Friday, December 30, 2011

10 Steps To A Low Or Even Negative Tax Economy, Plus How To Keep Inflation Pegged To 0%

This document is in the public domain.

Here are 10 steps to going from our overtaxed system today to eliminating taxes or even having negative taxes.

1 – Money Supply Linked To GDP To Eliminate Inflation And Deflation

If the GDP grows by 1% then 1% more money can be created without affecting inflation. The government can use this money to pay for its operations without needing to collect taxes.

Therefore money is only created or destroyed by the people depending on the growth or reduction of the GDP. This eliminates taxation through inflation and depression from deflation.

2 – Elimination Or Near Elimination Of Taxes

Taxation can be reduced or eliminated by growing the GDP each year and creating exactly enough new money to reflect this GDP growth. The new money is used for government operations without having to collect taxes.

3 – Tax Levels Are A Measure Of How Much Of A Failure The Government Is

Any business owner knows that to stay in business they must invest in their business in a way that brings a positive return on their money. If the government spends the peoples money so poorly that none of it results in a return on investment in the form of GDP growth, then it will have to collect taxes. This means the more taxes a government demands the more of a failure it is.

4 – Fractional Reserve Banking Is Counterfeit And Results In High Taxes

Counterfeiting is the creation of money without having added any value to the economy. Fractional reserve banking is also the creation of money without having added any value to the economy.

Therefore fractional reserve banking is the same as counterfeiting and has the same negative effect on the economy. When the banks create money through fractional reserve lending, that reduces the amount of money the government can create to pay for its operations without causing inflation. This means fractional reserve lending leads to high taxes.

100% reserve lending has been used successfully in the past so there is no reason to treat fractional reserve lending as anything other than a felony. Without the elimination of fractional reserve lending, there will be no way to eliminate taxation and pay for government operations by GDP growth alone.

5 – Only Taxes Which Promote GDP Growth Are Legal

The goal is to grow the GDP enough each year to pay for government operations without having to collect any more than a minimum amount of taxes. Therefore any taxes that are collected must be taxes that promote GDP growth rather than hindering it. Otherwise the taxes work at odds with the first rule.

Taxes which encourage GDP growth are excise taxes and tariffs. Excise taxes discourage inefficiency. Tariffs encourage domestic growth rather than importing foreign products.

Taxes which discourage GDP growth and economic expansion are income and sales tax. Both are illegal.

6 – Government Borrowing Is Illegal

The government must never borrow under any circumstance. The hand that lends is above the hand that borrows, so if a government borrows then it has given up its sovereignty and no longer represents the will of the people and cannot be considered a valid government.

If a government borrows it is the duty of the people to replace that government. If the government runs out of money it must do one of four things: 1 – tax, 2 – reduce expenditures, 3 – sell government assets, 4 – increase the GDP so it can create more money.

7 – Full Transparency Of All Economic Figures

It is imperative that price levels be closely monitored to make sure the government is not creating or destroying more money than it should be. All economic calculations used to decide the GDP growth are public information. It is illegal for the government to withhold economic figures such as the M3 figure.

8 – Creating Built In Demand For Currency When Necessary

If the government is successful in growing the GDP faster than the government spends money, then no taxes are needed. However this may cause demand for the currency to drop.

Therefore the government may require that its currency is good for the payment of debts and no citizen can refuse its currency as payment for debts. If the people decide not to honor this, then the government may institute taxes in order to create built in demand for the currency.

9 – Foreign Fractional Reserve Lending Is An Act Of Economic Warfare

The 100% reserve lending rule must be enforced domestically and across foreign borders, or it may as well not be enforced anywhere. To do that, any country that allows fractional reserve lending of the dollar will face ultra high tariffs or other sanctions.

10 – (Optional) Imprisonment Is Only A Legal Punishment For Violent Crimes

This step is not required, but it does make a lot of sense in light of the reasoning behind step 5 which states only taxes that result in GDP growth are legal. It follows then that punishment that shrinks GDP growth should be used as a last resort, not first.

Physical imprisonment is a high resource drain on the economy so it should only be used when the punishment exists to protect against further physical abuse from the offender.

