyo is famous for abandoning the gold standard in 1931 and introducing a major fiscal stimulus with central bank credit that was found to have been crucial in ending the depression quickly.
Ellen Brown has demonstrated how the German government used its currency issuing powers to finance public investment 1933 to 1937,transforming a bankrupt country into the strongest European economy in just four years. While Ryan - Collins and others have shown that OMF was critical to the economic development of Canada (1935-71) and New Zealand (1935-9)
Ref: Myung Soo Cha, 'Did Korekiyo Takahashi Rescue Japan from the Great Depression?, Discussion Paper Series A No. 395,Institute of Economics, Yeungnam University, August 2000.
Ellen Brown, Web of Debt, London :Third Millennium, 2008.
What happened in the old days when tax was paid in hard coin and governments did not spend on the economy?
Tally sticks in England - the government used to burn the tax "revenue"
It sounds like a chicken and egg situation. So can we conclude that an economy without any money transfers from Joe Public to the Treasury would be one with higher inflation. I’d like to see some evidence of how tax ‘tweaking’ by the government has reduced inflation. Do you look at the aggregate tax take at a specific point in time - which apparently is currently the highest we’ve had in the UK for 70 years - and compare that with inflation at that specific point in time. I’m curious…
NO.
An economy without any money transfers from Joe Public to the Treasury would be one with lower inflation as it would be self limiting.No taxes from Joe Public would keep the purchasing power with the public who could tell the GOV ie Bankers to F off.
Its actually the direct opposite to what we are deliberately told and worked well until the Banking cabal took over creating taxes and inflation to usher in Communism for the masses.there was very little taxes in the USA before the establishment of the Fed in 1913.
Is it a coincidence that the 1900s were the most violent and disruptive the world has ever seen.Endless wars,pain and suffering for what ??...........For nothing except the enslavement of the masses and greatest compression of money and power to a tiny cabal.
If it does not pay, why do it? This guy is talking carp.
So there really is a MagicMoneyTree...!
Mike Norman got it spot on with his swimming pool analogy.
Everytime someone gets a mortage it comes from the magic money tree the banks have.
You put in say £40,000 deposit, they 'create' £160,000 then lend this 'new' money to you at a healthy interest rate.
NO, but there was once a Magic Money Forest but Boris cut it all down to pay to get the UK through the dreadful global pandemic and now there are no trees left. 🤣🤣🤣
Can you do a video on the national debt, currently sitting at £2.6 trillion, and who do the government give the interest to. Can’t they just write it off, if it’s their creation?
All gov created money is debt of the gov to the public. Interest yielding money is called gov bonds. The interest payment is completely voluntary for the gov and should be abolished.
@@jarirutanen8762 so no one would buy bonds if the offer no interest? Can we just make the 2.6 trillion disappear?
@@jarirutanen8762 Those bonds are the backbone of your pension fund.
Adair Turner, The Case for Monetary Finance :An Essentially Political Issue, paper presented at the 16th Jacques Polak Annual Research Conference Washington DC, 5th-6th November 2015
Overt Monetary Financing (OMF) layman's terms 'money printing' first used in 1931 post Great Depression. Even advocated by Milton Friedman in 1948 with out the need of treasury bond sales. To provide a surer foundation for a low inflation regime. Friedman used the term 'helicopter drop'.
Now, from time to time, governments have been able to pay down a part of the debt. What di they use?
They only one who managed that was Margaret Thatcher and she taxed the working classes to the maximum.
Theft.
The government used to burn tax revenue in the UK. In fact, Parliament burned down in 1834 because of this.
Not true. UK government spends over 1000Billion annually versus annual printing of just 4000Million. Printing mostly replaces old notes and may increase/decrease the money supply.
A mortgage is new money.
Your mortgage lender must prove to the BofE it can afford to payback the debt, that's why they make you prove you can, so they can.
Selling your debt is just a new company paying off the debt to the BofE early and so someone else holds the future debt you owe.
Quantitative Easing (BofE buying bank debt) is printing new money.
Bonds / Gilts (BofE buying government debt) is printing new money.
