Posts Tagged ‘Federal Taxes’

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.
http://endoftheamericandream.com/archives/the-looting-of-america-the-federal-reserve-made-16-trillion-in-secret-loans-to-their-bankster-friends-and-the-media-is-ignoring-the-eye-popping-corruption-that-has-been-uncovered

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.”
http://www.nber.org/chapters/c11457.pdf

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.