Principium Volume II, Book 9, Quote 956 and 958

956. (11-7-2010) When a nation is already overburdened with taxes, nothing but the necessities of a new war, nothing but either the animosity of national vengeance, or the anxiety for national security, can induce the people to submit, with tolerable patience, to a new tax. (This is what is happening to us now. – 2015)ATJ (Consider this.)ATJ Every new tax is immediately felt more or less by the people. [But]ATJ a momentary suspension of the payment of debt is not immediately felt by the people, and occasions neither murmur nor complaint…(So, whenever a government experiences surplus revenue, instead of paying down the principal debt of the nation to free up the public revenue, it will use the surplus monies for new programs instead of raising taxes to pay for the new programs. The people then are happy, because not only do the new programs provide some group of society great benefits, taxes were not raised. The people imagine that this is good because it did not affect them, not considering that the old debt and the new debt created by the new programs which will grow and will be hard, if not impossible to stop, have been added together, remaining on the backs of the people and their children, and the unborn for generations.)ATJ

- Adam Smith – The Wealth of Nations, 1776


958. (11-8-2010) The raising of the denomination of the coin (or currency)ATJ has been the most usual expedient by which a real public bankruptcy has been disguised under the appearance of a pretended payment (inflating the value of the currency, inflation, only looks like the “stronger” money can pay off more of the debt)ATJ It would indeed by a pretended payment only, and the creditors of the public would really be defrauded….The calamity, too, would extend much further than to the creditors (the persons able to lend money)ATJ of the public, and those of every private person would suffer a proportionable [sic] loss; and this without any advantage, but in most cases with a great additional loss, to the creditors of the public. If the creditors of the public, indeed, were generally much in debt to other people, they might in some measure compensate their loss by paying their creditors in the same [inflated currency]ATJ in which the public had paid them. But in most countries the creditors of the public are, the greater part of them, wealthy people (their assets more than cover their expenses)ATJ, who stand more in the relation of creditors than in that of debtors towards the rest of their fellow-citizens. A pretended (over-valued)ATJ payment of this kind, therefore, instead of alleviating, aggravates in most cases the loss of the creditors of the public, and without any advantage to the public, extends the calamity to a great number of other innocent people. It occasions a general and most pernicious subversion of the fortunes of private people, enriching in most cases the idle and profuse debtor at the expense of the industrious and frugal creditor, and transporting a great part of the national capital from the hands which were likely to increase and improve it to those which are likely to dissipate and destroy it. When it becomes necessary for a state to declare itself bankrupt, in the same manner as when it becomes necessary for an individual to do so, a fair, open, and avowed bankruptcy is always the measure which is both least dishonourable [sic] to the debtor and least hurtful to the creditor. The honour [sic] of a state is surely very poorly provided for when, in order to cover the disgrace of a real bankruptcy, it has recourse to a juggling trick to this kind, so easily seen through, and at the same time so extremely pernicious.

- Adam Smith – The Wealth of Nations, 1776


(Remember, he is talking about national, government assumed dept. the government, run by people, stops saving for a rainy day, some emergency occurs and they need a bunch of money, collecting additional taxes is too slow, but will be done eventually. In the mean time, the government borrows from wealthy inhabitants of the nation promising a good return. This works out for awhile, but the debt, even during the non-emergency times is not paid off, so it simply keeps growing, because, remember the eventual taxes that were raised from the public for the “emergency” or “crisis”? Well, they didn’t strictly use those to pay off the debt that emergency “war” caused, they simply made interest only payments and then used the new excess for additional debt. This occurs until the debts are too big to pay interest only anymore, so the government, being the boss, inflates the currency, thus making every dollar seem like two, and using that money to pay down the debt. So if there was a million dollar debt, it could now be paid off with $500,000. The other half just doesn’t disappear, but it is a loss to those who lent it. That might sound alright if we subscribe to the idea that we should take from the rich and “redistribute” their wealth, but this is just a governmental trick, a dressed up version of stealing. The real crime is the dis-incentive to save both by society and government, and the impulse to spend astronomically above our collective means. As we have been counseled to avoid dept individually because of its binding and insidious oppression upon our lives, the same can and will be seen in the nations that recklessly mortgage the futures of their people through excessive spending, also called “deficit” spending.)ATJ

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