There’s No Such Thing as a Private Sector US Dollar

Currency is the product of the national government that issues it. In the case of the US dollar, that national government is the US Government. There is no issuance of US dollars among private entities. Every US dollar in existence is in existence, because the US Government brought it into existence. Many believe or act as though there are two types of US dollars:

1. The real, valuable US dollars that businesses and the “free market” have, and
2. The fake monopoly dollars that the US Government creates, making real US dollars less valuable, when it wants to live beyond its means.

The reality is that number one doesn’t exist. Number two isn’t the reality either. The US dollar is not a commodity. Think for a moment. Let’s consider the title “United States Dollar”. Do you think that US dollars are something that occur naturally like silver or iron, found buried in the ground only within the legal boundaries of the United States? Canadian dollars are found buried in the ground only within the legal boundaries of Canada? The notion is absolutely silly. But, what is not silly is that when we think for just a second, we realize that there is a Canadian national government and a US national government and in Canada, there are Canadian dollars and in the US there are US dollars.

Think!

As I’ve said many times over many years, regardless of your political “feelings” about the federal government, all US dollars in existence come from the US Government and there is nothing you can do about it. Further, it is the regulatory authority, which means that it has the power to tax away any/all US dollars that it has issued. When the federal government taxes US dollars it destroys those dollars forever. They are not collected and respent to fund future federal spending.

Why?

Because the US Government generates US dollars on the fly when it needs to spend. Taxation is what creates the demand for US dollars. Yes, it is through government force (if you really need to use that term), that the US Government ensures demand for its US dollars. That force mechanism is taxation and it has supreme authority to do so (See Article 1 Section 8 of the US Constitution). When the government issues a tax and then says it can only be paid with US dollars, how do you pay it without US dollars? You don’t. So, you need to obtain US dollars. How does the economy on the whole obtain the US dollars? It sells goods and services to the federal government in exchange for US dollars and then, the currency can circulate. When the federal government taxes, it destroys all US dollars taxed, thus reducing the amount of US dollars in the economy, controlling spending power. By controlling spending power, the federal government, through taxation, can control inflationary pressures as a result of “too much spending” if the situation should ever occur. In the meantime, the taxation makes room for more spending.

Federal taxation also modifies behavior that society might find unacceptable. One of those behaviors is smoking. By taxing cigarettes, the hope is that cigarettes become so expensive that people quit smoking. Why? So that the federal government can interfere with your “liberty”? No. It is to reduce the unnecessary burden on the health care system.

So, when the US Government issues more US dollars through deficit spending, it isn’t creating fake dollars and reducing the value of your real private sector US dollars. A federal reserve note, HPM in reserve accounts and US Treasury bonds are all US dollars and all US dollars that are in the private sector right now came from the US Government.

There is no “free market”.

There is no such thing as a private sector US dollar.