Printing money is rarely the actual 'printing' of notes or forging coins, its adding a line item in a ledger.
If everyone, including all business, stopped paying tax (all taxes) how long would it take before all services completely collapsed ? I'm guessing as long as there was money in the bank to pay the workers and bills and then as long as the Gov could borrow what it needed to pay for those services, or until the gold runs out. Cant see anyone supporting that kind of borrowing for long though, so what then ?
Gold convertibilty ended in 1971 when the Bretton Woods System ended. That's why all centeral banks signed up to the gold sale agreements. We use modern money now this is Fiat that has no intrinsic value. It works on demand of government, excess is removed out of the economy in the form of taxation. He's right. Look the central bank gold sale agreements up.
So the HMRC is destroying money through taxation? And the HMT are doing that and paying back the BoE on gilts so we are double destroying money?
So why tax the billionaires with a 2% wealth tax? Government does not use that money and we the people are paying for the borrowed government debt.
From some of the comments hereunder, it demonstrates just how difficult it is to convince people of the truth, so for those people ask yourself ; Why should the Gov / Citizens have to pay interest to a private Central Bank on “monies” borrowed when that CB simply created said “monies” out of thin air?, just typed numbers onto a computer !. Ask yourself where is the money for to pay the interest going to come from ?. Now you will maybe understand why its called the Debt System.
Niall Walshe, spot on and you probably know the only way the interest can be paid is from real wealth like gold , property and land as the 'interest' is never created. When the folk that know and understand this become the majority, maybe we'll see change.
So many self professed experts including journalists, politicians and economists fail to understand that taxation is nothing other than inflation control, or technically, money supply control.
Deficits lead to inflation (another tax in all but name).
Taxation still closely follows govt spending.
Govt already spends 45% of GDP
garbage - look at Japan
Nothing wrong with a bit of inflation, unless you're mega-rich. As long as the wages, pension etc of the poor and middle are index linked it's pretty irrelevant.
Deficits do not necessarily lead to inflation. Certainly a deficit that is too large can lead to inflation. But a deficit that is too small can lead to a recession. It is a question of getting the right deficit. It is the economy that needs to be balanced. Not the budget...
Deficits don’t cause inflation. It’s usually when the surplus of goods to sell is lower than purchasing power of the market, driving up costs due to scarcity. That is why they want to freeze our wages to reduce our purchasing power. You can see this in action post Ukraine invasion where energy scarcity push prices up due to a bidding war. OPEC do this habitually to create scarcity by limiting the number of barrels in the market to keep oils prices high. There are other types of inflationary pressure, like wealth hoarding, or market stagnation, but this is the most usually given example.
@@Vroomfondle1066 'As long as the wages, pension etc of the poor and middle are index linked it's pretty irrelevant.'
And there's the problem. Welfare recipients including pensioners have index-linking, but the overwhelming majority of workers do not. So it is in fact the most relevant part of this discussion by far.
As far as the wealthy are concerned, their equity investments will outperform inflation in the long-term. Indeed, the Cantillon Effect dictates that inflation makes them wealthier than the lack of it
Wow! They have managed to convince us in the biggest lie ever!
It’s not a lie, tax revenue does get spent on public services
@@RobinHarris-nf4yv says who? Tax is voluntary, don't forget - yet, they will take your house if you neglect to pay...
@@LyubkaLifePath tax is not voluntary, stop talking nonsense.
We pay tax to get public services.
@@RobinHarris-nf4yv Show me where it says in the tax laws that an INDIVIDUAL owes tax. I have looked into all of the UK tax laws.
Only companies are liable for tax. Not individuals.
I do struggle with these brief truism videos. They are good, but, please extend them a little.
It is often the follow on concepts where the eat lies.
In this case it is what the Government might do with this power to create money without causing runaway inflation or crashing the pound.
Thanks.
No, the point is to get these truisms into the "common sense" - once these truisms are stated and understood, the subsequent thinking that people have is up to them and based on reality.
@@abody499 There is no reason why a little more could not be said. I for one can manage videos with a little more than one concept. I expect most of us can.
