The Illusion Of Unlimited State Wealth And The Reality Of Hidden Expropriation

The economic discourse regarding the boundaries of state wealth creation has occupied societal debates for extended periods. Certain academic doctrines currently demand that the sovereign authority may generate currency without limits to finance public duties. This demand ultimately transforms existing wealth into pure ruler currency, allowing political decision-makers to dictate the purchasing power of citizens at their own discretion. To understand the far-reaching consequences of such unchecked currency multiplication, it is necessary to examine the fundamental mechanisms of wealth devaluation and hidden expropriation in successive phases.

The Concept Of Pure Ruler Currency

If the head of a household introduces custom playing cards as a medium of exchange, the household head achieves an immediate wealth advantage through the mere creation of this exchange medium. These self-created cards represent a conceptually unlimited ruler currency that lacks any natural limitation. All theoretical models regarding unlimited state financing ultimately aim to transform existing currency into such ruler currency. The advocates of these doctrines constantly complain about the institutional boundaries that are meant to prevent exactly this unlimited currency creation. They obscure this fundamental connection and falsely claim their statements already apply to the current currency system.

The Natural Boundaries Of Physical Effort

To clarify this state of affairs, consider the finite physical labor of the dependents within this household model. There exists a completely natural upper limit to the physical exertion the dependents can theoretically provide, regardless of motivation. By distributing the cards, the household head appropriates real values, creating an enormous incentive for personal enrichment when limits are absent. Eventually, the household head will distribute larger quantities of cards than the actual performance capacity of the household allows. During a transitional phase, the household head purchases luxury items and secures the loyalty of influential individuals to support the personal power structure.

The Inevitable Collapse Of The System

At some point, this excessive consumption manifests in massive currency devaluation, leading to the collapse of the entire system. The household members only realize late that they have been impoverished and systematically exploited. The representatives of modern monetary doctrines now deploy obfuscation tactics to conceal these fatal developments. They argue that the dependents performed labor in advance by receiving the cards, placing the household head in a debt relationship. From this cynical perspective, the cards are nothing else than a deferred tax debt that the household head only demands at the end of the month.

The Feudal Nature Of The Economic Model

Because the example involves a household, observers often overlook that this describes a pure forced labor system. The household head operates under the assumption of naturally owning the entire labor power of the subordinates. The household head does not recognize the provided labor as an advance performance requiring reciprocation, as is customary among normal individuals. The government requires nothing to be paid back in this thinking, but can simply demand taxes. The household head must necessarily maintain a card imbalance, distributing cards before the levies flow, so that an exchange medium exists in circulation.

The Trap Of State Debt Narratives

This point arises from the narrated medieval history of ruler currency and harbors a massive trap. In the current currency system, the vast majority of currency originates in the private sector through the credit issuance of banks. Modern monetary theorists attempt by all means to deny this fact and ideally eliminate private currency creation completely. If the household head continuously distributes larger quantities of cards than it collects in levies, the household head accumulates immense debts. Another trap is set here by claiming the state cannot generate a surplus because the state is the sole currency issuer.

The Reality Of State Asset Accumulation

This claim is simply false, because the state could easily form state funds and invest free funds abroad. Known northern European models demonstrate impressively that such wealth accumulation is entirely possible. The state could also participate in domestic enterprises and use the profits for the future, perhaps through lucrative infrastructure projects. There exist significantly larger quantities of participations than just debts, which the monetary theorists consistently deny. This trick serves solely to portray state debts as something positive, even though they do not represent the sole currency.

The Necessity Of Free Market Pricing

In the previous model, true market prices do not exist, but only values arbitrarily set by the household head for the labor. If these prices are incorrect, certain tasks remain unfinished because other activities appear cheaper from the perspective of the dependents. There must strictly be free markets so that fair prices can form. For this purpose, the dependents can also exchange the cards among the group, creating a natural balance. An individual dependent might pause for a period, while another dependent builds up a massive card buffer during this time.

