Do you remember how photography
used to be a very different activity than it is today? Because you needed film
in your camera to take pictures, and because each picture used up some of that
film, you had to be very sparing and judicious with the pictures you took. You
missed the opportunity to get some of your best shots because you had to be
frugal with your film. The danger of taking more than a few pictures was that
you would run out of film. Because you had to put new film in the camera to
take more pictures, you were constrained in the number of pictures you could
take by the amount of film you had at your disposal.
Then along came digital
photography. Suddenly the film constraint was gone. Since then, you have been
able to take as many photos as you like with no worry about running out of film.
The only constraint with digital photography is that you might run out of
storage capacity to hold all the pictures. At that point, you could delete some
pictures or add more storage.
One might argue that unlimited
picture taking is wasteful, but why? Each film photo expended some amount of a
limited supply of film while each digital photo costs nothing.
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Do you remember how federal
spending used to be a very different activity than it is today? Because the
government needed gold to back its dollars, and because expenditures tied up
some of that gold, the government had to be very sparing and judicious with the
amount of its spending. The government missed the opportunity to do what was
best for the country because it had to be frugal with its dollars. The danger
of spending more than a few dollars was that the government would run out of
gold. The government had to take back some dollars to free up gold so it could
spend again. It was constrained in the number of dollars it could spend by the
amount of gold in its vaults.
Then along came the end of the
gold standard in 1971. Suddenly the gold constraint was gone. Since then, the
government has been able to create (spend) as many dollars as it needs to with no
worry about running out of gold. The only constraint with federal spending now is
that the economy might some day run out of capacity to hold all those dollars. At that
point the government could remove some dollars from the economy or the economy
could expand to absorb those dollars.
One might argue that unlimited
dollar creation is wasteful, but why? Each gold-backed dollar expended some amount
of a limited supply of gold while each unbacked dollar costs nothing.
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When President Nixon took us
off the gold standard in 1971, he eliminated the risk of federal bankruptcy or
insolvency. Since then the government has had the ability to create unlimited
quantities of dollars without needing to recover dollars by taxing or borrowing
(yet it inexplicably continues those activities). Federal spending no longer transfers
money to some by taking it from others. The federal government has been freed
to spend on the things America really needs, such as better health care, better
education, better roads and infrastructure, safer environments, and medical and
technological advances.
For some reason, ignorance I
think, we continue to act as though we are still on the gold standard. We act as
though the next dollar spent will send the federal government into bankruptcy.
We cry and moan about the government taking dollars from hard workers and
giving them to lazy shirkers. We are too stupid to realize that we have moved
from film to digital with respect to federal finances. The capacity constraints
have, if not lifted entirely, been altered to the extent that any limit on
federal money creation is not in running out of money, but in creating too much if the economy
itself is at full capacity. Federal insolvency is not in the picture, so to speak.
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