Additionally - Simple truisms do not reflect the complexity of what really takes place in the real fiscal 'ecosystem' and thus they are simply truisms, which do not reflect the reality very much at all.
Where that is erroneous is where it ignores what I actually said - the point is to facilitate an understanding of what the material circumstances are founded on so that subsequent thinking is based on reality, which these succinct videos achieve. There is nothing to stop anyone else elaborating on these material facts in any way they would like.
@@abody499 I understand your point of view.
I am asking that they be fleshed out and expended.
Richard will decide on whether he wants to do that, or not.
Where I went wrong in this exchange was by allowing the characterisation of these videos as "truisms", which is not quite right. These videos are stating the material facts of their subjects, rather than actual "truisms". Moreover, facts which are rarely if ever highlighted in mainstream discussions. My point was to argue that the purpose these videos serve is the provision of basic facts in relation to the topics, upon which any subsequent thinking can be based.
It is indeed up to the author as to what he publishes. I make no claims to authority on that matter. What I am arguing against is the necessity of adding any subsequent concepts to these videos (i.e. ur argument) because they achieve what they clearly set out to achieve.
To engage further with the point u made, specifically on crashing the pound, consider the fed's QE programme, which began in November 2008. This was the bottom of an 8 year bear market in the dollar, and seemingly the end of a declining trend going back to 1985. It advanced over 60% from that bottom, and currently sits around 48% above it. The creation of money evidently doesn't by itself lead to a crash in the currency.
so how does this information help the people who are financially struggling 🤔
It tells them their problems could be cured, but Government has no intention of doing so
@stephfoxwell4620 😆 so basically this information is just another way of telling everyone they're fkd lol
@@dd-du9bz No. Not everyone.
The poor.
@stephfoxwell4620 well I hope this guy gets rich telling the poor how poor they are and why 😆
@@dd-du9bz knowledge is power, that's why the govt lies about everything
Government and councils simply take what they like from the magic money tree ( US MUGS) even before the flowers come.
Good work, next job is to explain to people that banks don't actually lend money.
They just deposit numbers into the account out of thin air. You are completely right. The legal level of reserves never get touched.
Is this an economic fact? The information that I have shows that tax revenue is the primary source of funding for government spending.
The ideas on this channel are a bit wacky. Either that or I am ignorant which is entirely possible
How do think the government raised money they didn't have to bail out the banks 15 years ago. They issued a Promissory note to the banks who monetized it and gave back to the government who then used it bail the banks out. Then they tax us to pay for it. Total scam and if you or I did it, we'd do prison time for fraud.
Yes it's true.
@@CCP_Operative I listen to these videos to learn - can you site any sources to corroborate what you said?
@@SeekTruthandKnowledge
1. A-Level Economics: Year 1 & 2 Complete Revision & Practice (with Online Edition) by CGP
2. www.parliament.uk/about/how/role/check-and-approve-government-spending-and-taxation/#:~:text=Why%20are%20taxes%20needed%20by,NHS%20and%20the%20armed%20forces.
This is true & was perfectly explained in The Deficit Myth by Stephanie Kelton. Ordinary people have to go to work to get money and that's how much money they have to last the week or month. Government has no such constraints. Government send out a nice pie chart explaining where our tax money is spent at the start of each tax year. It doesn't take into account spending money on infrastructure, pandemics and wars (the larter seems to happen every few years) where the spending is astronomical. If Ordinary people do spend over their budget we're considered profligate, spend thrifts. It makes you think that governments dont really need our taxes to keep them afloat. They'd just print more money anyway. Perhaps we should issue governments with invoices for all the money they take from us that doesn't need to be taken an we would have more money to spend on ourselves and our families
There is no perhaps !!
All taxes and inflation are only required to steal from the non insiders as a feudal control mechanism.
Do the wealthy pay taxes............NO ! By their power they are also protected from inflation as they get the printed money first.They then front run asset prices thus causing inflation for the masses ie devalue the purchasing power of the wage slaves.
There is a reason why tax collectors were hated in Biblical times, people knew more about money then today........Deliberately.