The Origin Of True Exchange Value

The dependents can also trade other items for cards, such as selling toys, whereby the cards become true currency. The value retention of these cards results exclusively from the actual labor power of the dependents. Cards for which no counter-performance is ever provided possess no actual counter-value. If the entire real wealth of the dependents increases, perhaps through abundant gifts from relatives, the dependent economy can grow. They can then absorb additional cards because the cards face larger quantities of real exchange goods.

The Stealthy Appropriation Of Growing Wealth

However, the household head skims this growth, because the household head receives the counter-performances of the dependents through the minting profit and not through own performances. Actually, the purchasing power of the saved cards should increase noticeably for the dependents during a growing economy. If the purchasing power remains the same instead, this means the household head appropriates the purchasing power gain with the help of the minting profit. Factually, the household head receives the gifts meant for the dependents, because the dependents must deliver the corresponding labor power. The dependents do not notice this, since the taxes supposedly remain unchanged.

The Illusion Of Infinite Solvency

Mathematically, the household head can manufacture an unlimited quantity of cards and formally never become insolvent. If the quantity of cards exceeds the levy debt and the real value of the toys, the cards lose their exchange value. A massive price increase emerges, which destroys the savings. The representatives of the modern doctrines always emphasize that it is impossible to become insolvent in a self-emitted currency. This is only true mathematically, but not actually, because the quantity of manufactured cards says nothing about the real goods received.

The Distraction Of Mathematical Arguments

This represents pure distraction that skillfully obscures the true core by constantly using mathematical terminology. When continuously larger quantities of cards are emitted, only the possibility remains to increase the levies and make the appropriation of real values visible. The hope of the dependents to reduce their labor in the future through saved cards is brutally destroyed in this manner. The simple realization remains that state debts inevitably lead to future taxes. In the model, there exists no mechanism to limit the emission and nobody to verify the value.

The Destruction Of Economic Illusions

The household head can thus simply continue distributing cards to receive labor performance beyond the visible taxes. This functions until the illusion dawns on the dependents and they believe they can celebrate their cards through idleness. Since the household head then receives no labor performance, the household head must increase the levies and officially devalue the cards. Eventually, the increases are exhausted, the illusion disappears, and the cards lose their value completely. It would therefore have been strictly necessary to erect institutional barriers that subject the emission to strict verification authorities.

The Plantation Analogy Of Forced Labor

To make the scope even clearer, the setting shifts from the harmless household to plantations with forced laborers. The overseer issues picking slips for delivered cotton and demands specific quantities every evening to allow the use of the dormitory. Observers must consider what happens when the overseer prints continuously larger quantities of slips and multiplies the issued amount by an identical factor per delivery. As long as the price for the dormitory remains constant, the laborers need to pick smaller quantities of cotton. A currency devaluation has taken place, which reveals itself unmistakably at this point.

The Adjustment To Devalued Currency

Adjustment processes to the new prices will occur, and in the final state, everything will be mathematically expensive. Since the currency used here is predetermined from the outside, the quantity theory applies in its general form. If the laborers save and build a buffer, the entire currency does not become price-effective. An interesting effect here is that the effect of the levies becomes smaller the larger the quantity of slips in circulation becomes. If the emitted currency grows boundlessly, the taxes measured against it vanish completely.

The Convergence Of Economic Theories

Observers could basically achieve the identical effect of the currency printing if the overseer abolished the levies completely. From the perspective of modern monetary theory, this means the currency is worth nothing without taxes. From the perspective of classical economic doctrine, this means that with a boundless currency quantity, the currency is worth nothing. Both results agree completely and prove the identical fundamental truth. This leads to the reverse conclusion that society pays smaller proportions of levies when currency devaluation occurs.

The Reality Of The Modern Tax System

No, because the actual tax system has built in a precaution against this so that the state loses no revenues. While there exists a fixed levy in the example, the taxes in our reality are proportional and increase automatically during currency devaluation. Due to the tax progression, they even increase disproportionately, which is designated as cold progression. This is not understood by the vast majority of people, so the state increases the taxes unnoticed through currency devaluation. While the highest tax rate in the final periods of the previous epoch amounted to a massive proportion of the average income, it begins in the current era at less than a minimal portion of the median income.