Solution to the Question of Deficit Financing

Roland Stahl
April, 2021

     Money is such an absolutely fundamental concept that a proper understanding of how it works is essential.   I hear a lot of commotion about President Biden’s recent spending initiatives ~ a few trillion here, a few trillion there ~ and a lot of people are wondering how that’s going to work.   Is it a meaningless question to ask, “how are we going to pay for that?”  Well, here is the way money works, in a nutshell, so pay attention ~

     To ask questions about deficit financing in a vacuum is useless, because the most important factor is left out of the equation.   Every piece of money spending can have an expected return factor, which would include all of the very long term consequences as well as the more obvious short term ones.   The more positive benefits, the higher the return factor.   Spending on reforestation, renewable energy, schools, healthcare, and the like come to mind as having very high return factors, while spending money for bombs which are intended to kill people and destroy the structure and cohesion of civilization, along with the whole program of soldiers and airplanes to escort the bombs, will calculate out to very high negative numbers in the expected return factor.  

     There it is.   That’s it.   The more money spent on projects with a positive return value, the better ~ go ahead and pile on those trillions, Joe! Any spending project can be rated by this expected return factor.   As long as any State, Nation, or Individual spends his money with high expected return factors, the economy will be healthy long-term, barring problems of short term fluctuation.  

     So, just to be clear, if you’re trying to finance a war by deficit spending, it is probably not going to work out, but if all of your spending is directed towards projects with a high expected return factor, then your future looks rosy.  

     Almost all of Biden’s spending proposals pass the test.

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