There Are Only TWO Ways a Government Ultimately Raises Money

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Over the years, I’ve noticed a very common misconception about how a government raises money. Interestingly, this misconception has been stated by Austrian economists as well as all the other “economists” in the world.

The misconception is that government raises money three ways: taxation, printing, and/or borrowing. But in truth, borrowing is just a detour from the only two ways that a government actually raises money: taxation and/or printing. Unless the government is going to default on its borrowed funds, it still needs to pay them back by taxation and/or printing—like it pays for everything else. (Unless, of course, it borrows more money to pay back the original borrowed funds!! But even then, unless it is going to completely default on any of its borrowed funds, the only way government raises money is through taxation and/or printing.)

As far as I’m concerned, for anyone—Austrian economists, or otherwise—to keep repeating the “three ways a government raises money” misconception obfuscates the real issue: that government can only raise money by theft and/or counterfeiting (i.e., fraud).

UPDATE: Many people have written to me to point out that by printing more counterfeit money (thereby lowering the value of the money already in circulation—i.e., inflation), counterfeiting is also a form of theft. (Another expression that has been around for years is that inflation is a “hidden” tax.) Up until a month ago, I would have agreed with all of these people. But as Austrian economists Hans Hoppe and Walter Block pointed out in a paper they wrote back in 2002, you own your physical property but NOT the value of it. The value is what other people think it is worth when they make an offer to buy it. Therefore, although printing more “Federal” Reserve notes is obviously lowering the value of your dollars, they are not “stealing” its value (i.e., it is not theft). When the government taxes you, it is forcibly taking physical dollars from you—therefore, that would be considered stealing your physical property (i.e., theft). By the way, I’m not implying that what the government is doing is “okay” because they are not “stealing” your value. Counterfeiting is still fraud. The reason why people don’t realize the true nature of this paper commodity is because the government has a monopoly on the printing of it. I’ve always maintained that if everyone started printing up these counterfeit “Fed” Notes tomorrow, they might soon realize (because of the ensuing rampant inflation) what a medium of exchange really is supposed to be (something that has a market value outside of its being used as a medium of exchange—that’s why it is initially accepted as a legitimate medium of exchange) and how they were being screwed by the government and the banksters who have controlled the “Federal” Reserve for the last 90 years.

People have also been writing to me to say that government “owns” property that it can sell. Oh really? Where did it get the money to purchase that property? Through taxation and/or printing? Did it just expropriate that property or piece of land? “Government”—like a corporation—is a group of people. Only people can own something, not some invisible entity. If I own shares in a company, I own part of that company’s assets. It may not be specified exactly which of its assets I own, but I can sell my share for cash. Which people in the government hold the shares in this “public” property? Do you and I, as taxpayers, really believe that we own part of GM—as Pres. Obama never tires of telling us? If so, I need to sell my share of GM because I’m a little pressed for cash at the moment. (Perhaps royal families actually do own vast amounts of their own countries due to homesteading centuries ago—though I wouldn’t be surprised if it was due more to aggressive wars.) The idea that Obama owns the Grand Canyon or Bloomberg owns the Brooklyn Bridge is a fiction. (Actually, I sold the Brooklyn Bridge to some tourists back in 1977…and 1985…and 2003.) There is no “public.” (More fiction from our ruling establishment over the centuries.) If you believe in some “public,” then you must believe in the validity of anti-discrimination laws because we are informed that businesses—unlike individuals in their private lives—can’t discriminate because they are dealing with the “public.” Here’s something else you can read by Austrian economist Hans Hoppe which explains what I’m talking about much better than I could ever hope to do.

11:09 am on August 31, 2010