How The Government’s Super-Platinum Credit Card Works
It has unlimited credit. It can repay itself. It has the best cashback deal in existence. What could you do if you had one of those?
Sovereign nations with their own currency (such as the UK, the USA or Japan) can spend before they receive any tax. That is what puts the ‘fiat’ in fiat currency. It appears at first glance to be counter-intuitive. How can this be?
If you think about it, most of us come into contact with this concept every day.
It’s called a credit card.
Imagine that the government does all its spending on its credit card. If you do, you’ll be pretty close to the truth.
There are differences with the sort of credit card you hold. A sovereign government has power over its own domain and can insist on a credit card deal you can only dream of.
It’s a Super-Platinum Credit Card, with the following unique benefits.
Certain people can get ‘no-preset spending limit’ cards. So it is hardly surprising that a government with its own currency can get one too. (Unlike the Greeks, who have a spending limit set in Brussels).
A sovereign government issues its own credit card. That means it can pay the credit card bill using the same card. If you could pay your credit card bill with a credit card, then you’d never have to use any ‘real money’ either.
The Best Cashback Deal in Existence
The key benefit is the cashback deal. You may get a measly percentage on your credit card when you spend money at Asda. Yet when the government uses its credit card at Asda we see how magnificent the cashback deal is:
- first it gets a large cashback percentage immediately
- when Asda pays its staff, the government gets another percentage
- when the staff buy beer at the pub, the government gets a further chunk
- when the staff at the pub get paid, the government takes a cut
And so on until all the initial government spend turns entirely into cashback.
For the government this is a cracking deal. It means that for every £100 the government uses to buy things, it always gets £100 back in cashback. Each time, every time.
We have a name for this cashback process. It’s called ‘taxation’.
So with this magical cashback deal in place, it will never have a balance on its credit card. Unless people out there decide they have bought enough, and will put a little of their earnings to one side instead.
We have a name for that. It’s called ‘savings’.
So if people don’t spend all their earnings the government ends up with a balance on the credit card. In other words, when people choose to save it causes a balance on the government’s credit card.
We have a name for the balance on the credit card. It’s called the ‘national debt’, and the change in the balance is called the ‘government deficit’. But the cause is the still the same — people saving. And there is nothing so terrible, surely, about people choosing to save.
If only I had one of those…
Now just think what you could do if you had one of these cards
- you could buy as much as you like anywhere where the card is accepted
- you’d never have to fund your spending
- you’d note the balance figure with cool detachment. You know you’ll get cashback if people spend their savings
So What’s The Catch?
Your Super-Platinum Credit Card may have unlimited spending power, but you can run out of stuff to buy. You have to make sure that you buy things wisely, encouraging the production of more goods and services. That way there is more for you to buy, and more for everybody else to buy too.
If nobody is tending your garden, then hire somebody without a job to do that for you. There is zero cost to you — you have a Super-Platinum Credit Card — but it gives somebody without a card the means to support their family.
You might trim back the cashback percentage. There is zero cost to you — as long as the rate is still positive you’ll get your cashback anyway. But trimming the percentage leaves money in people’s pockets a little longer. They can buy more goods and services for their family, and perhaps save something, or pay down their mortgage a little faster.
You might pay for the upkeep of universities and training colleges. There is zero cost to you — the colleges already exist and keeping them up gives people without work jobs to do.
You might also fund students to go to college and university. There is zero cost to you and those students will be able to use their greater skills in the future to generate more goods and service for you and everybody else to buy.
You might decide to build a raft of super-environmentally sustainable houses across the nation. Again there is zero cost to you — you have a Super Platinum Credit Card — and engineers short of work like nothing better than a big transformational project to get their teeth into. The houses built would last a century or more, reduce the nation’s carbon footprint, and bring great benefits to all (plus a significant amount of accolade to those who created them).
Or you might decide to be really bold and ensure that everybody who wants to work has a living wage job to go to. There is zero cost to you, but it ensures we have a society where nobody is left behind.
But I haven’t got one of those cards
No you don’t. But the government certainly has one — even it it is pretending it doesn’t.
Ask them “what’s in their wallet”. Ask them when they are going to use their plastic effectively.
If you liked this article, please click the ‘heart’ below to recommend it to others, and use the share buttons to spread the word. Remember Modern Money Matters.