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Government Spending Effects


Harry Browne explains government spending effects in 228 words

Terry Kinder precious metals analysisBullion.Directory precious metals analysis 26 September, 2014
By Terry Kinder

Investor, Technical Analyst

In 1970, Harry Browne, wrote How You Can Profit from the Coming Devaluation. It is still one of the best books, if not the best, about money, gold, silver and being prepared for whatever the future holds.

On pages 33-34 of his book, Browne explains government spending effects in a mere 228 words:

There are three ways for a government to raise the financial resources for its spending activities: taxing, borrowing, and printing.

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1. When taxation is the method, it’s not hard to see that one man’s subsidy from the state is another man’s tax. The total amount of property in the society hasn’t increased; it has only been redistributed according to the government’s wishes.

2. If the government borrows the funds it spends, nothing changes. Eventually the funds will be due for repayment. That means the taxpayers will pay the bill; or else the loans will be repudiated – which means the lenders pay instead of the taxpayers in general.

We should also notice that, in the short term, the resources the government has borrowed have been removed from private use as emphatically as if they had been confiscated through taxation.

Private investment has been curtailed by the amount of the government’s borrowings. Two people cannot use the same money at the same time.

3. This brings us to the most subtle method. It is inflation. The government, in effect, merely prints extra money substitutes and spends them for what it wants.

We have already seen, however, that these money substitutes only take on purchasing power at the expense of the other money substitutes which are thereby reduced in purchasing power. Prices are invariably higher than they otherwise would have been.

Browne’s explanation of government spending effects is as clear and relevant today as it was in 1970 when his book was published.

Harry Browne’s 228 word explanation of government spending effects is, equally, one of the best and shortest explanations of why so many have chosen to buy physical gold and silver to help insure against the continued government spending effects to this day.

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  1. I can only imagine what Browne would make of QE. Wonder when the next lot will be announced and if there will be a polite pause between now and then although I doubt the economy could take a time out

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