Who Needs Who?
If you've been following, you know that a currency issuing government doesn't collect tax in order to spend.
Of course, it doesn't collect anything. It's all accounting isn't it?
When tax is credited to government, the money is effectively destroyed on the spot. No bureaucrat or politician ever asks how much tax the currency issuing government is holding. The answer is always zero. none. zip. It's a nonsensical question.
When a currency issuing government spends (that is, debits) more than it credits as tax revenue for a given time period, it's said to be running a deficit.
Deficits are good. The non-government sector can't achieve an equivalent aggregate surplus without that deficit. It's accounting.
In this country (Oz), when the federal government runs a deficit, it borrows the deficit amount (issues bonds).
Why does it borrow when it can create money out of thin air?
The diversion, the con, goes like this.
If you, the voter, spend an amount greater than your income for a given time period, you have to borrow, sell something, tighten your belt etc. But, just between you and I, you put the difference on your credit card or mortgage don't you? Thanks to neoliberalism, there's really only one option.
It's easy to make you, the ignorant economist, think that government operates the same as you.
That taxes fund spending.
Why does government need tax money when it creates money out of thin air? Wake up voter.
That a deficit is a loan to be repaid.
It's just an accounting balance. Wake up voter.
That a bond is a government loan to be repaid. That's true.
But how can a currency issuing government ever default on a bond, if it creates money out of thin air? It's just accounting. It's an asset swap. You're just swapping non-interest bearing money for interest bearing money.
Neoliberals make you, the voter, think that your government is beholding to the wealthy tax payers and the bond holders. Vote neoliberal, and they will look after you. They know all about money and stuff. Are you kidding?
Let them get wealthy because some of it will trickle down to you. And, if you work hard, you might be one of them one day. It's all bollocks.
And so, you keep banging you head against a brick wall at the ballot box. Wake up voters. Wake up middle class voters who think they'll be spared.
The reality is that your wealth is rushing upwards to the rentier donors who control your government. If you see it trickling down, there'll be pigs in the sky.
If you've been following, you'll realise that bonds don't need to exist. They're primarily corporate welfare, a safe place to park money that can't be invested. There are fewer and fewer investment opportunities because household spending is being crushed by a broad range of rentier driven government policies.
The bond traders and the corporates sipping on bond welfare should know that the government can at any time cease to issue bonds1. The government is always in charge, and that government is always neoliberal.
As a voter, you have a choice of neoliberal or neoliberal. Perhaps you should have taken an interest in your democracy. It's never too late they say.
But neoliberal governments will never stop issuing bonds because it's critical that voters never twig that their government creates money out of thin air, and can never run out.
Voters believe that their government is beholding to the big tax payers to fund spending. Be nice to them otherwise they might go elsewhere and you'll lose your job.
The reality is that, when neoliberals spend, they're looking after their rentier donors. They're trying to balance books that don't need balancing by reducing taxes on the top end and spending less on the bottom end.
This is absurd. Wake up voter.
Voters should really be asking how the government is going to marshal and deploy all available real resources in their best interests. Those interests include adequate safety nets, social mobility, a healthy environment, and a place at the table for other life forms. You get the idea.
But what do neoliberals give you. All the time. Idle resources (especially people). A trashed environment. A 6th Extinction. Massive inequality. etc etc
The public discussion should be about quantifying real resources, determining priorities and ensuring that spending isn't going to, for example, generate excessive inflation, damage the biosphere or add to social dysfunction, to name a few.
In other words, government spending is constrained by many things. It's just not financially constrained. The art of politics won't be disappearing any time soon.
Of course, the most important discussion of all would be around how we're going to transition to a very low energy future. How are we going to feed and water 25 million people on a large arid island without dense energy?
Energy depletion's been in full view for half a century but somehow it remains unseen by voters. It's not even a blip on the radar. It's denial en masse.
All you can do is shake your head, and try and get out of harms way.
Where's the leadership going to come from? We've got Buzz Lightyear, but is he enough?
Governments use bonds to manage interest rates but if push came to shove they could cease the practice. Interest rate management is like pushing on a string.↩