[Steve_American]

In war time nations routinely deficit spent, borrowing as necessary.

During the 20th century and before in wartime nations deficit spent to buy what was necessary for the war. For most of the century the world was on the gold standard. However, I'm looking at it from an MMT POV.

OK, nations needed to win so they deficit spent. But then, it seemed like a good idea to run a surplus to pay back those bonds. i.e., get the national debt back in line with the gold reserves the nation held.

During the war the economy was not making consumer goods and yet the people were being paid well. The result was the people bought war bonds. The people saw these bonds as just another form of savings, like money in a savings account at a bank.

After the was was won, the Gov. thought it needed to [as I said] pay off those bonds because it lacked the gold to cover them. For, example, in the US the Repubs controlled the Government. They raised taxes or cut spending and ran a surplus all through the 20s from 1921 to '29. Then there was a recession that turned into the Great Depression. Also during the 20s the stock market took off, fueled by margin credit. Perhaps the mass of the people also increased their debt load. MMT says that they needed to because the Gov. surplus was sucking dollars out of the Public Sector. The comp. and people of the sector did not want to dip into their savings [war bonds] but they had to pay the taxes that were sucking dollars out of the economy.

[In a way we might think of this as a Great Con. In the war the Gov. deficit spends to get the people to work more to win the war. To do this it lets the people earn more dollars which they can't spend. However, after the war the Gov. turns around and cuts spending &/or raises taxes to take those dollars back away from the people. The reason is the gold standard requires this. But, isn't it a cheating thing for a person to bribe another to do something and then later to just take the bribe money back? So, why is it OK for the Gov. to do this?]

Getting back to my story --- So, during the 20s the Gov. is running a surplus, sucking dollars out of the economy, but the people want to keep the dollars they were paid (in good faith?) during the war. The result is the people try to keep their savings intact. They cut spending or borrow instead of dipping into their savings. As long as the banks keep extending credit the banks are increasing the money supply and this increase hides the damage the surplus is doing to the economy. Eventually, the shit hits the fan. The stock market has a bad day (maybe because the people have cut their spending so much that corp. profits suffer), this forces margin calls, this causes the banks to stop extending credit, this means the people can't finance the part of the tax payments that are paying off the war bonds, i.e. the surplus. This means those taxes start taking actual dollars out of the economy without spending putting them back, and suddenly the Great Depression starts. MMT asserts that the surpluses were the ultimate cause the Great Depression.

My point is --- MMT says that the problem is not so much the deficit spending that causes inflation, the problem is the idea that at some point it is *necessary* to stop borrowing and start repaying some of those bonds (by not just rolling them over). Now that most nations are using fiat currency, it is no longer necessary to do this. Why not just let the debt* keep rising without limit? As long as inflation is not a problem, what is the problem? And if inflation becomes a problem this is the signal that the Gov. needs to increase taxes. It means that raising taxes will not result in a recession** if it is done carefully. I suppose this means that some board of MMT economic experts [at the Fed. Res. Bank?] need to be given the power to impose a surtax added to every person's and every company's tax bill. Only un-elected experts have the freedom to fine tune this without being swayed by political pressures. This is, of course, unconstitutional, but it is sort of like the power to raise interest rates that the Fed. was given.

MMT asserts that the deficit and national debt are the only way that all the people can save at the same time. Without the Gov. creating dollars this way, all savings must come from the savings of someone else [or by someone borrowing from a bank, which creates a contract with a negative impact on the money supply that exactly offsets the positive effect of the creation of those dollars by the loan in the 1st place. That is someone went into debt to create the dollars so someone else can save them.]

The alternative is to cause a recession or depression someday because the Gov. again decides to run a surplus for several years in an effort to reduce the national debt. This and the one just below are really the only alternatives other than to default on on some of the debt [which is a truly terrible, horrible, catastrophic idea]. The only other alternative is the halfway measure of reducing the deficit to some small amount forever, and letting economic growth reduce the percentage of debt to GDP. This is just stopping the practice of letting all the people save more at the same time; and replacing it with making the economy a zero sum game again. Why is this better?


.* . Alternately, instead of borrowing to pay bills the Gov. could, for example, just spend newly created dollars. Maybe 1 such new dollar for every 2 borrowed. Again this ratio could/should be fine tuned by the board of MMT economic experts.
** . Again MMT asserts that this can be proven deductively if the right assumptions are made. Because this has never been tried, the experiment has not been done, so this is not a sure thing.