Never knew this. I thought our taxes go into a large pot and the government use it to spend
Show the video to your friends, if you haven't already. They might still think what you used to.
@@timg5011 I've been telling people
"Money created by the bank of England" Created from fresh air, yet we let it rule our lives.
Taxation used to be the way government funded its spending. The Neoliberal Economic model has created debt financed government spending which follows massive trade deficits while corporations and the very wealthy pay little, often no, tax. There has been a huge increase in the use of offshore companies to buy assets in the UK to get around higher stamp duty and to hide money from tax authorities. The system is designed to benefit a few who are subsidised by the majority.
A bit of a simplified explanation. He eludes to the fractional reserve system but does not explain its position in economics. He further makes a case that everything is balanced when it is quite obviously not.
Yeah i don't think you're on point with this.. Taxes are mostly certainly collected and then used towards government spending. i.e Military, Social Welfare. I'm sure some of it will also be used to pay off loans that the government have borrowed to finance infrastructure projects.
Also the reason a promissory note (cash) has i promise to pay the bearer is that cash used to be backed by gold and a 5 pound note was the equivalent to 5 pounds of gold to be handed over from the banks safe
Taxation as a prerequisite for government expenditure is obsolete in the UK.
@@maria8809ttt prove it beyond your opinion... There is no way they are just printing notes to pay for everything then taking back those notes as taxes only to keep them stockpiled while they print more to pay the expenditures. What they gather in on taxes goes towards government expenditure, that's the reality of it
They printed money for the pandemic and flooded the economy with surplus cash, which why we're experiencing inflation costs. They also print money for loans through fractional reserve banking methods
@@maria8809ttt ok all the replies i made weren't showing up so i thought youtube was censoring the comment so tried altering the message to satisfy the algorithm, only to find there was a server delay in making the messages appear
Adair Turner, the former chair of the British Financial Services Authority, has covered this very subject, taxation is just deleted on receipt, and the amount deducted from the monatery bace. It's all just state accounting conventions.
Ref: Adair Turner, The Case for Monetary Finance: An Essentially Political Issue, paper presented at the 16th Jacques Polak Annual Research Conference Washington DC 5-6 November 2015.
@@Explosivo55It's all good, that's happened to me before now. 🙂
We have chronic inflation. Why do we need to pay taxes now? Can't the government just print it off like it was 2019?
Lol, Let me rephrase your question:
We have too many people thinking the money is worthless, can't we print more to make it even more worthless?
Not going to lie, I can't wrap my head around this
You don't understand how it works, or that it's been going on like this for years? Or both?!
It's just to keep us plebs in our place.
Central bank operations (such as buying or selling foreign currency) are not usually referred to as government spending. It seems very typical of MMT to engage in these semantic arguments that really don't tell us anything essential about how the government works.
Overt monetary financing (OMF) layman's terms 'money printing'.
This is not new, it is part of the monatery system. It was used before perminent Fiat was introduced in 1971. Now it is a perminent fixture to how our monatery system works. You can find the use of OMF as far back as the Great Depression in the 1930s. A number of well known and diverse economists advocated similar policies as a response to the Great Depression. These include Harry Dexter White, Henry Simon, Irving Fisher, John Maynard Keynes and Milton Friedman's. The idea was further developed in the 1940s by Russian born British economist ABBA Lerner, one of the forefathers of MMT. Lerner advocated that the government should 'print money' to match the government deficit spending needed to achieve and sustain full employment. In his seminal 1943 article, 'Functional Finance and Federal Debt, Lerner noted: The central idea is that government fiscal policy, it's spending and taxing, it's borrowing and repayment of loans, it's issue of new money and it's withdrawal of money, shall all be undertaken with an eye only to the results of these actions on the economy and not to any established traditional doctrine about what is sound or unsound. This principle of judging only by effect has been applied in many other fields of human activity, where it is known as the method of science opposed to scholasticism. The principle of judging fiscal measures by the way they work or function in the economy we may call Functional Finance... Government should adjust its rate of expenditure and taxation such that total spending in the economy is neither more nor less than which is sufficient to purchase the full employment level of output at current prices. If this means there is a deficit, greater borrowing, 'printing money', ect, then these things in themselves are neither good or bad, they are simply the means to the desired ends of full employment and price stability. Remember this was before perminent Fiat that had has no intrinsic value was introduced globally. Now with no longer having the constraints of gold convertibilty or fixed exchange rate that ended in 1971 it is even easier to finance publicly good economic need.
