Debt
While governments are in perpetual debt, there are plenty of debtors in the private sector, too. The wealthy are good at generating profit, the poor and young are not, and are forced to borrow. Lenders get rich on other people's debt, which makes it easy for the rich to get richer, and the poor to get poorer. The criminal are best at getting wealthy because they buy lowest and sell highest. Stealing and then reselling can be easier than printing money because the income cannot be traced. The casinos provide an intersection for spending and gambling wealth, fencing stolen goods, and for laundering cash. Casinos are a lot like Congress, the Pentagon and Wall Street. However, the money flows with a lot of zeroes in the same pattern where there are few zeroes. The corruption at the top is a reflection of the troubles at the bottom. Everyone is seeking the easiest way to wealth. The more blazingly corrupt take the shortest path. If they get caught, then they can afford more lawyers to dissemble the truth.
Any action the government makes has a ripple effect, but the result will always be the same: more debt and more inflation. Someone spending more or less money at any particular moment, for any particular reason, is a constant phenomenon. The statistics can be massaged to say otherwise, but in the aggregate, no other result but inflation and debt are possible. Every transaction generates inflation. It does not matter what was purchased by whom. Guns and butter are both inflationary. Mathematically, all spending is the same. The government debt must match the new inflation created by new transactions. This will be further explained in Chapter 4: What is Inflation?
Not surprisingly, every nation in the world is in debt. This is an important phenomenon. Government debt is the money that the private sector needs to function. Once the people accept their currency, the government needs to maintain it in constant supply. There is a direct mathematical relationship between public debt and the aggregate of private transactions. The government does not create debt in a vacuum. The debt limit is raised so the participants in the economy have enough money to be able to trade. The private sector and the public sector have a mutually parasitic relationship. The higher the government tax rate percentage, the higher the private sector profit percentage. Government is the largest debtor, employer, and customer in the economy. The more the private sector profits selling to the government and to each other, the more the government taxes the private sector. The constant shifting of percentages back and forth is a vicious cycle of mathematical confusion. People blindly study these variations. From a coupon-cutter to a hedge fund investor, they are looking for a hidden pattern from which to gain an advantage. What a waste of time! Survival for everyone is accomplished through cost shifting. It is mathematically impossible for everyone (public or private) to keep pace with inflation indefinitely. It is the nature of blowback that the day of reckoning will eventually arrive.
The government is in the peculiar position of deriving its income from private-sector profit. That means when the economy is bad for the people and corporations, it is even worse for government. For example, a business can survive by breaking even. If the employees and the vendors get paid, and it shows no profit, the business pays no taxes and goes forward. It can cut overhead during lean times. Likewise, if the employees experience a pay cut or inflation, they can consume less and maybe pay less taxes, too. The people and businesses are significantly more nimble than the government. The government, however, must increase its spending during these slow periods. For them, if revenue is down, then there is also a pressure for their expenses to go up. Everyone wants to be in a state of profitability again. The states lobby the federal government for more cash to meet their own budgets. The federal government acts as the pressure release valve for inflation.
It is at these times that the federal government uses deficit financing to catch-up with private sector inflation. It is a regular occurrence in financial history. The debt limit is raised and large transfers are made to the state governments, which then attempt to pump cash into the local economy. Anybody who complains about the debt for the children is ignored. There is no mathematical alternative, only the frenzy of expediency. Unfortunately, this vicious cycle can never be stopped. The action and reaction are tied together. It is just a typical my expense is your profit transformation, but on a national scale. The roles have been reversed, just as they are in the private sector, when the seller becomes the buyer. The government becomes the giver rather than the taker.
When it comes to finance, the future is condemned by the past. Attempts to delay the debt, whether in public, corporate or private finance, are all based on the same logic: slow down the expenditures to give revenues a chance to increase. If only it were so easy. We are all connected in the commonwealth. Since my profit is your expense, cutting your expense cuts my profit, which is going to lead me to to cut my expense, which is someone else's profit. Every change will eventually work itself around. Death is the only escape. In fact, death is the only thing that keeps the system somewhat balanced. In death, the holdings of one generation must pass to the next generation, which is the impetus for the importance of inheritance. Every generation seems to enjoy a steadily increasing life expectancy, along with a population increase, which dulls the advantage for the next generation. There are more people waiting for what will be less money of less value.
Societies
As a simple model, the economy is a distribution system. Everything originates from the Earth for free. Man must add his labor to fashion the natural resources into something useful. We work to produce what others consume, others work to produce what we consume. Because the Earth is large, certain resources are found in various places. The shifting of goods and services is both necessary and natural. Trade is in everyone's best interest, but what we are trading primarily is the labor to produce the goods, not the goods themselves.
We are exchanging local harvests, but as goods move, numbers move with them. It is the shifting within numerical ledgers that is the problem. Our needs are uniform. Everyone needs each other. Seldom do you hear a complaint that is production-related anymore. The struggle is always with the numbers.
The divide between the rich and the poor should be understood as a symptom of a mis-regulated currency. The rich are not necessarily greedy or fascist. They are fortunate within a fascist system. While some people are more clever than others, and may work harder, those differences do not explain the wide discrepancy that exists.
The political process can give everyone a chance to vent their grievances, but we need a better analysis of the problem to solve it. There is no invisible hand. Science is based on explaining the result. A cause is either true or false. Treating the symptoms will never lead to a cure for the underlying disease. That is why it is important to recognize that we do not "own" money. It passes through our hands. We have a responsibility in regard to how we handle it.
The existence of government money masks the most important question in economics: What is value? How many eggs is one chicken worth? By continuously replacing one side of the barter exchange, the question of value is never addressed. We are hundreds of years late in holding this conversation. The island of Manhattan was exchanged for sixty Dutch guilders. The money had no meaning to the Native Americans. The island was a gift, not a sale. The Native Americans had a system based on sharing, not selling. There was no such thing as a hungry Native American until the white man arrived. When we celebrate Thanksgiving, it is to thank the Native Americans for sharing food. The Pilgrims and the Native Americans both understood the value of commonwealth. The genocide that followed was by the fascists who were more concerned with the Futures value of food, rather than its immediate benefit to feed everyone.
If Manhattan Island is worth $1 Trillion today, then the government must issue $1 trillion in currency. The government debt is always following the private economy, not leading. The United States government started off over $70 Million in debt, by using the private resources of people like Robert Morris Jr. To pay one citizen, government must take from another citizen. This could be sharing, but it is not. That is the critical difference between a selling system compared to a sharing system. The Native Americans could share an entire island and not feel any financial pain. We, on the other hand, suffer at our own hand. Selling is more painful than sharing.
Percentage variation is a ubiquitous problem. Because percentages have become accepted as a cultural norm, they are not recognized as the primary driver of volatility and inequity. It makes more sense to have a fixed percentage of zero, than to allow every transaction to be different. When we bargain over the percentage, nothing is accomplished. We are just poisoning the well. Commonwealth is common goals and common dignity. We all have a right to a measure of equality when we trade with each other. It is illegal to discriminate on the basis of race, gender and other criteria, but it is acceptable to discriminate for no reason at all.
If you go to a bank to borrow money, you get a different percentage rate for a car loan than you do for a mortgage. A new car has a different rate than an old car. A young person is charged a different rate than an old person. The same is true of the deposits. All these different percentage rates are forms of inequality that betray the concept of commonwealth and equality. It belies the fact that money is collectively owned, and creates classes that are favored or disfavored. This is not just a banking issue. It occurs throughout the economy. The same product is sold at different prices to different people by the same business.
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