Archive for August, 2012

Historically, there has been a theoretical limit on taxation which politicians are reluctant to exceed due to perceived political  fallout. It is commonly held that they then resort to inflation as an acceptable alternative to reduce the tax burden.

The $16 trillion that the Fed added to the money supply to lend to American and European banks not so long ago is a case in point. One implication was that U.S. taxes were being held in check, but in actuality 70% of the funds were being held outside the United States. Yet, who knew? Bloomberg suspected, but had to sue to extract a confession.

The fallacy behind this kind of thinking was exposed in a paper put out by the Bureau of Economic Research in the University of Chicago Press way back in 1982. Among other things, economist Robert Hall concluded that,

“Inflation distorts the measurement of profits, of interest payments, and of capital gains. The resulting mismeasurement of capital income has caused a substantial increase in the effective tax rate on the real income from capital employed in the nonfinancial corporate sector.”

MYTH: When government prints more money, the increased inflation results in a reduced tax burden.

The U.S. government has to borrow everything it spends beyond taxes.  Additional quantities of dollars are actually reckoned into existence at the instant of loaning by the banking system.

Is it Printing that increases the Dollars?

Our Federal Reserve Note bills ($1 to $100) are printed by the Bureau of Printing and Engraving.

Did you think those were real dollars?  Actually, these Federal Reserve “Notes” (FERNs) are just Debt Transfer Scrip.  The U.S. Government cannot spend these directly.  What actually happens (and they will tell you this on the Tour) is the Bureau prints them for-, and they are paid for by – the Federal Reserve, upon their order.  FedCentral NY, placed the order, paid the 6/20 cent-per-bill that covers the expenses of printing, then “sells” them to the regional branches to distribute to member banks.

As they move the physical notes into the possession of the member bank, the bank’s “account” with the Regional Branch is debited for the dollars represented.  Dollars move from Bank to Fed Regional.  FERNs move from Fed Regional to Bank.

Notice, no new dollars are created, only generic, paper claim-checks on bank debt.  Whichever bank you surrender it to has agreed to say that they owe you that many more dollars in an account – and to transfer that debt to a third party upon your authorization.  All the government “got” out of this deal, is not the spending power of those FERNs, but a modest operating profit on printing the special pieces of “paper” for their main customer, the Fed.

At the end of the wear-out life-cycle of the Federal Reserve Note, the bank sends it back to the Fed in exchange for credit on their account and the physical bill is destroyed.  Dollars move from Fed to Bank, FERNs move from bank to Fed.  Probably, a few bills never make it back because people lose them or destroy them in the rigors of life – in which case the Fed gets to keep the dollars credited to its account.

What really increases the dollars?

So, we see it is not the U.S. Government that is increasing dollar quantities, even though it is one of their agencies that is printing the paper.  You can research this yourself in an encyclopedia or Google-up materials on the Interweb, such as here and here. or Search on….

[Open Market Operations]  Fed Central NY conjures dollars to loan (formerly for US T-Bills, now for any “security” it wants).

[Discount Rate, Reserve Requirement]  Fed Central NY conjures dollars to Member Banks to fortify “reserves”

[Fractional-Reserve Loaning]  Member banks are not limited to loaning other people’s money.

What About the Claim That We Pay Less Tax?

Not less, but more.  Do the math.  If the U.S. Government had printed these (recent 16 trillion) dollars  and possessed title to spend them, they could have completely paid off the generally-recognized Federal Debt (under 15 trillion at the time), or made a modest partial-payment toward the future liabilities of the Social Security Trust Fund.  Of course, that didn’t happen, but if it had, the “tax” would still have been paid, but not just by tax-payers.  It would have been paid by all the dollar-holders in the world who would have lost purchasing power of their dollars because of the increase in quantities of dollars relative to the stuff dollars are traded for.

Instead of relieving us from any of our tax burden, our government will just keep on with its net borrowing each year of a trillion-dollars plus. Now we have to be taxed to pay off the principle borrowed plus the interest to the bankers who reckon this money into existence. By now you should have caught on that our wages are not rising fast enough to make any headway on the necessary taxes we would have to pay to keep pace with this. Besides wages, any other increase from investments are being taxed. Except in rare instances (like holding silver) taxes plus inflation is resulting in a net loss of wealth every year.

