Tuesday, January 18, 2011

The Immorality Of Government Bonds

I thought about adding some commentary to this but I've decided against it because it truly stands better on its own. Chodorov perfectly captures the economic and moral concerns I've had with the purchase of government debt for some time now:
The State's excuse for borrowing is that it invests the proceeds of its bonds for the benefit of posterity. Instead of putting the entire burden of meeting the cost of its beneficial acts on the living, it proposes to demand of unborn children their share of the cost. Quite plausible! But is this not the impossible doctrine of control of the living by the dead? What would you think of a prospective father who deliberately put a debt load on his expected offspring? That is exactly what you do when you cooperate with the State's borrowing program. You are loading on your children and your children's children an obligation to pay for something they had no voice in, and for which they may not care at all. Your "investment for posterity" may earn you nothing but the curses of posterity.

The use of the word investment in connection with a bond issued by the State is a treacherous euphemism. When you buy an industrial bond you lend your money to a corporation so that it can buy a machine with which to increase its output of things wanted by the market. The interest paid you is part of the increased production made possible by your loan. That is an investment. The State, however, does not put your money into production. The State spends it – that is all the State is capable of doing – and your savings disappear. The interest you get comes out of the tax fund, to which you contribute your share, and your share is increased by the cost of servicing your bond. In effect, you are paying yourself. Is that an investment?

When you depart from this earth you pass on to your heirs both the tax-collecting bond and the tax-paying obligation it represents. Or, as is usually the case – for the history of bonds is that ownership tends to concentrate in a few hands – if you sold your bond, the new owner in due time passes on to his heirs a claim on the production of your offspring. Your great-grandchildren are called upon to labor for his great-grandchildren. The bond thus becomes a legacy of slavery.
Read the rest of this powerful, all-encompassing article at LewRockwell.com.


  1. Don't you know that the government issues bonds only because the private sector is in need of safe savings? Otherwise, people would need to invest their money in risky entrepreneurial activities. Of course, only a fool would say that investing in bonds would cut down on investing in private firms.

    Speaking of the MMTers, today I learned that Roosevelt was doing the people's business in taking us off the gold standard which was beloved by the bankers AND that there has been NO theft of purchasing power under the fiat money regime:


    Further, the government is now running a surplus which is going to cause bad times:


    Everyone knows that government debt is necessary for the private sector to save, right?

  2. How did economics work before the invention of fiat currency, according to MMTers? Did economics work? Was there even life on earth back then?

  3. The state invented money and declared its value which worked just fine because people had to pay their taxes with that money. The state invented money and money did not arise organically from barter. And there are no Cantillon Effects or injection effects from providing funny money to some people and not others. Just cuz. (The concept of the pricing of zillions of alternative factors in the capital structure is beyond the comprehension of any MMTer. So there!).

    The state is always omniscient and benevolent (except right now, for some crazy unknown reason).

    I know, I know. It's preposterous and deeply dishonest.

    Of course, MMT savings (savings minus investment) are necessary so that the public might save. Which isn’t really saving because there is no foregoing of consumption. But never mind that. Even the government knows this:

    We must realize however, that a sharp reduction in Federal debt and the possible accumulation of a Federal asset raises at least three important issues. First, investors looking for an asset free of credit risk can no longer count on an abundant
    supply of U.S. Treasury securities, and Treasury securities may no longer provide a reliable benchmark for other interest rates.
    From the 1999 government report in .PDF:


    It sounds like a subsidy to rich investors to me.

    What a nightmare.