Monday, November 23, 2009
"There ain't going to be no money for nothing if we pour it all into Afghanistan"
Set aside the atrocious English for a moment as well as the over-arching debate on whether or not our presence in Afghanistan is even worth it, that was House Appropriations Chairman David Obey speaking with ABC News.
His comment highlights--once again--a total lack of understanding of our monetary system by our policy makers. They mistakenly believe the government is either "out of money" (as President Obama said) or very close to being out of money.
Their misunderstanding lies in a belief that taxes fund spending. This is a gold standard concept and is, therefore, inapplicable under the current paradigm where the government credits bank accounts electronically and its "money" floats freely and is non-convertible into any commodity such as gold exchangeable for another currency at a fixed rate of exchange.
Under the current system there is absolutely no constraint to how much crediting of bank accounts the government can do; the only constraint being political. And it is becoming quite clear that our political leaders are about to put limits on how much the government can spend, even though we have 10% of the workforce unemployed and our industrial capacity is being utilized at an anemic, 68% rate.