February 16, 2011

Tea Party Pipe Dreams

Always fascinating to see this particular aspect of American society and also the Tea Party movement in general. I say that with mixed feelings because on one hand I sympathize with what the people are striving for yet on the other hand I'm of the opinion that they are barking up the wrong tree here and are to some degree woefully ignorant of the entire system they support with its causes and effects. "Don't tax me" seems to be at the core of the current grievance with the government, and many signs during protests carry that message one way or another. People are concerned about their own personal wealth and money, and here is where the trick lies, because in case you haven't noticed billionaires and investment bankers do the same thing.

Lets get back to taxation though. Yes, America is going through a rough patch. It has been doing that since the Cold War ended. Military expenditures didn't exactly cut back, although there was a slight dip in the mid 90's it has skyrocketed ever since. You can ask yourself why billions of your taxpayer money are continued to be spend on defense. Public debt has increased to 14 trillion dollars with half of that owed to the Federal Reserve and a quarter of that to foreign countries. The politicians you voted for, no matter if they were Democrat or Republican, are responsible for the situation you are in. Yet even they are bound to the laws of the monetary system.

Where does taxation originate from? This may seem weird to you but it is automatically generated by fiat currency. The dollar in your wallet which is issued by the government basically has no value, it is being given value by what the government can put up in collateral (taxation). In other words the value of your money hinges upon taxation. The two are intimately connected. Fiat currency demands an immediate return in order to give it value, it has to have a backing. That backing is what the government can haul back should it need to. It gets even worse though. Money is basically debt - created out of thin air by banks who loan that money and demand interest on it.

The Federal Reserve creates money out of nothing, loans it to the U.S. treasury which has to be paid back with interest. How do you pay it back? Through taxation of course. That's the whole kicker. Any new money that's being created through the Fed will have a direct effect on the American taxpayer. The Fed itself is also made up of 'members banks,' private commercial banks who own stock and get a guaranteed 6% dividend on their capital. This is the singularity where money becomes debt because with its creation there's an immediate negative balance which can only be repaid through taxation and the creation of new money. This is a monetary law.

Socialism? No, I don't think so. This is pure capitalism. Accusing the Obama administration of socialism is a misnomer. A Republican administration is bound by the same monetary laws although they do have a tendency to tax less and make cutbacks on social programs. In the long run this changes nothing since the current public debt, which the Bush administration was also largely responsible for, still requires heavy taxation. The hole is already there and not going away anytime soon. On the flip side, even socialism is (and was) obligated to meet the demands of the (global) monetary system.

Socialism has a tendency to nationalize, while capitalism has a tendency to privatize. Here's a silly question. Is the U.S.A. a textbook case of nationalisation or privatisation? Of course it's the latter. Most of the healthcare system is privatized, defense hardware is researched and developed by private contractors. Even the point of money creation, the Federal Reserve is privatized. Private commercial banks are authorized to create new money using "fractional reserve banking." I'm sorry, socialism just isn't there. It's all capitalism whether you like it or not.

The credit crisis of 2008 wasn't a feat of socialism, it was unrestricted capitalism which brought many financial institutions on the brink of collapse and where the government felt to need to interfere in order to avoid a domino effect. Tea Party protestors often speak off not wanting to pay (more) taxes but at the same time they are perfectly happy to rake in the dollars themselves through private businesses operating in the free market system. They seem to neglect the fact that what you see today IS the free market system. Another pipe dream is to think that the free market system will provide for everyone in equality. It never has.

The free market system is a competition and as such is a type of economic survival of the fittest. Small businesses will eventually grow into big businesses or they go bankrupt. Don't think that your store or your job will provide economic stability for eternity. The economic jungle, the profit motive and the advent of new technologies will put your way of life in jeopardy sooner or later. Big business interests, just like the Tea Party protestors, will have their own financial (self) interest at heart. Like you - and what I hear often from Republican politicians - they are not about distributing the wealth. You know who's responsible for the current economic turmoil? Since you're supporting a system and seemingly oblivious to its drawbacks, you are responsible as well.

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