Thread by @AndrewPRLevi

How the govt obtains £ & pays for stuff. A note to ministers & interested citizens.

The govt instructs the Bank of England to create, say, £1 trn.

Parliament appropriates the £ amount the govt requests (the govt has a majority to ensure that).

The govt spends the £.

The end.

Photo credit: Shutterstock

Following on from how it obtains £s & pays for stuff, now what does HM Govt do with those it takes in tax?

You’re not going to like this.

It annihilates them. Literally. Gone. In a puff of digital smoke. Or, if you paid in cash (!), into the shredder.

Yup.

The end.

Considering the above two tweets, why does HM Govt levy taxes? Is it just habit?

HMG spends a huge amount of £ each year, on the things & in the ways it/parliament consider important/appropriate. But if all those £ were left in the economy there would be excessive inflation. /1.

So a significant proportion is taxed back, from the people & parts of the economy HMG/parliament see fit.

When the economy is running below its productive capacity, HMG can tax back less £ than it spends (run a deficit) without causing inflation. /2.

But it can’t tax back nothing. Inflation would go through the roof. It still has to tax quite a bit.

HMG also has policy priorities which determine who it wishes to allow to keep more of the £, who less. It taxes (annihilating the tax £) accordingly.

Finally (again, you’re…/3.

… really not going to like this) HMG levies taxes in £ to ensure the country has to busy itself with economic activity to earn £ with which to settle accounts including, crucially, hefty tax bills - enforced by law & severe penalties. /4.

In other words, every person & organisation in the country (apart from the govt) becomes a currency (£) user, with no realistic choice but to earn/use the currency (£) of which the govt is the sole, sovereign issuer.

Hmm. /5.

HM Govt (with the Bank of England & parliament, forming the sovereign currency trinity) uses taxation as a core measure to enforce its sole, immensely politically, economically & socially powerful, currency sovereignty.

Sterling stuff.

(Bitcoin isn’t the answer).

The end. /6.

P.S. Just because Bitcoin isn’t the answer (stop it: it isn’t) doesn’t mean there’s a problem presenting us with a question requiring an answer.

Unless you don’t like government.

Or democracy.

Then you really, really hate currency sovereignty of the sort I’ve outlined.

P.P.S. When commercial banks give a currency user (you, say) credit, they’re creating £ currency. The govt is still the sole currency sovereign, because the commercial banks are only allowed to operate under the govt’s licence & according to the rules it sets.