I don’t support the tariffs, but that’s not really true. Tariffs are basically taxes. They go to the government. Presumably they would then be redistributed through government programs. You can say what you will about how effective those programs are, but the money does not just disappear and is certainly not destroyed.
Tariffs only go to the government when people can actually afford to pay them.
When Tariffs jack up the costs of goods in a supply chain exponentially higher than they’ve even been, small to medium sized business can’t afford their now Tariffed supply chain and don’t pay.
That’s how the money disappears. Whatever industry Tariffs are added to is now an industry that small to mid size companies can no longer afford to manufacture in. Which lowers the total value of that market as the profits smaller businesses had are now captured and destroyed by Tariffs.
Without Tariffs, the supply chain is affordable. With Tariffs, it’s destroyed and doesn’t magically come back.
Soy bean market? Literally no more future profit potential now that our largest buyer has gone elsewhere.
Tariffs just effectively convert long term viable market wealth to short term government wealth in a time when markets are already suffering.
In no reasonable calculation will the gains of any Tariff offset the long term losses in the market those Tariffs destabilize. There’s literally hundreds of years of historical evidence supporting this as the outcome.
The commenter above said “The money exacted for tariffs leaves circulation is entirely, it’s basically destroyed.” They are talking about money that was spent on the tariff already. What you are talking about is the larger impact tariffs have on the economy.
I am not on the side of tariffs. I’m not against them on principle, but the implementation has never really been stellar. I appreciate your perspective, but in my opinion the OP made a somewhat misleading statement that is not really related to your point. People could walk away thinking that tariff money is basically just put in a big pile and incinerated. The money continues to exist and in fact could be directed toward a specific thing. So if we build luxury yachts here and people start importing them, we can add a tariff to them and allocate those funds to retraining programs for people who used to make yachts. I’m not advocating for that, but in that case the money would reenter in a specific location and affect a specific sector.
Eldritch is right, but it’s kinda like Newtonian physics vs general relativity: you can think of (federal) taxes as “funding the government” and it’s not a terrible approximation. But it’s not the reality.
The reality is more like what Eldritch said: money is spent into existence, and taxed out of existence. The issuer of a currency doesn’t need to take the currency from you in order to spend it — they need to destroy it so that their newly-printed currency is actually worth chasing after.
Sounds like a distinction without a difference, right?
Except it matters when we talk about “tariffs funding the government” (cuz they don’t) or “how are we gonna pay for something like the green new deal?” (paying for it is the easy part, controlling inflation is the real constraint).
When we talk about major economic initiatives, it kinda matters for people to understand how money actually works. Musk, for example, had no clue and thought he had uncovered some massive scandal when he gained access to the federal payment system and was confused at how the funds don’t actually come from anywhere: https://stephaniekelton.substack.com/p/elon-musk-discovers-the-magic-of
I’m not going to pretend I’m an economist, but the idea that the government prints money is not new to me. If the government is “funded” via destroying money (because there is an inflation rate they are attempting to keep constant meaning they can spend X for every Y they destroy) then taking in “funding” via tariffs allows them to either print more money to make up for the additional “income” (aka increased government spending ideally on the public good) or need less money from other sources (lower other taxes - not how it happens but theoretically a possibility), or apply that “excess” to the debt (basically print directly to the debt holders). This does not make taxes or tariffs irrelevant. It is the way the government is “funded” since it needs income to maintain inflation. Is this not a correct reading? I’m legitimately open to learning something right now, but replacing “spend” with “print” and “tax” with burn does not really affect anything considering inflation is a constraint. I understand it’s not 1:1 but that does not mean taxes are “disappeared” in any meaningful sense in this context.
It’s a very meaningful difference, because these two things (spending and taxing) aren’t actually related
Think of it like watering a plant. Watering is spending, and taxation is drainage. What actually matters is how wet the soil is
Our problem isn’t the spending, it’s that the drainage is bad. We have too much stagnant money. No amount of watering or not watering could fix that… The plant still needs water, even as mold in the bottom of the pot hurts the plant
Generally, taxes are drainage. As money moves around, a little bit drains out of the system at each step
Tarrifs aren’t drainage, they’re flow restrictiors. They reduce the amount of money moving around, which doesn’t help the situation
It’s not a perfect metaphor, but to strip it all away - the problem is that billionaires and speculation are collecting money in massive hoards, and the velocity of the money is zero
The actual health of an economy is the velocity of money, the amount in the system is secondary
Simple question to ask yourself. If the government can simply create money, which they can. Why would they need to fundraise through taxes. When they can simply print the money. Answer, they don’t. They can simply print it. The issue is that if you create too much you devalue it. Then you need to destroy some to bring it’s value back up.
This is why despite constant cries from the fascists bemoaning deficit spending. Claiming government should be run like a business. It’s all bullshit. When a government can print money and receive a 2x or better return on investment. Which they often do. Deficit spending effectively pays for itself.
