[Puffer Fish]

The current U.S. national debt is over $33.5 Trillion, as of October 2023.
This is a 47.5% increase above what it was 4 years ago.

That is $199,404 per each household filing a tax return, or about $148,800 per each individual person filing a tax return.

Keep in mind that the bottom fifty percent of households filing income taxes, with incomes below $42,184, only paid 2.3% of the total income taxes collected (in 2020).
Not counting the top 1%, the rest of the top fifty percent paid 55.3% of the total income taxes.
This means that households with incomes between about $42,000 and $548,000 pay around half the taxes. And so each of these "middle-income" households will be responsible for an average of about $200,000 of the debt.

If we factor in that household does not get to keep all of its income and must pay taxes, that $200,000 is more like the equivalent of $260,000, from the perspective of that household if they were not liable for paying taxes. It would take them that many years of income to pay off their share of the debt.

Interest rates have also been rapidly rising, which will eat into the government budget, to pay the return rates on this debt. The current yield on a 20-year U.S. Treasury bond has recently gone above 5%.
5% of 33.5 Trillion is 1.675 Trillion, which is about 34% of the government's annual revenue. That is percent of the tax revenue going just to make interest payments on the debt.

[Politics_Observer]

@Puffer Fish

Well, this is because the Republicans want to keep up with the tax giveaways to the rich. They want to cut spending, while also cutting taxes for the rich. If you want to bring the debt down, you need to raise taxes to bring in more revenue to pay the debt down. If you rein in government spending, that could hurt creating jobs. Republicans keep talking about spending being the problem while not addressing the fact their tax giveaways to wealthy contributed to this. And, they do this intentionally.

[Puffer Fish]

There will be tax increases, including on all levels of the middle class, and there will be painful government spending cuts.

At some point this is going to very obviously near a crisis. Either that or inflation will start ramping up, as the government finds itself in a vicious spiral of inflation, and rising interest rates in response to that inflation, and even more exponential inflation if the Federal Reserve attempts to keep rates down in the face of higher inflation. (Also another separate spiral of inflation as the rest of the world begins dumping the U.S. dollar in response to high inflation)

[Politics_Observer]

@Puffer Fish

I don't think it necessarily has to be that way. The main reason for our debt is primarily due to the tax giveaways to the rich. The Republicans, who represent ONLY the wealthy, want it that way, that way the wealthy get richer than they are now.

Today, Bobby Kogan, Senior Director of Federal Budget Policy at the Center for American Progress, published a report stating that, "Tax cuts initially enacted during Republican trifectas in the past 25 years slashed taxes disproportionately for the wealthy and profitable corporations, severely reducing federal revenues." In fact, "these tax cuts have added $10 trillion to the debt since their enactment" and "are responsible for more than 90 percent of the increase in the debt ratio if you exclude the one-time costs for responding to COVID-19 and the Great Recession."

Kogan concludes that, "If Congress wants to decrease deficits, it should look first toward reversing tax cuts that largely benefited the wealthy." However, Extreme MAGA Congressional Republican's proposals would add over $3 trillion to the debt with tax giveaways skewed to the wealthy and large corporations while raising taxes for working families.

https://www.presidency.ucsb.edu/documen ... le-for-the

The rich used to pay taxes. Now they loan money to the US government – at a profit that everyone else pays for.

The dire warnings of fiscal hawks are once again darkening the skies of official Washington.

They’re demanding that the $31.4tn federal debt be reduced and government spending curtailed – thereby giving cover to Republican efforts to hold America hostage by refusing to raise the debt ceiling.

It’s always the same when Republicans take over a chamber of Congress or the presidency. Horrors! The debt is out of control! Federal spending must be cut!

When they’re in power, they rack up giant deficits, mainly by cutting taxes on corporations and the wealthy (which amount to the same thing, since wealthy investors are the major beneficiaries of corporate tax cuts).

Then when Democrats take the reins, Republicans blame them for being spendthrifts.

Not only is the Republican story false, but it leaves out the bigger and more important story behind today’s federal debt: the switch by America’s wealthy over the last half century from paying taxes to the government to lending the government money.

This backstory needs to be told if Americans are to understand what’s really happened and what needs to be done about it. Republicans won’t tell it, so Democrats (starting with Joe Biden) must.

