But for-profit capitalists pay out ALL of the system's earned incomes, as their money costs. Capitalists need to get more money "out" of the economy in sales proceeds, than they invested "into" the economy as their costs of production. Without the realistic prospect of getting more money out of the economy than you invested into the economy -- and keeping the profits as your money savings and capital -- there is no point in investing your money in producing stuff for sale. So capitalists -- who own the economy's productive infrastructure and hire the economy's workers and suppliers to produce a supply of goods (and services) for sale -- stop hiring and paying incomes to the economy, and stop producing goods for sale. The capitalist economy stalls into Depression.
The capitalist economic production system, and the capitalist for-profit money-issuing commercial banking system, both need to subtract more money out of the economy (profits and interest), than they add into the economy (incomes and loan principal). Production and banking are necessary to our lives, but in money arithmetic they are both negative sum $arithmetic equations.
Money is $numbers, and $numbers work by the simple rules of arithmetic. The $ sign does not alter the rules of arithmetic. You cannot subtract more $numbers "out" of an equation, than the amount of $numbers than you added "into" the equation. You can "charge" the equation more numbers (profit and interest) than are "in" the equation, but the equation cannot "pay them". The microfinance peasants learned that hard lesson in $arithmetic: they "owe" the negative balance as arithmetically unpayable debt. Later we will see how that is 'resolved'.
A Monetary Solution to The Money Problem
The only solution to a negative sum $arithmetic equation is for somebody to add positive $numbers into the equation.
Who can add positive $numbers into the negative sum capitalist money equations?
Governments could, if they issued some of their own debt-free fiat money.
Fiat money that is "issued" by a government and spent or given into the national economy, is a net positive addition to the nation's money supply. A fiat money-issuing government does not have to "get money" from taxpayers in order to "spend money" and "give money" to program spending recipients. Nor does a money-issuing government have to "borrow money" by selling bonds to money-issuing banks, which saddles taxpayers with bond interest payments and permanent and ever-growing public debt: and ultimately, sale of the national public infrastructure to get money to pay down the national debt.
In the US, $1000 per month issued by the US government and given to every US citizen who has a SS number -- everybody from Bill Gates to you to the inner city tenement slumster -- would add up to about $2.5 trillion per year (my very rough guesstimate) of government-issued "income-money", paid directly to every person.
Indebted people could use the money to make their loan payments, which would bail failing banks out of their defaulting loan portfolios. Small businesspeople self-finance with personal debt, so small businesspeople could use the money to pay down their debt. This program bails out the banks by bailing out the bank's debtors.
Debt paydowns and/or payouts could be a requirement of the program, so indebted people have to use their government-issued income FIRST to pay down their bank and credit card and student loan debts, before any of the money was available for them to "spend".
Milton Friedman advocated a negative income tax. The IRS would give money to people whose income falls below some minimum level. Some agency -- like the IRS or the Fed or the US Treasury -- would have to work with the commercial banks in the administration of this kind of income distribution program.
The Fed anchors the money payments system that is operated by the commercial and central banking system. The Fed adds credits and subtracts debits from commercial bank reserve accounts at the Fed. The Fed could credit the banks' reserve accounts, and the banks could add those credits to their customers' deposit accounts. Then the banks could debit those deposit accounts to make the customers' loan payments. The undebited balance of the $1000/month remains in customers' deposit accounts as spendable, investible, saveable money.
Quite a few US citizens -- mainly poor people -- have no bank accounts. The IRS has a computerized record of everybody's SS# and address and banking and payments information. So the IRS could find and maybe pay the $1000/month to people who have no bank accounts. Probably those people would need to open bank accounts at commercial banks and get debit cards so they could spend the money without carrying around robbable cash all the time.
Poor people have a hard time cashing checks because they have no bank account, so they need bank accounts. Or the program could simply be a boon to the check-cashing services that charge high fees for cashing poor people's checks. One program cannot cure all problems.
The infrastructure to administer a government-issued money distribution program -- coupled with a debt paydown requirement -- is already in place. The program could be up and running in fairly short order.
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