If we cannot practically raise taxes, and if government cannot create money on its own, then it must just keep borrowing until no one will loan it any more money.  Beyond that (and some say this is already happening) our Federal Reserve Central Banking  system will just reckon more new dollars into existence to loan to the U.S. government.  We can summarize it this way:  The U.S. Government currently collects enough taxes to pay about 60% of what it spends (this doesn’t take into account its future liabilities).  Unless it starts taxing us more to close this gap, it will have to borrow and borrowing increases the amount it has to borrow because of the additional interest.

Because the banks can create all the dollars they need by lending, they can keep interest rates low (they don’t’ have to pay depositors to borrow their money).  No matter who creates additional quantities of dollars, the increase in dollar quantities decreases the trade-value of all dollars held by dollar-owners all over the world

The “good” news is that a lot of your “inflation tax” is paid by Chinese, Japanese, Brits, Germans, and Russians – whoever loaned us money.  The dollars they get back will not buy as much as their dollars we spent when we borrowed them.  Their loss is your gain.  Your kids won’t have to pay so much tax because these “non-tax-payers” will be paying through the global inflation of dollar quantities.  Americans have been getting a free ride for a long time.

This of course is a violation of the Eighth Commandment (Thou shalt not steal) on a national scale.  We should refuse all supposed “benefits” that government offers, which are outside of its divine mandate to punish the crimes God’s Word defines with the punishments God’s Word designates.  If you let the Government steal for you, you are partner with a thief.  Refuse to do business with the Fed, since it is pretending to be the Creator God, and its monetary inflation steals from the world.  Work with others to reconstruct a new money system that is honest in both substance and measure.

The “bad” news is that other nations will eventually get so fed up at losing value they will stop trading dollars.  If they won’t loan us dollars, we can’t afford a military to enforce the dollar-based currency.  If other economies stop loaning us dollars, our Central Bank will have to create/loan more and more dollars which, when combined with the dollars other nations are desperately trying to get rid of/spend back into our marketplace – is going to seriously increase our inflation problems.

These problems come about because men refuse to obey God’s laws which are written in the Bible, and endure in a tarnished, incomplete form, in men’s hearts. God requires honesty in all trade. We have pretty good honesty in money quantities, but our current global nightmare has come about largely from centuries of not being honest about the substance and measure of our money. Our other protection we have despised is the Biblical prohibition from collecting interest (usury) on loans to faithful Believers (Christians).

Case Closed: Myths Busted.

1. U.S. Government printing doesn’t increase dollars, privately-controlled central banks reckon them into pretended existence.
2. Increasing dollars doesn’t ease the tax burden, it increases and spreads it to non-tax-payers.

US Government deficit spending and borrowing will either increasingly enslave/impoverish US taxpayers, or precipitate an hyper-inflationary crash, or the crisis will be leveraged into coercing One global, money-issuing bank and its puppet-government to force people into using their mandated money.
Which, in turn, will either increasingly enslave/impoverish those new global taxpayers

US Government deficit spending and borrowing will either increasingly enslave/impoverish US taxpayers, or precipitate an hyper-inflationary crash, or the crisis will be leveraged into coercing One global, money-issuing bank and its puppet-government to force people into using their mandated money.
Which, in turn, will either increasingly enslave/impoverish those new global taxpayers, or precipitate bigger hyper-inflationary crash for the whole world.



Economics has been called the dismal science and today we have no lack of evidence for that accusation. One has only to turn on the evening news (or shop for about anything) to know that something is seriously amiss.

Every new day brings word of some new economic calamity somewhere in the world.  Greece is on the verge of default, faith in all fiat currency is faltering, another bank is begging for a taxpayer bail out.   Fear and uncertainty are in the air.

Just this week, Spain is admitting it is expecting a bail out from EU central planners. Greece is worse, though a new bailout is in the works. Ireland also has huge debt problems, but these are so small relative to Spain and Italy.

Everybody talks about it, but nobody knows what to do about it. Everybody can recognize the problems, few can accurately identify the root causes, and nobody can demonstrate a viable solution. The talking heads drone on and on.  Droll assurances from the big bankers are wearing thin. Everybody assures us that the Economy is improving — just slowly.

It never occurs to most that a theological principle could lie at the heart of an economic problem. As noted in our last post, the Church today has deferred the rule of Christ to a future millennium. This gives the economic manipulators a completely open field. [see previous post (puppets, puppeteers, clueless public)]

More people are recognizing it is the moral, religious, and legal environment that drives the motivation for a productive, instead of a lazily consumptive economy.  Nonetheless, the majority in both Church and State today, are convinced that Christ never intended to press His authority until He “returns” and His Kingdom begins.

