I was writing my last article and came across this quote from John Yarmuth. Mr. Yarmuth is the Chairman of the Budget Committee in the US Congress. He sounds pretty important, right? This mental giant had this to say about creating money, not even "printing" money, but just saying poof, here's some money:
“We are not broke as a nation. We are not bankrupt. We can’t go bankrupt. We absolutely cannot go bankrupt because we have the power to create as much money as we need to spend to serve the American people.”
My first thought when I see something like this is to ask this simple question. Why not just send everyone ten billion dollars? If you can create as much money as you want, just make everyone billionaires.
Now, if you're reading articles like this, I am sure you can point out the two flaws pretty quickly with what would happen. The economy would shut down overnight. The first reason being, how many billionaires do you know that are working as cops, firemen, grocery store clerks, plumbers or any other job we require to keep our lives going. Everyone that is now a billionaire would not be going into work the next day. The second issue is that now, the salary to try and attract someone back to working those jobs is 100,000,000 million dollars a year, which means your gallon of milk is now about 100,000 dollars to pay for those salaries. You get the idea.
Now, you might be saying, “He never said anything about giving everyone billions.” You would be right, but the concept is the same. Why not just give everyone enough money? The same two problems arise. One, is the basic capitalist principle that people need to be incentivized to get up and go to work and that drive is provided by the fear of starving if they don’t. Now, I like living in a society with a safety net provided by people who care about their fellow humans, but that is a far cry from free money for all. The second issue is a little safeguard that has been around since we stopped bartering and used money in society. Inflation. Just like the 100,000-dollar gallon of milk above, any increase in overall wealth will increase the price of goods and services. This isn’t just some idea or political argument; it happens every time.
Ron Paul, former presidential candidate, says it better than me:
“Creating too much money that chases too few goods also leads to price inflation, decreasing the purchasing power of the dollar.”
My real question from this article is how does a person that makes a comment as removed from factual financial common sense not get yanked from his position overnight. Well, because the people he represents have come to an agreement, probably without realizing that they have, that they are more willing to take free money today at the expense of security for tomorrow.
Many quotes come to mind:
“Eat, drink and be merry, for tomorrow we die”
“If it’s not about money, it’s about a lot of money.”
“Mo money, mo problems.”
“Inflation is taxation without representation.”
“The natural tendency of the state is inflation.”
One last comment. If there is someone out there saying, well Yarmuth is correct in that the US will not go bankrupt because they can make all the money they want, by definition they can always have money. Well, having an unlimited supply of money that is worthless or can't be used is the same as being bankrupt. The world can and will yank the dollar as the accepted world monetary unit and probably be happy to do it if this is the thought process of the American leadership.
One last, last comment. If congress actually believed this, why does it need to collect taxes? Wouldn't they just print the money they needed instead of requiring the populous to pay? Seems like it would be a lot less hassle.