In 1948, none other than Milton Friedman's argued not only that government deficits should sometimes be financed with Fiat money, but that they should always be financed in that fashion, on this basis that such a system would provide a surer foundation for a low inflation regime. Friedman used the term 'helicopter drop' to describe a situation where the government would receive printed money on demand from the central bank to the desired amount and then use that money where it is required in the economy, whether it be to build schools, hospitals, where there was economic need, even as we witnessed in covid into peoples bank accounts. There is no reason what so ever to sell bonds into the private sector to achieve this function. Infact the the issuance of treasury bonds effectively amounts to a form of corporate welfare for the purchasers, who tend to be financial institutions, wealthy individuals and foreign governments. Why should they enjoy a risk free government annuity?
Adair Turner, The former chair of the British Financial Services Authority, describes this form of monetary financing - which he describes to be 'an always available and always effective option for stimulating nominal demand. As running a fiscal deficit (or a higher deficit than would otherwise be the case) which is not financed by the issue of interest bearing debt, but by an increase in the monetary bace - i.e., of the irredeemable Fiat non interest bearing monetary liabilities of the government /central bank (they are one in the same, as the government has the ability to demand from the central bank.) OMF thus has the added benefit of flushing out a lot of debt related paranoia, however unfounded it may be, since the deficit would not add to the overall debt. To optimise the ease of implementation of OMF, the central bank and the treasury could(and should) effectively be 'consolidated' into a single government body. Technically, there is no need for one wing of the state (the central bank) to 'lend' produce money to another wing of the state (the government) it makes little difference from an operational perspective whether OMF is implemented in a non consolidated fashion by getting the central bank to facilitate the government's spending needs by underwriting government bonds or by directly creating private bank accounts as instructed by the treasury, without the government offsetting this with bond issuance-or in a consolidation fashion, by allowing the treasury to directly create new Fiat money and credit the reserve accounts held by the commercial bank. In either case, this would make macroeconomic policy wholly accountable to voters instead of being managed by centeral bankers that are largely unacceptable and dominated by vested interest, as it is today.
AI will change everything, macroeconomic empirical data is being fed to AI. This understanding of macroeconomics and the ability of a monetarily sovereign (or currency-issuing) government are never revenue constrained because they issue and own currency by legislative Fiat, will become understood by millions of people.
The neoliberal era is ending. The true will out, and polatitions know this.
For information Ref: Adair Turner, The Case for Monetary Finance:An Essentially Political Issue, paper presented at the 16th Jacques Polak Annual Research Conference Washington, DC, 5th-6th November 2015
Abba P. Lerner, 'Functional Finance and Federal Debt, Social Research, Vol. 10, No. 1 (February 1943)
Adair Turner, Debt, Money and Mephistophele:How Do We Get Out of This Mess?, speech given at Cass Buissness School, 6 February 2013.
So when Maggie put up my mortgage by 50% and then took away my job which in turn took my house that was to stop me spending, do you know it FKing worked, god she was clever.
Yep and the while you were working, you were paying the bank back for a mortgage that they never lent you.
Despite all the financial struggles i and my family faced, everything is finally falling into place! $47,000 weekly profit and riches I'll always praise the Lord..
Hello how do you make such weekly?? I'm a born Christian and sometimes I feel so down of myself because of low finance but I still believe in God..
Thanks to my co-worker(Alex) who
suggested mrs Elizabeth Ann Graney..
Wow! Kind of in shock you mentioned expert, elizabeth ann graney.What a coincidence!!!
Elizabeth Ann has really set the standard for others to follow, we love her here in the UK as she has been really helpful and changed lots of life's ..
I use to work 3 jobs,full time at Walmart,a server at night and Lyft on the weekend,until Elizabeth Ann graney change my story.
