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11-29-2012, 08:22 AM   #1
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How we are to err .."stupid" to abandon ideas

Historically, revenue needed to spend was an operational fact under the gold standard. If Congress appropriated more than tax or borrowing revenue would cover, the value of the dollar was negatively affected, and holders of dollars would demand gold to preserve the value of their holdings. This rule was designed to limit deficit spending under a fixed exchange rate regime

Because the U.S. had huge Vietnam war related deficits in the 1960s other nations demanded gold instead of holding a depreciating dollar. Nixon refused to convert dollars to gold....and defaulted on convertibility in 1971. By 1973 the entire world's monetary system was turned upside down. Flexible exchange rates replaced fixed rates, and all governments issued fiat currency. That is, currency backed by the "Good Faith and Credit of the Respective Governments", the U.S. Canada, England, Australia, Japan, Germany, and many others. Other nations pegged their currency to the dollar or some other strong internationally accepted currency.

This paradigm shift in monetary policy brought on a similar shift in how money was managed to fund obligations in nations sovereign in their own currency. None of these nations would ever need to face the issue of insolvency in their own currency. They would only need to manage inflation. However, American legislators failed to understand that this new monetary system rendered self imposed legislative constraints moot. No longer relevant would be legislation mandating a debt ceiling and prohibitions on Treasury overdraft authority or Congressional concerns about revenue equaling expenditures...balancing the Federal Budget.

Unwilling to repeal these constraints has lead to economic dysfunction year after year simply because Congress does not trust itself to spend responsibly. There are no relevant economic constraints on the Federal Government's spending that can't be managed with appropriate use of tax and borrowing policy tools. Yet, not until President Obama entered the Oval Office has there been a serious Congressional threat to oppose increases in the debt ceiling.

Not understanding the role of fiat currency management it is no wonder that elected and unelected participants in the debate on the Fiscal Cliff also fail to understand that taxation and borrowing do not per se generate revenue to fund Federal Government expenditures. All such expenditures are funded from Treasury's General Fund Account no matter the number of Trust Fund accounts there are or the balances in those Trust Funds. They are simply bookkeeping records. They don't disperse funds. The Social Security Trust Fund is major among these bookkeeping records. No matter what the level of receipts in that Fund beneficiaries will receive their checks because Treasury checks don't bounce.

It is indisputable that a nation sovereign in its own currency can issue as much of it as it wants to pay any obligation denominated in its own currency. It does not need to "GET" revenue to pay its bills. It simply issues more of its fiat currency to satisfy its obligations. Why would it need revenue/income to spend?

The Federal Government levies taxes to manage inflation, distort income distribution and market prices, and forces acceptance of the currency. It does not, levy taxes to raise revenue per se to spend. All statements from any source that tell you "tax payers fund this or that" simply displays the near universal misunderstanding in this nation of how our monetary system's tax policy functions post gold standard.

Lastly, the fraud of "The Balanced Budget." From the President on down society is bombarded with the silly mantra,

"We must balance the Federal Budget just like

businesses and households must balance their

budgets or face the financial consequences of


Again, this was likely under a gold standard, not so under a sovereign fiat currency system with flexible exchange rates. Why? Because until the government spends its fiat currency into the economy there is no money in the economy. And there is no legal alternative, i.e.,gold...which could be used as legal tender. Moreover, all of the currency spent into our economy is interest is debt money. When the government taxes it withdraws that debt money from circulation, it liquidates its own liabilities. It doesn't use those liabilities to balance anything. How could it? It would just be issuing more debt money if it did.
OpEdNews - Diary: The Fiscal Cliff Fraud

I'm sorry to be rude but from my perspective our ENTIRE GOV. is in error of thinking and logic..

I can't even write to my "Congresspeople" since they are all stupid.. regardless of party...


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