Chris Liss on Nostr: FACT CHECK REQUESTED Need some fact checking/concept validating help for the ...

FACT CHECK REQUESTED

Need some fact checking/concept validating help for the long-form post I’m working on. I know there are *many* here who are knowledgeable in the topic.

This is the first part of the essay. Let me know if anything I describe is inaccurate in this section if you’re inclined:

DRAFT:

I have a thesis as to why things have gone so off the rails in the United States (and beyond), but it might not be what you think. Most of what we decry as insane and inexplicable policies are but symptoms of an underlying process. That process is the creation of money via fiat, the way in which the money propagates through the system and how it distorts the incentives of so many who are beholden to it.

Let’s start at the beginning. New money is created via debt issuance all the time. It’s why the US government is nearly $36 trillion in debt — it issues bonds and owes the bond buyers the interest and principle on it. “Issuing debt” is a fancy way of saying “borrowing money.” The US government borrows from its citizens, corporations, geopolitical allies (and even adversaries) to finance its operations.

If there is insufficient demand for its debt, i.e., if not enough people want to loan it money, it can raise rates, i.e., promise to pay more interest so as to entice more lenders, or just have the Federal Reserve buy the debt and place the assets (bonds) on its balance sheet. US government debt (promise to pay) is an asset, and so the Fed can put that promise on its balance sheet.

The result of new money coming into the system via government borrowing is inflation. There is simply more money chasing the same amount of goods and services, so the prices for them rise. If while injecting more money into the economy the government were simultaneously injecting more goods and services, there wouldn’t be inflation, but unfortunately while you can always print more money out of thin air, you can’t print more energy, grass-fed steak or expert medical care.

But the inflation of the money supply and its concomitant debasement doesn’t happen all at once. Initially when there’s more money injected into the system, those who are closest to the new supply (banks, through which it passes, their largest accounts, investors and asset holders) spend it and benefit from it before its inflationary effect has taken hold. This is known as the Cantillon Effect. Eventually inflation drives ordinary wages up too, but not enough to offset higher prices, and only after the Cantillonaire class has disproportionately benefitted.

The unfairness of this arrangement is evident enough, but the second and third order effects are far more sinister. When the government can essentially borrow (print) money to finance whatever it wants, whether the Iraq War and its military contractors, “free” mRNA shots (Pfizer made $100B off those contracts) or any other policy that benefits cronies and favored corporations, there are going to be a lot of resources and effort devoted to getting in good with the decision makers in the government.

Put differently, if I run a small business, I can only earn money if I offer my customers something they value enough to pay more for it than it cost me to produce. If I hire you, you’ll need to add value to the business and also hope it can continuing adding enough value to customers to pay your salary. We have to work for it.

But the government can simply print it, and in infinite supply. Are you better off starting a business (or working for one) that relies on adding value to its customers in a competitive environment or one that taps the infinite font of government money?