[jimjam]

Why not just let the debt* keep rising without limit?

At $21,000,000,000,000 + is this not what we are doing?

Certainly Scott Pruitt is doing his part in adding to the debt. Witness his recent expenditure of $1,560 for 12 "special" pens @$130 each. Must be one helluva pen

[quetzalcoatl]

It's necessary to unpack the concepts of deficits and debt as they apply to public/private finance.

It's quite unfortunate that the word "debt" is used to identify two unrelated monetary concepts. In fact, as an accounting identity, public debt is complementary to private debt. That is, they don't sum up; they have opposite signs.

Debt in sovereign finance is causally unrelated, in terms of actual monetary operations, to annual operating "deficits." (Scare quotes are necessary, since "deficit" has a different meaning for a currency-issuer.) In your typical household finance scenario, operating deficits are financed by borrowing, and the accumulated total is your "debt." In sovereign finance, deficits do not finance anything at all. The spending, taxing, and bond-issuing functions are operationally independent.

Thus, year-to-year "deficits" don't add up and accumulate as an overhanging debt. The debt clock posted on signs and certain websites is an imaginary construct - basically a propaganda tool. In talking about economics, remember that propagandists live and die by the metaphor. "Overhang" is a big scary word, and that's why they use it. "Insolvency" is a big scary word, which is why it's applied to Social Security - even though a currency-issuer cannot be forced into insolvency over claims denominated in that currency.

Here's the key concept: there is no operational necessity to issue debt to offset so-called "deficit" spending. It's an institutional holdover holdover (or tradition, so to speak) that will eventually be abandoned. Treasuries need only be issued in amounts sufficient to accommodate the public's desire to save.

What we call debt (for a currency-issuer) is not actually debt at all, but simply a means to provide safe interest bearing instruments for private citizens or other governments. It doesn't finance public spending, for the same reason that taxes do not fund public spending.

The "national debt" is a political construct, not an economic one. The average treasury maturity is about six years, which means we are continuously paying off the national debt (on average) every six years.

If you're scared about the national debt, simply stop issuing bonds or issue fewer bonds. Either way, it has no effect on you, your children, or grandchildren. It's a policy choice, pure and simple.

What DOES have an effect on you, your children, and grandchildren is what you choose to spend (or not spend) this money on.

[Crantag]

It's necessary to unpack the concepts of deficits and debt as they apply to public/private finance.

It's quite unfortunate that the word "debt" is used to identify two unrelated monetary concepts. In fact, as an accounting identity, public debt is complementary to private debt. That is, they don't sum up; they have opposite signs.

Debt in sovereign finance is causally unrelated, in terms of actual monetary operations, to annual operating "deficits." (Scare quotes are necessary, since "deficit" has a different meaning for a currency-issuer.) In your typical household finance scenario, operating deficits are financed by borrowing, and the accumulated total is your "debt." In sovereign finance, deficits do not finance anything at all. The spending, taxing, and bond-issuing functions are operationally independent.

Thus, year-to-year "deficits" don't add up and accumulate as an overhanging debt. The debt clock posted on signs and certain websites is an imaginary construct - basically a propaganda tool. In talking about economics, remember that propagandists live and die by the metaphor. "Overhang" is a big scary word, and that's why they use it. "Insolvency" is a big scary word, which is why it's applied to Social Security - even though a currency-issuer cannot be forced into insolvency over claims denominated in that currency.

Here's the key concept: there is no operational necessity to issue debt to offset so-called "deficit" spending. It's an institutional holdover holdover (or tradition, so to speak) that will eventually be abandoned. Treasuries need only be issued in amounts sufficient to accommodate the public's desire to save.

What we call debt (for a currency-issuer) is not actually debt at all, but simply a means to provide safe interest bearing instruments for private citizens or other governments. It doesn't finance public spending, for the same reason that taxes do not fund public spending.

The "national debt" is a political construct, not an economic one. The average treasury maturity is about six years, which means we are continuously paying off the national debt (on average) every six years.

If you're scared about the national debt, simply stop issuing bonds or issue fewer bonds. Either way, it has no effect on you, your children, or grandchildren. It's a policy choice, pure and simple.

What DOES have an effect on you, your children, and grandchildren is what you choose to spend (or not spend) this money on.

Well, I found myself disagreeing with just about every single line of that.

