If all the money ends up in hands of billionaires and their corporations and there will be no money in hands of regular plebs…
Who do you think will have to pay the taxes? Also, the people would figure out a different way of trading or currency. And with that one getting taxed, all the billionaire’s money become worthless.

  • wewbull@feddit.ukEnglish
    26·
    14 hours ago

    “All the money” assumes there’s a finite amount of money. There isn’t. In a fiat currency, like the Dollar, Euro or Sterling, banks create money when they lend, and the money disappears again when the loan is repaid. This is what a banking license gives you; The ability to make loans without having the existing money to back them.

    Government spends by telling it’s bank (The Federal Reserve, ECB or BoE) to lend money for the things it wants to buy. Taxes then repay that debt and the money doesn’t exist anymore.

    In an economy where huge amounts of wealth is horded, there’s a problem of liquidity. All of that wealth is idle. It’s not circulating and there becomes a danger of economic collapse. Therefore more money has to enter the system, either through government spending or commercial banks making loans.

    Horded money is also money that isn’t going back to banks to repay the lending. So the amount of money in existence goes up, driving the value of that money down. This is inflation. One dollar can no longer buy as much as it used to as it’s value has gone down.

    So, billionaires cause:

    • Large amounts of commercial debt to inject replacement money into the economy. That is, personal debt or corporate debt.
    • Inflation caused by that cash injection

    Sound familiar?

    Now a government could choose to raise its spending so that it injects the required money into its economy, rather commercial banks doing it. The advantage of that is that they can balance that with raised taxes, so inflation doesn’t get out of control. They can also choose who to tax and protect areas of the economy.

    Most governments don’t see it this way, arguing that they can only spend what they take in taxes (The “government spending is like a household budget” argument). This has been false ever since they all came off the gold standard. They can spend what they want and they can tax what they want. The difference will drive inflation, so has to be kept reasonable, but if they don’t spend enough the commercial banks take over and will absolutely drive inflation.

    • schnurrito@discuss.tchncs.de
      2·
      12 hours ago

      I have read about these ideas about money being created through loans before, but also read contradictory ideas.

      Since you seem to know a lot about the subject, would you happen to know of materials where I can learn more about the topic?

      • wewbull@feddit.ukEnglish
        41·
        8 hours ago

        So these ideas are the basis of modern monetary theory (MMT) i.e. the theory of modern money, not that it’s a modern theory of money. There’s nothing very controversial here, in that the “theory” is just a description of how things work when you have a fiat currency. The controversial parts are what you do in your fiscal policy once you think about things this way.

        Stephanie Kelton is a vocal proponent of this style of framing. She’s been an economic advisor to Bernie Sanders and is the author of “The Deficit Myth” which explains these concepts. She also gave a TED talk on the concepts.

        Richard Murphy is a UK proponent who writes a blog and has a YouTube channel where he explains the concepts.

        There are others, but these two are a good way in. Searching for them, and also the the phrase “Modern Monetary Theory” should get you lots of talks, interviews and articles on both sides of the arguments.