While the iron is hot, I want to add a follow-up to my last essay, Defining “Fiscal Mismanagement” (for the Purposes of Revolution). Implicit in that piece was the stark reality that whoever controls the political reigns of the sovereign government holds the legal authority to issue fiat money, and tax fiat money, and thereby holds the authority to decide—irrespective of the Private Economy and irrespective of so-called “bond vigilantes”—how that fiat money shall be spent to promote the common good.

The essay’s frontispiece photo of lonely student waving the French flag in a fog of teargas seems to embody the futility of even hoping that protesting students might ever wrest that authority from the exclusive, entrenched grip of corporate capitalism—and thereby direct the spending of sovereign fiat money in new directions.

Only 24 hours after I posted the essay, an opinion piece in the New York Times caught me by surprise: A student “revolution” in Serbia is apparently on the verge of accomplishing that very thing! After two years of organizing, the Serbian students first forced strongman Aleksandar Vucic to hold early elections and, second, astonishingly, originated a strategy to put candidates of their own choosing on the ballot. Their “Party”—the Students’ List—is now favored to win the election which, coincidentally, is being held this very day, 25 October, 2026: TODAY as I write!

Uniquely, and perhaps surprisingly, the Students’ List of candidates does NOT include any students; instead the candidates have been chosen by the students from a broad spectrum of Serbian society—academia, the professions, the arts, unions, farmers.

In addition to nominating the candidates, the students articulated an eleven point platform which each candidate has pledged to pursue if elected. What makes this platform so eye-opening is that America’s Democratic Party (which is still floundering with a coherent counter-agenda to Donald Trump) could do very well taking it, point by point, word for word, and running with it to the 2028 elections.

There isn’t a word in the Students’ List platform about the control of fiat money. Only what the control of fiat money can accomplish. If the students do gain control of the Serbian Parliament—and we’ll know tomorrow—hopefully, they’ll quickly come to understand what they can PAY themselves to accomplish. (In that regard, please note that I have taken the initiative to add Point No. 12 to their platform.)

The Students’ List Platform

(From Wikipedia)

1. Freeing the courts and prosecution through a Special Prosecutorial Police

A vetted police unit to investigate corruption and arrest those responsible without political obstruction, freeing judges and prosecutors from political pressure; a comprehensive review of the Ministry of the Interior, removal of officials linked to organised crime, and dismissal of police officers who broke the law in dealing with protesting students and citizens.

2. Law on the origin and confiscation of illegally acquired assets, and lustration of public officials

Strengthening the Tax Administration to investigate the assets of public officials and return stolen public money to the budget; holding accountable officials who abused their position, engaged in corruption or violated human rights, the Constitution and the law.

3. Full transparency of public procurement and audit of government projects

Publication of all contracts and tenders, strengthening of the State Audit Institution, and audit of non-transparent and overpriced infrastructure projects, with emphasis on secret contracts, lex specialis laws and projects that missed their deadlines.

4. Freeing the media

Unblocking and depoliticising the Regulatory Authority for Electronic Media (REM); freeing RTS; investigating the responsibility of journalists and management of state and private broadcasters for discrimination and hate speech; reallocation of national broadcasting frequencies and a stronger role for the Press Council.

5. Professional employment and departisation of the public sector

Ending party-based employment, introducing strict competitive examinations, appointing proven experts rather than party loyalists to head public enterprises, and introducing strict financial control.

6. Innovation in education and free textbooks

Investment in modern curricula, critical thinking and practical skills; free textbooks for all primary and secondary school pupils, and affordable school trips and extracurricular activities.

7. Knowledge economy and support for domestic entrepreneurs and farmers

Linking universities, institutes and professional associations with industry; grants and subsidies for start-ups, innovation, domestic entrepreneurs and farmers, to move from a cheap-labour model to a high-value economy.

8. Permanent contracts after 12 months

Amending the Labour Law to reduce the maximum duration of fixed-term employment from 24 to 12 months.

9. Ending the import lobby’s monopoly and ensuring food security

Tackling import lobbies accused of distorting the relationship between retail prices and production costs; protecting agricultural land and water as national assets guaranteeing food security.

10. Affordable housing for young couples and underfunded professions

Flats with favourable rent and purchase terms, with tax relief for young families and employees in education and healthcare.

11. Affordable medicines and a doctor in every village

State control and a sharp reduction in medicine prices, renovation of rural clinics and health centres, and employment of young doctors and technicians.

12. Formal recognition of the mechanics of modern fiat money (added by J.D. ALT)

Including the admission of Public Banks to the Reserve Banking System and the establishment of an Equivalency Doctrine to pay for NOT-profit-making initiatives—if they demonstrate quantifiable benefits to the common good.

What’s now occurring in France is the dramatization, in real time, of the dire consequences of “fiscal mismanagement”—but NOT in the sense the economic pundits would have us believe. According to the New York Times, France is facing a nation-wide student revolt because it cannot manage its government spending resources to provide adequate schools and teaching staff to meet the needs of its aspiring young adults.

Evidence of this “fiscal mismanagement” is the enormous national debt the country has already burdened itself with providing healthcare, pensions, and social services to its citizens—a debt that now makes it virtually impossible to borrow more money to meet the needs of the students. The “bond-vigilantes” who set the interest rates national governments must pay for their borrowing simply won’t have it.

What we are REALLY watching, however, is not “fiscal mismanagement,” but the dire consequences of the “fiscal MISUNDERSTANDING” of modern fiat money.

In essence, this misunderstanding is the “common sense” insistence that fiat money, despite the fact that, by definition, it is issued out of thin air by sovereign governments, somehow manages to reside in the hands of a moneyed class of financiers that goes by the name of “bond-buyers.”

Yes, government issues the fiat money, but somehow government doesn’t have the opportunity to spend the money before it inexplicably ends up in the hands of the financier bond-buyers. Consequently, it seems, to pay for such things as healthcare, education, and retirement benefits for its citizens, the government must get the fiat money back from the financier class by issuing Treasury bonds—with the prayerful hope the “bond-buyers” will be willing to purchase them.

The French crisis—and, by extension, (according to the New York Times) the crisis now facing every western government—is that the bond-buyers are threatening to STOP buying Treasury bonds because they believe national governments are so overly committed to paying for public services, they will be unable to make interest payments on the bonds.

Thus, the national government finds itself in a “Catch-22”—(A) if it cuts back in paying for public services (“fiscal responsibility”) the citizens will revolt, bringing down the government; (B) if it doesn’t cut back on public services, the bond-buyers will revolt, demanding such high interest rates to buy the Treasury bonds, the government will have to choose between making the interest payments and paying for the public services—forcing the government into a “fiscal austerity” that will bring on the citizens revolt with a vengeance. As the New York Times drily observes, “this is something of a conundrum.”

Just as Joseph Heller’s Catch-22 was based on a cognitive stumble, however—(you can’t claim to be insane if you are trying escape insanity)—the idea that a currency-issuing sovereign government is dependent on bond-buyers for its spending money is a logical free-fall: In the present era of modern fiat money, it’s actually the other way around.

The Carousel

To see this, consider that fiat money is a circular chain of money-actions consisting of money-creation, money-transactions (that cause money to change hands in the creation of goods and services) and money-destruction, which causes money to be removed from the circular movement to make room for money to be created again. The movement is initiated—and kept going—by the issuing of fiat money by the authority of the sovereign government; if that didn’t happen, there would be no money and no circle of money-actions.

Depending on where we “jump onto” this carousel, we see different things. For example, if we jump on just after the government has sold a round of Treasury bonds and spent the fiat money received to pay for a round of healthcare, education, and pensions, we see those payments first going into the hands of nurses, teachers, and caregivers—who then pass it into the hands of landlords, grocery stores, and local merchants—who then pass it into the hands real-estate trusts, food corporations, and healthcare conglomerates—with some large portion of it accumulating, finally, in the bank accounts of a financier-class of super-wealth.

At this spot on the carousel it certainly looks like the government is dependent on the sale of those Treasury bonds for its spending! (Apparently, this is where the New York Times is standing.)

If we jump into the circle just before the government spends for another round of healthcare, education, and pensions, we see the government again issuing Treasury bonds out of thin air and selling them to the financier-class…. Read that again, slowly: the Treasury, AGAIN, issues Treasury bonds OUT OF THIN AIR—and bond-buyers, AGAIN, trade existing fiat dollars they’ve accumulated for the bonds.

The government is getting “real money” in exchange for paper certificates (“bonds”) it creates, at will, by simple fiat. But why would the financier-class willingly, even eagerly, make such a trade? Let’s stop the carousel for a moment and consider upon it.

For the wealthy financier, who “suffers” from the continuous accumulation of fiat money, a continuous stream of Treasury bonds is a dream-come-true: it solves his biggest dilemma—what to DO with his accumulation of fiat money while awaiting a sure-bet investment opportunity that will generate income. Buying Treasury bonds instantly creates that fail-safe income stream while requiring zero work or creative effort. If Treasury bonds were not available, the financier would find it hard to sleep at night, tossing and turning about what do with his stash of fiat money!

Turn on the carousel again and watch it go round. People and businesses pay taxes to the government and fiat money is removed from the circle. Banks issue loans requiring them to have new fiat money Reserves—and the Central Bank quietly accommodates this need with keystrokes (legally authorized by the sovereign government).

But now, in addition to the next round of payments for continuing improvements to education, healthcare, and retirement services, the government must also come up with the money to make a round of interest payments to the bondholders, right? What about that little “interest-payment” problem? Let’s jump back on the carousel at the very moment that interest payment is due and see what’s happening.

What do we see? The Treasury is issuing, out of thin air, another round of Treasury bonds! And the bond-buyers are eagerly lining up to make the trade so they can get all that lumpy fiat money out from under their mattresses. Are they demanding as much interest on the bonds as possible? Of course they are! (Bond-buyers, after all, are the expressed embodiment of the human selfish gene.) As we’ll see in a moment, however, there is a limit to what they can demand if they want to get anything at all.

Surely, this can’t go on forever?

Does this sound like a classic Ponzi scheme destined, by its very structure, to collapse? It would be except for one crucial difference: In a Ponzi scheme, the perpetrator must continuously sell the “investment” to new clients in order to get the money to pay “dividends” to earlier clients—a circular system that “works” until new clients inevitably dry up, forcing the “dividends” to stop, collapsing the circle. It’s an investment con that has been decreed highly illegal.

In a fiat money system, however, the “perpetrator” is the sovereign government itself—the party to the Social Contract which defines and enforces what is legal and illegal. And one of the core legalities it defines is the exclusive authority, assigned to itself, to ISSUE—out of thin air—the fiat money that the Treasury (“Peter”) uses to pay (“Paul”) the bondholder. It is not just “legal,” it is the defining motor-mechanism of the national money economy.

But what about the bond-vigilantes who are threatening to withhold their stashes of fiat money if the government doesn’t pay them an exorbitant rate of interest—a rate that simply makes them too rich, snooty, and self-important to tolerate? Well, lots of things could happen:

For example, the vigilantes could be imprisoned by the legal authority of the sovereign government for the crime of usury. Or they could simply be taxed—again by the legal authority of the sovereign government—and their excess interest income taken back and cancelled. And, finally, at some point in the game, the vigilantes themselves must realize if the golden goose is dead—if the sovereign government that, by fiat, issues and services their magical bonds is torn asunder—they have a much bigger problem than a lumpy mattress.

The principal question all this points to is this: WHO is that young French student waving le tricolore protesting against? Is he protesting against the bond-vigilantes who are greedily demanding the government pay them interest instead of paying for new classrooms and teachers? Or is he protesting against the parsimonious Eurozone Central Bank which refuses to buy the French Treasury Bonds out from under the vigilantes based on the argument that doing so would be “fiscally irresponsible”? Or is he protesting against the French government which is caught in a Catch-22 because no matter who—left-right-or-center—is in the majority, France is NOT, technically, a currency-issuing sovereign government?

Yes, this is all being badly mismanaged. But the reason why it’s being mismanaged is because the fiat money system that is paying for everything (or refusing to pay for it, as the case may be) is being willfully misunderstood.

In 2007, E.O. Wilson and colleagues presented an updated argument for the theory of group selection in the evolution of species. In essence, they argued that because of group competition, the broad arc of HUMAN evolution uniquely (and counter-intuitively) favors the ultimate dominance of the cooperative gene over the selfish gene.

This should be heartening news in these dark days of seemingly unstoppable domination by the selfish gene in current human affairs. I would like to make the news even brighter by arguing that the advent of modern fiat money—which is now fully upon us even if not fully embraced—will be the mechanism by which the cooperative gene finally takes control.

First, a quick overview of Wilson’s arguments:

Individual versus Group Competition

The traditional model of the evolution of species (Darwin) essentially defined natural selection as the choosing of “selfish genes” that produced behavior/characteristics that assisted an individual’s fitness to survive and reproduce—thus propagating that particular gene at the expense of less successful genes which died out.

Within this framework, the persistence of “cooperative genes”(genes that produce behaviors that assist the fitness of other individuals) could only be explained in one way: that the individual(s) being assisted carried the same genes as the cooperator—in other words, kinship. What appeared to be cooperative behavior, then, was simply selfish behavior in another light—the law of the jungle merely expanded to include the propagation of cooperative genes that assisted the survival of genetic family groups.

E.O. Wilson postulated that while this evolutionary framework explained most of the animal kingdom, it fell short of explaining the evolution of a few species characterized by the fact they operate—for their survival and fitness to reproduce—not as individuals, but as groups.

He further postulated—and demonstrated—that, in the case of these species, the competition of natural selection was not just between individuals within these groups, but between the groups themselves. He then argued (and demonstrated) that in this inter-group competition, a group characterized/operated by the largest contingent of cooperative genes always out-competed and defeated a group most dominated by selfish genes.