I’m glad there are other people out here trying to explain how money actually works. I gave up a while ago cuz I got sick of being treated like a crazy person.
I think that, partially, people don’t like being told their folk wisdom is wrong… but more importantly, they don’t wanna believe that the people in power are either just as misinformed or deliberately lying.
The government cannot “simply print money”. In order to add new currency, the government sells bonds to the reserve banks. Future debt is exchanged for money to spend now. If the banks do not loan money to the government by buying the bonds, new money cannot be printed.
The accumulated bond debt is the national debt.
Tax income is used to make payments on the national debt (to pay off bonds which have reached their maturity period). You can also participate in this system by purchasing government bonds, it is not exclusive to banks.
If the government fails to make payment on the bond debt, then the government’s credibility drops and banks may choose not to buy new bonds, which immediately devalues the currency.
Functionally, the value of currency is based on faith that the government issuing the currency is solvent and will be able to make payments on its bonds in the future. Tax income is necessary to ensure that the government is solvent.
None of that has anything to do with Trump’s asinine tariffs, of course.
I’m pretty confident that selling bonds is not the only mechanism by which the government has access to money. Selling bonds is a common way for cities and states to raise funds, but I’m pretty sure the federal government can just … fund stuff.
Bonds are the mechanism by which the government issues new money. They cannot “print money” without selling the equivalent value in bonds.
I knew that’s what you meant but I don’t think that’s true. They choose not to because there’s concerns about inflation and devaluing the dollar, but there’s no constitutional restriction on that. The necessary and proper clause is pretty broad, as is Article I, Section 8, Clause 1.
down voted because I’m trying to understand but your punctuation makes it really difficult.
I will never understand why someone takes the time and effort to write a paragraph and then not bother to make sure that it’s actually comprehensible. why bother?
Monetary policy is a complicated subject, but stating that taxes, in this case tariffs, disappear money from the economy is at best misleading if not outright false. They are part of a cycle. Money is printed. Money is destroyed. If money wasn’t being laundered through the government then they wouldn’t just print money. They’d have no money to invest in printing.
If you are suggesting that taxes are disappeared from the economy then how would you explain government services. The government spent over 6 trillion dollars last year. They spent more than they made including taxes, hence a deficit, so not sure what you’re suggesting at this point.
I don’t support the tariffs, but that’s not really true. Tariffs are basically taxes. They go to the government. Presumably they would then be redistributed through government programs. You can say what you will about how effective those programs are, but the money does not just disappear and is certainly not destroyed.
Tariffs only go to the government when people can actually afford to pay them.
When Tariffs jack up the costs of goods in a supply chain exponentially higher than they’ve even been, small to medium sized business can’t afford their now Tariffed supply chain and don’t pay.
That’s how the money disappears. Whatever industry Tariffs are added to is now an industry that small to mid size companies can no longer afford to manufacture in. Which lowers the total value of that market as the profits smaller businesses had are now captured and destroyed by Tariffs.
Without Tariffs, the supply chain is affordable. With Tariffs, it’s destroyed and doesn’t magically come back. Soy bean market? Literally no more future profit potential now that our largest buyer has gone elsewhere.
Tariffs just effectively convert long term viable market wealth to short term government wealth in a time when markets are already suffering.
In no reasonable calculation will the gains of any Tariff offset the long term losses in the market those Tariffs destabilize. There’s literally hundreds of years of historical evidence supporting this as the outcome.
The commenter above said “The money exacted for tariffs leaves circulation is entirely, it’s basically destroyed.” They are talking about money that was spent on the tariff already. What you are talking about is the larger impact tariffs have on the economy.
I am not on the side of tariffs. I’m not against them on principle, but the implementation has never really been stellar. I appreciate your perspective, but in my opinion the OP made a somewhat misleading statement that is not really related to your point. People could walk away thinking that tariff money is basically just put in a big pile and incinerated. The money continues to exist and in fact could be directed toward a specific thing. So if we build luxury yachts here and people start importing them, we can add a tariff to them and allocate those funds to retraining programs for people who used to make yachts. I’m not advocating for that, but in that case the money would reenter in a specific location and affect a specific sector.
Eldritch is right, but it’s kinda like Newtonian physics vs general relativity: you can think of (federal) taxes as “funding the government” and it’s not a terrible approximation. But it’s not the reality.
The reality is more like what Eldritch said: money is spent into existence, and taxed out of existence. The issuer of a currency doesn’t need to take the currency from you in order to spend it — they need to destroy it so that their newly-printed currency is actually worth chasing after.
Sounds like a distinction without a difference, right?
Except it matters when we talk about “tariffs funding the government” (cuz they don’t) or “how are we gonna pay for something like the green new deal?” (paying for it is the easy part, controlling inflation is the real constraint).