There is too much to try to unpack in a time-sensible manner.

I'll just cherry pick a couple things for brevity.

First, equating bond issues to savings is a clumsy effort. Treasury bonds are but one savings implement. It seems quite unreasonable to want to equate the two in anything like a straight-forward sort of way.

Social security has a trust fund, and that trust fund is being depleted. Nobody likes to talk about social security in a serious manner, no matter what their opinion is of the institution. The reality is that the funds are being spent more quickly than they are accumulating.

Your supposition that the treasury could merely print more dollars is just that, a supposition. That is, it is merely a hypothetical supposition and not based on any concrete realities. There are a lot of things that could be done, in a hypothetical world. This particular thing which you suppose could be done--and which you presume eventually will be done (although in the real world this is no kind of certainty despite your rhetoric) would likely be attended by certain consequences, which are apparently unforeseen to you.

As for bonds, they are genuine debt instruments, regardless of your denial of this fact. Treasury bonds are somewhat analogous to municipal and corporate bonds in this particular sense. I realize you prefaced with a logical escape valve, e.g. the currency issuer status of the U.S. government. Your supposition here does not contort with the genuine reality of contemporary practice and that is enough to undermine it. I'll add to this in reference to that point I made above about unforeseen (to you) consequences. The system of government finance is one which is built on an architecture of constraints. These constraints serve an essential purpose, including with respect to the stabilizing of the very currency; the managing of the currency; and restraining the financial sector. Oh, there are also legal constraints, which serve this architecture. Additionally, it is erroneous to ignore the Fed.

That last quip about what affects your children and grandchildren; I'm not exactly sure what you meant by it. Was that some kind of nod to consumerism?

[quetzalcoatl]

BTW, the basic assumptions which underlie my claims are not mine, but those of the Fed and the BOE. If you can point out any specific error, I will either post supporting citations or recant. As far as I know, everything in the above post is quite literally true.

I do agree that any money system is bound by constraints, and that's exactly the point. The constraints may be traditional, convenient, or purely arbitrary - but in any event, such constraints are imposed by people and can be lifted by people.

The argument should then devolve to the actual logical imperatives of a fiat money system. Once all the purely arbitrary constraints are taken out of the picture, the real and necessary logical constraints can be dispassionately assessed. These constraints are very simple: the actual ability of the real economy to produce goods and services, the availability of labor, physical resources, etc. The real economy supplies the constraints. The virtual economy (money) does not impose real constraints, but simply functions as a means of social/political control.

In the real world, the "national debt" is not an actual thing. It is a political construct, with political purposes. It is used specifically by elites to limit certain types of spending (Social Security, for example) but is never deployed to limit war spending.

My last sentence in the previous post was not about consumerism - it was about our responsibility to our children to provide a just society for them to inherit. A necessary part of any just society is a robust public sphere that includes universal healthcare, and a right to a living-wage job.

PS: The Social Security Trust Fund does not exist, except as a well-intentioned public relations gimmick. I get a check from Social Security every month. It comes from the US Treasury, not any trust fund. If I take on $1000 to manage for my nephew, and then deposit it in my bank account, is that a trust fund? The fact that I write the amount in a ledger book doesn't make it a trust fund - the funds are commingled and can be used by me for any purpose.

[quetzalcoatl]

error

[Steve_American]

At $21,000,000,000,000 + is this not what we are doing?

Certainly Scott Pruitt is doing his part in adding to the debt. Witness his recent expenditure of $1,560 for 12 "special" pens @$130 each. Must be one helluva pen

Yes, this what the Repuds do.
But, they say then we need to cut something to reduce the deficit.
They never want to cut spending that goes to rich people [like defense contractors].
Now, they want to cut Soc. Sec. by raising the age you can get it.
Repuds do one thing and say the opposite.

[Steve_American]

Well, I found myself disagreeing with just about every single line of that.

There is too much to try to unpack in a time-sensible manner.

I'll just cherry pick a couple things for brevity.

First, equating bond issues to savings is a clumsy effort. Treasury bonds are but one savings implement. It seems quite unreasonable to want to equate the two in anything like a straight-forward sort of way.

Social security has a trust fund, and that trust fund is being depleted. Nobody likes to talk about social security in a serious manner, no matter what their opinion is of the institution. The reality is that the funds are being spent more quickly than they are accumulating.