A half century ago, American’s wealthy helped finance the federal government mainly through their tax payments.

Tax rates on the wealthy were high. Under Republican president Dwight Eisenhower, they were over 90%. Even after all tax deductions, the wealthy typically paid half of their incomes in taxes.

Since then – courtesy of tax cuts under Ronald Reagan, George W Bush and Donald Trump – the effective tax rate on wealthy Americans has plummeted.

Not only has their income tax rate dropped but other taxes that hit them hardest, such as the corporate tax, have also declined.

Even as the rich have accumulated unprecedented wealth, they are now paying a lower tax rate than middle-class Americans.

Trump’s 2017 tax cut – largely a handout to the rich – helped push the tax rate on the 400 wealthiest households below the rates for almost everyone else.

By 2018, the 400 wealthiest American households paid a lower total tax rate – including federal, state and local taxes – than any other income group. Their overall tax rate was only 23%. It had been 70% in 1950.

Middle-class and poor families didn’t benefit from the drop in income and corporate taxes. They now pay more in payroll taxes (which finance Medicare and social security) than previously, so their overall taxes have remained fairly flat.

One of the biggest reasons the federal debt has exploded is that tax cuts on corporations and wealthier Americans have reduced government revenue.

In the first full year of the Trump tax cut, the federal budget deficit increased by $113bn while corporate tax receipts fell by about $90bn, which would account for nearly 80% of the deficit increase.

Meanwhile, America’s wealthy have been financing America’s exploding debt by lending the federal government money, for which the government pays them interest.

As the federal debt continues to mount, these interest payments are ballooning – hitting a record $475bn in the last fiscal next year (which ran through September). The Congressional Budget Office predicts that interest payments on the federal debt will reach 3.3% of the GDP by 2032 and 7.2% by 2052.

The biggest recipients of these interest payments? Not foreigners but wealthy Americans who park their savings in treasury bonds held by mutual funds, hedge funds, pension funds, banks, insurance companies, personal trusts and estates.

Hence the giant half-century switch: the wealthy used to pay higher taxes to the government. Now the government pays the wealthy interest on their loans to finance a swelling debt that’s been caused largely by lower taxes on the wealthy.

This means that a growing portion of everyone else’s taxes is going to wealthy Americans in the form of interest payments, rather than paying for government services that everyone needs.

So, the real problem isn’t America’s growing federal budget deficit. It’s the decline in tax revenue from America’s wealthy combined with growing interest payments to them.

Both are worsening America’s already staggering inequalities of income and wealth.

What should be done? Isn’t it obvious? Raise taxes on the wealthy.

https://www.theguardian.com/commentisfr ... 314tn-debt

[Fasces]

Top 12 Countries with the Highest Debt-to-GDP Ratios (%)
Venezuela — 350%
Japan — 266%
Sudan — 259%
Greece — 206%
Lebanon — 172%
Cabo Verde — 157%
Italy — 156%
Libya — 155%
Portugal — 134%
Singapore — 131%
Bahrain — 128%
United States — 128%

Top 12 Countries with the Lowest Debt-to-GDP Ratios (%)
Brunei — 3.2%
Afghanistan — 7.8%
Kuwait — 11.5%
Congo (Dem. Rep.) — 15.2%
Eswatini — 15.5%
Burundi — 15.9%
Palestine — 16.4%
Russia — 17.8%
Botswana — 18.2%
Estonia — 18.2%

[Puffer Fish]

Top 12 Countries with the Highest Debt-to-GDP Ratios (%)
Venezuela — 350%
Japan — 266%
Sudan — 259%
Greece — 206%
Lebanon — 172%
Cabo Verde — 157%
Italy — 156%
Libya — 155%
Portugal — 134%
Singapore — 131%
Bahrain — 128%
United States — 128%

Let me point out that there is some reason to believe a country with higher poverty levels cannot afford to sustain a debt-to-GDP ratio as high. Taking a certain percent of someone's income who is middle class is very different from taking that same percentage of someone else's income who is barely able to survive on what they have.

Japan is really a very unique case and I don't think is fair to include in statistics like that. We would need to have a much more detailed discussion about Japan. Their society is very hard working and is facing demographic decline, which both helps counteract inflation in some ways (due to deflating real estate market) while at the same time presenting unique long-term challenges.

