# Behavior of Nations

# Governments Spend Money, Inflate Currency, and Tax Citizens

"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default” - Alan Greenspan

Historically, governments often exceed their financial means, which necessitates imposing taxes on citizens.

This triggers public discontent, frequently leading to inventive tactics to fight and evade taxation, from the Boston Tea Party to the use of trusts, charities, and art as tax shelters during the Gilded Age, where families utilized the step up in cost basis between generations to reset capital gains tax.

When taxation fails to generate needed funds, governments typically resort to subtler strategies, such as the printing of money, an example being the Roman Empire's debasement of their currency by decreasing its precious metal content.

More recently, money printing is a bit more subtle, but can be measured by the size of the Federal Reserve’s balance sheet, which contains mortgage backed securities, treasuries, and even fixed income ETFs such as JNK and HYG that were purchased with money that was created in a database rather than a physical printer.

As money is created, purchasing power is eroded, and currencies are devalued.