Human evolution, then, is a complex mixture of two opposing dynamics: (a) Within a given group, the selfish gene will tend to dominate and propagate itself at the expense of cooperating genes. (b) When groups compete against each other, however, the group with the largest and most effective contingency of cooperative genes will always dominate and “defeat” a group characterized by less cooperation—and, thus, the cooperative genes of the successful group will propagate, while the selfish genes of the defeated group will die out.

Now comes Wilson’s crucial argument: Because human societies are overwhelmingly composed of groups competing for resources, over the long time-arc of group selection the cooperative genes in the human gene pool must gradually come to dominate the selfish genes.

So, what does this have to do with modern fiat money?

What If Lions PAID For Gazelles?

Every animal kingdom species—except one—competes for the resources enabling fitness directly. Of two predators hunting for food, for example, the one genetically endowed to run faster to catch the prey will succeed; the lion-pride genetically endowed to most cleverly cooperate in the trapping of prey will out-compete the pride more dominated by selfish running. The single exception to this mechanism of natural selection is the species homo sapiens.

Human beings, instead of competing for resources directly have devised an invention enabling them to contend for resources indirectly: Instead of competing for food and water like lions, humans compete for an “intermediate facilitator” which, once possessed, is then used to “buy” the resources necessary for fitness. Winners of the competition for the “intermediate facilitator” win access to the resources—losers go without.

This “intermediate facilitator,” of course, is MONEY.

If “money” were a naturally occurring substance in the system of nature, this exception to the mechanism of natural selection would be inconsequential—money would be no different than food or water itself.

Because money is an abstract invention of human thinking, however, the invented mechanisms controlling its creation and availability mediate the competition for the real resources the money ultimately buys. In other words, the INVENTED mechanisms controlling money creation and availability tip the scales in the competition for fitness.

Re-Tipping the Scales

It should be no surprise that the invention of money quickly evolved to favor the success of the selfish gene: Money became a finite resource to be “won” by those who could devise and implement the most successful schemes to maximize “money profits”—individuals who, virtually by definition, were driven by a selfish rapacity to succeed at the expense of others.

Despite this extreme tipping of the scales in favor of the selfish gene, the multifarious group competitions of human society slowly nurtured the continued success of the cooperative gene. Three steps forward, two steps back, two steps forward, three steps back, four steps forward—Violence! Catastrophe! Collapse!—redesigning, restructuring, rebuilding anew—over and over.

But now, suddenly, for the first time in modern human history, that redesigning and restructuring will be taking place in the context of a revised understanding of the “intermediate facilitator” itself. The invented structure of money has evolved—and it has evolved dramatically in favor of the cooperative gene.

Money—which once was a finite object obtained through violent physical competition, through war and piracy, through corrupt socioeconomic competition and exploitation, through colonial mercantilism, slavery, and capitalism to become crony-capitalism and oligarchic authoritarianism—(in other words through mechanisms totally dominated by the selfish gene)—has become “modern fiat money,” an infinite measurement of intermediate facilitation which can be issued, as needed, through the mechanisms of civil discourse and political majority.

Group selection in human evolution is about to take on a whole new meaning.

I would like to propose that understanding modern fiat money is the key to happiness.

That may sound like a ridiculous hyperbole, but an argument can be made for it that is (at least) as valid as the old saw “money is the root of all evil.” The new argument might go something like this:

Fiat money is the “root of happiness” because it enables you to obtain the education you need to pursue the career that inspires and motivates you.

Fiat money enables you to buy or rent an affordable home in a neighborhood close to the career you have started as a result of your education.

Fiat money enables you to seek a partner and start a family early in your career because (a) you have an affordable family abode, and (b) your preschool children will be cared for while you and your partner are pursuing careers and building your savings.

Fiat money enables you to go to the medical clinic, therapist, and pharmacy with your ailments—without worrying about how you’re going to pay for your treatments.

Fiat money enables you to live in a community that doesn’t pollute the air with greenhouse gases, that isn’t gridlocked with traffic and parking, that surrounds and integrates itself with healthy ecosystems, that is powered by a zero-carbon electrical grid, serviced by sustainable supply and food chains—and has no homeless people because everyone in the community has a paying job that suits their capabilities and needs.

In themselves, of course, these conditions are not happiness. They constitute, instead, an “enabling structure” that happiness can be built upon—the pot, the soil, the trellis, the fertilizer, and the drip irrigation of happiness. It’s up to each person to plant their happiness-seed, nourish it, and keep it growing on the trellis.

But how can I suggest that modern fiat money has anything to do with this—let alone that it can be the underlying instigator of it?

I can make this claim because, factually, each of the conditions described above can be created with REAL RESOURCES—labor, expertise, technology, materiel, energy, water, land—that are available to us, right now, as a collective society:

The teachers and classrooms are available to provide education. The land, building materials, design and construction expertise are available to construct the housing. The preschool caregivers and daycare space are available to nurture the children. The doctors, nurses, medical technicians, therapists, pharma-makers, and builders/operators of health clinics are available to provide healthcare. And the urban-planners, engineers, scientists, technology and LAND are available—right now—to begin building the green neighborhoods and transit systems of the future. And the macroeconomic framework has been laid for a national Job Guarantee program to end involuntary unemployment and homelessness.

And if you combine the fact that these real resources are available with the fact that the sovereign government—by definition—can issue and spend as much fiat money as necessary to put those resources to work, then, by simple common-sense reasoning, the mechanisms of fiat money can create the conditions described—can create the “enabling structure” by which the man in the street can bring his happiness to bloom.

Something’s A-Changin’

At this point in my essay, I’d normally feel compelled to defend and explain the central premise contained in the above argument—namely that the sovereign government can issue and spend its fiat money without limit, provided the real resources are available to be put to work by the issuing and spending of that fiat money. It isn’t just that I’ve grown weary of making that explanation; I sense, perhaps, it is finally becoming unecessary.

The core complaint about the premise—”well, yes, the government could do that, but doing so will devalue the currency and destroy the market economy”—is becoming, to my mind, a thoughtless, worn-out, mantra of the financial oligarchy. Incessantly mumbling and stroking this complaint like rosary beads, the Titans of Finance may have amassed all the existing fiat money on their side of the table—but they’ve lost all credibility as to what they would like to do with it, what they plan to accomplish by spending it. And, by losing that credibility, they’ve set the stage for the table-to-be-turned.

Like Bob Dylan, bless his imagination, once wrote a song about.

This is because our FUTURE money—that is to say, the unlimited fiat money the sovereign US government can issue and spend after a populist majority wrests control of its steering mechanism—will be in the hands of an agenda the financial oligarchs cannot even imagine. Because their brains are not wired to see it.

They will claim it is going to be a disaster. But what it really will be is the opposite of a disaster: It will be the building of the “enabling structure” that will allow the man on the street to pursue his happiness.

Thank you for reading PAYING FOR IT—I write with full knowledge that I am naively optimistic. I am now going to take a short, three-week break to try, as best I can, to further nurture that optimism.

This guy is not me. And yet he is me.

I have, on this Substack, written critically about AI from different perspectives, and those criticisms have not changed. I never imagined using Claude, Chat GPT, or any other form of AI to create content for PAYING FOR IT—but now, that HAS changed. Here is why and HOW I’ve decided to experiment with using it:

A few weeks ago, I posted an essay in which I bemoaned the fact that I felt like I was in an echo-chamber, exchanging “echoes” with readers and writers already sympathetic to the understanding of modern fiat money and the opportunities it presents for the general welfare of collective society. What I was looking for was a way to break out of that echo chamber and somehow connect with the people who really need to KNOW—people who are dramatically impacted by, but have little time for, and little interest in reading about, macro-economic philosophy.

Then, just recently, I stumbled upon a surprise: A colleague (frustrated by my verbosity) had taken one of my longer essays and asked Claude.AI to shorten and summarize it into 800 words or less. The result astonished me:

In the course of “abbreviating” my essay, Claude did something unexpected: it created a written “voice” that sounded very much like an effective political stump-speech: It “spoke” with a populous pitch that, it suddenly struck me, might well be LISTENED to—and paid attention to—by someone who, otherwise, would have no interest in, or patience for, the topic at all.

In other words, the very audience I set out to communicate with when I first started my Substack. The very audience I have so frustratingly failed to engage with for the last year and a half. The very audience that Claude, it turns out, seems to have a knack for “talking to.”

I wrote about that experience here, and included the “speech” Claude had created. But afterwards, I began thinking…. Wouldn’t it be interesting if I could actually SEE and HEAR a charismatic speaker deliver that speech? And would anyone else find that compelling? And—could I even know how to make that happen?

So, much to my surprise (and with a large gulp of trepidation) I began experimenting—for the first time—with the Devil Herself. I do not know what kind of bargain I’ve made, or where it will lead— but the initial result actually brought tears to me eyes.

Here is what I produced using a combination of Claude.AI (to generated the script, which I then tweaked and edited) and D-ID Studio which created my “speech-giver” avatar and put the words in his mouth. The speech was generated from my recent essay “PROJECT EARTH.”

In the interest of shedding light on America’s now mushrooming confusion about fiat money, tax-dollars, Treasury bonds, government spending, “deficits,” and the “national debt,” I’d like to take up a concept I was recently exposed to by Stephen Hinton in his essay, Capitalism Can Never Reform Itself. It Has to Go Back in The Box. The concept I’m referring to is the “Dividend.”

Basically, the idea of the “Dividend,” as I understand it, is that the national government levies taxes with the goal of discouraging businesses (for example, oil and gas extraction) that operate with heavy “externalities”—costs or harms that are passed on to be paid for, or suffered, by the general public. The “penalizing tax-dollars” collected are then distributed back to the general public as direct “dividend payments”—as opposed to being used for government spending.

This sounds quite reasonable, doesn’t it? We’d all love to get those checks in the mail! And we’ve been paying out the wazoo to enrich the oil and gas oligarchs for so long now, it seems only just that they’d be forced to pay us something back.

But there’s a problem: The “Dividend,” as it’s described, builds the ramparts even higher around our misunderstanding of the operational mechanism of fiat money: Chartalism (the operational mechanism) clearly says that (a) fiat dollars are tax IOUs issued by the sovereign government before taxes are collected and (b) are then cancelled (destroyed) when they are used to make a tax payment. If that is the case, Hinton’s “dividend” is not possible—except by the issuing of NEW fiat dollars.

The Heart of the Matter

This may seem like arguing about hairs on the head of a pin—but it goes to the very heart of our societal confusion about “money” that is so blatantly exploited by the financial and corporate oligarchs—aided and abetted by their political/Congressional lackeys—specifically to prevent progressive interests from paying for social initiatives with the operations of sovereign US fiat money.

To see this, let’s examine the idea of the “Dividend” more closely by asking a simple question: What is the difference between—

1. the government collecting tax-dollars, cancelling tax liabilities equal to the tax-dollars received, then putting the collected tax-dollars in envelopes and mailing them to American citizens; and

2. the government collecting tax-dollars, cancelling tax liabilities equal to the tax-dollars received while, simultaneously, shredding the tax-dollars—then issuing new fiat dollars for the dividends and mailing them to American citizens?

The two operations appear to be exactly equivalent: In each case, dollars are removed from the economy and dollars are put back in the economy. And, in each case, the dollars are transferred from one owner—the business/industry paying the taxes—to another owner, the American citizens as general recipients.

While seemingly equivalent, however, the two operations establish exactly OPPOSITE boundary conditions for what a national government can undertake for the collective well-being of its citizens:

Operation “1” requires—as a condition for its possibility—that the tax-dollars be collected first, before they can be stuffed in the envelopes and mailed out as “dividends.” It also establishes, mathematically, that the quantity of dividends distributed is limited by the quantity of tax-dollars collected.

Operation “2” has no such “conditions” on its possibility: The envelopes can be stuffed with the new fiat dollars whether or not the tax-dollars are collected at all. Even more to the point, the quantity of new fiat dollars to be stuffed in the envelopes can exceed—even dramatically exceed—the number of tax-dollars collected.

Why This is Crucial

The question here is not whether “penalizing” taxes should be levied on industries that impose heavy externalities on collective society. Progressives and Democratic Socialists would likely agree that should be done at all costs. The question is the internal logic and “visualization” of what happens to the tax-dollars after they are collected.

This “visualization” is crucial because it “frames” the UNDERSTANDING of taxes, “deficits,” and “national debt” that, in turn, CONTROLS the calculations we make about what we can “afford” to undertake and accomplish as a collective society.

Recent weeks provide a good illustration of this: A day has not gone by without a news article or op-ed ringing alarm-bells about America’s brand-new $40 Trillion “national debt”—laying out the calculations of why, in light of that astonishing number, American society must immediately begin cutting back on virtually everything we need: Healthcare, Social Security, Medical Research, Modern Infrastructure development, Affordable Housing, Climate Mitigation…. “Everything,” it is breathlessly declared, “must be on the negotiating table!”

This declaration of financial emergency is so overwhelmingly logical to our MISUNDERSTANDING of fiat money it will, predictably, prevent us from doing (or even seeing) what really needs to be done:

The REAL alarm-bells that should be ringing in the belfries are the ones warning about the desperate consequences we’ll be suffering down the road if we DON’T provide ourselves with a universal healthcare system, a more robust Social Security system, advanced medical research, a ZERO CARBON electric-grid and transportation network, a job-guarantee program for full employment, a production system for affordable housing, and multiple, moon-shot efforts toward Climate Mitigation.

We’ll never be able to do any of these things until we can “SEE” the crucial difference between what appears to be two “identical things”—(A) imagining that fiat dollars collected as tax payments are spent for government spending, and (B) imagining that fiat dollars collected as tax payments are destroyed while new fiat dollars are issued for government spending.

The difference between the two leads to astonishingly different worlds of possibility.

A colleague/reader of PAYING FOR IT thought my last post “Square Peg—Round Hole” was too long. As this colleague is wont to do, he gave it to Claude AI for improvement, with the specific instruction to consolidate its arguments into 500 words or less. Claude, of course, succeeded admirably—but what is most striking to me about Claude’s truncated version of the essay is the “voice” it created: The essay summary “sounds” like a very credible political-rally speech that could be given by THE Democratic Socialist candidate who is, finally, brave enough to step up to the plate and redefine the batter’s box.