If the offender’s crimes are not physically violent, then the corresponding crime should simply be a fine that reasonably corresponds to the amount of cost their crime had on the economy.

If they cannot pay the fine, then the government can set them to work repairing roads or some other public works project.

In the US, 1 in every 31 adults is in jail. The United States has less than 5% of the world’s population and 23.4% of the world’s prison population. It’s gotten to the point that prisons are a growth industry traded on the stock exchange. This is a model for disaster and the only way to turn it around is to use physical imprisonment only when physically necessary due to the physical nature of the crime.

For instance, “OH Co. Citizens Told To Get Guns – Only 1 Police Car Left”…=133951&catid=3
How To Keep Inflation Pegged To 0%

In order for this system to work well, you need a way to calculate how much money to create in order to keep inflation at zero. Here are a few ideas:

1 – Traditional calculations

We already have indirect ways of measuring inflation using tools such as the consumer price index and so forth. These tools are not exact however and they are always trailing indicators. So it will be useful to have more immediate and more exact ways to know how much the economy has grown in certain cases so that new money can be created immediately without having to wait for survey results to be calculated.

2 – Government bids to negate natural disasters

In the event of a natural disaster, the govt can negate its effects to a large degree using the bidding process. For instance, lets say a flood strikes and there’s a huge demand for portable generators.

In the city where the flood hit, the price of generators goes 5x what it was before. This represents an opportunity for the government to make a profit by popping the price bubble and fixing the supply problem.

If a 1600 Watt generator normally costs $1000 and the price during the flood is $5000, then the govt can put out a request for bids for people to deliver generators to the emergency site by a certain date.

It awards contracts to whoever can deliver the most at the cheapest price, lets say the price ends up at $1500. The govt can then print up money to pay for these generators and sell them at a mere $500 to the people in the emergency site and not worry about affecting inflation.

This is because the real value of the generators are $1000 each. That means the govt can print up at least $1000 in new money and pay for the generators and not affect inflation since it’s matching the creation of a $1000 generator with $1000 in new money. The generator is not over supply since it’s obviously needed in the emergency.

Since the govt is getting $500 from the people who receive them, the government can pay a total of $1000+$500=$1500 per generator and inflation stays at zero.

So using this process of bids, the government can negate price bubbles during emergencies without affecting inflation and without having to wait around for the monthly price survey data to come back with step 1.)

Note that this strategy only works when infusing the economy with lots of electric generators won’t lower the price of generators elsewhere. If the government were to simply start unloading lots of cheap generators without cause, then it would not be adding to the total value of the economy and the money it printed up to pay for them would result in inflation.

3 – Government loans

If the govt lends money to its own citizens at interest, for instance to pay for a mortgage, then the interest the citizen pays back to the government does not contribute to inflation. This is because if the government finds there is too much money in circulation, then it can just destroy some of the interest that’s being paid back to it.

This is of no injury to the government since it can simply create new money later once the economy expands enough to accommodate the new currency. The main motivation the government has to charge interest in the first place on the loan is to enforce the incentive for the citizen to pay it back.

The value that the citizen adds to the economy with the value of the loan will almost certainly increase far beyond the interest paid by the loan. For instance, a farmer that gets a loan to pay for farm land will more often than not be able to generate more than a 5% return on the land.

If the farmer is able to make a 7% return on the land, then the arrangement has actually resulted in a 2% deflation of the currency which the government can detect in its calculations in 1.) above and then compensate for by printing an extra 2% in cash.

Using government loans like this could be a way for the states to pull themselves out of this awful situation that Federal Reserve Corporation has put them in. By offering loans at rates lower than what the Fed Corp banks do, the states banks can prevent Fed Corp from creating another Great Depression with high interest rates.

This will go a long way toward de-toothing the Fed Corp beast and removing its power to row the economy back and forth.

With government loans it’s important that the loans only go to its own citizens and that the collateral on the loans be something real and tangible with recognized value such as land.

This is because the government should not be in the business of making loans to foreign countries and foreign citizens since there isn’t any real way that the government can ensure the loan is repaid, short of going to war. Jefferson and Washington warned repeatedly about not getting entangled in foreigners’ problems, so that includes not getting caught up with debt to or from them.