As for Singapore, this link claims that Singapore can be seen as actually having no net debt, when their assets are counted.
https://commodity.com/data/singapore/de ... 20at%20all.

Most all of those other countries on the list (like Portugal, Greece, Libya, Italy) have troubled economies and many young people have trouble finding decent jobs.

[Steve_American]

There will be tax increases, including on all levels of the middle class, and there will be painful government spending cuts.

At some point this is going to very obviously near a crisis. Either that or inflation will start ramping up, as the government finds itself in a vicious spiral of inflation, and rising interest rates in response to that inflation, and even more exponential inflation if the Federal Reserve attempts to keep rates down in the face of higher inflation. (Also another separate spiral of inflation as the rest of the world begins dumping the U.S. dollar in response to high inflation)

Lurkers, P_F and I have gone round and round on this topic.

The US meets the 3 criteria to be a sovereign currency nation. [Issue its own fiat currency, float that currency and do not peg it to anything, and never borrow money in any other currency.] This means that its national debt can easily be paid off with newly created electronic dollars. This would likely be inflationary, but maybe not. The corps and the rich who own the debt want to save it. They can not really buy anything more. They already spend millions/yr., and can not think of anything more to buy. They do want to invest it, but have limited options of good places to invest it. E.g., they can buy US real estate, but that just drives up prices in a bubble that can burst.

The MMT economic theory teaches that the national debt of sovereign currency nations is not a problem because it is just a record of how many dollars the Gov. has spent into the economy and not taxed back out yet. Also, the central bank can control interest rates and the Treasury can choose not to sell bonds that have a high interest rate. Instead, it can choose to not sell bonds, when it deficit spends (this would require a change in the law, but in a crisis, this will seem like a good idea). This is what the MMTer, Stephanie Kelton, has said many times in videos.

P_F believes in the old economic theories that functionally still assume that the world is on the gold standard. This would mean that the US needs to get dollars to spend dollars. However, Nixon ended the gold standard in 1971. OTOH, in about 2000 the EZ was created, and the euro was invented. Nations in the EZ, and to a lesser extent all nations in the EU, do need to get euros or their own currency to spend. They would have to leave the EU and get their own currency to get out from under the restrictive EU debt rules to meet the 3 criteria of a sovereign currency nation to be like the US.

I, personally, believe that all economic theories do not pay enough attention to the effect that international trade has on inflation. That is, nations with a chronic trade surplus will rarely have an inflation problem, but such nations are rare. OTOH, nations with a chronic trade deficit will very often have a problem with inflation. The US has had a chronic trade deficit since WWII, but it is special because the dollar is the world's reserve currency. So, foreigners want to save money as dollars, because dollars are better for this than any other currency.

Lurkers, I also think that P_F is worrying about the wrong thing. IMHO, the world is already in a climate change crisis, and he is going on about the dollar and debt crisis, that is not happening yet, and may not happen for a decade, and may not happen at all if MMT is a better theory, because the old theories are total Bullshit based on false premises. Also, the US will need to use MMT and deficit spend on the many programs that are meant to solve the climate change crisis.

[Puffer Fish]

The US meets the 3 criteria to be a sovereign currency nation. [Issue its own fiat currency, float that currency and do not peg it to anything, and never borrow money in any other currency.]

To me this seems a bit circular in logic. Argentina was forced to borrow in other currency because its currency was not strong enough to borrow in Argentine pesos. Just to let you know, a country doesn't necessarily have to have an (or the) international reserve currency to be able to borrow money in its own currency.
And probably the whole main reason it had to borrow in alternate currency rather than its own was because the rest of the outside world had limited trust in Argentine currency due to a troubled history of high inflation. (Argentina had a devastating period of hyperinflation from 1975 to 1991)

Even in 2003 their inflation was quite high at 13.44 % and stayed around 8 to 9% between 2005 to 2013.
At those continued rates, and with their history, it would have been very difficult and impractical to borrow on the international market in their own currency.

[Puffer Fish]

The MMT economic theory teaches that the national debt of sovereign currency nations is not a problem because it is just a record of how many dollars the Gov. has spent into the economy and not taxed back out yet.

The issue is when it becomes unrealistic to ever tax that money back. You can't keep deferring it forever. And the debt can't keep on rising forever. At this point, the U.S. would struggle to maintain a balanced budget while simultaneously paying the interest to maintain the debt (keeping it at its current level).