This is one way of thinking about it - however money can also simply be seen as a means of exchange.
England needs I.T. education
England I.T. illiterate on purpose
#TechIntoMentalHealth
Also government spending is only one of the ways money is created.
Money is also created when banks issue loans. The amount the banks ceate is affected by regulations on reserve cash requirements and down payment requirements. Deregulating bank loans, lowering down payment, and reserve cash requirements causes more money to be created in the system out of thin air.
Money is also created out of thin air when asset values increase. Stocks, real estate, collectibles and such, when the market value increases that came out of thin air. Artificial value bubbles (almost every market currently) create undue money out of thin air.
If these system cause too much money in the market it needs to be taxed out. Except the problem that the elite have manipulated all 3 systems so that all this money is created, but then hoarded in low tax or zero tax holdings. The money does not flow into taxable parts of the economy, so it is not pulled out of the system. Potentially causing inflation.
(Side note, this is not the only cause of inflation, there are many other kinds of inflation)
If the amount of money goes up, and it cannot or is not being taxed out of the system, the result is government issuing bonds to remove money from the system. National debt is a last effort to money balance and prevent this kind of inflation.
Finally if the money created cannot be balanced out with taxation or bonds, them the government is forced to "print" new money, acceoting the inflationary, or currency devaluing results. The government printing new money is a symptom, not the cause of the problems.
Stock and asset values increases are not created out of thin air.
If my friends company issues 1000 shares that are sold at £1000 each, valuing the company at 1million, and someone really wants one and buys it at £2000, then the company is valued at 2million. But that is not actualised value. No money has been created out of thin air, the shares are sold at whatever someone is willing to sell at, and the other party is willing to buy at, each with actual money.
Money is created out of thin air, when I go to the bank to get a loan for £2000 to buy a share, and it borrows that money from the BofE in the form of debt, the bank has to have £200 on hand as the reserve cash amount (or what ever the regulations say), but does not loan me that £200.
The government goes to the BofE and wants to borrow a trillion lets say, the BofE sets an interest rate and the government decides if the future tax revenues will a) pay off the loan, and b) pay the interest. The interest rate is a response to internal and external market pressures.
Inflation is the sentiment, that against all reasonable advice saying the shares are worth £1000, someone wants to pay £2000, it is an emotional response to demand.
In the post industrial greedy world a bad harvest may reduce supply, and the emotion leads to panic buying increasing demand, therefore creating an inflationary pressure of asset value increase, but generally these supply issues are actually insignificant amount of the price increase and inflationary pressures, its primarily the emotional response causing the majority of pricing pressure.
@@Youchubeswindon true that the media creates most inflationary pressure. Most inflation happens after the media claims we are about to go into an inflationary period. Or vice versa.
Emotional as you say.
Which is why prices of things like gas go up so quickly with a minor event, but then take months to fall when the event goes away. Or why gas is nearly twice the price it was last time oil was at this price, because they can due to all the media about gas prices going up.
Money supply really only affects foreign goods, due to currency value. So kinda an Indirect sorta affect and not as directly correlated as conservative politics would like us to believe.
There’s a great vid explaining how US taxes don’t pay for spending but is printed to pay for, e.g. twenty years of attacking another continent.
I think the taxes just go straight into the politicians’ pockets
They borrow the money and we pick up the tab. If they lived within there means like we have to we would all be better off . Governments should not be allowed to borrow more than they take in tax. If you have 4 pounds you can't spend five.
I thought banks created money when you borrow, based on fraction reserve. Gov't borrow the same as individuals. All money is borrowed initially, and all money eventually ends up back with the bank because of loan interest. This also means we have to expand the population to borrow more to pay off deft, when we are not doing that the gov't needs to borrow more and "should" tax the rich more to compensate for the lack of young person borrowing.
Hence the mass immigration!!
Why did I just learn more in 166 seconds than I did in the previous 39 years?
As unfettered inflation would destroy the government, it is somewhat myopic to say that tax doesn't sustain the government
Nah it would destroy the country. Taxes are just the price we/country pays for civil society and rule of law.
