Former Secret Service agent Dan Bongino (pictured) hosts one of the largest conservative shows on YouTube and other media.
His analyses of politics are often spot on, as are his pithy sayings. Two of his favourites are:
all debts are paid
there is no power in yes.
The first is actually quite a profound statement, and if you don’t understand the second, think of how many times you’ve been told “No!” by bureaucrats and other jobsworths, then you will understand.
Dan has a third saying though that is way off beam: “There’s no money fairy” might be considered a derivative of Margaret Thatcher’s famous epigram: the problem with socialism is that sooner or later you run out of other people’s money.
That really is a dumb statement for a man who has an in-depth understanding of economics. Or could it be that mainstream economics text books are as useful as The Book Of Mormon? You can read it, memorise it, understand it, but at the end of the day it is total rubbish, and all you have done with your years of study is waste your time.
The reality is that no government ever has to run out of money. Governments fund themselves and public works primarily by three methods: taxation; borrowing; printing money.
Taxation is the method preferred by fiscal conservatives like Dan: tax and spend. The problem with taxation is that it reduces both purchasing power and investment. This is what Alexandria Ocasio-Cortez and her fellow progressives don’t or prefer not to understand when they advocate soaking the rich.
The second method for governments to fund themselves is borrowing, from the public, from the banks, from other countries. Why would anyone, any entity, lend money to a government? For interest is the simply answer.
The third method any government can use to raise funds is simply to print the damned stuff. This can include minting coins – small change and relatively expensive; printing notes – a lot cheaper, especially high denomination notes; and creating it electronically. The latter is to be preferred because it is totally free.
The reason governments don’t simply create credit and keep creating it is because there must be a relationship with the amount of money in circulation and the stuff it can buy – goods and services. Yet before the current crisis, we in the West and the rest of the so-called free world had such a shortage of money that the shops were full while people were going without. In some places, that extends to housing. There are plenty of homes to rent, but people can’t afford to rent them, certainly the homeless can’t. So why is there this shortage of money?
The simply answer is that most of the money in existence is indeed created electronically. By the banks. Furthermore, the banks create this money ex nihilo, and then sell it at interest. The left ignores this, and has done right back to Karl Marx. His magnum opus has one mention of usury in its index. One! The International Socialist Review for April 1903 contains an article by Charles C. Hitchcock which includes some comment about usury. This is a rare exception. A century and more later, communist publications like the Morning Star were still denying the reality that banks create money.
The great Major Douglas explained the technique of credit creation way back in the 1920s. His two most important works Social Credit and The Monopoly Of Credit can both be found on-line, but here is the simple example he cited:
A new bank opens with 10 depositors depositing $1,000 each – dollars for you, Dan!
The bank has assets of $10,000.
Customer number one borrows $1,000 for a big project, handing over the deeds to his house as security. The bank then credits his account with $1,000 of NEW MONEY. Note, this loan is not drawn against any of the other customer accounts, and as this is a new bank, don’t let anyone give you any flim-flam about fixed reserves.
The situation is now as follows:
All ten customers have $1,000 in their accounts, while customer number one also has $1,000 in his overdraft account. He draws that $1,000, all of it, and the bank now has $10,000 in deposits plus $1,000 owing. Customer number one is successful; having paid his staff and his suppliers, he sells his goods, gives some money to his wife for housekeeping, and deposits $1,050 into his overdraft account. What happens now? The original loan of $1,000 is cancelled out of existence, literally. This has been summed up as every bank loan creates money; every repayment of a bank loan destroys money.
Major Douglas even expressed this as an equation. Anyone who is skeptical should try arguing with the mathematics.
To Part 2.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.