Your supposition that the treasury could merely print more dollars is just that, a supposition. That is, it is merely a hypothetical supposition and not based on any concrete realities. There are a lot of things that could be done, in a hypothetical world. This particular thing which you suppose could be done--and which you presume eventually will be done (although in the real world this is no kind of certainty despite your rhetoric) would likely be attended by certain consequences, which are apparently unforeseen to you.

As for bonds, they are genuine debt instruments, regardless of your denial of this fact. Treasury bonds are somewhat analogous to municipal and corporate bonds in this particular sense. I realize you prefaced with a logical escape valve, e.g. the currency issuer status of the U.S. government. Your supposition here does not contort with the genuine reality of contemporary practice and that is enough to undermine it. I'll add to this in reference to that point I made above about unforeseen (to you) consequences. The system of government finance is one which is built on an architecture of constraints. These constraints serve an essential purpose, including with respect to the stabilizing of the very currency; the managing of the currency; and restraining the financial sector. Oh, there are also legal constraints, which serve this architecture. Additionally, it is erroneous to ignore the Fed.

That last quip about what affects your children and grandchildren; I'm not exactly sure what you meant by it. Was that some kind of nod to consumerism?

I'll comment on just one part of Quetzal's and Crantag's replies.
MMT and quetzal are saying that there is very little difference between the US Gov. selling a bond and it just spending new dollars.
Crantag thinks there is a big difference between these 2 things.
I have come to the realization that what Crantag is missing is that the world is flooded with US bonds as of now and it has gotten used to easily converting them to cash.
This easy conversion of bonds means that there is always someone willing to buy your bond if you change your mind and decide that you want to spend that money now and not save it for later.
US Bonds have zero risk of default. They are as safe as any asset can be. This makes them very liquid, you can always sell your bond.
This makes them exactly the same in macro-economic effects as dollars. [Remember that now-a-days dollars are not pieces of paper. They are computer memory bits. There is $5T in cash in the world and $25T in cash plus US Bonds; and who knows how many dollars in bank deposits. But, still just the same $5T in cash dollar bills and coins.]
So as Quetzal said, if people are afraid of interest payments, they can be avoided by just spending new dollars.

- - - - - - - - - - - - - -
The Soc. Sec. TF was a huge mistake. The main effect it had was to make Boomers like me feel even more entitled to our benefits. We had been forced to prepay for them on top of paying for our parents. And, now that the TF is being depleted, the bonds are not being paid off with tax dollars; but rather with dollars being borrowed from China. We could have been allowed to keep our wages and now borrowed from China. It just let the rich avoid graduated taxes and made the rest of us pay the flat FICA tax instead.

[Crantag]

Treasury bonds are not unique with respect to their liquidity. The same applies to all sorts of financial assets.

It's funny that story about how US Treasuries are the safest asset in the world.

This is one of those big lies.

Do you remember that time when the US lost its tripple-a credit rating? Standard and Poor still rates the US AA+ as of right now.

There's this thing about a big lie. The more times you say it, the stupider it sounds.

[quetzalcoatl]

Do you remember that time when the US lost its tripple-a credit rating? Standard and Poor still rates the US AA+ as of right now.

Standard and Poor credit rating is a scam, as everyone knows. What were the consequences of its politically-motivated down-rating? Oh, that's right - there were none. That's because S&P's rating had zero to do with the US's ability to pay its bonds, and everything to do with trying to bum-rush politicians into austerity measures.

Incidentally, a US Treasury is the closest you will ever come to a zero-risk investment on God's green earth. There is a zero risk of default; the US cannot be forced into insolvency with regard to claims denominated in dollars, and it's constitutionally precluded from voluntary default (though, to be perfectly honest, if the US ever considers a voluntary default you may as well hang it all up anyway). There is, as with all bonds as a class, an inflation risk to their market value of Treasuries, so there's that.

[quetzalcoatl]

The Soc. Sec. TF was a huge mistake. The main effect it had was to make Boomers like me feel even more entitled to our benefits. We had been forced to prepay for them on top of paying for our parents. And, now that the TF is being depleted, the bonds are not being paid off with tax dollars; but rather with dollars being borrowed from China. We could have been allowed to keep our wages and now borrowed from China. It just let the rich avoid graduated taxes and made the rest of us pay the flat FICA tax instead.

I wouldn't worry about that too much The whole point of SS was to provide a universal retirement benefit, so yeah, you should feel entitled. The main risk is a political one: that Democrats will be duped into cutting benefits, rather than raising the cap on SS payroll tax. This is where the battle will be.

