Economics anyone? The relationship between spending and taxation.

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Londoner
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Re: Economics anyone? The relationship between spending and taxation.

Post by Londoner » Mon Oct 02, 2017 8:39 am

Arising_uk wrote:
Mon Oct 02, 2017 3:32 am
FlashDangerpants wrote: If you ask a philosopher what money is, you will get a much less nuanced answer than from an economist (short answer, nobody really knows). ...
I thought they're settling on 'It's what you can pay your taxes with' or is that currency and is there a difference?
The taxes-thing is what ultimately underpins a national currency. My countrymen could abandon pounds and start using coloured beads for buying and selling, if both sides agreed. But when it comes to paying taxes they have to be paid in pounds, so if you want to stay out of prison you have to get hold of some.

FlashDangerpants
Posts: 1209
Joined: Mon Jan 04, 2016 11:54 pm

Re: Economics anyone? The relationship between spending and taxation.

Post by FlashDangerpants » Mon Oct 02, 2017 8:01 pm

Arising_uk wrote:
Mon Oct 02, 2017 3:32 am
FlashDangerpants wrote: If you ask a philosopher what money is, you will get a much less nuanced answer than from an economist (short answer, nobody really knows). ...
I thought they're settling on 'It's what you can pay your taxes with' or is that currency and is there a difference?
To quote some rando from Forbes...
bloke from Forbes wrote: Unfortunately, we know what money is the same way the fabled Blind Men of Hindustan know what an elephant is: the one who grabbed the trunk knows it is “like a tree”, while the one who grabbed the tusk knows that it is “like a spear”, and so on. Money is such a multi-faceted and all-pervasive element of our system—the figurative “elephant in the living room”—that our capability to obsess about one aspect of it prevents us developing a proper appreciation of what it actually is.
That quote pinched from here

Science Fan
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Joined: Fri May 26, 2017 5:01 pm

Re: Economics anyone? The relationship between spending and taxation.

Post by Science Fan » Thu Feb 15, 2018 10:57 pm

The opening post simply refers to modern money theory (MMT), which is one of the latest fads in economics. It is another example of why economics has yet to reach scientific status. MMT has a slightly better handle on economic history than Austrian economics, but that is not saying much. Essentially, MMT exists as an ideological effort to "justify" government spending without regard to any barriers. In other words, it is simply an ideology that openly claims everything that exists within a country belongs to the nation's government.

One of the most fundamental concepts in economics is the problem of scarcity, which is the recognition that resources are limited. If we use resources for one purpose, then those same resources cannot be used elsewhere to achieve another goal. So, if government can spend without limit, this is literally stating that the problem of scarcity has magically disappeared from consideration.

Historically, we know people used to take their gold that they owned, turned it in to the mint, which would then hand back a gold coin that contained less gold than was originally handed over to the mint. So, the obvious question is then, why would anyone do this? If gold could be used as money, then one would have no need to give up some of the gold they already possessed in order to acquire a gold coin with a lesser amount of gold in it. People exchanged their gold for the coins, precisely because gold is not itself currency. The government does enforce the use of coins it produces to pay all manner of debt. So, the MMT has this aspect of economic history correct ----- currency is the product of some political body enforcing the use of the currency it issues.

However, the MMT misses the point that the gold coins originally came from gold that was already the private property of the people, and not of the government. So, in reality, the governments did not originally create wealth out of thin air by issuing coins, but rather, the governments confiscated wealth that already existed in order to do so. This is the equivalent of taxes being paid first to finance the production of currency issued by a government. MMT simply tries to turn this historical reality upside down.

Maybe some day economics will be a legitimate scientific enterprise, but it is doubtful that this will take place any time soon. MMT simply tells politicians that they make everyone better off by creating more debt. This is like a physician telling people that the more sugar they consume, the healthier they will be. If a government creates debt, then what it is doing is confiscating wealth from the citizens of the country, and that is harmful. Even if no taxes were ever collected, the effects of inflation would act as a tax and still result in the confiscation of wealth from people to the government. MMT overlooks this simple fact: government debt always represent a confiscation of resources.

So, no advocates of MMT, creating currency is not the same as magically creating wealth. Please, learn the difference.

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