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Comment by ErikVandeWater | Hacker News Reader

> a sovereign government has no need of revenue in the first place.

Please explain this. Are you suggesting governments can just stop taxing, and print the money to pay their debts with no ill consequences?

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I'm not an economist. But I can see inflation being thought of as a type of tax.

I'm not sure what kind of incentives that creates, and if those incentives are better or worse than the incentives existing taxes create.

So, maybe?

Off the top of my head, some results would be:

1. No one wants to lend to your country again because you paid them back with currency far less valuable than expected

2. Nobody wants to use your currency as a means of exchange in international transactions because it can fluctuate suddenly

3. Massive redistribution of wealth from savers and lenders to borrowers (maybe a good thing on the whole, but devastating for people headed into retirement)

4. Anything (including govt. programs) that aren't indexed to inflation are suddenly far less valuable

All of your post assumes that when government creates money, it causes inflation, and when private banks create money, it causes no inflation. No such distinction exists. Most money is created by private banks.

I know most money is created by private banks. But that is stable (it is assumed by ceteris paribus). If a government decided to stop taxing then that would be something new.

Is a good assumption that money created by private banks more stable than government created money? what economic mechanism provides such guarantee and what is the evidence?

Private banks used to be able to print their own currency completely: in one country each bank would have different money that coupd be redeemed for gold, and wasn't backed by the government. That was very unstable.

We basically stopped taxing multinationals after the end of cold war, we do have something new.

I can't do any better than Beardsley Ruml, Chairman of the Federal Reserve Bank of New York, who explained it in the 1940s. [0]

[0] http://home.hiwaay.net/~becraft/RUMLTAXES.html

People think government works like a household budget - it doesn't. Think about it - who controls how much money is the economy?

Does someone measure 'okay the economy has grown 5%, it needs 5% more money to be printed?" No, nobody does that.

If the government prints zero money, the money supply can still quadruple, because banks create money out of thin air.

Which is exactly what they did prior to 2008. The reason government had to 'print' miney in 2008 is that they were replacing all the 'unsupported' money that was creates by banks, and then suddenly imploded.

As soon as you suggest government should print money everyone starts screaming inflation, but when private banks do it, noone blinks an eye.

The rules that allow banks to create money have changed dramatically over the past 20 years, and nobody is even discussing it.

The money that banks create by fractional reserve lending is (at least somewhat) backed by real assets. The money that governemnt 'prints' is backed by nothing.

The money government prints is backed by the best asset of them all - the power to recover it as taxation.

Paying the tax to the tax collector is far cheaper than the alternative amount you end up paying to the bailiff when they confiscate all your assets.

Taxation is, ultimately, the only 'reserve' asset there is. And as you can see it is very definitely backed by real assets. All your real assets.

We have not operated fractional reserve banking for generations.

A bank today can give out loans and mortgages without any assets.

https://positivemoney.org/2011/04/monetary-reform-myths-1-10...

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