[Crantag]

It's easy to dismiss anything contrary to your personal framework as a scam. Unfortunately for the denouncer this is merely in service of ingrained personal biases. However it is not really an argument.

[Steve_American]

It's easy to dismiss anything contrary to your personal framework as a scam. Unfortunately for the denouncer this is merely in service of ingrained personal biases. However it is not really an argument.

OK Crantag, I'll grant that the 'scam' part was not evidence or proof. It was just an attack. Just like your 'big lie' attack.
However, you didn't go on to reply to his actual evidence.

Was there any effect when S&P down rated US Bonds? No, none that I could see. Did you see some? If so what were the negative effects of S&P action?

Can you reply to his evidence?
I have noticed the usual internet behavior from you and most others here. That is when you can't refute or insult a claim of evidence you-all just run away and ignore it.

So yes, he did have an argument and evidence, you just ignored it and claimed it wasn't there.

[Steve_American]

{[Please delete this double post.]}

It's easy to dismiss anything contrary to your personal framework as a scam. Unfortunately for the denouncer this is merely in service of ingrained personal biases. However it is not really an argument.

OK Crantag, I'll grant that the 'scam' part was not evidence or proof. It was just an attack. Just like your 'big lie' attack.
However, you didn't go on to reply to his actual evidence.

Was there any effect when S&P down rated US Bonds? No, none that I could see. Did you see some? If so, what were the negative effects of S&P's action?

Can you reply to his evidence?
I have noticed the usual internet behavior from you and most others here. That is when you can't refute or insult a claim of evidence you-all just run away and ignore it.

So yes, he did have an argument and evidence, you just ignored it and claimed it wasn't there.

[Crantag]

OK Crantag, I'll grant that the 'scam' part was not evidence or proof. It was just an attack. Just like your 'big lie' attack.
However, you didn't go on to reply to his actual evidence.

Was there any effect when S&P down rated US Bonds? No, none that I could see. Did you see some? If so what were the negative effects of S&P action?

Can you reply to his evidence?
I have noticed the usual internet behavior from you and most others here. That is when you can't refute or insult a claim of evidence you-all just run away and ignore it.

So yes, he did have an argument and evidence, you just ignored it and claimed it wasn't there.

No I will be doing no such thing. And it isn't running away. It is what's called personal time management.

As for the debt rating. It is just an indicator of the emergence of stress cracks. And S&P isn't the only one.

[Rugoz]

My point is --- MMT says that the problem is not so much the deficit spending that causes inflation, the problem is the idea that at some point it is *necessary* to stop borrowing and start repaying some of those bonds (by not just rolling them over). Now that most nations are using fiat currency, it is no longer necessary to do this. Why not just let the debt* keep rising without limit? As long as inflation is not a problem, what is the problem? And if inflation becomes a problem this is the signal that the Gov. needs to increase taxes. It means that raising taxes will not result in a recession** if it is done carefully. I suppose this means that some board of MMT economic experts [at the Fed. Res. Bank?] need to be given the power to impose a surtax added to every person's and every company's tax bill. Only un-elected experts have the freedom to fine tune this without being swayed by political pressures. This is, of course, unconstitutional, but it is sort of like the power to raise interest rates that the Fed. was given.

If inflation becomes problem, the central bank sells bonds. That should be a signal to raise taxes or cut spending. Ask Trump whether he got it.

[Steve_American]

If inflation becomes problem, the central bank sells bonds. That should be a signal to raise taxes or cut spending. Ask Trump whether he got it.

Of course Trump didn't get it. He is not an MMter. He may act like he is but he isn't. In this case actions don't make you one.
But it is strange that Repuds seem to act like MMters in some important ways. I.e., "deficits don't matter" and "growing debt doesn't matter".

Still I'm confused by the 1st part of your reply. As of now the Fed. Res. sells Bonds all the time. So, they can't 'start' selling bonds.
And, is inflation [= a general rise in prices] high? [I have to define the term because MSE confused the whole issue when it defined inflation as a rise in the money supply. Trying to change the good definition everybody understood into a bad one that would confuse laymen.]
. . . Anyway, the signal (to raise taxes) is to be sent when inflation is too high. Is it too high now? I don't think so.

[Steve_American]

Please you-all let me restate a central claim of MMT.