 

Also, the central bank can control interest rates and the Treasury can choose not to sell bonds that have a high interest rate. Instead, it can choose to not sell bonds, when it deficit spends (this would require a change in the law, but in a crisis, this will seem like a good idea). This is what the MMTer, Stephanie Kelton, has said many times in videos.

No, the central bank cannot "control" interest rates. You don't seem to be capable of comprehending that.
Not when it comes to trying to deal with inflation in a long-term way.

Printing more money and lending it out at low rates to subsidize the cost of borrowing creates inflation (inflationary pressure might be more accurate to say).

If the Treasury chooses not to sell bonds with a high interest rate, it will make it hard to find anyone to buy them in the private sector. The market is already oversaturated with government debt.

In addition, with shorter bonds (Treasury notes) having a lower interest rate, it can also make the government's debt more volatile, since when those bonds soon become due the government is going to have to find other buyers (lenders).

When there's inflation, it puts pressure on interest rates to rise. Lenders typically don't want to lend money when the return is lower than the rate of inflation, it means they are losing money. With pressure on interest rates to rise, it makes it even more difficult for the central bank to hold down interest rates without causing more inflation.

[Puffer Fish]

Lurkers, I also think that P_F is worrying about the wrong thing. IMHO, the world is already in a climate change crisis, and he is going on about the dollar and debt crisis, and may not happen for a decade,

You seem to be trying to deflect and change the issue.

Of course as someone on the Left you believe the "climate crisis" is worse than the looming debt crisis. I believe the opposite.
When the economy implodes and you have something even worse than the 2007 Great Recession, very few people are going to be concerned about the climate.

If it's so easy to pay off the debt, why not start right now?
How about just sticking to a balanced budget and start paying down $25 billion of the debt a year? (that's only a half percent of the annual tax revenue)
At that rate is should take 1,340 years to pay it off.

Of course, that not counting the 1.3 to 2 trillion dollars the U.S. is going to need to pay every year to go towards the interest payments.

Let me just make it clear to people how much a trillion is
1 000 000 000 000

A trillion seconds would add up to 31,709 years.
Even if I gave you 100 dollars per each second, you would never live to have a trillion dollars.

If you took a large child's sandbox found at the park and were able to count up all the tiny grains of sand, there would still be a little less than a trillion grains of sand.

[Potemkin]

You seem to be trying to deflect and change the issue.

Of course as someone on the Left you believe the "climate crisis" is worse than the looming debt crisis. I believe the opposite.
When the economy implodes and you have something even worse than the 2007 Great Recession, very few people are going to be concerned about the climate.

If it's so easy to pay off the debt, why not start right now?
How about just sticking to a balanced budget and start paying down $25 billion of the debt a year? (that's only a half percent of the annual tax revenue)
At that rate is should take 1,340 years to pay it off.

Of course, that not counting the 1.3 to 2 trillion dollars the U.S. is going to need to pay every year to go towards the interest payments.

Let me just make it clear to people how much a trillion is
1 000 000 000 000

A trillion seconds would add up to 31,709 years.
Even if I gave you 100 dollars per each second, you would never live to have a trillion dollars.

If you took a large child's sandbox found at the park and were able to count up all the tiny grains of sand, there would still be a little less than a trillion grains of sand.

So in other words, it’s a little bit less than the cost of invading and occupying Iraq in 2003-2010?

Sounds like a bargain then.

[Steve_American]

You seem to be trying to deflect and change the issue.

Of course as someone on the Left you believe the "climate crisis" is worse than the looming debt crisis. I believe the opposite.
When the economy implodes and you have something even worse than the 2007 Great Recession, very few people are going to be concerned about the climate.

If it's so easy to pay off the debt, why not start right now?
How about just sticking to a balanced budget and start paying down $25 billion of the debt a year? (that's only a half percent of the annual tax revenue)
At that rate is should take 1,340 years to pay it off.

Of course, that not counting the 1.3 to 2 trillion dollars the U.S. is going to need to pay every year to go towards the interest payments.

Let me just make it clear to people how much a trillion is
1 000 000 000 000

A trillion seconds would add up to 31,709 years.
Even if I gave you 100 dollars per each second, you would never live to have a trillion dollars.

