Swindled: If Government is ‘for the people’, Why is the King Wearing No Clothes?

By Don Fraser

This book is about how governments could, if they really wanted to, create jobs for all those who want them and pay decent pensions or benefits to those who are unable to work. It is also about how to ensure easily affordable, even free, education at all levels; and affordable healthcare, energy, transport, communications and much more. It is, in short a prescription for enabling and ensuring sustainable equity in the distribution of income and other benefits from economic growth.

The book shows, first, how national governments have been effectively SWINDLED out of the means to fund Budgets which support the above means of ensuring equity. It then goes on to show how, if they really wished to do so, governments could very simply reclaim their full funding power and use it to achieve and maintain all of the above – jobs, pensions, affordable essentials and so on for sustainable, socially acceptable income equity – and all without raising taxes or redistributing existing wealth.

• Language: English
• Publisher: BookBaby
• Release date: Nov 10, 2014
• ISBN: 9781483543178

Book preview

OVERVIEW

How National Governments Can Find the Money to Ensure Equitable Income Distribution AND Support Free Market Growth

Aim

The aim of this Overview is to provide a very clear summary of two crucial components essential to enabling national governments to fund Budgets which can achieve and ensure socially acceptable income distribution and, as a bonus, achieve more certainty in economic growth, too.

The first of these components is to identify those who are most disadvantaged in terms of either income, per se, and/or in access to services which are essential to adequate economic and social wellbeing. For example, there is a need to ensure that everyone willing and able to work is able to find a job which pays an adequate income; there is a need to ensure that everyone unable to work because of disability or age is still provided with an adequate income (pension/benefit); there is a need to ensure that no-one is financially unable to obtain the education or skills training to the full level of their interest and ability; and so on.

The second component is to identify a source of Budget funding, with sufficient certainty, quantity and accessibility to enable the actions needed to ensure that the necessary incomes and services can be assured. For example, to fund sufficient job creation to absorb all who want to work; to pay pensions/benefits to all who are unable to work; to fund public education, health, transport, and so on with accessibility and charges at levels which make them readily accessible to all who need them.

As a bonus, it will emerge that, together, these two components will also ensure a more certain and more effective level of economic demand, opening the way to higher levels of private sector production and profitability.

To ensure there is no mystery, however, it needs to be understood at the outset that the proposal for funding component two is basically simple: it is that national governments can ensure that they always have access to the funds they need by directly creating a certain proportion of it – most commonly understood as printing it - for their own direct Budgetary use.

The first reaction of most readers will probably be that this suggestion is economically absurd and totally discredited by any number of historical precedents. Germany in the 1920s will spring to mind.

Hence, there is an immediate need to make it clear that what makes this proposal for printing money very, very different from all other experience with printed money is that it comes with some very special RULES. In brief, it comes with FOUR RULES, each of which must be strictly followed if the kind of outcomes alluded to in component one, above, are to be achieved. To the extent that these FOUR RULES are followed, it can then be shown, clearly and logically that the case for partially funding national Budgets with printed money become very strong indeed; including, amongst other benefits to be outlined, the avoidance of unwanted inflation. It is crucial, too, to note that it is ‘partial’ funding: it does not eliminate the need for taxes, but it does mean that government Budget funding does not need to be confined to what can be raised in taxes (or borrowings or sale of national assets).

Most importantly, it will be shown that money, per se, need never be the scarce resource for government action, provided it is created and used according to the FOUR RULES to be identified and elaborated below (see Chapter Five for explanation of this assertion).

Context

With Thomas Piketty’s recent blockbuster, Capital in the 21st Century, providing the most irrefutable evidence, there is a growing awareness of the urgency for governments to address the growing gap between the haves and the have-nots in terms of income distribution and wealth. The key problem is that there is no consensus as to how to go about it – let alone a consensus which can be supported across the whole of the political spectrum from Left to Right.

The aim here, therefore, is to show that not only is there a very simple and effective methodology available to redress the growing income gap, but that this very same methodology can, at the same time, ensure greater certainty for growth and profitability of the free market private sector. Because of this dual capability, it is a methodology which could, and should, be embraced with some enthusiasm across the whole political spectrum from Right to Left; albeit with differences in policy detail.

What Could Be Achieved?

The proposal which will be put forward is that any government of Right, Left or Centre could, if it really wished to do so, simultaneously achieve, for example, all of the following key objectives – and more, as appropriate:

•Full employment for those who are available to work

•Pensions with genuine purchasing power for those who are not able to work

•Education, health, essential services and infrastructure at affordable rates

•Low taxes

•No government debt

•An orthodox Budget Surplus .

How Could These Objectives be Achieved?

The key to finding how to simultaneously achieve this seemingly incompatible list of objectives begins from one very simple issue: governments cannot find enough money to do what is needed. They cannot find

(i) enough money to create the jobs which could eliminate most forms of unemployment;

(ii) enough money to pay decent levels of pensions/benefits to people unable to work because of age, disability, etc;

(iii) enough money to pay the full costs of education and skills training (at all levels), plus health and other essential services and infrastructure; and so on .

