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Why The Government Has Infinite Money
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this post was submitted on 22 Sep 2023
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So, what hadn't clicked until I watch this video, is that federal taxes don't 'pay for things', they are just the mechanism by which federal government ensures the currency has value: They compel us to pay taxes (via courts, police, etc.) and those taxes must be paid in the same currency, and so we have to do work to acquire that currency, and so it has value.
No, this is not how currency gets or keeps its value. The work itself is what creates value, which is paid back in currency. If you pay taxes, you transfer some of that value you created to the state. The money would not become worthless if the state did not collect taxes. Money is a way to transfer value, not to create it and taxes are like any payment just that, a transfer of value.
Value is generated by work, but valorization is based on processes of use or exchange. Generally assets have intrinsic value. Fiat currency has no intrinsic value. Its value derives from the state assuring a demand for goods and labor, which will be purchased in the currency, from assuring the availability of investment assets, which will promise a return above an original value, and from regulating the supply, to assure that the values of ordinary goods will remain generally stable.
Well, and also by removing currency from general use, raising value by decreasing availability.
Money existed before the government started using it.
The idea that taxes remove money form the economy and government spending prints new money is an abstraction created for macroeconomics to simplify its models. But it's a lossy abstraction, so don't go thinking this is exactly what happens on the real world.
Centralized, minted currencies definitely did not exist before states started using them. Minted currencies were invented multiple times independently across multiple cultures, but one of the biggest through lines between them is that they required a centralized state who held large reserves, and that they were, in every known case, used to support standing armies for those states.
Fiat money maintains its value largely because the government will purchase labor, goods, and other assets without any concern for gain versus loss.
The state therefore generates demand even when and where private entities will not or cannot hire workers, make purchases, or invest.
Not really. The US dollar is taking longer hit rock bottom because other countries are forced to payback their debts in dollars. Eventually all FIAT currencies go to zero.