This post attempts to close the circle of understanding from some of the more recent posts, both on economics and a currency, taxes of a nation (1,2), and the current pandemic (3,4,5) (although referencing those prior posts is not necessary to follow this post). As discussed in the last post, I do not subscribe to the philosophy that some things are just too complicated for average people to understand. Rather, if something is supposed to be common ( e.g. money or health), it should be understandable by common people, and using common sense. We make several simple points that any average person can understand, to help us understand what is going on. The points can tie things together for us and the conclusions should be reasonable.
POINT # 1.
There is something that can occur with taxes called the misallocation capital. To use a crazy example, we know that in the winter people need to pay for heat. Suppose a government however imposes a winter tax on people, and uses that tax money to support businesses that build air-conditioners during winter season instead. So the money that could be used to pay heating bills is taken away and used for something contrary to what the people need. The point here is that a government tax can allocate money wrongly. People of course can use money wrongly also, but in this case the damage is limited to the person that makes the wrong decision. Not the whole country. And why would a government ever appropriate money away from what people need? Maybe we can figure that one out.
POINT # 2.
We all hear about how governments are in debt. This means that there must be a lending institution or bank that is loaning money to the government. This lending provides the currency to be used for the exchange of goods and services for that country. Bank loans at different rates defines their business, a commercial enterprise. It should come as no surprise then that taxes people pay could be paying interest. If a country’s currency and liquidity are defined in this way, then the country becomes exactly that: a commercial enterprise. Note that at this point if you are a person or institution that does not pay taxes, such as the apostolic churches in the west, you may not care about this and may even discourage people to read on.
POINT # 3
We now look at a remarkable coincidence (or not) regarding the COVID-19 pandemic. The observation centers on the so called overnight repo interest rate. This source describes what this rate is but there are other sources. From the link:
“Overnight repo rate is the interest rate at which different market participants swap treasuries for cash to cover short-term cash needs. The repo rate is helping to ensure banks have the liquidity to meet their daily operational needs and maintain sufficient reserves. The repo rate usually trades in line with the Federal Reserve’s target interest rate.”
The distilled point from this definition for the sake of this article is that the rate provides the means of liquidity (cash) for banks to meet their daily operational needs. So if these means are not met, people’s money would be in jeopardy. The daily commercial lives of people would have to be limited somehow and the banks would have to set a cap on withdrawals. A cap on the exchange of capital. But is there another way to do this? Is there another way to shut down the economy? Look at the figure from the link:
There is a point in October 2019 when the control over the rate seems to have been lost briefly. Also the inflection where the graph flattens to near zero near the end coincides exactly with start of the COVID-19 pandemic or at least when the attention to the virus started.
One could say this is a coincidence. Or one could say that the rate was adjusted because of the pandemic. The virus is after all real. But if you want to define your country as a commercial enterprise, where its very existence, its very soul, is defined by a loan, then could we not expect at least some manipulation of reality based on interest rates?
POINT # 4.
This last point delves into some speculation but is based on another fact of banks: they are instruments for investments. And since the currencies of nations come into existence by loans, we should expect countries to do what banks ask them to do. It’s nothing personal. Just business. And the way some banks operate today, existing loans are used as “assets” to solicit new loans and business. This could explains how leaders seem empty, almost soul-less, with no personality, and scripted, while knowing exactly “what needs to be done”. They are employees of a new venture. So if a solicitor of business, such as the vaccine industry or other entity, provided the cash for an investment idea, a stimulus may be offered to support the investment. For example: providing billions of dollars to consolidate and even exaggerate the diagnosis and death rates of COVID-19 to hospitals now on the verge of bankruptcy, financing press releases disguised as news, financing studies that downplay alternative treatments, or making state bail-outs conditional on lock-downs.
There is much literature on the nature of a currency and purpose of money that blames “fiat” currency for our problems. That money comes into existence out of nothing and that those that print money in this way are the problem. These critics say that money should be gold or silver based. But a country still needs liquidity, or some kind of means to adjust the amount of money supply to support the exchange of goods and services of her people. Wouldn’t it be easier to just stop defining countries as commercial enterprises? Just stop defining the currency by a loan. Look again at the curve above. The rate is almost at zero. Why not keep it there for good and let the supply of money continue as needed. Leave interest rates to the realm of commercial banks and borrowers in the free market. The currency supply could be adjusted on the value of gold or silver, or some other resource. How about on the number of families, babies, or small businesses? Just stop basing it on interest, because the loaner will always think that money is really theirs.