San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Wednesday, August 3, 2016

SDA Citizens Stupidly Believe Government Creates Money

The Princeton Survey Research Associates International group conducted a survey of 1000 stupid citizens of the Socialist Democracy of Amerika last month and, surprise, they discovered that SDA citizens are shockingly ignorant of basic economics.  Let's talk about the results of that survey for a while today.  But first, let me give you some basic economic principles that everyone should, but most likely doesn't, understand.
  • Money is not wealth.  Money is a means of exchange that is important in the creation of wealth.  Anything, like salt, cigarettes, gold and paper dollars, can serve as a means of exchange and, thus, be considered to be money.
  • Although profit seeking businessmen and entrepreneurs, intent upon producing goods and services that the consuming public wants for a price they are willing to pay, can create wealth in any environment, the best conditions for wealth creation are those in which there is a stable money supply and the government remains uninvolved in the process of monetary creation. That is why a gold standard is considered to be the ideal monetary standard.
  • When government declares a fiat (unbacked) paper currency to be legal tender and embarks upon a concerted program of continuous inflation the inevitable result is lower or negative economic growth and the perverted cycle of expansion and contraction stupidly called the "business cycle."  The process of boom, followed by bust, should actually be called the "government money cycle" since it is the federal government that creates it.
  • The federal government of the SDA created the Federal Reserve to allow it to borrow unlimited amounts of money.  The federal government, and the career politicians who infest it, want to be able to borrow unlimited amounts of money for two reasons:  1) citizens get tired of taxes and are likely to not vote for a candidate that is always raising them and, 2) unlimited access to dollars allows career politicians to pay for all of the social spending programs they create and use to buy votes in order to remain career politicians.  
  • When the Fed loans money to the federal government, its only customer, it is not lending out dollars that it has taken in from depositors.  If you do not count the counterfeit dollars left on deposit with the Fed by its member banks, the fed has no deposits.  All money that comes from the Fed is counterfeit money, created out of thin air and utterly worthless for economic growth.
  • Creating more money does not create more wealth.  When the federal government spends the counterfeit money that it has borrowed from the Fed in  order to pay for its social spending programs the net result is a decrease in the value of all existing dollars and no real wealth is added to the economy.  In other words, the only money government has to spend is money that was first either taken from the taxpayers or created out of thin air via a legal process of counterfeiting.
With these principles in mind, consider one of the results of the poll mentioned in the first paragraph.  According to the pollsters, 62% of SDA citizens say "they support debt-free university tuition."  In other words, a significant majority of the citizens of the SDA believe that college education should be free, just like Bernie has been saying the past year.  The survey went on to be a bit more specific and, to the surprise of nobody, those who make more money, always called "the rich," would be expected to pay for some or all of their children's college education.  At some point along the scale, however, 62% of SDA citizens believe the children of people below a certain income level should all have free college educations.
Should such a program be enacted it would create an immediate and perverse incentive for many families in the SDA.  Those families with incomes that are just over the high side of the margin would be induced to earn less in order to get free tuition.  At the same time those families on the low side of the margin would be incentivized to make sure they do not make more money and thereby lose their tuition free ride.  Incentives of that sort are always harmful to wealth creation and the economy as a whole.  Everyone in the country suffers when socialism reigns supreme.
The article did not say how the money needed to pay for the free college tuition would be extracted from the citizens of the land.  It did, however, go on to ask all of the people who wanted free tuition if they would be willing to pay their fair share for it.  According to the article, "among those surveyed, 48% said they would not be willing to pay more in federal taxes to fund free college."  So there you have it!  62% want free college tuition but 48% are unwilling to pay for it.  Just where do they expect the money to come from?
The answer to that question is simple.  The citizens of the SDA are amazingly stupid.  They believe that the federal government can pay for things from revenues that it somehow has created for itself without either raising taxes or issuing counterfeit money via the process of inflation.  Although I have never seen this question asked on a poll, I suspect the majority of the unwashed masses in this envy-filled land actually believe that the federal government somehow earns money from whatever it is that it does and that it can then use that money to do good things for the citizenry.  Let's get one thing straight.  Free college tuition would be paid for by raising taxes, thus hurting only the top 49% of the citizens who pay all of the federal government's tax bill, or by inflating the supply of dollars, thus hurting all holders of dollars.  One thing that is certain, however, is that the federal government cannot provide a free college education without forcing some of us to pay for it.  Money, contrary to the popular and majority opinion, does not grow on trees. 

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