Monday, December 19, 2011

A Taxing Problem, II: What Happened to the Federal Reserve?

Last week we had a few things to say about taxation. Today we have a few more. Mostly today's posting has to do with the way the tax system has been used for purposes other than revenue generation — and the Federal Reserve has been used to provide money for government instead of the private sector, effectively handing over the key to the "money machine" to the State, which is the last place it should be.

To take up the slack and permit unaccountable spending by the federal government, the Federal Reserve has been hijacked from its original and legitimate mission to provide liquidity for private sector investment by rediscounting eligible paper for qualified commercial, industrial, and agricultural capital projects (vide Alexander Hamilton's Opinion as to the Constitutionality of the Bank of the United States, 1791; and the previously-noted McCulloch v. Maryland, 1819), and diverted to funding government by accepting bills of credit that, given a strict interpretation of the Constitution, may be unconstitutional, as it exceeds the specific regulatory, not creative, power granted under the enumerated powers.

We see the tragic results of this "new philosophy" all around us. Government debt has virtually destroyed Europe and is endangering the United States and Japan, making serious inroads on our natural, inalienable rights to life, liberty (freedom of association/contract), and property. Forcing people into dependency on the State has made it much easier to coerce people into accepting programs that they would normally find morally repugnant, with "welfare blackmail" ensuring that the rest give in for the sake of the promised State benefits. Further, because the tax system has been manipulated to meet goals other than mere raising of revenue to defray legitimate expenditures, the IRC has grown so complicated that no single person, even group, can understand it. Even if CESJ's proposed Capital Homestead reforms were not manifestly in accordance with justice, the reforms could be justified on the grounds of expedience for the sake of increased efficiency and decreased cost of compliance and maintaining the system.

In our opinion, the underlying cause of the massive social and economic chaos we see around us is the absolute insistence by academics and policymakers that it is impossible to finance new capital formation without first cutting consumption and accumulating money savings. This displays an egregious misunderstanding of money, credit, banking, finance, and private property. It also effectively abolishes private property by re-defining it and making serious and unjustifiable inroads on its exercise.



E.J. Dodson said...

I would add that, in general, the primary beneficiaries of infrastructure spending are the owners of land in proportion to the inecrease in economic activity facilitated by the new infrastructure. That increased value is publicly-created and should be publicly collected. As Norm knows, I view this as a public asset; failing to collect this fund awards a subsidy to nonproducers simply because they hold a deed issued by government that grants monopoly privileges we call land ownership).

Larry Walker Jr said...

Geez, what a mess! I copied you at:

Michael D. Greaney said...

Larry, that's just the surface. If you can find a copy (it's rare) read Harold G. Moulton's "The New Philosophy of Public Debt" (Washington, DC: The Brookings Institution, 1943). At 93 pages and small format, it's a quick — but frightening — read. We've asked Brookings for permission to republish, but they're evidently not talking to us.

Ed, that's why we advocated the Citizens Land Bank (CLB). There's no reason why, with the corporate and financial technologies available today, the State should own anything. It can all be owned directly by the citizens, each with a discrete share in the land and infrastructure, without adding a layer of questionable political agendas into the mix.

Larry Walker Jr said...

[ Harold G. Moulton's "The New Philosophy of Public Debt" (Washington, DC: The Brookings Institution, 1943). At 93 pages ]

Hmmm. There's one copy available on Amazon, listed as a collectible, for $150.

But then there are several copies, allegedly, available from as low as 2.66 at Alibris. This might be a bargain, if it is what it says it is. Ordering now.

Michael D. Greaney said...

Use They usually have the most copies. Then write a note to Brookings demanding a reprinting ... with a Just Third Way foreword.