It is incorrect to state that "taxes fund government spending". It is more correct to say "taxes release real resources from private employment such that the prior government spending can acquire them in a non-inflationary way". But even this statement is under the assumption that their is full resource employment. If there are resources left idle, then government can spend non-inflationarily to acquire these resources for the public purpose without any need for further taxation.
Money creation is not the sole preserve of the government. Where does a mortgage come from? The banks simply put the money on their balance sheet as a liability to you, balanced by the asset, ie, your debt to repay. I think Mr Murphy is insinuating that government debt is not a problem. Trust me, it is. Ask a Zimbabwean. Ask someone who lived through the Weimar Republic. Why did the French revolution occur? This spend first then tax to prevent inflation mindset is a dangerous one, it is how governments try to buy your vote. Meanwhile this inflate-the-money trickery reduces the value of debt and penalises savers. It is an insidious, hidden, wealth destroying tax. Are you saving a pension, so you don’t have to work until you drop? Better hope the government doesn’t inflate too much. Saving for a home? Better hope house prices don’t go up too much. Oh dear, too late.
just a fancy way of saying governments can't just print money to maintain or increase spending, otherwise rampant inflation would destroy the economy. Taxes are needed to restrain such inflation. So what? You think we don't know that?
Not really. There is a big difference between running out of money and potentially risking inflation. One is a hard limit the other requires allot more thought about where the resource restraints are. Government spending more never usually destroy economies, the opposite is true. Cutting too much, removing too much money "austerity" is what government lead destruction of economies do.
@@diablosv36 no one is claiming there is NOT a big difference between running out of money and potentially risking inflation.
On the contrary, a LOT more thought has to go into spending decisions when you have a hard limit! You got it backwards.
Government spending does destroy economies. You never heard of the Weimar Republic?
Austerity is like medicine. It hurts in the short term, but brings recovery long term. it's a wise trade off.
@@duncansmith7562 You have it backwards, if the government limits its spending based on an arbitrary number rather than real capacity then it will be causing a whole bunch of unemployment and untapped capacity for no reason at all.
The Weimar Republic is a good example of not examaning the whole context, such as why the government kept on increasing spending in he first place, such as extreme reparations, currency devaluation.. etc which all made things more expensive. The Extra government spending was a response to the increase in prices, and not the reason for the inflation in itself.
Austerity in most contexts is poison and will literally cause a recession because the money required to do things will not be there.
@@diablosv36 the difference between you and me is you seem to think government can cause a whole bunch of unemployment. It can't.
Market forces and trade create employment, and thus unemployment. Government can only interfere with the market and alter those market forces, slightly redirect of stifle those forces, not cause them.
what on earth is "real capacity"? for that matter, please define "unreal capacity".
You have forgotten what inflation is.
Inflation is an increase in money supply. In Weimar, it became a vicious circle. More money had to be printed to keep paying all the bills until the system collapsed, but maybe that is what you mean by achieving "real capacity"?
Austerity is medicine, not poison.
"the money required to do things".
Again, you are lost.
Money is just a means to exchange goods and services.
If the goods and services aren't there, no amount of money will create the goods and services.
Austerity is just a reality check, your bank manager saying you reached the limit of your credit card, so given we don't want a Weimar, no more irresponsible spending, time to cut back.
@@diablosv36 i just want to make sure you understand that inflation is not price rises. rising prices are the effects of inflation, what inflation causes.
inflation is the governmental decision to increase money supply. agreed?
"more money chasing same number of goods = inflation" is nonsense.
inflation = more money, and when chasing same number of goods = rising prices. agreed?
Those that think taxation is essential should consider how powerful Britain became during the use of Tally sticks. Taxation kills growth, living standars and ultimately freedom
Taxation is essential
@@RobinHarris-nf4yv Is it ? Perhaps then, you can explain how Hong Kong grew from a few buildings in the 50's to the economic force is today. The governor scrapped taxation from around 1958 and the growth boomed. Taxation is only essential if you wish to maintain serfdom.