The problem, of course, is that current perception is that it is increasingly impossible to find the money needed from acceptable tax levels and it is undesirable to look for it in the form of borrowings because they generate debt and, hence, the need for both principal and interest to be repaid. Underlying this perception is the generally accepted belief that the only sources of money available to budget strategists are, in fact, virtually limited to taxes and borrowings; and preferably only the former. But since these sources are not sufficient to do what is needed, where can the money come from? Is there any other source? Is there, for example, a lost Gold Mine somewhere; which, if it was found by our national government, could be used only for Budget purposes to achieve the kinds of things listed above?

The fact is that there actually is such a Gold Mine: it exists in the form of government’s own authority to create legal tender money (NB At this point some will think of recent experience with printing money known as quantitative easing –QE. And while QE will be discussed, it will also be shown very clearly why the QE approach to printing money is not what is being proposed.)

The only reason that printing money (by the method to be proposed) it is not currently used is that conventional wisdom of economic and political correctness has a fixation which regards it as unthinkable; an indicator of economic nonsense and a certain road to financial disaster – just as happened in Germany in the 1920’s.

But this conventional wisdom is – as it so often is – not just wrong, but wrong for the wrong reasons! Not to put too fine a point on it, this conventional wisdom is built on nothing more nor less than a longstanding ‘con’ job. In short, we have been – and continue to be SWINDLED into believing that printing money will cause economic disaster (see Chapters One to Three for more detail on how the SWINDLE has been achieved).

The simple fact is that if government did find and use its own, real gold, Gold Mine in the ways to be proposed below, no one would raise an eyebrow – everyone would accept how lucky we are to be able to find the fund we needs; inflation would barely get a fleeting thought. Equally, therefore, there is no reason why governments should not be able to use money they directly create by ‘printing’ in the way to be described, to enable all of the above equity focused objectives to be achieved. In effect, governments with the authority to print and mint legal tender actually do have their own Gold Mine. And, contrary to conventional belief, they could very easily and very effectively use it – just as they could – and certainly would - if they found a real gold mine, full of real gold, which they kept entirely for use in funding the national budget. At the same time they could put it to effective use without generating unacceptable inflation – PROVIDED they follow the FOUR RULES referred to above and elaborated below! This is the key: there are just four Rules, but they must be observed. At the same time, while each is crucial, none of these four Rules is such as to prevent creating enough money – ‘digging’ enough gold from the virtual mine - to achieve the kind of income distribution outcomes we want; and without fuelling inflation.

So, why don’t governments currently use this Gold Mine? Why don’t they create their own money, as needed, to ensure the kinds of outcomes above, all of which are essential to a sustainable society?

The only reason that governments don’t do it is that they have been ‘conned’ into believing that the sky will fall in; that printing money will cause hyper inflation, currency debasement and loss of credit ratings and worse. The economy will collapse. The SWINDLE is in and it is working.

Moreover, history appears to be on the side of the SWINDLERS.

Printed money has been used many times. Most notably, perhaps, it was used to finance the American War of Independence, the French Revolution and the American Civil War (both sides), just to name a few cases. In each case, this money did its immediate job perfectly well, but then blew out into inflation of disastrous proportions when it was misused beyond its essential purpose and was soon abandoned. Most notably of all, of course, is the memory of Germany in the 1920s where barrow loads of cash came to be needed to buy a loaf of bread. Against these experiences, governments have trembled to the point that it has now become widely accepted conventional wisdom that directly printing money should never be put on the table as a serious option.

The real issue, of course, is that no one seems to have adequately thought through why printed money worked well in some circumstances but then became total financial disaster. Why did it work well one day and then get completely out of hand the next? This failure to think it through has, in fact, enabled the very sophisticated ‘con’ to be put in place: a ‘con’ which has effectively SWINDLED governments out of using their right to print money for any reason; including what is proposed below to benefit both growth and distribution. Not surprisingly, perhaps, it is largely the way in which the banking and finance industry has historically emerged – as we will see - which has been the vehicle which has enabled this ‘con’ to succeed so effectively.

Just for starters, the ‘con’ can begin to be exposed by looking at the very recent experience with printing money: both for some good examples and some bad ones. Most notably, in an effort to re-float their economies after the Global Financial Crisis (GFC) of 2008, the USA and then Japan and others turned to printing money – but, unfortunately, only in a form which the very first of the four rules, already alluded to, will specifically exclude as being exactly the wrong way to go for the purposes we are focused on.

The method of creating new money which the US and Japan have used has come to be known as ‘quantitative easing’ (QE) and the first thing to note is the one good thing it has shown: despite it delivering huge amounts of money into the economy and despite interest rates being very low, this QE use of government created money has not shown any signs at all of hyper inflation in the cost of living – the sky did not fall in. That is the up side of QE.

Unfortunately, however, QE also has a down