If you took a large child's sandbox found at the park and were able to count up all the tiny grains of sand, there would still be a little less than a trillion grains of sand.

Just to the part I highlighted.

It is easy only is it is done with newly created electronic dollars. P_F would call the newly "printed" dollars. This is what i said above.

I have said many times that it is impossible to pay off the debt with dollars from taxes and a surplus. P_F did you forget my many such statements? I thought I had made myself very clear.

Lurkers, as long as the US has a huge trade deficit and some people who want to save for the future in cash, not investments; running a $25B surplus as P_F suggests would in a few years cause a recession. If the policy was not changed to running a huge deficit again, the recession would soon become a 'Greater Depression' than the Great Depression.

The US has 2 choices. 1] Find a way to live with a large national debt.[Remembering that the UK, aka England, has had a national debt since 1694 that is for329 years.] Or, 2] Pay the debt off fast or slow with newly created electronic dollars.

[Steve_American]

The issue is when it becomes unrealistic to ever tax that money back. You can't keep deferring it forever. And the debt can't keep on rising forever. At this point, the U.S. would struggle to maintain a balanced budget while simultaneously paying the interest to maintain the debt (keeping it at its current level).

 
No, the central bank cannot "control" interest rates. You don't seem to be capable of comprehending that.
Not when it comes to trying to deal with inflation in a long-term way.

Printing more money and lending it out at low rates to subsidize the cost of borrowing creates inflation (inflationary pressure might be more accurate to say).

If the Treasury chooses not to sell bonds with a high interest rate, it will make it hard to find anyone to buy them in the private sector. The market is already oversaturated with government debt.

In addition, with shorter bonds (Treasury notes) having a lower interest rate, it can also make the government's debt more volatile, since when those bonds soon become due the government is going to have to find other buyers (lenders).

When there's inflation, it puts pressure on interest rates to rise. Lenders typically don't want to lend money when the return is lower than the rate of inflation, it means they are losing money. With pressure on interest rates to rise, it makes it even more difficult for the central bank to hold down interest rates without causing more inflation.

P_F, if the lenders are banks, then they are not lending their own money. Believe it or not, the law that created the Federal Res. Bank also licensed banks to create US dollars with every loan they make. This is why we can find statements like "95% of the current money supply was created by banks making loans." Is the rest a result of previous Gov. deficits? I'm asking because I don't know where the other 5% came from.

It seems to me that a bank can loan money that it creates and not worry about losing money. It gets the interest to add to its profits. It matches the payments of the principal against the asset on its books and they cancel each other out, poof, gone. I suppose that bankers act as if they are lending their own money, but they really know that is not correct, right?
. . . I'd be happy if you (or anyone) can prove to me that I'm wrong. I do not want to keep believing a false "fact".


Or maybe by 'lenders" P_F meant people who may buy a Gov. bond.
MMters assert that selling bonds is a choice. Currently it is required by a law from the days of the gold standard. It can be changed. IIRC, Pres. Lincoln had problems selling bonds and so just paid the troops with newly printed cash dollars.

[Steve_American]

To me this seems a bit circular in logic. Argentina was forced to borrow in other currency because its currency was not strong enough to borrow in Argentine pesos. Just to let you know, a country doesn't necessarily have to have an (or the) international reserve currency to be able to borrow money in its own currency.
And probably the whole main reason it had to borrow in alternate currency rather than its own was because the rest of the outside world had limited trust in Argentine currency due to a troubled history of high inflation. (Argentina had a devastating period of hyperinflation from 1975 to 1991)

Even in 2003 their inflation was quite high at 13.44 % and stayed around 8 to 9% between 2005 to 2013.
At those continued rates, and with their history, it would have been very difficult and impractical to borrow on the international market in their own currency.

P_F, do you read what I write?
So, why did Argentina need to borrow at all? I think it was the common result of having a chronic trade deficit.
Like I said, the damage that trade deficits do to a nation are ignored by most economic theories. Even, AFAIK, MMT.

I have pointed out that economists work for the rich. The rich want nations to have trade surpluses. However, if one nation has a trade surplus, some other nation must have a trade deficit. Then, the economists attack that nation for having a trade deficit.

It is very like attacking the unemployed for being lazy when the reason they don't have a job is that the Fed. is increasing unemployment to fight inflation caused by corps raising their prices to price gouge their customers, and rents are up because the Fed. drove up real estate prices with QE.

