“What you are talking about is an expansion of government to correspond with an expansion of the economy.”
Exactly. It’s sustainable, but not desirable.

“On the other hand, tax cuts can stimulate the economy and can drive higher total tax receipts simply due to higher transaction volume.”
This is analogous to a company changing its bonus incentive for shipping product at the end of the month. If you examine the two months, you may find twice the number of units shipped the month with the higher incentive. Some of that is because the bonus gave people an incentive to work harder. But some of it is building up inventory that all ships after the increase. Or if it’s a decrease, people racing to ship before the decrease. The person arguing that incentives increase production may be correct, but you can’t just look at the period around when the incentive suddenly increased.

This analogy is different from taxes because a bonus is compensation for work while taxes are taking money people earned. It’s also different in that higher taxes means higher gov’t spending, which can mean lower long-term growth. The difference is slight but adds up over time.

All of this means we have good reason to keep taxes as low as possible. But raising/lowering taxes raise/lower revenue, so the idea that new taxes don’t generate more revenue or cutting taxes doesn’t lower revenue is NOT one of those good reasons.

I don’t know where you get the idea that I don’t equate money with value. To state my view more precisely: The bank runs were not because people were concerned about the value of their cash being impaired. The bank runs were because people were concerned that the banks would not have sufficient cash to allow them to withdraw the money they had on deposit at those banks.

Re: “The method you are proposing does nothing to alleviate this.” It does a whole lot to alleviate this, by halting the rise in the national debt and by gradually freeing taxpayers from the national debt’s crippling interest payments.

And you didn’t answer my question from your previous post.

"There are multiple ways to get out of debt for individuals and nations."

Multiple ways which destroy their respective economies, yes. The method you are proposing does nothing to alleviate this. The authors acknowledge it in the criticisms section and yet avoid answering the question or differentiating themselves from the previous examples.

"The runs were never about the value of the cash itself."

And that's why you think this method can work: you don't equate money with value.

Re: “There's only one way one gets out of debt - whether that be an individual or a nation - you pay it off by cutting spending back under your income.” This statement is flat-out wrong. There are multiple ways to get out of debt for individuals and nations. In the case of nations, other available options include outright repudiation or the method detailed in www.fixourmoney.com : Gradually paying down the debt using unbacked fiat money. Nothing “magical” about it at all.

Re: “A run on the banks happens when people are concerned about being able to recover their value from those in whom it is placed in trust. It is as much about the money itself as it is whomever is managing it.” Can you back up this assertion with evidence? Every major bank run I can think of was due to people scrambling to get their money out of banks before the banks’ cash was depleted. The runs were never about the value of the cash itself.

Thanks, that was my understanding from research a decade ago.

Yes. The typical way they handle this is just to re-finance and issue new debt to pay off the old. It's like a ferris wheel which just keeps going round and round and the same people get on and off...

"A rate of growth equal to the growth rate of GDP is sustainable (not desirable)."

What you are talking about is an expansion of government to correspond with an expansion of the economy. An expanding deficit has been our problem for nearly a century now. The presence of a deficit indicates an unwillingness to pay for things as we go. Just because an economy is expanding doesn't give us license to expand our spending even beyond what we're doing now.

"I do not want tax increases, but I don't agree that tax increases stifle the economy significantly."

The data don't support your argument. The facts are that tax increases always bring in less money than their burden. The people who advocate for tax increases forget that taxes are a broken window fallacy - you are simply diverting money way from what people would prefer to put their money into and into something that is a proverbial sinkhole with no profit. On the other hand, tax cuts can stimulate the economy and can drive higher total tax receipts simply due to higher transaction volume.

If you want examples, one can look at the massive tax increases in the 1970's vs the tax cuts under Reagan. One can also look at the tax hikes and regulation spikes under Bush/Obama vs the tax cuts under Trump. (It should also be noted here that the true culprits of tax policy are the House of Representatives. Reagan was an anomaly due to his landslide victory.)

Most of the national debt comes due in the next few years, as shown in the following chart (pdf page 25, listed page 21):

https://www.treasurydirect.gov/govt/r...

The analogy is spot on. Getting the govt to go on a diet after splurging for many years isnt going to happen

A run on the banks happens when people are concerned about being able to recover their value from those in whom it is placed in trust. It is as much about the money itself as it is whomever is managing it.

Yes, we've never had a run on the banks while on a fiat standard so any speculation about what would happen is precisely that. The significant difference is that with a backed currency, a standard still exists for establishing market values - you're just shifting the market currency. With a fiat-based currency, you're destroying the market entirely.

