RE: Three Extremely Important Taboo Questions (And The Answers)
I don't like conspiracy theories, so I'm a bit hesitant to answer your questions because...
When it comes to preserving the AAA rating, the advice that credit rating agencies give to governments is that they must achieve a budget surplus. This can be done by either cutting spending, increasing taxes and/or selling off public assets. The most politically acceptable of these three options is to sell off public assets. Historically, governments sell them cheap to people who have lots of money! If these assets are monopolies, then that makes things even worse for society.
Every time I see a newspaper complaining that Australia's AAA rating is under threat, there are people from the Big 4 banks, giant securities firms, and others who would be involved in the sales transaction saying that the government must achieve a surplus for the sake of the economy. It's all rather infuriating once you understand what it really means.
Thank you for your answer. Do you have any idea where the tax dollars end up, if they aren't in the government bank accounts? That's the bit I couldn't quite comprehend.
They get destroyed.
Think of how it looks on a balance sheet when money is created - the central bank creates the money as a liability to itself and an asset to whomever is receiving the money.
When the money comes back in taxes, the asset is given back to the central bank and it then cancels the liability on its balance sheet.
The Australian Tax Office doesn't accept notes for the payment of taxes. However, if someone in the US pays dollar bills to the IRS, those notes are thrown into a shredder. You can buy the shredded dollars, if you want.
Okay thank you. You did explain that in the post, but I guess it didn't fully sink in. Not having any accounting training it probably went past me. But I think I get what you mean. So is this 'double-entry accounting?'
Yes, double entry bookkeeping. Basically, every entry is a + to one person and a - to another person. When you add the +’s and -‘s together, you should always get 0.