Government Deficits Explained

[Martin Hash]

Money is imaginary - just numbers in a computer. Government spends the imaginary money buying things it thinks it needs. Everybody who receives that money then buys things they think they need, and the people who get that money buys things, over-and-over, so that the original money multiplies itself. Government then asks for its money back as taxes and we all win because life gets better and better. As simple as this sounds, and as easy as it is to implement, it doesn’t work because almost everybody misunderstands it! Use this analogy when you explain economics to your friends:

Pretend money spent by Government is painted red, white & blue. It bounces around in the economy like a pinball machine, with each bounce generating new money, however, this new money is not painted red, white & blue. At the end of the year we all look in our bank accounts to see how much red, white & blue money we have so we can send it back. Obviously, people without bank accounts have none of the red, white & blue money and people with big bank accounts have lots of it… But they have NOT been paying it back!

[Martin Hash]

How does money multiply itself?

Government spends red, white & blue money on missiles. Defense Contractor puts money in bank. Bank mixes red, white & blue money in a barrel with 10 times as much new money, and gives to 9 borrowers, (keeping 10% in reserve as per fractional reserve requirements).

[Martin Hash]

What about Free Trade?

I blame "Free" Trade (which is actually the most expensive trade on the planet) for the National Debt, in combination with a tax policy that didn't cover for it.

First people need to understand that taxes are simply repaying a loan then we can get into the nuances of the massive hole in "Spend & Tax" economics caused by unbalanced trade.

However, blame for the rise of the 1%, and the National Debt still lies at the feet of the tax policy in this country. You can fool me but you can't fool math.

[Martin Hash]

How do the rich get richer?

For every $10 Government spends, The Rich get $9 of the Red, White & Blue money. (Plus $36 of new money.)