Fiscal Policies, Spending Policies and Conflicting Aims

Dimitris N. Chorafas

Chapter 6 in Sovereign Debt Crisis, 2011, pp 99-116 from Palgrave Macmillan

Abstract: Abstract Few people really appreciate that the state has no money of its own. The money it has in its Treasury comes from two sources: taxation and the central bank’s printing press – in other words, inflation. The first is the object of the government’s fiscal policies; the second, that of the central bank’s monetary policies, as well as of the politicians’ pressures. The two correlate because the difference between the money the government gets through a reasonable level of citizen taxation and its unwisely assumed huge commitments – from entitlements to foreign aid and military expenditures – is made up by the printing press, as well as by increases in all sorts of taxes. ‘We must tax the poor,’ André Tardieu, a French radical socialist prime minister, said in 1930. ‘They are the most numerous.’ Indeed, so it is. Value added tax (VAT) picks up a hefty share of private money for the government and it is paid by both rich and poor.

Keywords: Current Account; Fiscal Policy; Public Debt; Credit Default Swap; Current Account Deficit (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-0-230-30712-4_6

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DOI: 10.1057/9780230307124_6

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