67. Two Legitimate Recalls

Two Legitimate Recalls
Bob Komives
::

Monetary recall is not without merit. It has two small but legitimate uses: price distortion and surprise extraction.

Monetary recall can distort prices in the marketplace in accordance with a government policy. A tax on beer favors the drinking of soda pop, for example. To discourage smoking, the USA initiated in 1998 significant increases in its tax on cigarettes. To induce capital investment it taxes ordinary income more than income from what we choose to call "capital gains." Such distortions are price taxation.

If imposed as a surprise, monetary recall can remove some currency from circulation. This surprise extraction is useful in times of rampant inflation. It works if government imposes the tax rapidly and one-time-only. Otherwise, the all-knowing marketplace will inflate itself to compensate. Sudden reverses in monetary recall also work for a short time. The tax cuts of the 1980's in U.S. America did put great quantities of unearned income into the pockets of the wealthy who were able to keep some of the inflation that the previous higher level of monetary recall had added to their income.

So, our national government can use recall carefully to remove money from circulation or to distort prices. It should, not, however, keep a general system of recall (such as the national income tax) just to be able to selectively distort prices and suprisingly extract money. Nor should it treat the recalled currency as income. This money is a by-product, an incidental possession, much like moonshine whiskey confiscated from illegal stills. We can burn this money and moonshine for heat, but we cannot use them to balance a national budget.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 67. Two Legitimate Recalls ::
With attribution these words may be freely shared, but permission
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