25A047 A Magic Money Mystery by Jim Davies, 11/25/2025

Recently I had an "Aha!" moment. For many years I've been vaguely puzzled about why the FedGov should bother collecting tax, given that it has the de-facto power to print money - why not just print (or create electronically) all that it "needs", like several South American governments used to do for decades during the last Century? But now, I think I see why.

Perhaps it's long been obvious to you, and indeed it's rather simple. If that's the case, there's no need to continue reading; but do sample a few past Editions of this blog in its archive. Several hundred await you.

One reason for continuing to tax is that doing so preserves the illusion that government must balance its books, like all households and businesses must - and even town and states, since they don't have the ability to conjure fiat money out of thin air. The FedGov can, and so has not balanced its accounts for half a century, but is too shy to admit its radical dishonesty.

Another theory I'd heard was that having flooded the ecomony with bogus money it needs to mop some of it up, so that the resulting inflation does not get out of control. This I never understood, and doubt that it was valid. It added to my confusion.

Yet another reason may be that its flagship tax - the one on "income", whatever that is (the Law never defines it) - is a big component of its spying and surveillance system. A great deal of properly private information is revealed in the tax "returns" it likes everyone to file, and that contributes to its huge database on everyone living in its tax farm.

But the reason that I've been missing all these years is the following.

When the FedGov creates new "money", it gets to use it first, while it has full value and before everyone else discovers its purchasing power has been decreased in the "inflation" process. This, I knew. But then about a year later when inflation has resulted, it collects tax and so increases the total grab, by even more. We might express it as:

Total pillage = new fiat money now + taxation later

That is, it grabs our money twice; it gets it both going and coming. For example if it fabricates a fresh $1 trillion this year and takes in by tax another trillion next year, the total plunder is $2 trillion. So of course it continues taxation; otherwise it would lose (in that case) half its revenue. Elementary, my dear Watson.

In the coming zero government society ordinary people buying and selling goods and services (the "market") will choose and agree what forms of money to use. I expect gold and silver coin to be the top choices. Paper will appear, but only as portable certificates of deposit for convenience, similar to this pre-1913 FedGov silver certificate:

It will certify that a silver coin is being held in a free-market bank (not the US Treasury, for that won't exist) and promise that the coin will be exchanged for the paper "on demand." So the paper will be literally as good as gold (or silver) and hence as honest as the bank; and woe betide the competitive bank that fails to earn and keep a reputation for honesty.

Will there be inflation? - nope. You can't print gold or silver - though you can mine them, hence there could be inflation of maybe 1.5%. Will there be taxation? - no, absolutely. There won't be a government to do the taxing. So, why wait?