"But being overly dismissive of fiat is as unrealistic as being overly dismissive of gold, as most “mainstream” economists are."

Not sure where that came from. I'm dismissive of there being any significant difference between "debt-backed" and "non-backed" fiat currencies - especially since as freedom points out, the debt is invented from thin air as well by the Federal Reserve.

"All I’m claiming is that “unbacked” fiat is superior to “debt-backed” fiat."

I know that's what you are claiming and you've linked to a paper you think proposes a stable mechanism for magically wiping away our debt. To me, its just more smoke and mirrors. There's only one way one gets out of debt - whether that be an individual or a nation - you pay it off by cutting spending back under your income.

While I don't know if that method could succeed, I am in favor of removing the interest cost that benefits only the banking cartel. Is the current debt in long term instruments? How long will the existing interest bearing instruments continue before being retired?

Freedomforall, I pretty much agree with everything you say above. I’m not proposing either forgiveness or default on the national debt. What I am proposing is that “unbacked” fiat money is much less destructive to the economy and to personal liberty than the “debt-backed” fiat money we use today. The essay at www.fixourmoney.com suggests a moral, legal and practical method for transitioning from debt-based money to debt-free money.

Don't understand your question, CBJ. How does that occur? Do you mean if the debt was (a) forgiven or (b) defaulted ?
I'm not arguing with you, CBJ. (Nor do I have the time for an extended harangue over semantics. ;^)
I think the banking cartel has arranged this situation with government (politician looters) and Wall St looters as accomplices to steal from everyone else, both foreign and domestic. The income tax was created (unconstitutionally) at the same time as the Federal central bank by design - to enslave all producers as security for the federal debt. The banking cartel does create debt from nothing and profit greatly from doing so. It should be stopped, but I don't see that happening unless the people rise in armed revolution.

How would this be different if the dollar were not "backed" by $21 trillion in U.S. government IOU's?

A “run on the banks” indicates loss of faith in the banks, not in the currency. It’s actually a panicked demand for currency from the banks. Nearly every run on the banks in the U.S. occurred when we were still on a gold standard. We’ve been totally off the gold standard for nearly 50 years, so belief in the currency has turned out to be anything but “ephemeral”.

This is not to say fiat is superior to gold – it isn’t. But being overly dismissive of fiat is as unrealistic as being overly dismissive of gold, as most “mainstream” economists are.

All I’m claiming is that “unbacked” fiat is superior to “debt-backed” fiat. The “fiat-based debt” that you object to disappears if we quit issuing bonds to “back” our fiat currency. There will still be inflation if the government “prints” too much money, but taxpayers will no longer be on the hook for ever-rising interest payments on an unsustainable national debt.

At the present time the USD's "value" is supported by demand for oil and the USD is required to buy oil from almost all sellers. If that were reduced or eliminated, demand would fall quickly and the "value" of the USD with it.

"If unbacked fiat money has no 'real value', then fiat money backed by a bond redeemable only in that same fiat money can have no 'real value' either. How can a promise to pay in a currency that has no 'real value' realistically serve as backing for the currency itself?"

There are two problems with this statement - one in the supposition and one in the conclusion.

Suppositional problem: Fiat money has a backing - it's just an ephemeral one: the good will of the people and belief in the currency itself. The problem is that a fiat currency faces intrinsic and catastrophic problems if that belief is challenged such as by a run on the banks, etc. A commodity-based currency still has a non-ephemeral backing (based on scarcity) which may be reverted to if the government destroys the faith in the currency itself.

Conclusionary problem: issuing more fiat-based debt has only ever had one consequence: inflation. Why? Because it undermines the good will in the fiat money in the first place by diminishing its rarity. We've actually been doing this for the past 50 years in order to undermine the value of our own debt. The Fed has been "managing" this ongoing inflation in concert with Congress in order to promote the reckless spending of our government - and because it makes those in charge of the Fed rich.

The only thing I can see in this paper is another method of exacerbating our existing problem through monetary manipulation. The only way out of this problem is to STOP spending more money than we bring in. Fancy accounting is going to end up for our nation just like it ended up for Enron. No thanks.

Fiat capital planned and designed to ultimately fail.
We have been on this path since 1914 Jekyl Island
The Rothschild banking Cabal have been bleeding our country ever since. The kiss of the $’s death came from the murder of JFK 1965 coins were not silver any longer. Nixon/Halderman/Bush took us off of the gold standard. During this whole period the banking industry consolidated and abandoned sound banking principals. Now one big bank can take down the whole system.