Here is Claude’s “speech,” based on SQUARE PEG—ROUND HOLE. (I’ve resisted the urge to slightly edit and tweak it. I want Claude to get full credit.)

BY CLAUDE

Why We’ve Been Lied To About “The Government Being Broke”

Let me make the case plainly: the idea that our government can’t afford Medicare for All, free childcare, or a modern electric grid because “there’s no money” is a myth — and once you see through it, you can’t unsee it.

Here’s the truth: since 1971, the U.S. hasn’t operated on gold or silver. Our money is fiat — created by government decision, not dug out of the ground. That changes everything about how spending actually works.

Think about how a government issues fiat money from scratch: it spends dollars into existence to pay for goods and services, then collects some of those dollars back as taxes — not to “fund” anything, but to give the currency value and manage inflation. Colonial governments did exactly this: print money, spend it, collect it as taxes, then literally burn it. There was no “debt.” Just dollars issued, circulated, and retired.

That’s still how our system works today — it’s just been obscured by an accounting split between the Treasury and the Federal Reserve. The Fed issues currency; the Treasury spends and taxes. Because of this division, it looks like the Treasury is spending money it collected from us, and that any shortfall must be borrowed — hence “the deficit,” hence “the debt,” hence supposed limits on what we can afford.

But look closer: Treasury bonds — the “debt instruments” everyone panics about — aren’t loans in any ordinary sense. Buying a bond isn’t lending the government money. It’s swapping one government-issued asset (cash) for another (an interest-bearing bond), both fully backed and convertible by the same sovereign authority. That’s not debt. That’s fiat money wearing a different hat.

Once you see this, the entire panic around “unsustainable deficits” and “debt ceilings” collapses. The government issuing its own currency can always create the dollars needed to pay for real, physical resources and labor that already exist in the economy. It is not fiscally constrained the way a household or business is — it is constrained only by real limits: whether the workers, materials, and capacity exist to build the hospitals, staff the childcare centers, or install the solar panels we’re asking for.

So when politicians tell us we can’t afford universal healthcare or climate infrastructure, they’re not describing an economic law of nature — they’re making a political choice, dressed up as inevitability, that conveniently protects existing concentrations of wealth and power.

The real question was never “where will the money come from?” It’s “do we have the people and resources to do this?” If yes — the money is not the obstacle. It never was.

That’s the case for MMT: not a trick or a loophole, but a more accurate description of how a sovereign, currency-issuing government actually operates — and a case for using that power in service of the public, not just the interests of those who benefit from convincing us we can’t.

Not a bad stump-speech, huh? I’ve often thought about what the PREMIER political speech explaining modern fiat money to the American public might sound like. This is the first thing I’ve read—or “heard”—that sounds plausible. It could do, I think, with a few edits and tweaks, though. That, I think, should probably be done by a human being?

NOTE: This is the reworking of an essay I posted eighteen months ago that never flew as I thought it should. Recent conversations re: the role of Treasury bonds in modern fiat money have brought it back to mind. I’ve given it a new framing, a new title, refolded the wing-flaps, and hope it will glide further than the first time.

WHY is America’s common-sense so resistant to the idea of Modern Fiat Money? A great deal is riding on this question because until we can make the two “fit” together we will continue to be at the mercy of a financial and corporate oligarchy telling us that what we can do (and what we can have) as a collective society is entirely dependent on what THEY decide is worth producing for profits.

Government spending initiatives appropriated by the People’s Congress? Forget it. The government is BROKE and can only spend more dollars by collecting more taxes—which the oligarch’s (aided and abetted by their conservative politicians) make sure is something that never happens. Medicare-for-All? Paid family leave? Free career and job training? Free childcare? Affordable housing? Expanded Social Security? Moonshot cancer research? Zero-carbon electric grid? Go find the money! None of it is what the oligarchs have any interest in spending a dime on.

BUT WAIT!—Am I saying what the oligarchs are telling us is simply not true? Am I saying the national government doesn’t NEED to collect more tax-dollars to pay for these things we so desperately require for our collective well-being? Am I saying that because the “money” we’ve been using for more than half a century now is something called pure “fiat money” that the government can just “spend it” out of thin air? That’s some kind of bad joke, right? Let’s get serious. That just not COMMON SENSE!

But WHY isn’t it common-sense?

What follows is an attempt to insert a very square peg into a very round hole—without using a hammer.

Two Premises

The vexing confusion common-sense has with “fiat money,” I believe, stems from the fact that we have two different logical premises looking at the same reality from different points of view.

If you begin with the “common-sense” PREMISE #1—that tax revenues pay for government spending (where else would the money come from?) and spending beyond tax revenues generates a “deficit” that must be made up by issuing “debt instruments” (Treasury bonds)—then the “official” explanations of the US government’s dire monetary predicament are perfectly logical, even “true.”

If, for example, the government collects $1,000 in tax revenues and then spends $1,500 in government initiatives, it obviously has created a “deficit” that must be made up by borrowing the $500 shortfall from the Private Sector. If this debt build-up continues into unrestrained territory (like say $40 Trillion!) the Private Sector will eventually refuse to lend the government more money, causing it to default or, maybe worse, the next generation will be overwhelmed by the taxes needed to repay the ballooning indebtedness, and the whole structure will collapse. It is, therefore, “fiscal common-sense” to impose a “debt limit” on what the government can borrow—and then restrain spending initiatives to stay under that limit.

In contrast, if you begin with PREMISE #2—that America has been using a pure fiat money system for over half-century (which is demonstrably true since “hard money,” gold and silver specie, have not played a monetary role in the world since 1971)—in that case, a very different narrative immediately unfolds:

In a fiat money system, the government (by necessity) issues and spends fiat dollars first and follows by imposing taxes which can only be paid with the fiat dollars it has issued. Tax payments to the government, then, simply cancel the tax liabilities the government has imposed—and the government then issues NEW fiat dollars for its next round of spending. To be clear: Tax-dollars are not necessary for, and are not used for, government spending.

The example usually given of this “fiat money logic” is the money issued by the American Colonies before the Revolutionary War. The colonial government issued paper fiat money notes, bought goods and services from the citizens using the notes as payment—and then imposed taxes on the citizens that could only be paid with the notes. On tax-collection day, the citizens came to the town square and paid their taxes. Their tax liability was crossed off the official ledger and—so there was no chance the same paper notes could be used to pay taxes twice—the fiat money used as payment was publicly burned in the square. The colonial government then issued new paper fiat money notes to initiate a new round of buying goods and services from the citizens—and a new round of tax collections followed.

What is crucial to observe here is that within the fiat money system just described, the concept of a government “deficit” does not exist. A colonial citizen, of course, could have a “deficit”—arriving at the public square on tax-payment day with a shortage of money-notes and, in that case, may have had to borrow money-notes from another citizen to make up that “deficit.” But as for the colonial government itself—if, after having collected and burned $1,000 in tax payments, it then issued $1,500 new fiat money notes to pay for its next round of spending—that difference of $500 could hardly be defined as the government’s “deficit.” It is not a shortfall that has to be made up but is simply an additional $500 it has issued and spent.

If there is no government “deficit” in a fiat money system, there is no need for the government to borrow to make up the shortfall. By logic, then, there is no need for a “debt limit”—and no need to curtail public spending to stay within its limits. The constraining factor on the government’s spending is not tax revenues, but rather what is actually available for the government to buy with its fiat money: If what it wants to buy doesn’t exist, it’s of no use to create the fiat money to buy it. If, on the other hand, it is available for purchase, there is no constraint on issuing the fiat money to acquire it.

Seeing Double

The confusion between these two narrative-premises lies in the fact that our “modern” economy has managed to create—and found a way to clumsily operate with—a dualistic “hybrid” of PREMISE #1 and PREMISE #2. While we are, for sure, operating with a fiat money system, it doesn’t look like the colonial model used to explain it. We don’t have a sovereign government issuing fiat dollars, spending them to buy goods and services from citizens, standing in the public square receiving—and burning—those fiat dollars as tax payments—and then issuing new fiat dollars for another round of spending.

Instead, for reasons of historic complexity, while our government has retained its sovereign authority to collect taxes—and its responsibility to spend for the public good—it appears to have “assigned” its sovereign authority to issue fiat dollars to a separate AGENT, the Federal Reserve central bank. And it has assigned that authority with the specific caveat that the FED cannot directly issue fiat dollars for the government’s spending.

(Historical note: The reason for this circa 1913 “caveat” was to prevent politicians from controlling the FED and directing it to issue more US dollar “gold certificates” than it had gold to back-up.)

The hybrid (and confusing) situation therefore exists today where the government collects fiat dollars in taxes and spends fiat dollars for public initiatives (just like the colonial government example) but, unlike that example, the US government appears to have no means of issuing the fiat dollars it needs for its next round of spending. Since that authority appears to have been “given” to the FED—and since there is no public burning of the fiat tax dollars collected—it appears the government must be spending those tax revenues! What other money could it be using?

This seemingly irrefutable reality places us inescapably in the logic of PREMISE #1. If the Treasury spends more than it collects in tax revenues, it obviously has a “deficit.” Since it appears the Treasury has no mechanism to issue new fiat dollars directly, it must then issue “debt instruments” (Treasury bonds) to make up the “deficit.” And since the “debt” appears to be something that must be repaid with future tax revenues, it seems “fiscally responsible” to impose a limit on how large that “debt” can become—and to curtail public spending initiatives to stay within that limit.

This is why common-sense thinking is so resistant to the fiat-money explanation of PREMISE #2. While PREMISE #1 seems to reflect the reality we “see,” PREMISE #2 simply describes an idea—an idea that may have had historical moments of embodiment and experimentation—but an idea that is clearly (and dramatically) different than what we “see” happening today.

Except here’s the thing: If you make a slight shift in the structure of PREMISE #1, it dissolves instantly into PREMISE #2—and you realize they are, in fact, the same reality viewed from two different perspectives. And if we are dealing with a single reality, rather than two competing realities, the only question to be resolved is: which perspective of that reality is the most useful for common-sense to hold? Which perspective provides the greatest utility and benefit?

Resolving the Duality

The structure of modern fiat money (embodied in our colonial government example) was transformed into our present hybrid confusion by one simple “shift”—the sovereign government’s decision to apparently “assign” its authority to issue fiat money to a separate agent, the FED. This shift created a disconnect in the fiat money logic—as if an electrician had inadvertently left a wire hanging loose, preventing electricity from properly flowing through the circuit.

Modern Monetary Theory (MMT) posits the fact that this circuit was never really broken but continues via “another wiring” that subsequently evolved.

There are at least two ways to illuminate this other “wiring.” The first is by what MMT refers to as “consolidated government” accounting. This accounting structure assumes the FED and the Treasury are a single, unified, entity: when the FED issues fiat dollars, that is identical to the government issuing them. Thus, the fiat money model remains operational: The “consolidated government” issues the fiat dollars, collects the tax dollars, destroys them (unceremoniously), and issues new fiat dollars for the next round of spending, etc.

This works but has a problem that prevents an enthusiastic embrace by common-sense: it doesn’t seem to reflect what is actually happening. It feels as if MMT is bending the facts to fit its premise. If Congress rewrote the Federal Reserve Act of 1913, enjoining the Treasury and the FED, all would be well. But that is a tall order.

A second illumination, I believe, works better: It acknowledges the reality that the U.S. Treasury and the FED are separate entities. The FED issues fiat money in the form of digital Reserves and paper Federal Reserve Notes—while the Treasury, in turn, accepts these fiat monies as tax payments. The new circuitry is established by realizing that Treasury bonds—which the Treasury then issues for its spending—are NOT “debt instruments” but, in fact, are themselves, instruments of sovereign fiat money.

Treasury bonds become fiat money simply because their conversion to Reserves or Federal Reserve Notes is guaranteed—by fiat. In acquiring a Treasury bond, private investors are NOT “loaning” the US government money, they are simply executing an “asset swap” of one form of US fiat money—which does not pay interest—for another, which does. And, to finalize the relationship, Treasury bonds are, operationally, interchangeable with fiat dollar Reserves at the FED.

Thus, the structure and logic of modern fiat money is restored: The government’s Treasury collects tax-dollars, destroys them while cancelling tax liabilities, then issues NEW fiat dollars (in the form of new Treasury bonds) to initiate new spending. This happens again and again, so long as Congress directs the Treasury to spend. The concept of a government “deficit,” once again, is inapplicable. The idea the government must borrow fiat dollars that must be repaid with future taxes disappears. And the need for a “debt limit” becomes irrelevant.

Choosing Perspectives

So, what seems like something common-sense simply can’t wrap its head around is, in fact, the very thing common-sense has already accepted—but seen, now, from a different vantage point. The question to be answered is which vantage point is the most useful place to be standing?

We can stand over there and look at our money system from the perspective of PREMISE #1 with its “broken circuit” and its narrative that taxes must therefore pay for government spending. Or we can stand over here and look at our fiat money system from the perspective of PREMISE #2 with the circuit restored by understanding that Treasury bonds are simply the issuing, by the sovereign US government, of “interest bearing fiat money.”

From over there, what we see is a national government chronically short of money, constantly struggling with the “perceived” need to downsize and curtail its spending initiatives for our collective well-being. As a result, we are divided against each other—competing for some share of what we believe is a shrinking pot of dollars. And this divisiveness, in turn, renders us helpless to stop the oligarchs from “hijacking” the fiat money system for their own purposes and their own profits.

Standing over here, on the other hand, we see a national government that is fully capable of paying its own citizens and businesses to undertake and accomplish ANYTHING we decide by democratic process is necessary, or useful, for our collective well-being—so long as the real resources are available to be employed for the task.

Common-sense is telling me the view from over here is far more useful than the view from over there.

The most interesting moment in writing a Substack publication is receiving a comment from a reader that turns your head around and makes you think about what you’ve written in a new or deeper way—and, as a result, stumbling upon a new perspective about what you’d been writing about in the first place. This happened recently with a comment I received regarding my essay, Taxpayer’s Dollars. The comment was from Lorenzo Morinho who writes the Substack “The Last Decade.”