[Skynet]

As long as the Dollar is the world trade currency, the US can make debts without limits, but when it is not anymore the world currency US would be the next Japan.

[Steve_American]

P_F, if the lenders are banks, then they are not lending their own money. Believe it or not, the law that created the Federal Res. Bank also licensed banks to create US dollars with every loan they make. This is why we can find statements like "95% of the current money supply was created by banks making loans." Is the rest a result of previous Gov. deficits? I'm asking because I don't know where the other 5% came from.

It seems to me that a bank can loan money that it creates and not worry about losing money. It gets the interest to add to its profits. It matches the payments of the principal against the asset on its books and they cancel each other out, poof, gone. I suppose that bankers act as if they are lending their own money, but they really know that is not correct, right?
. . . I'd be happy if you (or anyone) can prove to me that I'm wrong. I do not want to keep believing a false "fact".


Or maybe by 'lenders" P_F meant people who may buy a Gov. bond.
MMters assert that selling bonds is a choice. Currently it is required by a law from the days of the gold standard. It can be changed. IIRC, Pres. Lincoln had problems selling bonds and so just paid the troops with newly printed cash dollars.

Then I posted this.

P_F, do you read what I write?
So, why did Argentina need to borrow at all? I think it was the common result of having a chronic trade deficit.
Like I said, the damage that trade deficits do to a nation are ignored by most economic theories. Even, AFAIK, MMT.

I have pointed out that economists work for the rich. The rich want nations to have trade surpluses. However, if one nation has a trade surplus, some other nation must have a trade deficit. Then, the economists attack that nation for having a trade deficit.

It is very like attacking the unemployed for being lazy when the reason they don't have a job is that the Fed. is increasing unemployment to fight inflation caused by corps raising their prices to price gouge their customers, and rents are up because the Fed. drove up real estate prices with QE.

That was a month ago. So far no one has replied to either post (in any detail, P_F did but he used the word "this" to refer to what he disagreed with, so nobody knows just what he disagreed with].

[Steve_American]

You seem to be trying to deflect and change the issue.

Of course as someone on the Left you believe the "climate crisis" is worse than the looming debt crisis. I believe the opposite.
1] When the economy implodes and you have something even worse than the 2007 Great Recession, very few people are going to be concerned about the climate.

2] If it's so easy to pay off the debt, why not start right now?
How about just sticking to a balanced budget and start paying down $25 billion of the debt a year? (that's only a half percent of the annual tax revenue)
At that rate is should take 1,340 years to pay it off.
Of course, that not counting the 1.3 to 2 trillion dollars the U.S. is going to need to pay every year to go towards the interest payments.

Let me just make it clear to people how much a trillion is
1 000 000 000 000

A trillion seconds would add up to 31,709 years.
Even if I gave you 100 dollars per each second, you would never live to have a trillion dollars.

If you took a large child's sandbox found at the park and were able to count up all the tiny grains of sand, there would still be a little less than a trillion grains of sand.

1[ P_F, which crisis would you rather have?
One where real stuff like food and fuel, are not enough to feed even 75% of the population at the 2000 cal./day level, and with not enough fuel to heat the homes in winter.

OR

One where the shortage is of something like points on the scoreboard?
Money is not gold, it is now like points on a scoreboard. The Gov. can temporarily solve a shortage of money like it did during covid and just send everyone a check.
Yes, this can be inflationary. So what?

I'd rather not live in a time when people around me have guns and ammo and ARE STARVING. There is no easy fix when crops fail because of a drought make worse by high temps or the crops were washed away by massive floods like happened in Pakistan recently.
_________________________________-,__________________________________-

2] I have explained several times why the US Gov. needs to have a deficit every year (given current economic conditions). I guess I need to do it again.

