Running government just by inflating its currency

[btcusr]

Is it possible to run a country / government just by inflating its own currency, without any taxes? If possible, how much money should that government hold, how much should be in distribution and how much in gold?

[steelhouse]

Yes, I think you could run a country with only inflating a currency.  If the United States started with $600 billion a year and increased that amount 2% a year, there would provide plenty of money for defense, national parks, general welfare, and courts.   The BLM turns a profit already and the forest service could.

You may not know the United States in 1910 ran the whole government basically on an alcohol tax.  Once the income tax was started, only then did they vote for prohibition. You could have other smaller sin taxes like carbon, alcohol, and firearms.

You could also get rid of sales taxes as most states did not have them.

[herzmeister]

So you mean ever-expanding money supply?

Without taxes, there would hardly be any money flowing back to them.

So if governments were as wasteful as today, the inflation rate would have to be much, much higher. People will probably resort to different moneys, bleeding the state dry. That'll happen fast, because don't forget the monetary monopoly today is ensured exactly by taxes and the network effect they create.

[Rothgar]

I do not think this is possible.  With out the threat of harm these pieces of paper would loose their value.  People would switch to the currency that is not inflating. 

[steelhouse]

If there was an auto treasury and it was written into law.  Thus the treasury would be able to print 2% a year.  Yes it would be a tax.  Considering you save on tax collection, IRS, and even collecting a sales tax it would be a good way to make money.  You could also tax land a small bit, not building but land.  To hold gold or any other commodity has costs.  Thus, I think people would accept a small inflation.  BTW, the money supply (national debt) in the United States has grown about 8% a year since 1971.  This is basically the same thing because if interest rates get too high the fed will print to lower the rates.  The congress has no real spending limits except the inflation rate and revolution.

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I think you could also run a country by pegging your currency to the U.S. dollar or euro.

Maybe a 1% inflation rate and $500 per acre land tax.

[Elwar]

Or better yet, create a system where the government just borrows money from the money printers who inflate the currency as needed. Then the money printers can charge interest and you can collect a tax to pay the money printers the interest on that debt.

[Lethn]

Sure, you could 'run' a country with just inflation but that depends on how patient or stubborn your citizenry is, otherwise you're just going to end up like Spain with entire cities completely empty so you may as well plant a flag on a barren wasteland no one else wants and declare yourself rulers of it.