His comment included one specific point that especially caught my attention. It referred to my diagram of US government “Deficit Spending”:

The diagram shows that when the government issues and spends more fiat dollars than in collects back in taxes, the Private Sector ends up with a net savings. Mr. Morinho expressed concern that this net savings amounted to a net “devaluation” of the fiat dollar currency—i.e. INFLATION—which is, of course, the pre-eminent, “case-closed,” criticism of Modern Money Theory. Specifically, Mr. Morinho offered this calculation example as proof:

When USA has 6% public deficit (i.e. issues and spends 6% more fiat dollars than it collects in taxes) with 2% growth (in GDP) and 3% CPI (price inflation), you have 1% of fiat currency devaluation by design (i.e. there’s a net 1% increase of fiat currency in the economy).

At first, this mathematical reasoning seemed unassailable: My diagram did seem to illustrate a general “devaluation” or inflating of the currency. If the diagram continued to operate as shown, soon the Private Sector would be “swimming in fiat dollars!” In pondering this, I stumbled upon a missing factor that explained something “new” in the diagram—something that changes the logic of Mr. Morinho’s calculation:

TIME

The growth and CPI components of his calculation are measuring the results of what has happened in the PAST, whereas the “public deficit”—assuming it reflects fiat spending that was invested in public/private initiatives to benefit the collective good—represents something to come in the FUTURE: Namely, the beneficial goods and services those initiatives will generate down the road which will be purchased with the new fiat dollars generated by the “deficit.”

In other words, the 1% fiat currency “devaluation” Mr. Morinho is tallying could easily be, instead, a zero % devaluation—coupled with a 5% economic GROWTH in the future. And that growth, according to the principles of MMT, would reflect new goods and services that specifically provide new employment and well-being for working-class families.

The general insight here has to do with what is perceived (and presented) as Modern Money Theory’s “fatal flaw”—the threat of run-away inflation. “If only it wasn’t so INFLATIONARY”—the general sentiment seems to be—“MMT would be a wonderful thing!”

But now, what’s suddenly jumped out of the confusion is the realization that in expressing that point of view, people are not taking into consideration the factor of TIME. Specifically, they are confusing the action of simply “adding money” to the system now, with the action of using that money to add employment opportunities in the near and distant future—employments that produce useful goods and services that can be purchased with the wages (fiat spending) the new employment creates.

That, by definition, is NOT “inflation.” It is the growth of opportunities for people to earn wages and salaries doing new work that benefits the collective well-being of society. Which, as I understand it, is the fundamental mission of Modern Money Theory.

Rather than explaining to the American people how our US dollar FIAT MONEY actually operates, how it can enable us to pay ourselves to provide a myriad of goods and services working-class families desperately need to make ends meet—America’s “Democratic Socialists” seem intent, instead, on projecting their best imitation of Vladimir Lenin and Joseph Stalin, telling American voters the way forward is to use tax dollars to subsidize “public” grocery stores that might (so what) put “capitalist” grocery stores out of business. (See Gustavo Gordillo’s interview with Fox News host Martha MacCallum).

This is beyond perplexing. For one thing, it means that, despite the fact that 70% of American voters now seem poised to put an end to the catastrophic presidential regime of Donald Trump, this “regime from hell” could nonetheless survive because just enough voters can’t get on board with the idea of calling their neighbors “comrade.” But it means even more than that.

Obviously, American socialism needs to vigorously differentiate itself from the current version of oligarch-controlled capitalism. But it also—perhaps even more strongly—needs to differentiate from the stereotype of Marxist-Leninist “socialism” that tried vainly to impose itself on market democracy. For many Americans—progressives included—that attempt is still a bad memory, both for what it tried to impose and for the irrational American over-reaction it brought forth, (an over-reaction that ultimately led to the generational catastrophe of the Vietnam War and, if you think it through, the “overpower” of oligarchy-capitalism that followed).

Way Beyond That

The newly emerging socialism of today has no need to have anything to do with that memory. Today, socialism has the opportunity to encompass a completely different and new set of possibilities that render the stultifying catechisms of Russian socialism not just unnecessary, but obsolete: To achieve the goals of modern “socialism” it is not necessary to impose a transformation of the “social classes”—it is only necessary to transform our socioeconomic understanding of MONEY.

In his book FIAT SOCIALISM, Carlos Garcia Hernandez eloquently introduces this new set of circumstances with a short-fiction anecdote:

August 16, 1971. The Secretary General had cancelled all his appointments. The day before, the person in charge of economic affairs had sent him an urgent note. It was vital that they meet. Eventually, the economist entered the room.

“I hope it’s important.”

“It is. The money Marx talks about no longer exists.”

The Secretary General went from surprised to impatient. “Would you please explain yourself?”

“Previously, bank-deposits were backed by gold. One ounce was equivalent to 33 US dollars. The international currency exchange was based on this equivalence. And even more important than that, the spending capacity of governments was limited to the quantity of gold available. Now it’s not like that anymore. Governments can create and spend without limit in their own currency. Money is not a commodity any longer, it has become an intangible accounting entry. This is called fiat money. This changes everything.”

The face of the Secretary General revealed that he was very perplexed. He could only ask: “Since when?”

“Since yesterday.”

Hernandez goes on to explain that Karl Marx had built his entire treatise on the assumption that “money”—which is inextricably tied to “capital”—is comprised of a finite quantity of gold specie which the “classes” are forever competing to have a claim on. And that “commodity money” ceased to exist on August 15, 1971 when Richard Nixon took the United States—and the rest of the world which was “pegged” to the US dollar—off the gold standard.

A Soft Revolution in Waiting

The fact that gold specie ceased to be “money” is less important than the fiat mechanism that became money in its stead—especially in the context of social democracy: In essence, the evolution of money has taken the place of the evolution of “society.” Or, to put it another way, once the new fiat money is understood and embraced, a democratic society will naturally restructure itself accordingly.

This “understanding and embracing” of modern fiat money has not yet occurred. Both conservatives and progressives seem terrified of it—for different reasons. The conservatives are terrified because it puts in the hands of a people’s democracy the power to create money that, heretofore, had been the exclusive province of capitalist entrepreneurs. (The folks who have now grown to become our dominating oligarchs.)

The progressives seem terrified of fiat money because—well, you explain it to me! As best I can tell, it’s because they fear that, in trying to explain something so counter-intuitive as the fact that tax-dollars do NOT pay for government spending, they will be held up for relentless ridicule by the mainstream economists and thinkers who define “reality” for America’s common sense. They’ll be laughed out of the game. By arguing, instead, that social well-being should be paid for by raising taxes on the rich, they’re still in the game—even though it’s a game they’re bound to keep losing.

And now the Democratic Socialists, terrified perhaps by the same fear of being marginalized by a scathing ridicule of “common sense,” seem intent on pretending we’re still using Marx’s money system, and must therefore overthrow the capitalist class and—for example—take control of the food distribution system.

That, it seems to me, is not only a Quixotic windmill long collapsed of its own structural fallacies, it gallops right past the larger windmill standing in plain sight: undertaking the challenge of developing, financing, and implementing a strategy for teaching American voters how their US dollar fiat money actually works. And, by doing that, bringing forth the “soft revolution” the advent of modern fiat money has laid the foundation for.

ALL around America, now, public meetings are taking place to debate the granting of permits and public subsidies for the construction of DATA CENTERS—the mega-project digital storage and processing facilities that will power the Brave New World of Artificial Intelligence. The complex questions about whether AI itself will benefit or harm human society—and how it should be managed and controlled—are just a humming background in the assembly rooms of discussion: What is being hotly debated are the trade-offs between the creation of local jobs and tax revenues, on the one hand and, on the other, the harms and stresses the DATA CENTERS will impose on local resources—astronomical greenhouse gas emissions, water usage, and electricity consumption.

In each case, what is striking is the sheer scale of the proposed projects and their impacts—tens of billions of dollars in investment, tens of millions of dollars in future tax revenues, thousands of construction-related jobs over the first few years, and hundreds of permanent wage-earning positions in the long term.

These starry-eyed “economic development” and “union employment” numbers are vying with an equally staggering scale of calculated harms—tens of millions of tons of greenhouse gas emissions and hundreds of millions of gallons of extraction from local groundwater reserves (often in regions already suffering from severe droughts and projected existential water shortages).

Passions run high on each side of the debate. Economic development officials and construction trade-unions can’t imagine not jumping on the opportunity to create so much employment, generate such a windfall of tax revenues, and establish the region as a magnet-hub for new businesses and corporate ventures associated with the AI boom—the “economy of the future.” For them, there is a palpable fear of being left behind, and a palpable excitement at the notion of being “chosen” to be part of this future world of wealth and technology.

On the other side, those concerned about the depletion and degradation of shrinking water resources—and the de-facto REVERSAL of efforts to curb greenhouse gas emissions and mitigate global warming—can’t imagine making those kinds of trade-offs simply in the interest of “economic development.” It almost seems like an oxymoron: It’s like selling the family farm to buy a month’s worth of groceries.

The Strange Absence of Alternatives

The strangest—and most telling—thing about this stand-off, however, is that it does not seem to occur to anyone that there could be an alternative “project” that would accomplish the same goals of job creation, economic resurgence, and local tax revenues WITHOUT imposing the harms of accelerated global warming and resource depletion. An alternative project that, perhaps, could even do the opposite— preserve resources and mitigate climate change.

Why is that possibility not on anybody’s radar screen?

To put it another way, why do we “passively” believe we are at the mercy of the financial and technology oligarchs—who happen to have amassed trillions of dollars in personal wealth by devising ways to “own” computer technology and the internet—to, in essence, now “offer us a job” to help them amass trillions more dollars by “owning” Artificial Intelligence as well?

Why do we just assume these people are now fully in charge of our future? Do we really believe we are completely dependent on them to provide us with something to DO that will generate our economic sustenance?

Many readers may find it difficult to even make sense out of these questions. What other kind of project could I possibly be talking about? If the profit-making capitalist entrepreneurs don’t come up with business ventures that will hire us to do something, who else will?

ONCE UPON A TIME, In The Year 1961…

President John Kennedy, gave a speech to a joint session of the US Congress in which he defined a “project” that would have the US government spend $340 billion (in current dollars), over a decade’s time, to design, engineer, and build the technology, infrastructure, and hardware to send a man to the moon and bring him safely back to Earth again. The US Congress took up President Kennedy’s proposal and began appropriating federal spending to undertake and accomplish the goal.

At its peak, the Apollo Project employed 400,000 men and women distributed over 20,000 American businesses and universities. Even today, NASA continues to generate more than $75 billion in total annual economic output across the U.S. economy, supporting over 300,000 jobs nationwide. Its operations and research produce an estimated $10 billion in federal, state, and local tax revenues.

In effect, with Project Apollo, the American people—through the money-appropriating actions of their representative democracy—hired themselves to undertake an initiative they, themselves, defined as aspirational: American business was put to work by the American people—not the other way around.

Sometime between July 10, 1969, when Neil Armstrong stepped foot on the moon, and today—when local citizens are gathering in meeting halls and struggling to comprehend what the high-tech oligarchs are now demanding they give up in exchange for having a JOB IN AMERICA—something has changed; something has shifted, got turned upside down and inside out.

How Can We Hire Ourselves To DO Anything If We’re Broke?

I would propose that what has been turned inside out is America’s belief in Public Works as a mainspring of American aspiration. This shift first expressed itself in the early 1980s with two profound political pronouncements made by the foremost leaders of world democracy—US President Ronald Reagan and British Prime Minister Margaret Thatcher.

Said Reagan: “Government is not the solution—it is the problem.”

Said Thatcher: “There is no such thing as public money—there is only taxpayers’ money.”

These deceptively simple statements of inversion were willful denials of the government’s use of public fiat money to, first, overcome the Great Depression of the 1930’s, and then to defeat the axis armies of fascism in World War II. They were statements that led to public policies that led to actions that led, inexorably, to a framework of logical premises that resulted in where we stand today:

Government cannot be the “solution,” therefore government should be forced to do nothing by imposing upon the public mind the idea that government has no MONEY to do anything with: It can only extract money from the people who earn it.

And, by logical extension, it is therefore only the profit-making initiatives of Private Enterprise that can undertake to DO anything. And by logical extension from that—it is, therefore, exclusively the profit-making initiatives of Private Enterprise that must define democracy’s aspirations.

Even more important, more transformational, has been the resultant, incremental transfer of the “power-of-the-purse”—the exclusive sovereign prerogative to issue fiat currency for the common good—from the people’s Congress to the oligarchs of private equity: If the government isn’t supposed to be allowed to spend, it is counter-productive to imagine it is the government that issues fiat money in the first place! A muscle, even a muscle that was once overwhelmingly powerful, left unused quickly atrophies and is replaced by the actions of another muscle—perhaps even by someone else’s muscle.

And this is why America now stands so flatfooted and empty-headed looking down the barrel of the AI DATA CENTERS: If you want a JOB IN AMERICA, hand over your air quality, your water aquifers, your electric grid—and give up on even trying to mitigate climate-change. If you want a job, we’re the only ones who can offer it.

Apparently, Project Apollo never happened.

Imagining the Alternative

I cannot complete this essay without a specific example of what an alternative “project” to a proposed AI DATA CENTER might be. Here is one that comes to mind:

Imagine a public meeting somewhere in America, debating the permitting of AI DATA CENTER XYZ, when suddenly a group of six or seven well-dressed, serious-looking individuals, armed with a very competent visual presentation, walk in and make a simple declaration:

“We have a better deal to offer!”

We have an alternative project that can provide MORE construction related jobs, MORE permanent employment positions, and MORE local tax revenues, than what XYZ is offering.