GDP is equal to the total incomes of every person and corp in the nation. When the GDP falls in a Recession, it means someone's income is less.
Incomes are reduced when money leaks out of the economy. There are 3 main ways this can happen.
a] The nation has a trade deficit, so the money leaves the US and is saved by a foreigner.
b] Someone in the US parks some of his income in a savings acc.
3] More dollars are repaid in a week to banks for old loans than the total of new loans that week.
If the US Gov. had a balanced budget, then the only for those leakages to be replaced is for banks to be making enough loans to match the leakages.
If the leakages are not matched somehow, then someone's income falls. So, by definition the GDP falls.
If the GDP falls for 2 straight quarters, by definition, a Recession has started.
If the Gov. has a balanced budget for a few years, then to avoid a recession, banks need to make a lot of loans to match the total of the trade deficit and people's and corps' savings. At some point, history shows, the people are required to stop borrowing because they can't add to the payments they must make. THIS STARTS A RECESSION OR DEPRESSION.

The best way to avoid such recessions is for the Gov. to replace the leakages with deficit spending. The great thing about Gov. so-called debt is that it never needs to be paid down, as long as each bond is repaid on time.

I know that you do not accept these conclusions. I think this is because your brain accepts the model or theory that functionally assumes that the gold standard is still in force.

Dr. Keen says that economics has not changed much for over 140 years, since about 1883.

Since 1883 in 1913, the US with a law created the US Federal Reserve Bank. This law licensed banks to create real dollars when they made loans. This ended the usefulness of the "loanable funds theory". Economists didn't change the theory.

Since 1913, the gold standard was paused in WWI and again in WWII. After WWII the Brenton Woods system pegged all currencies to the dollar and kept the US on the gold standard at $35/troy oz of gold.
The US promised to have a trade deficit and buy the stuff made by everyone. [My source for this is Peter Ziehan.] This allowed most nations to have a trade surplus because the US had a huge trade deficit.
In 1971 this US trade deficit became unsustainable (likely because the US had to stop exporting oil and needed to import it). So, the US ended gold payments. This ended the gold standard for the whole world. This began the current system of fiat currencies and floating exchange rates. Economists didn't change the theory.

Worse yes, in about 1998 the EU was formed based on this totally wrong theory. MMTers pointed to the problems and warned them that it would be OK, if not good, until the 1st crisis, and then the EU would not be able to react to the crisis and would finally have to break its rules. This turned out to be a totally accurate prediction after 2007.

The theory you, P_F, learned in college was not changed to reflect reality. At this point the theory is worse than useless, it is actually damaging economies and keeping the world from fighting climate change, with the full capabilities of the many nations.

[Puffer Fish]

Yes, this can be inflationary. So what?

As I explained to you, inflation drives up interest rates, making it more expensive to maintain the debt, and thus presumably requiring even more inflation to pay the bills. This can lead to a rapid inflationary spiral.
Are you still going to say "So what?" if there's a looming danger this could lead to a lot of inflation?

[Steve_American]

As I explained to you, inflation drives up interest rates, making it more expensive to maintain the debt, and thus presumably requiring even more inflation to pay the bills. This can lead to a rapid inflationary spiral.
Are you still going to say "So what?" if there's a looming danger this could lead to a lot of inflation?

And I explained to you that the theory that you learned (probably in college) was formulated in about 1883, and it was not changed in about 1814 when the Fed Res was created and so the loanable funds part of the theory became invalid, and it was not changed in about 1971 when the US stopped making payments in gold, making a lot more of the theory invalid.

Many MMTers, including the investment banker, Warren Mosler, assert that the US Gov. can (and should) not sell bonds at all or set the interest rate on them near or even at zero%.
This is because selling bonds was started under the gold standard to keep the cash money supply lower to protect the nation's gold supply from a run on its gold. With a fiat currency that is floated internationally, there is no need to protect the gold supply; so, there is no longer a need to sell bonds. All MMTers assert that selling bonds is just a choice.

You keep asserting things based on your theory of economics. I keep telling you that that theory is old and invalid because its proofs use false premises.
You asserted there that something I proposed would cause inflation, I have shown you why this is likely not true. However, in this post you didn't specify just what I had proposed was going to cause inflation. So, I could not disagree with that. I do disagree that inflation must result in higher interest rates on US bonds.

You have totally failed to prove your points; you just assert them based (I suppose) on your theory or on expert opinions you've seen that are based on your theory.

So again, the theory you believe is based on logic and uses false premises to prove its conclusions. It was (according to Dr. of econ Steve Keen) formulated in about 1883 and has not changed much since then despite major changes to the way money is handled in the economy. Specifically, that the Fed Res now licenses banks to create dollars when they make loans, and the dollar is no longer backed by gold or anything, etc.

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