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Taxation is not enough to pay back the entire public or private debt since all the new money which is injected into the economy enters via the banking system as

Taxation is not enough to pay back the entire public or private debt since all the new money which is injected into the economy enters via the banking system as loans or via government bonds (also backed by debt at a 1 to 1 ratio); so no amount of taxation against those dollars is sufficient to cover the debt which was created as a consequence of injecting those dollars into the economy in the first place... Unless the tax rate was 100% - But that would be impossible for other very obvious reasons. The only real purposes of taxation are to force people to keep using the fiat currency as a means of payment (maintain currency monopoly) and also to maintain scarcity of the currency as this helps to keep inflation under control (at least for consumables). But it doesn't actually prevent inflation in absolute terms because the government usually ends up spending more than it collects in taxes anyway (take loans from the Fed by creating new bonds); they mostly care about having inflation lower or proportional to other countries, not about preventing inflation. The only way to pay off the debt would be to change the mechanism via which money enters the economy so that it is no longer tied to a debt as it does so. But then the question would be who should receive all that new debt-free money? Probably it will be big corrupt megacorporations via insanely large government contracts.

vkou 6y ago
> The only way to pay off the debt would be to change the mechanism via which money enters the economy so that it is no longer tied to a debt as it does so. Yes, all money is created in the form of debt, which implies that it has to be paid back with interest. There is no way for everyone to pay off all outstanding debt. However, you are forgetting that not all debt is paid off. Some of it defaults, which destroys money.
- cryptica 6y ago
  True, and I guess private banks just sell all that toxic debt to the reserve banks. But it's not the money which is being destroyed by defaults, it's only the debt component which is wiped clean. The credit component of the loan was already spent into the economy by the now-insolvent borrower and cannot be recovered by creditors so it's still circulating and adding to inflation. It really sucks. What a horrible society we live in. The current system monetizes bankruptcies. Bankruptcy is the only mechanism which allows debts to be wiped clean without simultaneously adding more debts.
  - D13Fd 6y ago
    >Bankruptcy is the only mechanism which allows debts to be wiped clean without simultaneously adding more debts. This is untrue. There is also repayment, which is the way the system is designed to work. There is also voluntary/negotiated forgiveness by lenders. More than that, how is bankruptcy a bad thing in this context? Isn't bankruptcy exactly what should happen when repayment becomes impossible? Our system of bankruptcy organizes the process of default, and was actually the solution to the older problem of things like debtor's prisons.
    - arithmomachist 6y ago
      The invention of credit scores and their use to screen people for renting apartments and getting jobs brought in a coercive system of similar magnitude to debtors' prisons. Credit scores should be only used for evaluating potential loans, not for anything else.
      - bhawks 6y ago
        I understand your sentiment but renting housing comes with significant legal protection for the renter. If the renter can't make their payments it is a long process to evict (no landlord wants to evict). This is a long-term relationship between renter and landlord. It seems reasonable to allow landlords to gauge the ability of tenants to make payment. They'd be doing this anyway, at least they're going thru a neutral mostly centralized group of third parties instead of judging from their gut (although that does happen too - but it'd be more biased if you eliminate credit checks).
    - cryptica 6y ago
      >> This is untrue. There is also repayment This is incorrect. Repayment helps to clear the debt only from the perspective of the individual who has the debt but this is only possible because someone from the next generation took on even more debt to purchase the debtor's assets (took out a loan to buy the house, for example). So the aggregate debt never goes away, it's just transferred to the next generation and it keeps growing along with asset prices. Asset holders see their capital increase continuously while non-asset holders keep getting squeezed until they are basically reduced to slavery. Bankruptcy, however, clears the aggregate debt because the central banks end up taking the loss.

vkou 6y ago

> The only way to pay off the debt would be to change the mechanism via which money enters the economy so that it is no longer tied to a debt as it does so. Yes, all money is created in the form of debt, which implies that it has to be paid back with interest. There is no way for everyone to pay off all outstanding debt. However, you are forgetting that not all debt is paid off. Some of it defaults, which destroys money.

cryptica 6y ago
True, and I guess private banks just sell all that toxic debt to the reserve banks. But it's not the money which is being destroyed by defaults, it's only the debt component which is wiped clean. The credit component of the loan was already spent into the economy by the now-insolvent borrower and cannot be recovered by creditors so it's still circulating and adding to inflation. It really sucks. What a horrible society we live in. The current system monetizes bankruptcies. Bankruptcy is the only mechanism which allows debts to be wiped clean without simultaneously adding more debts.
- D13Fd 6y ago
  >Bankruptcy is the only mechanism which allows debts to be wiped clean without simultaneously adding more debts. This is untrue. There is also repayment, which is the way the system is designed to work. There is also voluntary/negotiated forgiveness by lenders. More than that, how is bankruptcy a bad thing in this context? Isn't bankruptcy exactly what should happen when repayment becomes impossible? Our system of bankruptcy organizes the process of default, and was actually the solution to the older problem of things like debtor's prisons.
  - arithmomachist 6y ago
    The invention of credit scores and their use to screen people for renting apartments and getting jobs brought in a coercive system of similar magnitude to debtors' prisons. Credit scores should be only used for evaluating potential loans, not for anything else.
    - bhawks 6y ago
      I understand your sentiment but renting housing comes with significant legal protection for the renter. If the renter can't make their payments it is a long process to evict (no landlord wants to evict). This is a long-term relationship between renter and landlord. It seems reasonable to allow landlords to gauge the ability of tenants to make payment. They'd be doing this anyway, at least they're going thru a neutral mostly centralized group of third parties instead of judging from their gut (although that does happen too - but it'd be more biased if you eliminate credit checks).
  - cryptica 6y ago
    >> This is untrue. There is also repayment This is incorrect. Repayment helps to clear the debt only from the perspective of the individual who has the debt but this is only possible because someone from the next generation took on even more debt to purchase the debtor's assets (took out a loan to buy the house, for example). So the aggregate debt never goes away, it's just transferred to the next generation and it keeps growing along with asset prices. Asset holders see their capital increase continuously while non-asset holders keep getting squeezed until they are basically reduced to slavery. Bankruptcy, however, clears the aggregate debt because the central banks end up taking the loss.