WHAT’S MORE—Our project, instead of emitting tens of millions of tons of greenhouse gases, will contribute to reducing atmospheric carbon to levels below current baselines. Instead of extracting tens of millions of gallons from your local groundwater reserves, our project will contribute to the conservation of local and regional water resources. Instead of consuming more electricity than your three biggest regional cities combined, our project will contribute to minimizing the per-capita consumption of electricity and energy in general.

Anybody interested in what WE want to build?

PROJECT EARTH—A $19 Trillion Alternative to AI DATA CENTERS.

To paraphrase John F. Kennedy:

“We plan to send 10,000 people at a time to various locations in our Great Country, to establish there an industrial research and demonstration CITY to develop, test, and deploy a means for living ON our planet sustainably, peacefully, and in harmony with the systems of nature.”

Each PROJECT EARTH RESEARCH CITY will constitute a new, from scratch, Urban Habitat for 10,000 people—organized around a research and industrial base focused on technologies and services for green energy, water conservation and replenishment, carbon-capture and sequestration, regenerative farming and food production, ecological and wildlife restoration, and affordable housing.

The RESEARCH CITIES will not only create new employments: They will create an affordable, harmonious place for employees and their families to live while they work with the cutting-edge research organizations, businesses and manufacturers who will contract with the project to set up operations in the City—and whose products and services will be deployed, demonstrated, and tested in the living habitat of the City itself.

Public Money, Collective Purpose, Private Enterprise

There are, of course, many other kinds of initiatives that could find a home in a PROJECT EARTH RESEARCH CITY. The list above simply provides an idea of what the alternative to an AI DATA CENTER might focus on—what kinds of employment would be generated, what kinds of positive benefits would be produced in lieu of the egregious environmental harms the DATA CENTERS offer.

Most important, however, the list suggests how PROJECT EARTH would use the “public money” (sovereign fiat currency) Margaret Thatcher said did not exist—and that Ronald Reagan said should not be ALLOWED to exist—to pay Private Enterprise to PAY American citizens to do the work, do the research, do the thinking, designing, and engineering that will accomplish the collective benefits.

How much public money can be appropriated and brought to the town-hall meetings to counter the tech-oligarch’s claims of “economic development”? Let’s use Kennedy’s Apollo Project as a back-of-the-napkin metric: In 1961 the US Gross Domestic Product was $3.69 trillion (in current dollars). Today GDP is roughly $32.5 trillion—58 times larger. Applying the same GDP-percentage metric today, PROJECT EARTH could spend 58 X 340 billion, or roughly $19 TRILLION dollars to build the Research Cities.

From my perspective, that’s a lot of “economic development.” The sleeping giant of AMERICAN Purpose, it turns out, can far outweigh anything even the richest and most powerful oligarchs on the planet can put on offer.

Some weeks ago, the community I live in decided that learning to line-dance would be great fun—and likely good for us old-folks who’d forgotten how to move around to music. I must tell you it was a remarkable experience.

MOST remarkable, however, was my subsequent realization (thanks to a reader of my Substack) that line-dancing, when it comes to a process of “comprehensive comprehension,” might help us understand modern fiat money.

This, obviously, requires some explanation

Our dance teachers—a man and wife who were previous competition ballroom dancers—patiently explained that you couldn’t go out and dance the waltz or CHA-CHA-CHA without first knowing the steps and movements involved—and getting those parts and pieces individually committed to your body-memory. Then, you could begin to put them together as a “dance.” It didn’t work the other way: to begin with the “dance” and then learn the parts as you went along.

The first dance we were to learn is called the Electric Slide—an intimidating name for a dance-step when you’re over seventy. It didn’t seem possible that thirty of us—lined up in three chaotic rows of varying physical ability—could possibly learn to do something in unison called the Electric Slide. It turned out, however, that it was quite possible indeed.

The Electric Slide has three distinct movements, and we learned, practiced, and memorized first one and then the next.

• MOVEMENT #1 is called the “grapevine”—moving sideways, RIGHT, LEFT-BEHIND, RIGHT, STOP—then the other way LEFT, RIGHT-BEHIND, LEFT, STOP. (Four beats.)

• MOVEMENT #2: BACK, STEP, BACK, STEP. (Four beats.)

• MOVEMENT #3: FORWARD, BACK, FORWARD—KICK (four beats) AND-TURN.

The “KICK-AND-TURN” lands on the first right-foot step (and beat) of the MOVEMENT #1 “grapevine”—this time facing 90 degrees in a different direction.

Putting it Together

Next, we connected these three movements together to become one continuous movement that rotated itself—with each KICK-AND-TURN—90 degrees to the left. It took several raggedy attempts—doing it again and again—but suddenly (miraculously) we found ourselves a three-line dance troupe synchronously doing #1, #2, #3 and rotating 90 degrees with each KICK-AND-TURN until we were back facing the same direction we started.

This was an extraordinary sensory experience involving the cognitive thinking part of the brain coordinating with the muscle movements of the feet, legs, arms, and system of balance. It was a little bit transcendent.

Then We Added MUSIC.

I won’t go into the music part now, but instead will jump to the question: What does all this have to do with understanding modern fiat money?

A reader of my Substack recently made a comment to the effect that she sort of “got it” (fiat money)—but there was one part that just made no sense, and that nonsensical part made it difficult to buy into all the rest.

In other words, I suddenly realized, for a long time I’d been trying to explain the “whole dance” as a unified experience—and maybe that’s why (a la line dancing) my explanation wasn’t working so well. Maybe it would work better if (like our line-dance teachers) I focused on just one part or “movement” at a time. And then put the parts together. And then add the music so people can actually feel the transcendent logic of it all happening at once.

Oh, that diagram again!

It is interesting that the particular “part” of fiat money my reader was not happy with is a seminal building-block—and so, if I were going to break fiat money down into something like specific dance movements, her question would be the place to start:

MOVEMENT #1. The reader’s question is with respect to the following diagram representing the fact that tax-dollars are NOT used to pay for government spending. Instead, tax-dollars are IOU’s that are cancelled at the moment they pay taxes:

“John,” my reader commented, “You wrote: ‘As in the payment of any IOU, two things happen simultaneously—(1) the debt is cancelled and (2) the IOU is extinguished. POOF.’

This explanation just isn’t clear to me. In what sense is a unit of fiat money an IOU? Who is the I and who is the U? I just don’t yet see why it’s impossible (which is what I think you’re saying) for tax receipts to make it back to the government’s spending spigot. I’m not disagreeing -- I just haven’t yet been able to wrap my head around the inevitability of that all-important ‘POOF.’”

Here is the answer I gave:

Thanks so much for your question. It’s very helpful to know where people get stumbled up on this. Quick answer: When the US was on the gold standard, the US dollar was an IOU that said: “I, the US government, OWE YOU, the holder of this gold certificate, 32 oz (or whatever) of gold.” And that exchange could actually be made.

After 1971, when Nixon took the US off the gold standard, a US dollar became an IOU that says: “I, the US government, OWE YOU one dollar’s worth of cancelled taxes.” This, in fact, is the one and only thing a fiat dollar promises.

When the gold certificate was presented for gold, the gold was handed over, and the gold certificate was cancelled (shredded, torn up, burned) so it could not make another claim on the gold supply.

In the same way, when the fiat dollar is presented in exchange for a dollar’s worth of tax liability, the tax liability is “handed over” (forgiven) and the fiat dollar is cancelled (shredded, torn up, burned) so it cannot make another claim as a tax payment.

Here is a recent essay I wrote about this topic that might provide additional framing:

So, that is what I would propose is the first “movement” of the fiat money dance—understanding the SHIFT from an IOU that promised a quantity of the gold specie stored at Fort Knox, to an IOU that promises the cancellation of a dollar’s worth of tax liability.

In each case, the IOU is a physical or digital “voucher” for that promise, and when the voucher is presented, and the promise is fulfilled, the voucher is destroyed so it cannot come back and ask for the promise again.

After we practice that step a dozen times, until we don’t have to think about it, we can go on to the next step. As a preview: the next step will be understanding what the first step means—in effect, that when the government spends again, it CANNOT be spending its tax-dollars (because they’ve been cancelled). Instead it issues new fiat money for that new spending. And it “creates” this new fiat money out of thin air—by “fiat”—which is why it is called “fiat money.”

For the last several months, I’ve been feeling like my Substack, PAYING FOR IT, is an echo chamber. Everyone reading it seems already familiar with the topic of modern fiat money; we seem to be talking at each other while no one else is listening—least of all the people who need to be listening. That would be people with a hand or a foot in the door-of-doing-things that leads to actual public policymaking.

So, I decided to try to write a piece designed specifically for an audience OUTSIDE the echo chamber—an audience who (a) never heard of fiat money and (b) would care less if the topic came up in conversation. The piece, I decided, would have to be short, non-technical, a bit entertaining, framed perhaps as a puzzle to be solved and, finally, lay out some personal benefit the reader could derive from understanding the topic.

I made the mistake, in my first two attempts (Taxpayer’s Dollars and For Those Not Interested), of neglecting to explain what I was trying to do. Here, with my third attempt, I’m prefacing it with this explanation of intent. So, please do this (if you have the patience):

Consider the essay that follows not as a redundant rehash of things I’ve presented previously, but as a striving toward a “perfected” version of those things that might have some impact outside the Echo Chamber. And then perhaps weighing in on the perplexing question of where, outside the Echo Chamber of Substack, could this “piece” possibly be presented? Here goes….

Why You Should Understand Fiat Money

By John Alt

Most people are unaware of the fact that the dollars in their wallet, or in their checking account, or enumerated on the pages of their brokerage statements, are “fiat money”—and see little reason to be interested in knowing what that means, if it means anything at all. The purpose of this essay is to flush from their hiding places two SURPRISES that show why, indeed, understanding fiat money should mean a great deal to every American citizen. We need just a few paragraphs of groundwork to get started, so let’s go:

What IS “Fiat Money”?

Unlike gold and silver specie (hard-currency) which the world abandoned monetarily over half a century ago, “fiat money” is created (issued) by sovereign governments—by “fiat”—out of thin air. In America, fiat money is either printed as Federal Reserve Notes by the US Treasury, or it is issued digitally by the US Federal Reserve central bank, using keystrokes that credit dollar numbers to bank accounts. You can use fiat dollars to buy gold and silver—just like you can buy houses or bicycles—but your fiat dollars are no longer “backed by,” or exchangeable for, the gold and silver held at Fort Knox.

The first thing to understand about this state of affairs is that the government’s issuing of fiat money is quite different than the infamous “printing of money.” “Printing money” was a cautionary tale during the era of the monetary gold-standard when US dollars were claims on a certain amount of gold. The US Treasury could not spend by simply “printing” US dollar gold certificates because doing so would dilute the amount of gold each dollar was worth. Hence the politically famous and hard to escape accusation.

Why Fiat Money “Works”

The second thing to understand is why fiat money “works.” Intuitively, it’s easy to see why someone would accept a $20 gold certificate for a day’s labor—that gold can buy real things! But why would they provide a day’s labor in exchange for $20 fiat dollars that aren’t worth anything at all? The answer is called “Chartalism” (after the Latin word charta, or token—like the token you get when you check your winter coat at a Christmas gala).

Chartalism “works” because (1) a sovereign national government has the power to impose taxes on its citizens—and the legal authority to collect those taxes by force; and (2) because the only thing the government will accept as payment for its taxes is the fiat money it issues. A citizen, then, is happy to exchange a day’s labor for $20 fiat dollars because they will need those fiat dollars when it’s time to pay taxes. The fiat dollars thus become the money of the land—the legal tender everyone uses for commerce and exchange.

What I’ve just described is the basic structure of the fiat money system we use today. We don’t need to add any more details—or concern ourselves with the financial complexities built on top of this structure—to now coax out, into the light of day, the astonishing surprises hiding inside it.

SURPRISE NO. 1

If we make a simple diagram of Chartalism, we immediately discover something startling and counter-intuitive: The sovereign government must issue and spend fiat dollars BEFORE it can collect them back in taxes!

By logic, it cannot happen by any other means or sequence. The government cannot collect tax dollars first because it must issue and spend fiat dollars before the private sector has them to pay taxes with.

This, in turn, leads directly to an associated counter-intuitive reality: The currency-issuing government cannot be spending the tax dollars it collects! Tax dollars never make it to the spending spigot. Instead, they simply cancel the tax liabilities the government had imposed on the citizens. As in the payment of any IOU, two things happen simultaneously—(1) the debt is cancelled and (2) the IOU is extinguished. POOF! No tax liability, no tax-dollar. And when the government needs to spend again, it simply issues new fiat dollars.

What this means, quite simply, is that for the sovereign government to spend, say, $1 million dollars to repair a bridge, it does not need to collect $1 million tax-dollars. There is no direct correlation between taxes collected and fiat spending by the sovereign government. If the bridge repair turns out to cost $2 million dollars, the government doesn’t need to “find” the extra $1 million—it simply issues $1 million more fiat dollars. The limiting factor on government spending is not whether it can create enough fiat dollars, but whether the real resources—the steel, concrete, heavy-equipment, expertise and labor—actually exist, and can be marshaled, for the bridge repair to be completed!

We’ll now use these twin appendages of Surprise #1—(a) that the currency issuing government must issue fiat dollars before it can collect taxes, and (b) tax dollars collected are not what the government uses for its spending—to flush out of its hiding place the biggest surprise of all—the real shocker.

SURPRISE NO. 2

What our current politics, with great alarm, calls “DEFICIT SPENDING” looks like this:

In the realm of our political discourse, there is probably no criticism of a proposed government initiative more condemnatory than saying it will increase “DEFICIT SPENDING.” Look! the government is spending MORE than it’s collecting in taxes! This means it will have to borrow dollars to make up the difference—and this borrowing pushes our “national debt” beyond what we can ever hope to pay back. “Deficit Spending” is destroying our nation!

But if we look at our fiat money diagram, we see a simple bookkeeping logic that must be true: If the government issues and spends more fiat dollars than it collects back in taxes (“Deficit Spending”), American citizens and businesses end up with a net-savings. That certainly doesn’t look like the definition of a “fiscal disaster.” Indeed, it looks like a positive outcome we’d like to repeat over and again.

