The thing that most people miss when they say that the government is diluting your purchasing power by printing money is that the value they print is not just gone, it is used to provide government services like hospitals, schools, defence, roads and other stuff. Ok, a lot of that is done inefficiently, but a lot of it is also kind of essential and it’s probably better to be done inefficiently than not done at all. Or ok we could have things like a private defence force but then everyone has to pay voluntary contributions of $5000 per person for it to be effective.
Discussion
People call inflation a "hidden tax" because if the circumstances you elaborate.
If the government can't dilute the money, they would have to tax people directly, leading to a lot of questions about the sense of the things they want money for, who should pay more or less of it and so on.
An interesting thing to research in connection to this is the difference between tax revenue and government spending. Good Luck on that path 🫣
My point is I don’t know if you can call it a tax if it’s providing services you’re using. Or you can but then you have to admit that you’re getting a lot of government services for free ie all the things I listed.
Alternate money people often talk as if you can have this situation where there is no money debasement but somehow it wouldn’t just end up either with anarchy or gangs and cartels
Hmmm well you do pay for it by losing buying power, right?
The normal tax also pays for services you use, right?
all the government does is in general for the people. For example care for the homeless is something I haven't used so far, but it's a service I do like.
If the government came out and said: we gonna raise the tax on food and rent 2-7% this year, to pay for roads and police.
(Buying power for everyday items goes down, the items are 2-7% more expensive)
And then they do that every year 😅
People would surely ask why we don't divide the tax burden more on "the rich" or why the services get more expensive all the time.
And then imagine in that situation the people hear that we gave a gazillion dollar to foreign countries. People would be pissed 🙈
But I do agree, government does things we need and needs to raise money for that.
They would still do that if Bitcoin were the only currency on the planet.
Raising the money covertly through inflation is a way to hide the real cost from the voter and I think it impact poor and middle class people disproportionately more.
I think the government would have to scale back and concentrate on things that most people want, like roads, police and national defense, maybe healthcare and schooling, because people wouldn't tolerate expenses they don't agree with.
ot of what you're saying doesn't really make sense. Firstly, the amount of seniorage, which is money debasement, relative to the income tax collected in developed countries is really low. Like, maybe money printing accounts for 10% of tax generated through direct taxes. This can be higher, like maybe 20% in developing countries, or 50% in hyperinflation countries. But in developed countries, it's a really small amount. So you can't really say that governments need to print money to get the country going and cover expenses. And that if the government just raised taxes a little bit more, that would mitigate the need to print money at all. Like, you have to have one or the other. Secondly, no, the government couldn't raise tax effectively if Bitcoin was the standard. Because the transactions would have to be traced, and privacy measures would mean that it would be very difficult to trace Bitcoin to collect tax on it.
Raising tax on the rich instead of inflating the currency would be far more popular in a democracy among the poor and middle class in the short run because the tax burden wouldn’t fall on them.
Maybe I'm wrong, I don't know 😔
It’s ok, I think you’re partly correct. It’s just that there’s no magic if you get hard money, where you somehow get all the benefits of a deflationary currency but none of the drawbacks of the government not being able to gain purchasing power to help fund the public sector. Smaller governments can be just as good if they are more efficient, but a small government with the same efficiency as a bigger one will mean less government services, and so you’ll just have to pay for that.
And then there’s the big problem that if the government has no way to raise capital quickly to fight off an invading fiat empire, they will be invaded. Not in the US psyche at all but kind of ironic that they complain about money debasement that contributes to their military strength.
There is a situation like you talk about- large tax base but also deflationary money, although as I said that would be very difficult on a bitcoin standard due to the problem of how to tax encrypted peer to peer transactions. But lets say the US government decided to cap the US money supply or introduce a new hard USD regardless of consequences, you of course could fund a government on direct tax alone and it wouldn’t be much of a loss (say 5-10%of tax base) if you couldn’t also print money. The issue like I said is it would mean the government would have to constantly fire or rehire government employees and programs because they couldn’t print money to avoid bankruptcy.