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Here is a fairy tale about taxes and currency ... that could never happen here: Paul Heise

Posted 4/25/18

Once upon a time it happened that the president of a small country in a faraway place (certainly not here) wanted to use his presidential term to make his country great again. The people deserved it, …

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Here is a fairy tale about taxes and currency ... that could never happen here: Paul Heise

Posted

Once upon a time it happened that the president of a small country in a faraway place (certainly not here) wanted to use his presidential term to make his country great again. The people deserved it, he said!

The president opined that, because he was elected the leader, he must be the one most competent to lead the country to greatness. He decided that there should be a great fair where the merchants would produce and sell a large volume of goods and services and the country would be richer.

The president regularly was confused about taxes and revenue, expenditure and budgets. He was pretty sure that most people equate money with greatness even though he did not. To be sure, he consulted the National Fortuneteller whose official title was president of The National Bank. He wanted to find out how much money it would take to fund a royal parade and fair. The king wanted something huge and beautiful.

Then something fortuitous happened. The Worldly Philosophers, officially the Council of Economic Advisers, informed The National Fortuneteller that they learned there was a new type of currency, a currency that was invisible, no gold, no bales of cotton, no paper money, not even overnight deposits. They got the basic facts but not all of them in regard to what was called Fiat or Invisible Money. All the president had to do was say so and whatever he was talking about became money, they said.

This explanation satisfied the president and he set a date several months in the future when Fiat money would be the second currency of the land. The week before the parade and fair, the president went out in the main square to demonstrate the money. He informed the merchant who he was tipping that the 10 units of currency had been transferred. At this point only the president could designate invisible money. The merchant said nothing because he was expecting a scam. Merchants are naturally suspicious if they want to stay in business.

The president proposed and the Cabinet agreed to a parade to celebrate the introduction and trial of the new currency paid for with new tax money. The merchants had been expected to pay in invisible money but they had shunned it. New taxes were only supposed to be paid until the new invisible money became available.

The end of invisible money gave it its due. A group of small boys was throwing dice against the side of a curb. The boy with the most money was accepting payments only in standard money despite the fact that most of his money was imaginary but for that reason he should have been able to use it. The small boys described the money as fake and refused to take it or (pretend) to use it. The merchants soon joined them and the king was so embarrassed he ran for the palace pretending to scatter invisible money as he ran.

“All we know is that the story of the [president] emperor will last forever because in every man’s heart is the hope that there will always be someone to speak the truth where there is hypocrisy and because as long as there are foolish grown-ups in the world, there will be children who cannot be fooled.”

This is the story of how an unnecessary and burdensome tax was imposed on the people. It is a common tale.

Paul A. Heise, of Mount Gretna, is a professor emeritus of economics at Lebanon Valley College and a former economist for the federal government.