Instead, what our Congressional leaders and economic pundits tell us we should be striving to achieve—the Holy Grail of “fiscal responsibility”—looks like this:

“We must balance the federal budget,” they say! And this is a political mantra that both Republicans and Democrats seem to have memorized from their class in Economic Logic 101: We must either increase taxes to be equal to government spending (Democrats), or we must reduce government spending to be equal to taxes collected (Republicans).

Once again, however, the simple “bookkeeping” of our diagram reveals a different story entirely. If the currency-issuing government collects tax-dollars equal to its fiat spending—either by cutting spending or increasing taxes—the citizens and businesses of the private sector earn fiat dollars, pay their taxes, and end up exactly where they started! How could this possibly be the Holy Grail we’re pursuing?

Why You Should Think About these Diagrams

This simple explanation of modern fiat money leaves out a great many issues and questions—such as, for example, if the government simply issues fiat dollars when it needs to spend them, why then does it appear to borrow money when it issues Treasury bonds? Once you start down that path, it can take over your computer-time and your life—(not that you shouldn’t do it).

But it isn’t necessary to embroil yourself in all those details to see the fundamental usefulness of understanding the basic fiat money structure we’ve just observed: It’s useful to know that if the US Congress is debating whether to undertake some initiative that provides us a great collective or public benefit, and some politician or pundit declares we CAN’T DO IT because we can’t collect enough taxes to pay for it—we know they are either being disingenuous, or don’t know what they’re talking about.

It’s useful to know that the US federal government can keep Social Security operating indefinitely—and even increase its benefits—without having to collect more taxes or borrow money in the bond market. It’s useful to know that a national health-insurance program—Medicare-For-All—can be implemented without having to levy new taxes or increase something called the “national debt.” It’s useful to know that you, or your sons and daughters, can get all the education and job-training they thirst after without going into debt—and without the country going into “debt” either.

It’s useful to know that all the things just mentioned are not paid for with tax-dollars but are paid for with the basic mechanisms of fiat money we’ve just observed and diagrammed. And that if America’s sovereign government “Deficit Spends” to provide these things, citizens and businesses will—in addition to having the things themselves—end up earning a net-savings of fiat dollars to boot.

That is why you should understand fiat money.

It’s not because fiat money will help you make better investments, develop a retirement plan, or earn more with cryptocurrency. It has nothing to do with any of those kinds of things that directly drive your personal financial wealth.

Paradoxically, however, even though UNDERSTANDING modern fiat money will not directly put cash in your bank account, it has everything to do with your personal well-being—for three BIG reasons:

Reason No. 1

The first reason is AFFORDABILITY. The mechanics of modern fiat money can dramatically REDUCE the cost of things you have to spend money to buy—thus, making your life less stressful. Examples of personal “costs” that can be reduced (or even eliminated) with fiat money mechanisms are:

• Healthcare and Medications

• Childcare and Eldercare

• Education and Job Training

• Housing and Transportation

• Food and Nutrition

• Low-cost Green Energy

Unless you’re in the top 1% of America’s wealth distribution, there’s something on that list you, or your family members, can benefit from spending less on. That’s a pretty big reason. Even so, I doubt I’ve gotten the attention of anyone who is not already interested in the topic of social-economics. Before continuing, then, I’ll try to lay some groundwork that might make the reasons to come—no. 2 and no. 3—more compelling.

What Is Fiat Money, Anyway?

Habitually, we think of “money” as being a finite, physical “thing.” For centuries it was “hard currency”—gold and silver specie (sometimes called “commodity money”) based on metals found in the ground. Hence, it had a limited quantity which, by the necessity of its “finiteness,” was competitively allocated across markets and resources.

Fiat money, in contrast, is CREATED. More important, it can be created in unlimited quantities, as necessary, to meet the needs of ALL markets and resources as they arise. Does that mean you get to have as much fiat money as you want?

The answer is “NO”—and the reason is because of the way the fiat money mechanism works. But for that same reason, even though you still must earn the money you spend, fiat money can PAY FOR a lot of the things you need but otherwise cannot afford to have. Things like what we listed earlier. Here’s how and why that can happen:

Who CREATES Fiat Money?

Fiat money, by definition—and by practice—is created (“issued”) by a sovereign government. It is issued, out of thin air, by sovereign authority—by “fiat.” If the government is an authoritarian dictatorship, the dictator decides how much fiat money should be issued, and for what purposes. If the government is a democracy, the citizens, through whatever democratic process they have in place, decide how much fiat money should be issued—and for what purposes. (This “ambivalence” of fiat money—that it can be created for public benefit OR to maintain authoritarian power—is one of the reasons why it’s important for us to understand it. This is something we’ll return to in our conclusion.)

There is a reason why fiat money is only created by sovereign governments: You could create your own “fiat money”—but why would anyone take it as payment for services? It is just “worthless” paper! A sovereign government, however, can uniquely do what you, personally, cannot because it has the power to levy taxes and ENFORCE their collection by coercive law. If you don’t pay your taxes, the government can take your property or even put you in jail.

So, citizens and businesses subject to the sovereign’s taxes are more than willing to accept the government’s fiat money in exchange for their goods, services, and labor—because the taxes they owe can ONLY be paid with the fiat money the government issues. This mechanism is called “Chartalism” (from the Latin word charta, meaning ticket or token)—and it creates the money of the land, the “legal tender” we all use in our commerce.

A Helpful Diagram

“Chartalism” leads to a crucial—and counter-intuitively confusing—factual reality that can best be understood with a simple diagram. The factual reality is this:

The sovereign government must issue and SPEND its fiat money BEFORE it can collect it back in taxes. Legally and practically, it cannot happen any other way.

Here is the diagram of this factual reality:

The implications of this diagram modify virtually everything we imagine to be true about what politicians and economic pundits call “fiscal responsibility.” What they mean by that phrase is the “obvious truth” that YOU CANNOT—OR SHOULD NOT—SPEND MORE THAN YOU EARN. Spending more than you earn forces you to “borrow”—and if you borrow more than you can pay back you are forced into bankruptcy (economic collapse).

But if you ask yourself where the “earning” is occurring in our diagram, there’s a bit of a surprise. Two things jump out: First, the “earning” is being done by the Private Sector as it exchanges goods and services for the fiat money the government is issuing. Second, taxes are NOT the “earnings” of the government, because the government doesn’t need the tax dollars in order to spend fiat dollars. Tax dollars merely cancel the tax liabilities the government has imposed: As in the paying of any IOU, both the liability and the IOU itself are then cancelled—POOF! No tax liability, no tax dollar.

If you think about it, this changes a lot of things about the meaning of “fiscal responsibility” when it’s applied to a currency-issuing government. For example, what American politicians, with great alarm and finger-wagging accusations, call “DEFICIT SPENDING” looks like this:

The government is spending MORE than it’s collecting in taxes! If you imagine taxes are the government’s “earnings”—the dollars it uses for spending—this looks like a fiscal disaster. But as we’ve just seen (and as the diagram illustrates) taxes are NOT the government’s “earnings.” Earnings are in the Private Sector, and when the government taxes less than the Private Sector has earned, businesses and families end up with net SAVINGS. This doesn’t look like a “disaster” at all. Indeed, it looks like a positive outcome we’d very much like to repeat—over and over!

That’s a surprise, right? But there’s more to come: Now let’s look at what our diagram says a US government “BALANCED BUDGET” looks like:

This is the Holy Grail of “fiscal responsibility” politicians and economic pundits rant and stamp their feet about! The government is limiting its spending to what it is collecting in taxes—or it is increasing taxes to match its spending. Whichever way you look at it, the result is that private citizens and businesses break even: They earn, they pay taxes, and they’re right back where they started. How could an outcome this bleak be considered “fiscally responsible” on the part of a government dedicated to the well-being of its citizens?

But things become even more logically ludicrous if we see what a “GOVERNMENT SURPLUS” looks like in our diagram:

Consider that many American progressive Democrats believe this diagram represents the greatest achievement of the Bill Clinton administration—the running of a government SURPLUS in four consecutive years, 1998-2001. The Democrats were riding high! They’d taken the bullets out of the Republican Party’s six-shooter: They could no longer be called “Tax-and-Spend” profligates, wasting “taxpayers dollars” and driving the economy towards bankruptcy. They had not just balanced the budget, they’d actually collected more dollars in taxes than the government spent!

But look what the diagram reveals as the real “accomplishment”: If the currency-issuing government collects more in taxes than it spends, private citizens and businesses end up with LESS fiat money than they started with—and they must either cut back on their spending or borrow money to make up the difference.

Why We Must UNDERSTAND These Diagrams

So, it turns out “fiscal responsibility,” when applied to a currency-issuing government, is 180 degrees opposite from what we habitually believe—and what we are led to believe by our political leaders and economic pundits. The truth is our sovereign government MUST spend more than it collects in taxes, or we the people struggle to make ends meet.

Even more to the point, we the people forego (per Reason No. 1) the opportunity to PAY OURSELVES to provide ourselves a great cornucopia of goods and services we need but otherwise cannot afford to have. And this leads to the second reason why—even if you’re not much interested in “economics”—you should UNDERSTAND modern fiat money: It can super-enhance the quality, safety, and resiliency of your life:

Reason No. 2

Fiat money can make the environment you live in—your city or neighborhood or rural community—safer and cleaner, with better services, recreational facilities, and disaster mitigation. It can clean up a polluted creek or river, put in place storm-water systems that reduce flooding, tear down and replace abandoned buildings, provide people-movers that reduce traffic congestion, build community centers, recreational fields and parks.

Modern fiat money can build safe, ATTRACTIVE, permanent shelter for homeless people—and provide them with self-help services and counseling—enabling them to abandon their street corners, makeshift campsites, and hopeless lives.

Fiat money can help your County buy land and put it in Community Land Trust for affordable housing.

If your community lies in a coastal area that has lost insurance coverage because of endemic flooding and projected sea-level rise, modern fiat money can save the loss of your family asset by purchasing your property and renting it back to you until you decide it’s time to move to higher ground.

If you live in a community surrounded by landscapes vulnerable to wildfires or floods, fiat money can put in place a veritable army of work-crews to manage vegetation fuel levels, re-channel storm-water topography, and respond immediately to a wildfire or flood disaster with life and property saving crews and equipment. And—rather than dealing with a FEMA hogtied with bickering about federal “budget deficits”—modern fiat money can help you quickly rebuild or relocate your home, your neighborhood, and your life.

All that’s necessary is for the US Congress—representing the democratic majority of US citizens—to decide to SPEND fiat money to pay for the kinds of things I’ve just described. And this leads us to our conclusion with the third reason you should not only understand fiat money, but insist that the people you elect to Congress should understand it as well:

Reason No. 3

Earlier, we made note of the fact that fiat money is “ambivalent”—it can be created for the benefit of the collective well-being OR to project and maintain authoritarian power. Unfortunately, if it is not used for the first purpose, it will inevitably be used for the second.

If the US Congress does not act with an understanding of how fiat money operates—if, instead, it acts as if “fiscal responsibility” means it must CURTAIL government spending in an attempt to “balance the budget”—it will quickly degenerate into a legislative body that argues vehemently and endlessly about all sorts of things, but fails to undertake and ACCOMPLISH anything with any usefulness to anybody at all.

Under those circumstances—with virtually NOTHING being done to improve the quality and affordability of life and well-being in American society—it is inevitable that an Authoritarian Power should come to the front, and:

1. “Promise” to provide struggling and hurting citizens what Congress has stopped providing,

2. Seize CONTROL of the fiat money system, and

3. Use the fiat money system NOT to benefit the American people at all, but to enrich itself, solidify its authority, project its power and, ultimately

4. Prevent democracy from re-establishing itself ever again.

Today, the only thing standing in the way of that happening is three hundred million “YOUs” taking the time to (a) UNDERSTAND fiat money and (b) making sure your democratic representatives not only understand it as well, but USE it to improve the quality and affordability of American life.

If we eliminate the chaff of “social ideologies”—which capitalist politicians (both Republicans and Democrats) use to churn up and energize their voting base—American Capitalism is not associated with or driven by any particular socio-ecological goal at all. It is not concerned, for example, with making a good life affordable for wage-earning American families. It is not concerned with nurturing and maintaining a healthy balance of the natural ecosystems human society is embedded in. It is ONLY concerned with maximizing profits.

American Capitalism is just as happy with the profits it makes doing X as it makes doing Y. If it calculates that it will make $Z in profits digging a hole in the earth, it will be just as pleased to make $Z in profits planting trees where that hole would have been. It does not have an ideological interest in the digging of holes over the planting of trees. Between the two, it will simply choose whichever generates the most financial profits. It is not, in other words, inherently destructive.

But There’s a Problem.

As things stand, this profit-seeking ambivalence of American Capitalism has virtually complete control over what the American economy undertakes to accomplish. The engine driving this control is a remarkable fiat money mechanism wielded by the Federal Reserve Banking System. This system, by monopoly sanction of the sovereign US government, creates fiat money, as necessary, to ensure completion of the daily clearing/payments process at the Central Bank—the process where bank-loan-dollars make claims on bank-Reserves (US fiat dollars).

Those bank-dollar claims on Reserves represent decisions American Capitalism has made about what goods and services to produce. They are, in effect, the equivalent of the following statement:

We have taken out a bank-loan for X dollars because we have calculated—and the bank has agreed with our calculation—that by spending those X dollars to pay to produce Y products and services, we will generate Z dollars in profits. Accordingly, we are submitting our CLAIM for US fiat dollars equal to the amount of our bank-loan.

In response, the Federal Reserve (Central Bank) will issue US fiat dollar Reserves—as necessary—to ensure that claim is met. And it is these fiat dollar Reserves that will, in the daily payments/clearing process at the Central Bank, PAY FOR the labor, material, technology etc. required to produce the goods and services that will generate the profits.