@@stevendavis7079 your argument is completely and utterly false. Hong Kong may not have taxes on income but it gets its tax revenue from loads of other taxes.
If you are going to make an argument at least don't try to do it based on a complete lie
@@RobinHarris-nf4yv suggest you do more research
@@stevendavis7079 I have, Hong Kong has loads of taxes…..you are talking nonsense and you know it.
You've literarily just explained how our taxes fund government spending. It may be a strange way of doing it. Yet simplistically, it is our taxes that fund government spending, or the circuit would not be completed.
The spending came first. Cause precedes effect (not sure about quantum mechanics). If tax = spending there would be no money for people to use (as RM points out).
@@Ghnarumen💯
@@Ghnarumen He never spoke of banking, only the cycle of government spending. Banking is similar, yet there is only so much money in print at any one moment. The rest are just numbers created and exchanged. We haven't dealt with printed money in that sense for quite some time as a civilization.
Though at the end of the day, they decide on value and we agree by participating. Even though we as people do not get a voice in such matters. The system does whatever they decide it does. It all an illusion.
No, He didn't, you were not listening at all. Richard was saying spending comes first. Government creates the money, ie debt and cancelled out by your taxes. Deficits occur when debt creation, money exceeds tax revenues. This why there are debates about wealthy paying more tax to close the deficit (and other reasons too)
@@karlkerr7348 The government does not create money, it does not have the power to create money. Only banks can create money. That is why people were excited over crypto and bitcoin, as it cuts out the bank. And would allow direct flow from the government to the people. It does not matter which comes first, effect can proceed cause. Things are not linear.
semantics, if everyone stopped paying tax then there would be no money for the gov to spend. it might take some time but eventually they would run out.
You didn’t listen if everybody stopped paying taxes there would be MORE money leading to rampant inflation.
Govt creates money out of thin air by typing numbers into bank accounts. Virtually all our money is digital, ie. numbers in accounts. The purpose of taxes is to create demand for the currency. You need British pounds to pay your taxes. This is why they don't accept Bitcoin or USD. If we didn't tax, we couldn't take advantage of the super powers a currency-issuing state has to effectively finance public goods for free, ie. make very low risk investments that are guaranteed to pay off many times over
The government can never run out of money……ever
Indeed - but the fact that our governments enforce mickey-mouse currency on the whole of society so that THEY are mostly free to direct resources toward their goals without concern for the disruption caused might be great for political ideology but what is the cost for everyone else?
FREEDOM
And how do they enforce micky-mouse currency - taxation!
This is the majority of central banks, it was changed by the US in 1971.
@@BALLOOROOM HJR192, thats how, look it up.
As Angela Merkal said, Europe accounts for about 10% of the Worlds population, and about 25% of the Worlds GDP, and about 58% of the Worlds Welfare. This is unsustainable and will bring catastrophe in the end. Welfare is the driving force behind mass immigration into Europe from the poorest parts of the World. Welfare systems all across Europe needs to be cut dramatically or Countries will go bust, this is where the real money has gone.
Yes I take your point but it is this money of welfare and pensions which is pumped back into the economy .
The benefits of this is immeasurable and keeps the economy rolling , any spanner in the works of this would be counterproductive .
@@roddychristodoulou9111 Keep putting taxes up to fund it until you go bust then
@@garyb455 no, just tax billionaires instead of giving them free money, which is govt actually does
@@ChucklesMcGurk Not just billionaires. Reducing tax reduction (double dutch etc) and prosecuting tax evasion (cayman islands) and knocking off subsidies to companies actually damaging the environment.
Welfare increases are a response to an aging population and lack of H&S over the past decades.
Public retirement funds where aimed not to provide people with a long retirement, but aged to just above average age of death, and so if you where lucky the government would help you out, but medical advances have progressed so fast we have STD epidemics in retirement homes, and not increased the retirement age in line with actuarial tables.
Immigration is seemingly the only way of reducing long term welfare costs except forcing a 2+ child per family policy.
Oh dear. You don't understand how fiat currencies work and you don't understand the difference between "wealth" and "money".
Go back to school and learn something before seeking to be an economics guru.