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)
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Brown University political economy professor Marc Blyth, author of "Austerity" (Oxford U. Press, ~ $15 at Amazon), which destroys the theories of Austrian economists Hayek, von Mises, and Schumpeter.
UMKC Economics Department Chair, Dr. Stephanie Kelton, at NewEconomicPerspectives.org
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Q1: From the standpoint of the taxpayer, is our so-called "national debt" really a debt?
A1: No, it is not really a debt 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 outstanding Treasuries (TVOT).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" / TVOT has never been repaid and never will be repaid. The TVOT must grow with the economy.An economy without an adequate supply of risk-free Treasuries is not only undesirable but unthinkable!
We leave our grandchildren not debts but assets: infrastructure! Schools, environment, and an energy supply. We must fully employ idle resources as did Lincoln (railways, telegraph, and land-grant colleges), "Teddy" Roosevelt (Panama Canal), and FDR (TVA, the Interstate Highway System, and Social Security),
2. The taxpayer does not pay interest on the debt.
Yes, the bond-holders receive 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 has no burden.
The Treasury can always redeem a security by selling another. If necessary, it can create an artificial shortage and demand by buying securities on the open market with keystrokes, as with "quantitative easing". The Treasury has no burden like a home 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)
Under our fiat currency and floating foreign exchange rate regime, which we have had since 1971, there is no reason to believe that budget deficits cannot again be successfully financed by keystrokes.
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. Regulate the banks!
Louis XVI had a wheat shortage. The German "Weimar Republic" deliberately caused inflation to avoid paying war reparations in gold. Zimbabwe is the victim of corruption.An oil embargo caused stagflation. The Eurozone does not have our fiat currency. None of that stuff applies to us.
Added (1). Q2: Could bond-holders make a run on Treasuries?
A2: For the risk-free interest that they demand, where would they put $11T? The Wall Street casino? GM bonds? Illinois bonds? Detroit bonds? CDs? Safety is not everything. Safety is the ONLY thing!
Q3: Is there a danger that risk-averse buyers could prefer foreign sovereign bonds?
A3: Yes, indeed! So far, over 60% of the world's reserve currencies are in dollars and half of all US Treasuries are held by foreigners. But that could change if China's sovereign bonds become safer than ours. And that could happen if China's infrastructure (and therefore its productivity) becomes better than ours. And that could happen if US voters worry more about our "national debt" / TVOT than they worry about China's fast-growing infrastructure and our failing sewers and falling bridges. America! Wake up!
Q4: Won't we need higher tax rates to pay for infrastructure?
A4: Our money tree does not need our taxes for spending. Government first creates and sp
Added (2). And spends and then, only to avoid inflation, the IRS repossesses almost all of it, which is then destroyed. (Cash payments are shredded!) Think about it: how did the first tax payer get money for the first tax payment?
Every federal dollar that is spent and not repossessed by the IRS is saved by the private sector. 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" is really our Total Private Sector Savings (TPSS). The dreaded "Debt Clock" is really the "Savings Clock"!! The debt scare is a fraud on the public!
Since bank loans must be repaid with interest, budget deficits are the ONLY source of private sector savings. We need to DOUBLE our "national debt" / TVOT / TPPS / Investment to guarantee prosperity! Our ratio of "national debt" plus total bank deposits to GDP is less than half of the comparable figure for China. Our M2 (money supply) / GDP ratio is half o
Added (3). Is half of Switzerland's ratio and one quarter of Hongkong's.
Q5: How much should Congress tax and spend?
A5: Ideally, Congress should tax barely enough to prevent inflation and should spend almost enough to cause full employment and inflation. Result: low unemployment and low inflation. Heaven on Earth!
Instead, Congress, bribed by Wall Street, taxes as little as possible, enriching the rich, and spends as little as possible, impoverishing the rest of us by restricting "national debt" / TVOT / TPSS / Investment / Consumer Demand. Just as quacks killed George Washington by bleeding "bad blood", Congress is destroying our rising generations by cutting (maybe entirely!) deficits / private sector savings increase.
Result: recessions, high unemployment rates, a reserve army of unemployed labor, a growing under-class, a frightened 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 c
Added (4). Communities: Hell on Earth!
Q6: How should one vote?
A6: Vote for someone who NEVER worries about the "national debt" / TVOT / TPSS / Investment 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, exactly half of our voters have below-average intelligence. And there's no cure for that.
Q7: "I have to balance my budget. 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 understand something so simple?
Added (5). Ragnar: The Fed is trying and failing to increase inflation. You are barking up the wrong tree.
Added (6). Steel: Your previous response was a non-answer to my answers A1 to A7. If you can't deal with it don't deal with it.
См. статью: Can you find a flaw in this logic?