On the Fourth of July, 2006, we celebrated the 230th anniversary of the signing of the Declaration of Independence, drafted in protest among other things against the taxation of the colonies without representation. The colonists fought a revolution and gained their independence, thus putting an end to that particular complaint. But it would seem that the time is now long overdue for drafting a new”declaration of independence” to protest our present government’s practice of continuing to tax us, its citizens, without representation.
During the last two years, for instance, the U.S. government has taken from individuals in this country roughly the equivalent of $500 billion. (According to Federal Reserve M2 statistics, the money stock of $6,288.6 billion in June 2004 was increased to $6,796.6 billion by May 2006. That means the number of dollars had been expanded during those particular two years by $508 billion. This two-year increase in M2 is by no means exceptional. The number of dollars is circulation has been increased fairly steadily and continually over the last six or seven decades.) In doing so, it did not ask the approval of the people or even of their representatives in Congress. The process by which these dollars were extracted from the people was in effect “taxation without representation.”
It is true that this $500 billion was not levied directly, as taxes. Individuals did not have to actually forward this $500 billion to Washington – but they might as well have had to, for they lost purchasing power in that amount. As the increased number of dollars made each dollar in existence relatively less valuable, every dollar lost purchasing power and everyone with dollars in their wallets, bank deposits, and savings became poorer.
Goodness knows how these billions were spent. We can know only that they were used to fund projects for which the people, the taxpayers and voters, had no say; projects which the representatives of the people in Congress were unwilling to finance directly through taxes; projects which the government could not otherwise have been able to afford. As far as the government spenders were concerned, they were “free” dollars, created by monetary manipulation through the “magic” of the Federal Reserve’s system of credit expansion and/or monetization of u.s. government debt. But as far as the people were concerned, they constituted taxation without representation.
As long ago as 1913, the Federal Reserve System was set up to make the currency “flexible,” that is expandable. Inflation and credit expansion now enjoy the almost unanimous support of everybody, not only of today’s establishment economists, Keynesians and Chicago School Monetarists, but also of politicians who are under constant pressure to spend, and of run-of-the-mill businessmen who rely on being able to borrow “easy money.” Monetary expansion is now firmly entrenched and rising prices are equated with prosperity. It seems more likely that hell will freeze over before a stop will be put to inflating and thus to extracting value from every dollar in circulation. “Taxation” without representation will undoubtedly continue into the foreseeable future.