Thursday, April 20, 2017

Government Money is Unwarranted

Government money has been a complete deception from the time governments have attempted to convince societies that prosperity derives from the coffers of stolen wherewithal from the private sector.

Murray Newton Rothbard once concocted a small book called, "What Has Government Done to Our Money?" which inter alia summarized the unnecessary existence of government money. Essentially what Rothbard did in this recapitulation was vanquish any ideas which exist among scholars as well as the intelligentsia espousing government existence in general.

As Austrians, cogently we notice that individual decisions arise from time preference, which is subjective. Value is indeed subjective. The preference of undertaking a particular choice and what portion of time will be allocated toward this endeavor are enumerated concepts of human action and praxeology delineated by Von Mises. Money is what organizes a society, as transactions elucidate the indicative natures of man. Prices are of the essence, as they are the guiding tool toward professing ones actions of exchange.

Based on the aforementioned theories, we then realize the harmful nature of inflation. Inflation is a rise in the money stock, yet at what point in time one measures this specific rate or increase is very important when setting the corresponding rate of return or mark up. This is best left for private entities borrowing money (debt instruments) or lending money (loans).

Banks would be the reference point corporations would most certainly revert to in order to gauge the price at which they borrow funds from investors at as they hold the capital of others. This would be their agio of enticing, which would also include the specifics of their savings, or solvency. Surely at this point one may notice how important the equity price of a corporation is.

Market capitalization is of course the price spread for the speculator which suggests the possibility of generating a certain rate of return. A low equity price with substantial debt would mean higher risk (low savings), moreover a high equity price with less debt would engender less risk (more savings). Again, this is subjective as a higher equity price may allude to a lower rate of return (shrinking price spreads). Certainly one would also use other particulars of noted company savings to render a choice of capital allocation such as the price spreads of Sales or Net Income.

Government money is so parlous to these price signals, which create these price spreads, because the overabundance of money reduces the purchasing power. As previously mentioned, the rapid increase in the denominator results in an abridging of the price spread of purchasing power. All to stimulate the economy governments then cause a scenario of the then rapid increase of the numerator, all the while the denominator continues to increase yet at a slower pace. This causes an overconsumption of savings (the unseen), or what Austrians refer to as Capital Consumption.

The Treasury should not exist, it's truculence is that of a coercive central monopoly desiring to gauge it's costs and ultimately does not comprehend the natures of money. Their intention is to fund all of their public goods and in order to do so, they issue debt instruments. The business cycle is a natural occurrence, and governments simply amplify the booms and busts which arise during these cycles. A monopolized money therefore wreaks havoc on all whom hold the inflated instruments.

In order for a government to have money, they must extort it from the private sector. By issuing debt instruments they require then implementing taxes so as to pay back these debt instruments. Thus capital stock pilfering arises. Managing the cash flows is what all whom issue obligations must undertake, and in paying these cash flows government creates more money due to delusive estimates. At maturity the face must be imparted.

In order to pay par value (the principal of this loan from the issuer), corporations create sinking funds which is debt issued in advance to pay for debt maturing at a much closer time. Their other option is to manage their Sales (top line) in order to withhold enough funds to remunerate the debt that will quickly mature. Those that fail at this process, go bust or bankrupt.

Governments do not ever go bankrupt, and if so ever they did, the economy using their money would collapse. An Austrian would not hesitate to assert the necessity of this position for the very reasons that weeding out bad practices and readjusting the market toward unfettered Capitalism is required in order to attain the level of a truly free society. The statist is fearful of this and thus enjoys intervening by setting lower rates through their central banks. They presume asset purchases quickly provide funds to those feeble banks on the brink of collapse. Both processes are often performed simultaneously. This inflates the money stock, and reamplifies the business cycle as the clearing out process never truly occurred.

Debt instruments issued by a government are instruments of consumption. Government debt instruments steal money from the productive sector, which is the non-governmental private sector, and thus reduce the real value of it by expanding credit overall.

As the same process of creating a sinking fund aforesaid is partaken in by governments, the estimates their bureaus generate never signal revenues (stolen capital from the private sector) to the level of solvency. In order to avoid constantly issuing further government debt instruments to remunerate those whose securities are maturing, they would need surpluses large enough to pay off those outstanding instruments soon to mature.

As time has passed, no new president, cabinet or those other lawyers arguing in DC, have been able to confect such a scenario. Debt has mounted up for so long whilst the government officials promote the preservation of their union. We have been deceived, and now our money is valueless (fiat inconvertible). We are at the precipice of the empire, and secession is on the way. The debt has never been reduced, and will never disappear. Let us not forget that the desire to keep the Union together, led to the creation of the Federal Reserve Bank in the first place.

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