MYTH: The kingdom of Christ has been delayed until after His Second Coming.

The implications of this myth are profound in the area of economics. If men think Christ, as Divine Emperor, is not yet defining crime and punishment – they will be subject to whatever arbitrary laws men in power manage to enforce.

That is getting to be a scary prospect, as the current power brokers appear to lack a basic understanding of cause and effect in matters of the economy.  After a careful examination, MythBusters identified at least five economic factors that are severely affected.

                                   The Economic Implications of The Kingdom Delayed

1) Inflation. Without the moral compass of Biblical law, we are left at the mercy of the Majority and/or the Manipulators to increase our money supply. Simple inflation should cause wages to rise with costs, but instead, we are getting an increase in costs above wages.

2) Money: A generation after the Christian minority abandoned the theology that Christ was the head of Civil Government — the banking sector began pretending they were the Creator (of money, at least). The Civil War Greenback began the drive to disconnect measure and substance from Quantity in our money system (which is all we’ve had for over 40 years).

People are ever-so-gradually recognizing that there is no dollar or Euro, that these “things” are imaginary, and beneficial only to a corrupt banking system as a means to acquire title and control over the land and labor of the people and their civil governments.

3) Property Rights.  We are bitterly discovering that we have abdicated property rights in our own labor and property-we-trade-for-our-work – for the bait-and-switch promises of the Corporation of our national government. That bankrupt Corporation can only give what it first steals from others.

4) Central Control.  Our highest civil officials perpetrate and promote legal theft and murder on a grand scale.  The populace appears to be blind to it, and dumb when it comes to protest. Our trust in their protection is denied by their attempts to take away our ability to defend ourselves (gun control), Meantime, Homeland Security and the Social Security administrations are ordering hundreds of thousands of rounds of ammunition.

5) Debt.  ”Freedom is everybody’s banner, yet we voluntarily enslave ourselves through government deficits, personal debt, accepting debt-based “money”, and begging the US Govt to restrict “the other guy’s freedom” so that we can enjoy benefits at our neighbor’s expense.

                                   The Biblical Impossibility of The Kingdom Delayed

The Bible doesn’t leave room for this kind of thinking.  John the forerunner of Jesus, as well as the Messiah Himself, assumed that the Kingdom was engaging, even as they spoke.  Here are a few of the many verses which verify that the kingdom is now:

Mark 1:14 — Now after John had been taken into custody, Jesus came into Galilee, preaching the gospel of God, 15 and saying, “ The time is fulfilled, and the kingdom of God is at hand; repent and believe in the gospel.”

Luke 9:27 — But I say to you truthfully, there are some of those standing here who will not taste death until they see the kingdom of God.”

Matt. 26:64 — Jesus said to him, “ You have said it yourself; nevertheless I tell you,hereafter you will see the Son of Man sitting at the right hand of Power, and coming on the clouds of heaven.”

Daniel 2:44 — In the days of those kings [Rome] the God of heaven will set up a kingdom which will never be destroyed, and that kingdom will not be left for another people; it will crush and put an end to all these kingdoms, but it will itself endure forever.

The Bible certainly allows for a culture to chose laws and morals by the will of the People, but what they cannot chose or control is the consequences of  those arbitrary actions.  Why should one mere man, or any group of men – have any more ethical authority to define law than some other man or group of men?

When Eve presumed the right to define good and evil based on her own standard of knowledge she introduced the reign of hell on earth.  Christ with His death and resurrection replaced that with the gradually increasing reign of heaven on earth:  “It is like a mustard seed, which a man took and  threw into his own garden; and  it grew and became a  tree….” (Lk. 13:19).

Case Closed: God has driven us into a corner. Man is running out of options and out of time. His only hope is submission to Christ in every realm of existence, including the economic. Ideas have consequences and what man believes about the future determines how he acts in the present.

MythBusters concludes that man as an economic actor will act according to his faith. If he believes the Majority controls the future, he will naturally gravitate toward pleasing the majority. But if he recognizes the Lord Christ as Lawgiver, Judge, and Emperor in the present, he will more likely be guided by the realities of Christ’s final evaluation when He brings the down the curtain on Human History.

MythBusters Poll

Posted: August 16, 2012 in Economics Polls, Uncategorized