The logic below is based upon writings by:
Frank N. Newman, former Deputy Secretary of the US Treasury, currently CEO, of Shenzhen Development Bank, China, and author of "Freedom from National Debt" (~ $10 at Amazon)
Francis X. Cavanaugh, US Treasury economist for over 30 years and author of "The Truth about the National Debt": Five Myths and One Reality" (Harvard Business School Press, ~ $10 at Amazon)
Warren Mosler, economist, hedge fund founder, and author of "Seven Deadly Innocent Frauds of Economic Policy", (Oxford U. Press, ~ $12 at Amazon or $1 for a Kindle download).
Marc Blyth, professor of international political economy at Brown University and author of "Austerity" (Oxford U. Press, ~ $15 at Amazon), which destroys the "Austrian" theories of Hayek, von Mises, etc,
Dr. Stephanie Kelton, Chair of UMKC Economics Department at NewEconomicPerspectives.org
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RULES OF THE GAME: I give my own answers to my questions below.To falsify the logic, you must, instead of ranting, show that my answers are incorrect. Play the game by the rules!
Q1: From the standpoint OF THE TAXPAYER, is our so-called "national debt" really a debt?
A1: No, because it has none of the three essential qualities of a debt.
1. The TAXPAYER will never repay the debt.
Yes, bonds are redeemed at maturity, but the "national debt" is the total value of all outstanding Treasuries.In our history, we have rarely had even a modest annual budget surplus.No serious politician today has any plan whatsoever for a budget surplus.In effect, the "national debt" has never been repaid and never will be repaid. The total value of all outstanding Treasuries must grow with the economy.
2. The TAXPAYER does not pay a significant debt interest.
Yes, the bond-holders receive significant interest payments, but the Treasury pays the interest by simply auctioning more bonds, ad infinitum, with no burden other than a few keystrokes. Economists recognize this by declaring that our "primary" annual budget deficit does not include debt interest payments because they never consume physical resources and have no economic effect.
3. The TAXPAYER does not have a burden.
The Treasury can always redeem a security by selling another. If necessary, it can create an artificial shortage by buying securities on the open market with keystrokes.It is not assuming a burden like a home-buyer undertaking a mortgage. A Treasury bond cannot be foreclosed.
The Treasury auctions bonds only because Congress requires that the proceeds cover the annual budget deficit. Such "borrowing" is an unnecessary relic of the former gold standard regime. This requirement was suspended during World War II, followed by 35 years of strong economic growth without harmful inflation, thus proving that such "borrowing" is absolutely unnecessary.
(http://neweconomicperspectives.org/2013/08/mobilization-and-money.html#more-6200)
There is no reason to believe that, under the fiat currency regime and floating exchange rate which we have had since 1971, budget deficits cannot again be successfully financed by simple keystrokes instead of "borrowing" with bond auctions.
Inflation? Deficit spending NEVER causes inflation during a recession. During prosperity, bank lending ALWAYS causes inflation, creating over $30 of credit for every deficit dollar spent.
The Versailles Treaty's requirement that German war reparations be paid in gold caused the Weimar inflation. Zimbabwe is the victim of corruption.An oil shortage caused stagflation. The Eurozone does not have our fiat currency. None of that stuff applies to us.
Q2: Could bond-holders make a run on Treasuries?
A2: For the risk-free interest that they want, where would they put $11T? The Wall Street casino? GM bonds? Illinois bonds? Detroit bonds? CDs? Money Market? Stop kidding! Treasuries are the only game. Safety is not everything. Safety is the ONLY thing!
Q3: What if these risk-averse buyers prefer foreign bonds?
A3: That could happen only if another nation's bonds become safer than ours. And that can happen only if that nation's infrastructure becomes better than ours. And that can happen only if US voters worry more about our "national debt" / outstanding Treasuries / TPPS than they worry about China's fast-growing infrastructure.So far, China is still hoarding its mountain of low-interest US bonds!
Added (1). Q4: Won't we need higher tax rates to pay for infrastructure?
A4: Contrary to the myth, our money tree does not need our taxes to finance government. (The IRS shreds all cash payments!) Government spends first and then, ONLY to avoid inflation, taxes almost all of it back. (How else did the first tax payer get money for the first tax payment?)
Every federal dollar spent is finally pocketed either by the IRS or by a private saver. Our annual budget deficit is exactly equal to the annual private sector savings increase. Yes, DEFICITS = SAVINGS! No deficits, no savings! Our so-called "national debt" / outstanding Treasuries is really our Total Private Sector Savings (TPSS). The dreaded "Debt Clock" is really the "Savings Clock"!
Since bank loans must be repaid with interest, budget deficits are the ONLY source of private sector savings. We need to DOUBLE our deficit spending / "borrowing" / saving / consumer demand to guarantee prosperity! Our ratio of "national debt" / outstanding T
Added (2). Treasuries / TPSS plus total bank deposits to GDP is less than half of the comparable figure for China. Our M2/GDP ratio is half of Switzerland's.
Debts for our grandchildren? If we employ idle resources, we leave them assets such as Lincoln's railways and telegraph, the TVA, community hospitals, the Interstate Highway System, and the internet,
Q5: How much should Congress tax and spend?
A5: Ideally, Congress should tax just enough to prevent inflation and should spend almost enough to cause full employment and inflation. Result: low inflation and low unemployment, Heaven on Earth!
Instead, bribed by Wall Street, Congress taxes as little as possible, enriching the rich, and spends as little as possible, impoverishing the rest of us by restricting private sector savings / consumer demand. Just as quacks killed George Washington by bleeding his "bad blood", Congress is destroying our rising generations by cutting (maybe entirely!) deficits / private sector savings / consumer dem
Added (3). Demand.
Result: recessions, high unemployment rates, a reserve army of unemployed labor, a growing under-class, a scared work force, declining wages, still lower consumer demand, etc., etc.: a downward spiral of despair. Growing inequality will create a land of slums and gated communities: Hell on Earth!
Q6: How should one vote?
A6: Vote for someone who NEVER worries about the "national debt" / outstanding Treasuries / TPSS / consumer demand and ALWAYS worries about the 20% of unemployed and underemployed Americans who draw benefits forever instead of building infrastructure to stay ahead of China.
Unfortunately, half of our voters have below-average intelligence. And there's no cure for that.
Q7: "I have to live within my means. Why doesn't Congress balance its budget?"
A7: Moron! If you could legally print dollars, why would you balance your budget? Our money tree only needs to balance full employment against inflation. Why can't you unders
Added (4). Understand something so simple?
Added (5). Eliot K.: For the 99%, A5 is the answer. The 1% have to have their estates heavily taxed to prevent aristocracy.
См. статью: Can you find a flaw in this logic?