View RSS Feed

Memories of the 28th Century

Making the Dollar Worth a Dollar, again

Rate this Entry
Most people donít think about inflation and the money supply, but they are things that are important. It has come out in the news recently, because Congress is discussing raising the debt ceiling again, and that is an important factor in determining the value of the dollar. The dollar is backed by debt, Treasury Bonds to be specific. As long as there is a market for Treasury bonds, the dollar will be worth something, but the quantity theory of currency applies. That means that the more money that is outstanding, the less each unit will be worth, and the Treasury Bonds are money outstanding. It also means that every time the U.S. floats additional debt, the value of the money and bonds will decrease due to inflation.

Inflation eats away the value of money constantly. While it doesnít make much difference what the dollar is worth in daily expenditures, but the effect is felt over time, when prices increase faster than incomes increase, and when real estate prices increase so much that most people canít afford to buy a house.

Inflation has been official government policy for more than 100 years, because it makes Treasury Bonds more desirable and more profitable to the government. The rate of inflation has been variable, but to put it in proportion remember that in 1820 an ounce of gold was worth $20. Today, 5/22/2023, gold closed at $1973.80; thatís almost 200 times the 1820 value. That is the overall rate of inflation in the last 200 years. Of that loss in value of the dollar, most of it has come in the past 70 years; in 1950 an ounce of gold was worth $35.

It is possible to reverse that trend and to make the dollar worth much more. All we have to do is to pay down the debt, and all we have to do to accomplish that is to have the federal government spend less. The details will have to be ironed out, but the U.S.A. spends more on defense than all of Europe, including Russia pls China and the rest of East Asia. If the U.S. spent only as much as the EU, then that would save a lot. See listing of defense spending by country
https://wisevoter.com/country-rankin...ng-by-country/

But defense is only one of the many things that the federal government wastes money on. There are entire cabinet departments that are not among the areas of authority that the constitution granted the feds the power to operate in. Housing and Urban Development are clearly within the exclusive authority of that states, and the same is true of Education. Everyone will be better off after the feds drop the extra things and contrate on what they are supposed to do: regulate trade and defend mostly. And there are other matters that the states should be handling.

After we finish with that side, we can make federal taxes fairer and more productive for getting rid of the debt. A simple income tax that applied equally to all tax payers whether human or artificial entities would be nice and fair. Equal treatment is good. A simple income tax that excluded the first $30,000 of gross income less actual expenses, and 20% of what is left would be the tax amount. There would be no special treatment for some kinds of income, no depletion allowance, no theoretical depreciation. Tax accountants would scream, because anyone could figure their taxes. Someone who makes $30,000 or less would pay nothing, and someone who makes $20 billion would pay $400 million. The extremely wealthy would pay their fair shares. And the Treasury wo pull in more, so it would be able to retire more debt.

Between cutting expenses by 75% and increasing tax revenue by 25%, the national debt would start shrinking, and the dollar would gain value.

I realize that economists would claim that this system would be unworkable, and people in Congress wouldnít be ale to pay off their pals, and the military would shrink so much that there wouldnít be enough jobs in military supply companies to take all of the retiring officers. Maybe we could have military personnel other than the Corps of Engineers do useful work., and the foreign bases would cease to be expenses.

On the other hand, we can allow the dollar to inflate at 2% per annum, and it will be worthless in a lot less than another two hundred years.
Making the Dollar Worth a Dollar, again


Most people donít think about inflation and the money supply, but they are things that are important. It has come out in the news recently, because Congress is discussing raising the debt ceiling again, and that is an important factor in determining the value of the dollar. The dollar is backed by debt, Treasury Bonds to be specific. As long as there is a market for Treasury bonds, the dollar will be worth something, but the quantity theory of currency applies. That means that the more money that is outstanding, the less each unit will be worth, and the Treasury Bonds are money outstanding. It also means that every time the U.S. floats additional debt, the value of the money and bonds will decrease due to inflation.

Inflation eats away the value of money constantly. While it doesnít make much difference what the dollar is worth in daily expenditures, but the effect is felt over time, when prices increase faster than incomes increase, and when real estate prices increase so much that most people canít afford to buy a house.

Inflation has been official government policy for more than 100 years, because it makes Treasury Bonds more desirable and more profitable to the government. The rate of inflation has been variable, but to put it in proportion remember that in 1820 an ounce of gold was worth $20. Today, 5/22/2023, gold closed at $1973.80; thatís almost 200 times the 1820 value. That is the overall rate of inflation in the last 200 years. Of that loss in value of the dollar, most of it has come in the past 70 years; in 1950 an ounce of gold was worth $35.

It is possible to reverse that trend and to make the dollar worth much more. All we have to do is to pay down the debt, and all we have to do to accomplish that is to have the federal government spend less. The details will have to be ironed out, but the U.S.A. spends more on defense than all of Europe, including Russia pls China and the rest of East Asia. If the U.S. spent only as much as the EU, then that would save a lot. See listing of defense spending by country
https://wisevoter.com/country-rankin...ng-by-country/

But defense is only one of the many things that the federal government wastes money on. There are entire cabinet departments that are not among the areas of authority that the constitution granted the feds the power to operate in. Housing and Urban Development are clearly within the exclusive authority of that states, and the same is true of Education. Everyone will be better off after the feds drop the extra things and contrate on what they are supposed to do: regulate trade and defend mostly. And there are other matters that the states should be handling.

After we finish with that side, we can make federal taxes fairer and more productive for getting rid of the debt. A simple income tax that applied equally to all tax payers whether human or artificial entities would be nice and fair. Equal treatment is good. A simple income tax that excluded the first $30,000 of gross income less actual expenses, and 20% of what is left would be the tax amount. There would be no special treatment for some kinds of income, no depletion allowance, no theoretical depreciation. Tax accountants would scream, because anyone could figure their taxes. Someone who makes $30,000 or less would pay nothing, and someone who makes $20 billion would pay $400 million. The extremely wealthy would pay their fair shares. And the Treasury wo pull in more, so it would be able to retire more debt.

Between cutting expenses by 75% and increasing tax revenue by 25%, the national debt would start shrinking, and the dollar would gain value.

I realize that economists would claim that this system would be unworkable, and people in Congress wouldnít be ale to pay off their pals, and the military would shrink so much that there wouldnít be enough jobs in military supply companies to take all of the retiring officers. Maybe we could have military personnel other than the Corps of Engineers do useful work., and the foreign bases would cease to be expenses.

On the other hand, we can allow the dollar to inflate at 2% per annum, and it will be worthless in a lot less than another two hundred years.

Comments

  1. tailor STATELY's Avatar
    I may be seeing double here... economics seems to be a shell game played by grifters; one gets a raise and then the goods industry raises their prices accordingly in addition to a % for the CEO and shareholders for their inconvenience for having to raise their prices

    Ta ! (short for tarradiddle),
    tailor
  2. PeterL's Avatar
    Both happened, because the dollar lost value, so they increaased the number of dollars for something. Pay inflation and retail inflation are effects of thje underlying problem.