When we talk about major economic initiatives, it kinda matters for people to understand how money actually works. Musk, for example, had no clue and thought he had uncovered some massive scandal when he gained access to the federal payment system and was confused at how the funds don’t actually come from anywhere: https://stephaniekelton.substack.com/p/elon-musk-discovers-the-magic-of
I’m not going to pretend I’m an economist, but the idea that the government prints money is not new to me. If the government is “funded” via destroying money (because there is an inflation rate they are attempting to keep constant meaning they can spend X for every Y they destroy) then taking in “funding” via tariffs allows them to either print more money to make up for the additional “income” (aka increased government spending ideally on the public good) or need less money from other sources (lower other taxes - not how it happens but theoretically a possibility), or apply that “excess” to the debt (basically print directly to the debt holders). This does not make taxes or tariffs irrelevant. It is the way the government is “funded” since it needs income to maintain inflation. Is this not a correct reading? I’m legitimately open to learning something right now, but replacing “spend” with “print” and “tax” with burn does not really affect anything considering inflation is a constraint. I understand it’s not 1:1 but that does not mean taxes are “disappeared” in any meaningful sense in this context.
It’s a very meaningful difference, because these two things (spending and taxing) aren’t actually related
Think of it like watering a plant. Watering is spending, and taxation is drainage. What actually matters is how wet the soil is
Our problem isn’t the spending, it’s that the drainage is bad. We have too much stagnant money. No amount of watering or not watering could fix that… The plant still needs water, even as mold in the bottom of the pot hurts the plant
Generally, taxes are drainage. As money moves around, a little bit drains out of the system at each step
Tarrifs aren’t drainage, they’re flow restrictiors. They reduce the amount of money moving around, which doesn’t help the situation
It’s not a perfect metaphor, but to strip it all away - the problem is that billionaires and speculation are collecting money in massive hoards, and the velocity of the money is zero
The actual health of an economy is the velocity of money, the amount in the system is secondary
Yes it’s true. Taxes don’t work that way either.
Simple question to ask yourself. If the government can simply create money, which they can. Why would they need to fundraise through taxes. When they can simply print the money. Answer, they don’t. They can simply print it. The issue is that if you create too much you devalue it. Then you need to destroy some to bring it’s value back up.
This is why despite constant cries from the fascists bemoaning deficit spending. Claiming government should be run like a business. It’s all bullshit. When a government can print money and receive a 2x or better return on investment. Which they often do. Deficit spending effectively pays for itself.
I’m glad there are other people out here trying to explain how money actually works. I gave up a while ago cuz I got sick of being treated like a crazy person.
I think that, partially, people don’t like being told their folk wisdom is wrong… but more importantly, they don’t wanna believe that the people in power are either just as misinformed or deliberately lying.
The government cannot “simply print money”. In order to add new currency, the government sells bonds to the reserve banks. Future debt is exchanged for money to spend now. If the banks do not loan money to the government by buying the bonds, new money cannot be printed.
The accumulated bond debt is the national debt.
Tax income is used to make payments on the national debt (to pay off bonds which have reached their maturity period). You can also participate in this system by purchasing government bonds, it is not exclusive to banks.
If the government fails to make payment on the bond debt, then the government’s credibility drops and banks may choose not to buy new bonds, which immediately devalues the currency.
Functionally, the value of currency is based on faith that the government issuing the currency is solvent and will be able to make payments on its bonds in the future. Tax income is necessary to ensure that the government is solvent.
None of that has anything to do with Trump’s asinine tariffs, of course.
I’m pretty confident that selling bonds is not the only mechanism by which the government has access to money. Selling bonds is a common way for cities and states to raise funds, but I’m pretty sure the federal government can just … fund stuff.
No, of course the government has other sources of revenue. That’s not what I said.
Bonds are the mechanism by which the government issues new money. They cannot “print money” without selling the equivalent value in bonds.
I knew that’s what you meant but I don’t think that’s true. They choose not to because there’s concerns about inflation and devaluing the dollar, but there’s no constitutional restriction on that. The necessary and proper clause is pretty broad, as is Article I, Section 8, Clause 1.
I’m not a lawyer though
down voted because I’m trying to understand but your punctuation makes it really difficult.
I will never understand why someone takes the time and effort to write a paragraph and then not bother to make sure that it’s actually comprehensible. why bother?
Monetary policy is a complicated subject, but stating that taxes, in this case tariffs, disappear money from the economy is at best misleading if not outright false. They are part of a cycle. Money is printed. Money is destroyed. If money wasn’t being laundered through the government then they wouldn’t just print money. They’d have no money to invest in printing.
If you are suggesting that taxes are disappeared from the economy then how would you explain government services. The government spent over 6 trillion dollars last year. They spent more than they made including taxes, hence a deficit, so not sure what you’re suggesting at this point.