"We the people just have to vote in ZERO deficits, "
I wholeheartedly agree. It's like how I would be healthier if I just decided to take in a balanced diet of reasonable portions, went easy on the bad habits, and exercised equal to what I ate, and then LIVED BY IT. It would simple. I am actually trying to do that. We the people should do the same in personal finance and gov't spending.

"We have to get a budget that is at very minimum ZERO deficit."
You and I want that, but we don't have to have it. A rate of growth equal to the growth rate of GDP is sustainable (not desirable).

"Tax increases only serve to stifle the economy"
I do not want tax increases, but I don't agree that tax increases stifle the economy significantly. Suppose taxes are 30% of GDP. If we increase them to 35%, GDP growth may go down a little, but not that much. Revenues (discounting the first year where people use accounting tricks to move money into the low-tax year) will increase nearly (35-30)/30= 16%. This is not a reason to accept tax increases. The higher ratio of gov't spending to total GDP lowers the structural (i.e. long-term, not cyclical) growth rate. Over time that has a huge impact.

"Freezing spending when you have a $1.4 TRILLION deficit isn't really going to get us anywhere before we're bankrupt."
Yes. I think the numbers work out that you must decrease spending or increase taxes.

"Yes, but I'm skeptical. The Republicans controlled the House, the Senate, and the White House in 2017 and 2018 and didn't get it done. You can be sure it isn't going to pass a Democratic House or a Democratic White House. "
I too am skeptical they will take action. I think the Republicans are the party of large, intrusive, debt-financed government. They took over government and increased spending and more than doubled the deficit. I have no expectation of them getting us back to Obama-era deficits in the $400B range. I have very low expectations of current Democrats, many of whom are openly socialists and supported by people who say deficits don't matter, of getting back to Obama-era deficits. And as you say, we have to get to near zero, not $400B, to avoid a crisis. So I agree with you that politicians will not act until a crisis is happening.

" your easy fix?"
https://www.galtsgulchonline.com/post...

"Neither party has a goal of fiscal responsibility"
Which is why probably no one will address the problem until it becomes a mini-crisis.

"The only things that are likely to fix the deficit now are default or armed rebellion. "
Armed rebellion absolutely will not work. The borrowing and spending are not something carried out by rulers over the objections of the people. If you look at the finances of many average citizens, you find the same debt to income ratios. The political process is accurately realizing the will of the people. If you ask the average citizen if the gov't should do something about various problems, e.g. the economic cycle, prescription drug prices, the war in Syria, college tuition, etc; many people say yes. If they had to take detailed non-partisan classes on the philosophy behind the American Revolution and on macro-economic theory, they might have a different view. Ewv got me thinking this way. Without that foundation in philosophy, it's hard for a piece of paper to force people to limit government.

From www.fixourmoney.com :

"If unbacked fiat money has no 'real value', then fiat money backed by a bond redeemable only in that same fiat money can have no 'real value' either. How can a promise to pay in a currency that has no 'real value' realistically serve as backing for the currency itself?

Although inferior to a gold-based currency, fiat money does in fact have real value. The U.S. dollar’s value derives from the fact that it is the official medium of exchange and unit of account within a large, productive and reasonably stable economy. It does not derive from the fact that $20 trillion in U.S. government IOU’s are 'backing' the nation’s currency."

It's a purely Keynesian (and false)"
My limited understanding of Keynesian economic theory is that a government spends money it doesn't have to prime the economic pump, but then
recover it through taxation--unfortunately they don't follow through with the recovery.

This sounds like "selling short" in the stock market except in the market one MUST cover the short one way or another. Am I correct?

I hold the opposite view: that value can't be invented out of thin air. The whole problem with hyperinflation was the introduction of more valueless currency into an economy. The source absolutely does matter because the source is what confers value.

This "paper" does not satisfy my concerns. It dismisses or avoids valid criticisms and I'm not willing to give it any more of my time.

(I would also add that if the author(s) wants to be taken seriously, using wordpress to host the site doesn't contribute much.)

I would urge you to read the rest of the article. If the Fed invents money out of thin air, we pay interest on government bonds. If the Treasury invents money out of thin air, we don't. The difference is much more than semantics.

I don't think debit/credit accounting necessarily applies to the creation of new money, regardless of whether that money is backed by gold or thin air.