All of the US Gov. debt is now either some American's savings (including assets held by pension plans and insurance comp.) or
Americans used it to buy some real thing like a car from a comp. or person overseas. In this case, didn't we get a good deal? We got a thing and they got a 'worthless piece of paper' (well, maybe not SO worthless, but still paper).

How can you want to take all those savings away from those Americans? Are they hurting anyone now? No? Then why not wait until they are hurting someone in the then 'now'?

[jimjam]

The "tax reform" jammed through recently by the Republican snake oil salesmen touting the wonders of increased wages for the working class has so far resulted in some temporary peanuts for the working class while the plutocrats laugh all the way to the bank and use their new found money to purchase politicians who will now attempt to lower benefits to workers ( Social Security, Medicare, etc.) to pay for their one or two trillion robbery from the U.S.Treasury.

So far there has been no visible effect on wages. All those stories about worker bonuses were essentially bogus; real wages of ordinary workers are slightly lower than they were a year ago, while after-tax profits are way up.

[Steve_American]

So, you think that the US Gov. is just like a family.

Keynesian economics calls for 2 things ---
1] In a recession or business downturn (also in wartime) the Gov. should run a deficit.
2] When the business cycle is roaring along the Gov. should run a surplus to pay off *all* the money it borrowed in the last downturn.

How can I create a comparison of this for a family? Does this sound right?
1] In down times the family should borrow so as to keep spending.
2] Then in better times it should pay off what it borrowed.
Wow, that seems strange. I disagree with the 1st point. It is reckless in the extreme for a family to borrow when it can't make the payments. Borrowing to pay interest is really dumb. But, the US Gov. does it every year.

How about this?
Let's look at the budget inside the family just like the US Gov. budget is mostly inside the nation.

Suppose a family has created its own fiat currency that it uses to pay the children for doing their chores and it taxes the children to motivate them to want the fiat currency. I assume it uses play money that it bought with the parents both being required to sign every dollar bill to make them hard to counterfeit.

Now what?
1] Times are tough. Mom slipped and fell, injured her back, and is stuck in bed for 2 weeks. The parents want the kids to work harder to do her jobs for the next 2 weeks. It offers to pay the kids for the new work. The kids say fine.
2] The parents decide they they don't want to just create new cash, so they offer to borrow cash from their kids and pay interest. The kids say fine. So, every day or 2, the parents go to the kids and give them bonds for some of their earnings. The parents then give the kids the cash they just borrowed to pay them for that day's work.
3] Things seem to be working. The kids give up some of their play time to work doing their mom's jobs around the house. Things are fine. The kids have a bunch of extra fiat currency and extra bonds that they intend to use to slack off their regular chores because they can now easily pay their taxes for some time.
4] OK, mom is back on her feet, but the kids are slacking off. The parents decide to run a surplus to pay off the loan so to speak. So, they raise the taxes on the kids to take back the fiat currency that the kids earned for working harder. And use this new revenue to pay off the bonds.

. . . Does anyone see the problem here? The kids worked for nothing. Yes, their parents paid them more for a while, but then they just taxed it all back.

If this is so obviously going to be a problem in that family, why did Keynesian economics work so well for so long?
My answer is that we ignored the foreign sector in the analogy story. I propose that Keynesian economics worked well as long as the various nations generally had a foreign trade surplus. This allowed the Gov. to not have to tax the people to take away the savings, i.e. the bonds, with taxes to pay off those same bonds. Instead the Gov. could suck up some of the trade surplus with tariffs before the people get their hands on it. So, the people didn't miss it as much as they would have missed their savings being taxed away. But, the people were paying more for foreign made products directly because they had to also pay the tariff. And also the people paid more for some domestic made stuff because the companies could charge more because the foreign stuff was taxed with the tariff.

. . . I propose that the glaring flaw with Keynesian economics is the stated intention to find a way to have a Gov. surplus in good times which has the effect of confiscating the savings of the private sector in order to pay down the debt that was run up in the last business down turn. The people are being swindled out of their work. Yes, the Gov. pays them now but in 10 years it will raise taxes and take it all back. *All back* because of the aim to have the net deficit/surplus over several business cycles be zero. Imagine the uproar if the US Gov. decided to tax all bond holders a 10% tax on the value of the bonds they hold in order to get the cash to pay off the bonds as they come due? Is it that much different to tax something else and make the bondholders cash in their bonds to pay the new taxes?
Well, please answer this last question for me.