by Summary:
The Myth of Taxation Explained.
Topics:
Steve Keen considers the following as important:
This could be interesting, too:
The Myth of Taxation Explained.
Topics:
Steve Keen considers the following as important:
This could be interesting, too:
Mike Norman writes Trade deficit
Mike Norman writes Bond market now pricing in one 25 bps rate cut by Fed in 2025
New Economics Foundation writes What are we getting wrong about tax
Sandwichman writes The more this contradiction develops…
| The Myth of Taxation Explained. |
Why do we need to pay taxes then? The biggest tax is inflation!!
As far as the top/Fed level is concerned, if they continue to spend new money into the economy (where the money originally comes from that we don't borrow from a bank), and don't tax any back out – that would be similar to you eating & never eliminating. Doesn't go well… At lower levels, they DO taxtl to spend. Understanding the difference is important.
Taxes are important to create demand and acceptance for a currency and also to steer the economy i.e. incentivise or disincentivise behaviour (think of carbon tax).
Taxation in a currency creates demand for the currency.
They spend more than they tax so that there's cash in the economy to circulate.
Money Mechanism Measurement Piracy Problem.
The issue is, that spending comes first. Practically it works like this (simplified version):
1. the gov demands $1000 tax from you, which means, it indebts you by $1000. The consequence is, that you do need $1000 now to be able to pay the tax.
2. the gov creates $1000. You owe those $1000 to the gov because of 1.
3. the gov tells you, it will give the $1000 to you, but you must work for it. You do what the gov wants you to do and the gov pays $1000 to you.
4. you carry the $1000 to the tax office and pay your tax.
5. the gov destroys those $1000.
6. next year it starts again at 1.
So taxation and money do exist only to make you work for the gov. Via the market it just works not that straight forward but it results into practically the same.
The gov does not need the money you pay as taxes. The flow direction of money just means, that you do need the money of the gov to be able to pay the tax.
It works practically the same as if you would borrow money from a bank with the simple difference that the money you borrow is given to the gov. So you are in the same situation like after having spent the money: you must get the money back in order to be able to pay back your debt.
Paying taxes is paying back your debt to the gov and not financing the gov.
Money is a bookkeeping system of debt.
"The governement doesn't need to tax to spend" because the central bank can print $$, Steve I think you have been brainwashed by MMT idiots, I would not expect such a low IQ take from you
Steve is absolutely correct.
Taxes are paid from the money the gov spends into the private sector. The tax payer needs the money of the gov to be able to pay the tax. Money does not grow onto trees.
Taxes can only be paid in fiat currency. Taxation is absolutely essential as it creates demand for the currency.
All money is fiat since money is a bookkeeping system of debt. Demanding a tax creates debtors owing to the gov.
@@ThomasVWorm debt ≠ liability. money is a means of tracking chained liabilities between trading entities. you do not need debt for this to work, whether or not money is created by debt (as is the case, and what Keen referred to at 0:32), and this is just as true in economies based on a gold standard or equivalent.
@@StrixTechnica you miss the point.
When money is created in a bank, there is no debt yet.
Imagine your account is at zero. Now you borrow $100, which means the bank creates and puts $100 to your bank account while at the same time you do have a liability of $100, which means, there is still no debt: $-100 + $100 = 0.
The same is true from the perspective of the bank. There is no debt at all.
Now you spend the $100 by buying something from me, what I did produce and work for.
Now your balance is $-100 and mine is $+100, which means you owe to me to sell something for $100 too. If you do, I pay you $100, you return it to the bank and the money vanishes: $-100 + $100 = $0. You do no longer owe to me, which means no debt exists and it also means, no money exists.
It makes no sense to accept money, which exists without the responsibility of a debtor to sell for it. When you accept it as payment, you may be the last one, who did.
This is why a bank is insolvent, when its debtors turn out to be unable to sell. Nobody wants to accept the money, it did create, any longer.
Money is the bookkeeping system of this type of debt and the banks are the accountants. And regarding gold: almost nobody wants it, because it does not match the demand in an economy.
The gold standard is a sign of madness. We dig out gold from the ground which had been there for billions of years only to bury it in a central bank forever. And then we continue only with the only thing, which counts: the numbers in the ledger.
@@StrixTechnicaand the same is important when the gov taxes.
When the gov spends the money it creates, it wants to demand a supply. This supply does not pop up out of nowhere. The private sector does not need the gov in order to get rid of the stuff it produces. It produces it to consume it itself. Nothing left for the gov.
Demanding a tax, which means indebting the private sector makes the private sector to take the demand of the gov into account. The private sector can now reserve a fraction of its resources as a supply to the gov or it can produce a surplus as a supply for the gov or simply do both.
Taxation keeps the globalists in charge
@ProfSteveKeen, QE and fiscal spend are quite different, you know that, and private sector bonds are a form of debt which, like mortgages, net to zero at maturity. yes, it's a balance sheet exercise that increases M3 in the short term but, at maturity, M3 is decreased by the same amount.
in contrast, government fiscal spend is money injected into the economy (productive and asset) that isn't returned to the government, other than by taxation.
so in that sense, yes, a government does have to tax to spend, and debt-funded fiscal spend doesn't count because, like bonds and mortgages, that debt has to be paid back (even if only by rolling-over the debt again). ultimately, the only way public debt is ever repaid is through future taxation, amplified by inflation decreasing the real value of historic debt.
What a bunch of double talk.
Basically, the maths is no more complex than we learned in primary school. Why do they pretend it's too complicated for ordinary people to understand?