"If the major opportunities for future growth of government lie in the area of conventional taxation, are there any defenses available to the citizenry? ... Perhaps the most fruitful advice comes in two parts. The first piece of advice is to avoid war and the rumor of war: this is history's greatest boon to the tax man. ... The second piece of advice is to seek ways of inhibiting government's ability conveniently to increase its collections. Possibly the very increase in that ability that is in prospect can be turned to account by a constitutional provision which forbade the income tax, and perhaps even the storage of information regarding individual incomes by third parties, including government." ~ Benjamin Ward
Trade Deficit: Hooray!
Column by Paul Hein.
Exclusive to STR
With an election looming, our politicians are wailing and bemoaning the economic crisis, which, given their policies and legislation during the past century, was inevitable and predictable. They express grave concern over the balance of payments and trade deficits, among other things.
If you do any research at all on those subjects, you will be inundated with economic details, such as current accounts, capital or financial accounts, external debt, international reserves, double-entry bookkeeping, etc. Like most experts, the financiers and economists writing about these matters assume you are already familiar with the forest, and just need some technical data regarding individual trees.
Being a Monetary Realist, and not an economist, I have little interest in specific trees, and most certainly not in individual leaves. It’s the forest that I see, much as the little boy saw the emperor’s new “clothes,” and not the details of collar or cuff.
I note that in March, the U.S. had a trade deficit of almost $52 billion. With regard to China alone, and in terms of goods, not services, the U.S. exported $9.4 billion in goods to China, while importing $27 billion from that country. In other words, we sent over $17 billion more to China than we received from China. And that, remember, was just for March!
Well, so what! We got from the Chinese $17 billion worth of goods, and what did they get from the U.S.? Bank credit. The “liabilities” of commercial banks, having no tangible existence, being entirely imaginary “money,” exchanged via checks. We got the stuff; they got the promises. And the promises will never be kept. If there is cause for concern, it is the Chinese who should be, and no doubt are, concerned.
Of course, the Chinese could start a currency war, and dump hundreds of billions of dollars into world markets, severely reducing the “value” of the dollar; but that would be cutting off their noses to spite their faces, making the dollars held by Chinese firms, to be spent for American goods, of much less buying power. They could use their dollars to buy up more and more American goods, or property, but that would hardly be a problem! If the Chinese, realizing that the best thing to do with dollars is to spend them for real goods, decided upon such a course of action, it could alleviate the sagging market for real estate, and boost employment. And, of course, the U.S. could retaliate by dumping Yuan, thus threatening the Chinese economic bubble.
If the Chinese decide to do nothing, and merely sit on their dollars, that would mean billions of dollars taken out of the market, helping to maintain their buying power, at least for the time being. Maybe our great leader, and theirs, have agreed to do so--at least until after the election!
If an individual family struggles with its finances, how much more does a national government, even if it can obtain “money” for nothing. Exchanging imaginary money for goods at the “correct” price, and determining an exchange ratio between one ruling group’s imaginary money and another’s, is an impossibly complicated job. Real people, and their lives and families, hang on the perception of the “worth” of account numbers representing no thing, and manipulated by individuals with no concern for, or even knowledge of, the millions of persons whose well-being they hold in the palms of their hands. No one, or group, should have such power; and they wouldn’t, and couldn’t, if money were some thing which they could not create at will.
Isn’t there some sort of supreme law of the land that says only gold and silver should be legal to tender? Nah, I guess I just imagined that, just as I imagine I have money when I have those paper chits in my wallet.