Who Pays?

“The great mass of the people are interested in only three things – food, water and clothing. A politician in a district such as mine sees to it that his people get these things. If he does, then he doesn’t have to worry about their loyalty and support.” ~~Martin Lomasney, Boston Ward Boss

Question: Who pays for all that free stuff that people get?

Answer: You are probably referring to the line "necessities are free to all, as needed" that is part of the ten principles of the new money. But you should remember that not only necessities are given but also capital goods and services. The only things that this new money can buy are goods and services designated as "luxuries." That means that everything else from timber and ores through trucks and hammers to bobby pins and broadcast towers are not paid for at all. So there is really a lot more to be explained than just who is paying for that hamburger than Joe is eating.

The first and most obvious answer is that the Payers are paying for all that stuff. They even are paying for the luxury goods and services. But that is just a surface answer and is not really addressing the underlying question. Why should anyone give property to someone else without getting money in return from that person?

We are so used to two-party interactions when we think of money that it is difficult to think of any other kind of economic activity. But this new money uses three-party interactions. Yes, when property owner Oscar gives an item of property to someone else there is a third party involved in the payer: Pat. If Roger, the receiver of that property, benefits from having that property or if Roger does something with that property which benefits others, then Pat increases the amount of money in Oscar’s account. This means that Oscar is giving his property to Roger in the expectation that he (Oscar) will get money as a consequence of that action.

For Oscar this is exactly the same situation as when today he sells something to someone else. He gives up some item of property (or provides some service) and gets money in return. The difference for Oscar is that the money is not coming from the person to whom he gave the property or service but from a payer.

For Roger this is like getting something for nothing. But if he wants to keep on getting things for nothing he must either benefit from the property himself or see to it that others benefit (and thus earn Roger money as well) or he may not get any more property for nothing.

For Pat, this is like shopping for the best deal. Pat is in this free market to buy the most net benefits he can. He wants to have people who have goods or services to offer (producers) provide the most good consequences they can so Pat tries to pay all the Oscars fairly. If Pat pays too much, Oscar uses his resources unwisely by producing too much of some good or service. If Pat pays too little, Oscar produces too little. So Pat must pay enough to keep Oscar producing at just the right rate. (That is a lot easier than it sounds, as it turns out.)

But does Pat have an unlimited supply of money to use? No. The supply of money is equivalent to the supply of goods and services for sale. As more luxury goods and services are produced, the supply of money increases. As luxury goods and services are bought, the supply of money decreases. Therefore, the supply of money the Payers (millions of Pat’s) can deposit in accounts corresponds to the increase in luxuries available.

The payer organization has no incentive to pay less than the total supply of luxuries. That would not make people happy. They also have no incentive to pay more than the supply of luxuries. That would make people mad. Since the Payers can’t have either the money or the luxuries, they don’t have a motive to keep them for themselves.

So who is paying? Well, everyone and no one. It doesn’t cost the Payers anything to pay and it doesn’t cost any producer for some other producer to be paid. The situation is not a zero-sum game. All benefit and all lose together. If Oscar is getting rich it is because lots of other people are benefiting from Oscar’s actions. If Oscar fails, then everyone is the poorer. If we are considering necessities, there are enough for everyone and more besides. It doesn’t deny me food for someone else to eat. Necessities are not scarce in an industrial economy unless people stop working. Besides, what business is it of mine what someone else chooses to do with their property? If we are considering capital goods, what right do I have to tell someone else what to do with their property? I presume that the capital owners want to make as much money as they can so that others will cooperate with them in the future. That means that they will give capital to me if I can show that I will use it well. They have no motive to have the capital sit idle. When it comes to luxury items, I can buy whatever I can afford if the owner chooses to sell to me. The owner will be compensated by the Payers, not by my money since that ceases to exist when spent. Therefore, luxury owners who choose to sell don’t really care what the price is. They get paid for their service to me as a buyer. They are on my side.

So it really doesn’t matter who pays for all that free stuff. Even if you are a payer, it won’t cost you anything. It’s only money.

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