The above process is seamless and “automatic.” It does not require a democratic vote on what initiatives deserve money-creation for their undertaking. So long as American Capitalism has determined an initiative will generate profits—that’s all that is necessary: BINGO! The Federal Reserve Banking System will produce the fiat dollars to meet the claims of the bank-dollar loans created to pay for it.

Marvelously efficient as it is, however, the operational system described above has an overwhelming defect: It has no “steering mechanism” connected to the NEEDS and WELL-BEING of the collective market society it supposedly serves.

Who’s Steering the Boat?

Capitalism tells us the “market” itself is the guiding mechanism. The market, by telling Capitalism what to produce, and how to allocate resources for that production, makes the system “self-steering.” But how can that steering mechanism work when the market—the great population of lower-middle class wage-earning families—is telling Capitalism that what it wants, what it NEEDS, are things Capitalism cannot produce for profits—and which the Reserve Banking System, therefore, cannot create fiat money to pay for? Things such as:

• Affordable Healthcare-For-All

• Free College and Career Training

• Affordable Childcare for Working Families

• Zero-Carbon Energy Grids

• Affordable Housing in Livable Neighborhoods

• Forest and Wildfire Management Corps

• Regenerative Farming Systems for Carbon Capture

Because they do not generate profits—and cannot engage the fiat money mechanism of the Reserve Banking System—these urgent “calls from the market” fall on Capitalism’s deaf ears. Instead, not knowing where else to steer, Capitalism simply heads for the next round of profit maximizing pursuits. Initiatives like, what…? Artificial Intelligence? This is what market society is saying it needs? Seriously?

An Open Door of Possibility

When you consider it, this profound DISCONNECT between what Capitalism chooses to pursue and what market society says it needs is now holding the door wide open for American Socialism to step through. It cannot, however, step through empty handed: It must step through with a steering mechanism in its grasp that can actually change the course of America’s economy to include and embrace what the market is actually calling for.

And that steering mechanism is a FULL understanding of the operations of modern fiat money.

As previously noted, Capitalism “works” because the Federal Reserve Banking System has a mandate from the sovereign US government to generate US fiat dollars, as necessary, to support the profit-making transactions private enterprise decides to initiate. Everybody gets that mechanism (sort of). But what very few people get—and what American Socialism now needs to grasp—is that there exists another facet of the fiat money mechanism that can be directed specifically toward the NOT-profit-making initiatives market society is calling for.

American Socialism needs to understand—and somehow imagine how to explain to the American voters—that US Treasury bonds are not a “debt” that must be repaid with tax dollars, but are, in fact, the primal SOURCE of US fiat money.

Fiat Money for NOT-Profit-Making Initiatives

Back when Alexander Hamilton devised them, US Treasury bonds actually were a debt which the government had to collect taxes to pay the interest on. Gold and silver specie were what was borrowed—and gold and silver specie were the taxes collected to pay the interest. The Great Depression and World War II changed that.

In 1933, President Roosevelt required that all monetary gold held in the US be given to the government in exchange for paper currency that could no longer reclaim the gold. The interest on US Treasury bonds was thereafter paid with paper currency. In 1971, President Nixon completed the transition to a pure “fiat money” system by declaring that US dollars held by foreign countries were no longer exchangeable for gold. “Money” was transformed, and the mechanisms of modern fiat currency began to evolve.

Today, US Treasury bonds, issued to meet the spending directives of the US Congress, are no longer, in any meaningful way, a “debt” that must be repaid with future taxes—they are the primal ISSUING of the US fiat dollars that are used to PAY FOR federal spending. (They are also, in fact, the bookkeeping source of the fiat dollar Reserves the Central Bank issues to meet the claims of Capitalism’s bank dollars.)

Treasury bonds CREATE the fiat dollars that redeem them. And because of this sovereign agency, they provide the steering mechanism American Socialism needs to answer the call Capitalism cannot hear.

US Treasury bonds are America’s fiat money—pure and simple. And because the US Treasury can issue them at will, and because the Federal Reserve will take Treasury bonds in exchange for new Reserves—which the FED creates with keystrokes—the US Treasury can spend any amount of dollars to undertake and accomplish any NOT-profit-making initiative the US Congress (representing the American People) chooses to pursue.

A deaf and ambivalent Capitalism should no longer be alone in directing America’s economy. Someone else—with the power to create fiat money and spend it for the collective well-being of society as a whole—can and SHOULD have a hand on the boat’s tiller. It could be American Socialism.

It’s hard to imagine two words in the English language that generate more intense confusion—and cause more havoc to our collective well-being—than those two words in my title. On the one hand, it seems very simple: We all pay taxes into a common pot of money, and then we debate and vote on how to spend those “tax dollars” for our collective benefit. We vote to build roads and schoolhouses, for example.

Complications set in when (a) we need to build something that costs more than the taxes we’ve put in the pot, or (b) we feel that some people—those who have more money—should pay more tax dollars into the pot than those who have less, or (c) some of us feel the need to build something because it will benefit us, while others do not want to contribute to the building of it because they won’t benefit at all, or (d) all three of these together.

Resolving these complications has given rise to what we call “Politics”—the arguing, debating, strategizing, and arm-twisting of democratic election cycles. On one level, these election cycles are struggles about how (and for what purpose) to spend (or not spend) “taxpayer’s dollars”—and how to fairly collect enough tax dollars to do the spending (or, instead, curtail the spending to match the tax-dollars in hand).

All of this is made hopelessly divisive and counterproductive by the fact that we are arguing and debating with an understanding of the operations of taxes that derives from an era long past—an ANTIQUATED understanding that is no longer applicable to the system of pure fiat currency we use today. There was a time, perhaps, when we did pay our taxes into a common pot of money—and then spent that money for our collective benefit. That is not, however, how it works any more.

How, then, does it work?

To put it as succinctly as possible, in a “fiat money” system the sovereign government must issue and spend fiat dollars BEFORE private citizens can earn them to pay their taxes with. This is, by definition, the sequence of money flow because it is the government which must create the fiat money in the first place.

Fiat money has no other source: It cannot be found in the ground like gold and silver. It cannot be issued or printed by a private citizen, or a private bank, or a city or state government. It can ONLY be created by the legal decree (fiat) of the sovereign national government.

In addition to the sequence of money-flow, the basic diagram above focuses our attention on another “reality” of crucial importance: We often imagine that “government spending” is money that’s simply “lost”—gone forever—whereas in fact the dollars the government spends go INTO the private bank accounts of US citizens and businesses.

So, let’s now consider: If this diagram is true (and it’s hard to refute) how does it change the narrative of “taxpayer’s dollars” we started out with?

Let’s begin with a tax payment. If the government can (and must) issue and spend fiat dollars before it collects taxes, why does the government collect taxes at all? The answer has a formal name: “Chartalism” is the mechanism whereby a sovereign government issues its fiat money and simultaneously levies taxes on its citizens that can only be paid with the fiat money it issues. Under these circumstances, the citizens are more than willing to sell their goods and services to the government in exchange for the fiat money—which they need to pay their taxes—and thus the “fiat money tokens” the government creates become the legal tender for the national economy.

In essence, then, a US fiat dollar is the government’s IOU: In issuing it, the government is saying “I OWE YOU” one dollar’s worth of tax credits. And because it’s nothing more than an IOU for something the government can create out of thin air—tax credits for tax liabilities the government itself creates—it can issue as many “tax-credit-IOUs” (US dollars) as it needs or wants to spend.

So, what happens to a “taxpayer’s dollar” when taxes are paid? Are they put in a common pot for the government to spend? Obviously, that understanding no longer makes any sense at all because the government doesn’t NEED those “old” dollars in order to spend “new” ones. What actually happens is the same as when any IOU is paid off: the government makes good on its promise—the tax liability is erased—and the IOU is cancelled. POOF!! There’s nothing left—no tax dollar, no tax liability.

The Most Extraordinary Thing

It’s worth stopping here a moment and visualizing something quite extraordinary about the structure of the mechanism just described.

(A) If the government issues and spends more fiat dollars than it cancels with taxes, the citizens end up with a net SAVINGS of fiat dollars.

(B) If the government levies taxes equal to the fiat dollars it issues and spends, the citizens break even.

(C) If the government levies taxes greater than the fiat dollars it issues and spends, the government ends up “in surplus” while the citizens end up with fewer fiat dollars than they started with.

Please ask yourself: Which of the above diagrams looks like a better deal for US citizens?

Now, pinch yourself and realize that scenario (A) is what our pre-fiat thinking calls “Deficit Spending”—while ringing the alarm bells of economic collapse: Oh My! The government is spending MORE dollars than it’s earning!

Scenario (B) is what our pre-fiat thinking calls a “Balanced Budget”—the very thing that virtually every American politician, Republican and Democrat, holds up as the Holy Grail of “fiscal responsibility.”

Scenario (C) is what Bill Clinton still considers to be his greatest accomplishment as president—the government is running a surplus!! (Seven years later, the build-up of crushing private debt culminated in the subprime mortgage crisis and the virtual collapse of home-ownership in America.)

Now, let’s briefly consider the “complications” of the “taxpayer’s dollars” we listed at the outset, and see if our understanding of modern fiat money has changed the political debate surrounding them.

COMPLICATION #1. We need to build something that costs more than the tax dollars we’ve put in the pot.

In this first complication, pre-fiat understanding tells us we have three choices:

1. We must forego having the thing we think we need (like, for instance, Medicare-For-All).

2. We must agree to put MORE tax dollars in the pot to pay for it.

3. The government must BORROW the necessary dollars from wealthy citizens by issuing Treasury bonds (which must be repaid with future taxpayer’s dollars)!!

It’s now clear, I hope, that number one is not a necessary choice—unless there aren’t enough doctors, nurses, and medical technicians available to be paid to provide the healthcare. The limiting factor is not how much fiat money the government has for the issuing of medical paychecks and the purchasing of equipment and medications—the limiting factor is the availability of REAL RESOURCES the government can buy with the fiat money it issues.

It is also clear that the second option is an unnecessary choice as well. We now understand the government doesn’t NEED to collect more tax dollars to spend more fiat dollars.

Finally, just as the government doesn’t need to collect more tax dollars to pay for something like Medicare-For-All, it doesn’t need to borrow them either. Why would it need to borrow the very thing it uniquely has the sovereign authority to create, as necessary, out of thin air?

But why, then, does the US government issue Treasury bonds at all?

The answer is quite simple: Historically, (going back to the days of Alexander Hamilton, before the evolution of pure fiat money), the government DID need to borrow money (gold and silver specie) from wealthy citizens—and Hamilton’s Treasury bonds were the mechanism for doing that.

The wealthy citizens were happy to hand over their gold and silver because the government paid them a nice interest-income they could live on, comfortably, without having to work. The bonds, themselves, then became a “container” of money that became the basic component of the US financial/banking system. Today, Treasury bonds “contain” fiat dollars issued by the US government—and are the primary mechanism by which the government “creates” the fiat currency the financial system uses.

COMPLICATION #2. We feel that some people—those who have more money—should pay more tax dollars into the pot than those who have less.

This remains a complication we need to agree about— but our understanding of fiat money changes what the complication is. Chartalism still requires the collection of taxes, but now, since taxes aren’t paying for government spending, they serve different purposes—and the debate about what should be taxed, and who should pay more, becomes a conversation about what taxes can accomplish other than providing the government with spending money.

For example, taxes can be used to discourage certain behaviors that harm the collective well-being—like smoking, for instance, or driving pollution-generating cars. But taxes can also be used to prevent those who are fortunate enough to be wealthy from accumulating a “super-wealth” that gives them unfair control over the political debates of our democracy, or enables them to unfairly dominate and manipulate our markets. This is a genuinely contentious debate—but it is made genuine by the fact it is no longer about what we can afford, but rather what is FAIR and beneficial to the common good.

COMPLICATION #3. Some of us feel the need to build something because it will benefit us—while others do NOT feel the need to build it because they won’t benefit it at all.

One of the most divisive aspects of the pre-fiat understanding of “taxpayer’s dollars” is the idea of being forced to pay taxes from our hard-earned paychecks to pay for something that someone else will benefit from—someone who isn’t working as hard to earn money as we are. Take Supplementary Food Assistance, for example: Why should citizen Jones work his tail off to put food on his family’s table and then be forced to pay taxes to pay for Food Assistance that will be consumed by citizen Smith, who may not be working at all?

The mechanism of modern fiat money magically eliminates this complaint. “Taxpayer’s dollars” are NOT used to pay for food stamps, for unemployment benefits, for housing assistance—for any of the social safety net programs that assist people who are having difficulty making ends meet. There is no need to argue about whether people receiving these benefits “deserve” our altruism—or about whether they are “trying hard enough” to avoid needing help in the first place.

What we discover is that we do not have to be altruistic with our personal bank accounts to become truly and fully altruistic as a COLLECTIVE SOCIETY.

A Final Thought

Perhaps the most important aspect of what I’ve described here is that it is NOT a proposal to change anything about our monetary system. It is simply a description of the way the modern fiat money we use today actually works.

The only thing that needs changing is our UNDERSTANDING. And changing that will change (almost) EVERYTHING.

Somewhere between 1965 (“Medicare”) and 2010 (“Obamacare”) the ideology of “Public Spending for the Common Good” collapsed.

What had been the legacy platform of the American Democratic Party since 1932—the platform that had pulled America from the depths of the Great Depression, had defeated the fascist and imperialist armies in World War Two, had built the American post-war middle class with the GI Bill of Rights for college education and home-ownership, the platform that Lyndon Johnson carried to a new level with his “War on Poverty” and “Great Society” programs (think Medicare, Medicaid, Head Start, the Jobs Corps, Food Stamp Nutrition Assistance, National Public Radio and PBS)—this remarkable agenda was suddenly pushed to the sidelines by Johnson’s descent into the societal and fiscal disaster of the Vietnam War.

By the time the dust settled (if it ever has) the very idea of “Public Spending for the Common Good” had become so entangled in social malaise and so vigorously disparaged by the claim it was now BANKRUPTING the American economy even the Democratic Party itself came to believe it was true.

