Off-Budget – Financing the Transition

Congress follows a rule, sometimes, that requires them to find a source of income to tax to cover increased spending.  Did you notice that when the Fed dropped interest rates from 6% to 1% to stimulate the economy that Congress taxed nothing?  That is because the money necessary to fund that drop was accomplished by expanding the money supply – a device called Off-Budget Financing.  “Expanding the money supply” is code for the more commonly understood - printing more money.

Printing more money does not increase the intrinsic value of the country’s asset UNLESS that money is used to buy assets like stock which not only grow over the years by human effort but increases in value through inflationary pressure. If the investment in stocks grows and compounds over the years, the country has made a wise investment without devaluing the dollar.

On the other hand, if the country finances current spending and consumption off-budget they are just supporting the status quo and not increasing the value of the country. They are decreasing the value of the dollar.  They effectively are stalling and freezing the economy at its present level.  Gone are the benefits of growth that investment in the capital markets will generate to all Americans and the country. If spent, those funds will decrease the value of the dollar and trigger more inflation.

We learned in the last century that there is no consumption without production. It is necessary to produce something first before you can consume it.  And pray tell who consumes and who produces? The answer is the people – people in the private sector.  And pray tell who is trying to engineer our economy to tell the people what to do – that’s right the government – the public sector - that useless teat on our economic pig.

What government takes in and spends is a drag on the economy. What the people can do is another matter. If we take the $1.3 trillion the government collects every year in payroll taxes and dump it into individual taxpayer personal investment accounts which are immediately invested in the capital markets we won’t have the normal decrease in the value of the dollar as those monies will grow, multiply and compound over the years into hundreds of trillions for the benefit of all.   Your ordinary American will be worth $3.2 million dollars (2007) at retirement and be able to pay his own way.

See here for financing the transition to personal accounts in a most attractive and profitable way - an off-budget way -  that makes perfect sense.