Government spending increases value of money | Bemidji Pioneer
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Government spending increases value of money

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I have heard complaints about the taxes and spending. I have wondered why these people seem to complain so much, what is it about the system of economics that these people don't get? I then realized they don't understand how money is valued. They don't realize that government spending increases the relative value of our money, that the debt incurred on that spending ultimately is less then if the government had not spent money.

This is because if the money is not spent it would devalue that same money (Deflation). This would mean that the old debts would amount to larger overall value thus creating larger levels of national debt. The reason most don't understand this, is they don't understand what really backs our money. To quote the U.S. Treasury, "The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are 'backed' by all the goods and services in the economy."

Since the money itself is backed by our continued spending, it is a requirement for spending to continue to maintain the value of the money. This is why when consumer spending slows as it has during this recession it is necessary for the government to spend money to maintain the value, this has to happen whether or not the money is directly available. If this does not happen, the value of our money will fall, and tax revenue to pay past debts will fall.

People talk about bankrupting the government by spending too much, however, the opposite is true. If the government were to not spend and watch the value of the dollar deflate and watch tax revenue fall, it would certainly bankrupt the government. The government must spend and put money into peoples' pockets so that the economy will rebound and so that tax revenue will rise as well as increase the value of our money.

Not only will this fix our economy but it can fix something that we in Minnesota are all too well aware of, that is our crumbling infrastructure. Not only can we fix it we can improve it. When we are done we will have a robust economy and a robust infrastructure to boot.

Chris Asendorf

Bemidji

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