Ironically, just seven years after the collapse in confidence began, the MONETARY CONSTRAINTS on “Public Spending for the Common Good” were permanently removed when Richard Nixon took the US (and the rest of the world) off the Gold Standard. But this accidental miracle was too late in coming, and too late to be properly understood and explained to the American people. Despite the fact that America was suddenly operating with a pure fiat currency—was able to issue US dollars as necessary to pay for any Public Benefit for which real resources could be marshaled—despite this new “reality,” everyone (including the Democratic Party) had already been captured by the misguided but overwhelming logic that a proactive US government was spending far more than it could ever recoup in taxes.

The back-sliding into an ideology of Austerity had begun. Each time a Republican administration was elected, taxes were lowered and the existing “Public Spending for the Collective Good” programs were attacked and disparaged as a fiscal irresponsibility that would lead to economic disaster. Each time a Democratic administration was elected, the old energy tried to resurrect itself, new initiatives for Public Benefit were proposed with fanfare—then quietly abandoned when the Democrats were forced to acknowledge they could not PAY for them without increasing taxes.

The nadir of this backsliding occurred in Barack Obama’s presidency when he (1) threw in the towel on Universal Healthcare for all Americans; (2) entered into a “Grand Bargain” with Republican Speaker John Boehner to cut the entitlement programs initiated by Franklin Roosevelt and Lyndon Johnson; and (3) signed the Statutory Pay-As-You-Go Act requiring all NEW government spending to be “paid for” either with new tax revenues or commensurate reductions in existing spending programs.

“We’re just taking out a credit card from the Bank of China,” Obama told the American people leading up to the PAY-GO legislation. “We’re borrowing all that money” we want to spend. (This was the pronouncement and the legislation that initiated the famous “gotcha” question, HOW ARE YOU GOING TO PAY FOR IT?—the question that subsequently sank virtually every Democratic pipe-dream to actually DO something that would benefit the collective good.)

Now, of course, we have Donald Trump, who has pulled off the amazing hat-trick of doubling down on and REINFORCING America’s self-imposed image of a national government perpetually in hock—(We need more revenues from tariffs! We must cut the government payroll! We must stop wasting money on medical research! We can’t afford these giant foreign aid programs! We can’t even think about spending for the collective good when the rich are already being taxed to death!)—while Mr. Trump, his family, and his entourage of oligarchs, busily funnel into their pockets fortunes now denominated in the TRILLIONS of US fiat dollars.

Can the Bow-and-Shuffle Finally Stop?

What remains to be seen is whether this brazen Trump Kleptocracy will re-awaken the core-logic and moral compass of the Democratic Party. Will they figure out that they have been complicit in the robbery of the American people? Will they realize they’ve been duped into telling the working and middle-class to naively hold their fiat money purse open wide while looking the other way—the way the Kleptocracy has been telling them to look with its narrative about “deficit spending” and out-of-control “national debt”? Have they figured out that America is even using “fiat money”? And what that actually means?

Assuming the American voters give the Democrats one more chance to be in charge, the question is what will they do THIS TIME? Will they continue to bow-and-shuffle to the narrative that America is broke? Will they continue to acquiesce to the bogus logic that only NEW TAXES (or spending cuts) can pay for the government initiatives we desperately need for our collective well-being?

Or is it possible the Democrats could get their “Public Spending for the Collective Good” mojo back? Is it possible they could rise to the moment and explain to the American voters how the US FIAT MONEY SYSTEM actually works? And, having explained how the government spends, can they throw the ideology of “monetary austerity” into the trash-bin of history? Can they rally the American people behind a fury of VERY COSTLY initiatives, long overdue, and convince the American people they CAN, in fact, fully afford to PAY THEMSELVES to undertake and accomplish them?

It’s an epochal moment of opportunity. If the Democrats fail to re-assert their “legacy platform”—if they continue, instead, to naively bow-and-shuffle to the narratives of Austerity and Kleptocracy—I fear the opportunity might never come again.

It suddenly occurs to me that I could be the world’s richest person if only the US government had an obsession with building economically vibrant, beautiful, ecologically sustaining, and affordable cities—and then connecting them all together with a hydrogen powered, high-speed rail network.

If the US government had such an obsession, I could then negotiate contracts with the Departments of HUD and Transportation to provide my proprietary urban building system—Matrix Architecture™—and my patented urban people-mover (SMARTram™) to provide the basic infrastructure to meet the obsession from coast to coast. I’d name my company EARTH X, and I’d issue an IPO which I’d value at $2.5 Trillion (approximately the cost of the coast-to-coast Matrix Architecture-SMARTram™ infrastructure).

Unfortunately, America is not even mildly interested in building economically vibrant, beautiful, ecologically sustaining, and affordable cities . That kind of thing is what PRIVATE CAPITALIST ENTERPRISE is supposed to take care of—without, by the way, any “interference” from government. All of us “people”, then, get to live in whatever private enterprise figures it can build for the biggest profits.

Basically, that’s why most American cities are such a perpetual mess—a mess of ostentatious rentier monuments interspersed with a mess of parking structures and run-down buildings waiting to be demolished for even more elaborate rentier monuments; a mess of cars and trucks trying to get to—and around in—and then away from the mess of parking structures and delivery docks; a mess of no-man’s-land freeways and spaghetti bowl over-and-underpasses trying (unsuccessfully) to manage the mess of traffic; a mess of rentier apartment stacks scattering themselves around and within the spaghetti bowl of off ramps and jersey barriers protecting the perpetual mess of roadway widenings and lane additions; a mess of disconnected green parks struggling for sunlight interspersed with a few—a very few—enclaves and neighborhoods that “owner-PEOPLE” actually care for, places where everybody really WANTS to live and work and dine and play, but there’s just too little of them—and, boy, are they pricey.

So that’s what Private Capitalist Enterprise gives us as a place to live.

And, I should add, as an architect, it’s that Private Capitalist Developer I got to work for all those years—fooling myself with the idea that what I designed could somehow make the mess less messy…. Retirement has come as a kind of relief.

But, also, a shock: A shock to realize (in retrospect) that I chose the wrong field of design! I should have been prescient enough, back in college, to have majored in Outer-Space Architecture for the SOOPER-wealthy—with a minor in Detention-Camp Space-Planning and AI DATA Centers for those having to live on Earth.

If only I could have been that smart, I could now have sold the very eager and forward looking US government SOOPER rockets to shoot glittering mansions into low-earth-orbit—in addition to my (patent-pending) Modular Data Center Detention-Camp System™. I’d name my company DYSTOPIA X.

Now that would be an IPO worth celebrating.

Bernie Sanders recently announced that America should have a Sovereign Wealth Fund to pay for the things that Americans desperately need but otherwise (apparently) cannot afford to have—universal healthcare, free preschool childcare, affordable housing, free public college, etc.

You will note that, oddly, all the things just listed—and many more that could be tediously added—are goods and services that Americans are perfectly capable of providing for each other: We can train ourselves to be doctors so we can provide healthcare to our fellow citizens; we can take care of and provide early education to our young children; we can cut dimension lumber and nail roof shingles to build houses; those of us who have acquired special knowledge and skills can provide training to our young adults starting out in their life careers.

Apparently, however, even though we can do those things for ourselves, we cannot actually DO them because we lack the money to put in the pay envelopes of the folks doing the doing. That money can only come from businesses making profits. And this, it seems, is the big problem we don’t know how to solve.

Bernie now has a new “solution” to this dilemma which is to establish a Sovereign Wealth Fund—a source of cash owned by all Americans together. Specifically, he wants to establish this Wealth Fund by having the US government (representing the American people) acquire 50 percent of the initial public stock offerings (and hence 50% of the profits) of the giant Artificial Intelligence companies. Bernie frames this acquisition as a one-time “tax”—and reasonably justifies it as follows:

“Since A.I. is built on the collective knowledge of humanity, the wealth it generates must benefit humanity. Not just Mr. Musk, Mr. Altman, Dario Amodei and other moguls whose companies are positioned to dominate the industry. Not just venture capitalists in Silicon Valley or money managers on Wall Street who undoubtedly see A.I. as the next great wealth-extracting machine.”

What I am trying to wrap my head around is whether Bernie’s proposal is a great idea to solve the wrong problem, or a bad idea to solve a problem that doesn’t even exist.

Logical Confusion

On the one hand, Bernie’s proposal is framed as a way to put on the chopping block of a PUBLIC FORUM the questions of how, and for what purposes, AI will be deployed in our market society. Presumably, if America’s democracy owns half the stock in these companies, this will create the opportunity to limit AI’s deployments to pursuing what democracy decides is in the interest of the public good and collective well-being—rather than simply leaving it up to the tech oligarchs to decide how AI can best maximize profits. Accomplishing something like this is rapidly becoming an existential necessity for mankind—and Bernie’s proposal is a unique strategy for actually building that public forum, for rolling that chopping block into place.

On the other hand, it is completely unnecessary to employ this as a strategy to “PAY FOR” undertaking and accomplishing the things our collective well-being now requires. The American people don’t need a “Sovereign Wealth Fund” because we already HAVE one: the Modern Fiat Money System we use every day—(but which we are presently led to believe we can’t use by the very people who, in fact, are using it to enrich their own bank accounts). Bernie’s “solution” simply reinforces this charade.

If, as Modern Money Theory clearly shows us, we can already issue fiat money, as necessary, to pay ourselves to provide any good or service we need—so long as the real resources necessary to produce that good or service are available to be employed—then why would we need a Sovereign Wealth Fund to draw US dollars from? Why would we need (or want) to jump through the hoops of having the AI companies earn the dollars, first, and then, second, distribute dividends to the US government’s Sovereign Wealth Fund which would then (third) disperse the dollars to pay for the goods and services we need that private commerce won’t provide for lack of profits?

By this logic, the Sovereign Wealth Fund, itself, will want to maximize AI profits every bit as much as the tech oligarchs, right?—a motivation that contradicts what should be the primary goal of limiting AI to pursuing the public good and well-being instead of profits. The logic is made even more perverse by the fact that a large portion of the AI earnings (step one) will be generated by extracting existing and future wages and salaries from American citizens and diverting them to the AI company’s revenues in the form of subscriptions to the AI “workers” that will be replacing human employees in virtually every segment of the marketplace.

At The Brink

This is robbing Peter to pay Paul to pay Mary—when, in fact, nobody needs to be “ROBBED” in the first place. Our modern fiat money system enables us to pay Peter to hire Paul to pay Mary to take care of Uncle Fred in the waning years of his happiness. And Peter, Paul, and Mary can all make “profits” in the sense that they can put something away for a rainy day or special occasion, can raise and nurture their children in a home they OWN (in the same inalienable way they own their own skin) and retire from working in the marketplace without falling into destitution. America doesn’t need a Sovereign Wealth Fund to accomplish any of that. We can do it, right now, with the fiat money mechanism we have in place.

It is a truism that capitalism is flawed because it is built upon the inherent contradiction between the need to minimize human labor (to maximize profits) while ALSO maximizing the consumer market capable of purchasing what capitalism produces to generate its profits. Capitalism has never figured out how to do both at the same time. Artificial Intelligence is now leading us to the very brink of this contradiction—the place where one side of the dialectic begins, finally, to destroy the other.

Bernie Sanders’ proposal for a Sovereign Wealth Fund manages to get everything right and WRONG at the same time. A simple “tweak” to his legislation would set everything straight: America’s democracy SHOULD acquire 50%—no, 51%—of AI’s stock NOT to earn dividends for a Sovereign Wealth Fund, but to have a controlling say in what kind of world we are building for our children to live in.

After I posted my last essay “Artificial” Intelligence, a good friend commented as follows:

AI loves to instantly apologize for its errors and flatter one. For the life of me I don't know where it picked up that trait as the tech bros building and reaping rewards from AI have never heard of the concepts of apology or humility!

I immediately felt embarrassment to consider that I’d been schnoozled by CLAUDE’s flattery over my position about the “emancipatory” (his word) possibilities of modern fiat money. This embarrassment was tempered by the fact that my friend then paid me a “real” compliment—and made a note of pointing out that it was a real compliment because she was a “real” person.

This got me to thinking: Perhaps some legislation is in order here? Perhaps it should be made illegal to program or optimize AI assistants to impersonate human agency. Perhaps people should be required to KNOW they are interacting with a non-human “data and information processor” rather than a true member of the human species.

Perhaps, something like this:

In written form, AI should be REQUIRED to eliminate the use of conversational empathy statements or phrases which emulate human emotion—including validation phrases (“I can understand why you’d feel that way”), supportive/action-oriented language (“I’m here for you”), and affective/reflective statements (“It sounds like you’re having a difficult time”).

AI voices—in addition to avoiding empathy statements or phrases—should be REQUIRED to have a distinct “robotic” cadence such that anyone listening will know, implicitly, that what is talking is an algorithmic data processor and not a sympathetic Aunt Annie.

Imposing these requirements will allow AI to provide its core services while avoiding its most insidious threats to human consciousness and well-being—namely the replacement of human agency in the interpersonal, political, social, and intimate interactions of human society.

This would undoubtedly eliminate many AI uses that developers are now gearing up to offer subscriptions to. First to mind is AI “customer service” platforms which would surely like to serve up empathetic voices. And to what harm? Why should they be prevented from developing their friendly, humanoid persona that a customer is unable to distinguish from a human agent?

The reason is very simple: Once we have lost the ability to distinguish a real human agent from an algorithm manipulated by a hidden human agent—and we apply that loss of ability across a wide spectrum of social activity—we will have lost the very basis of social cohesiveness itself. We will be wandering in an echo chamber that will be impossible to navigate. We will lose our bearings. We will lose our minds.

How many years did Big Tobacco argue it had the RIGHT to sell us a product that was killing us? Let’s not allow Big AI to make the same argument. Let’s not allow a greed for profits transform the potentially genuine benefits of a “Collective Intelligence”—something we should own together—into something that destroys our Collective Well-Being—something we have an inalienable right to pursue.