The US is off the gold standard. This has converted the national debt into the assets of the people. - Politics Forum.org | PoFo

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Everything from personal credit card debt to government borrowing debt.

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#15186735
The US has a "fully" fiat currency. This includes --- the US issues the dollar; it floats the dollar on the international currentcy market, and so, is not obbliged to intervene to support the dollar; and it has no debts in any other foreign currency.
1] Therefore the US can always pay the interest and the principal on all US bonds.
2] The damage to the world's economy and the US's economy would always be much worse if the US defaulted on its bonds; than if it just minted a $1T coin and gave it to the Fed. to top-up its account balance, so it can send out checks or pay the bonds that have come due.
3] It is the American rich (who currently CONTROL the US Gov.) who would suffer the most if the US defaulted on the bonds that the American rich themselves hold.

Therefore, the US "national debt" is no longer a debt at all.

When the US went off the gold standard all the US bonds became interest bearing assets of the American people, foreigners, US corps., incurance comp., and banks, etc.

This is because the US can, whenever it wants, just create dollars (out of thin air) to pay off the bonds or to pay the interest. And, the American rich will not block this, because they hold the bonds and would lose $billions$ or $trillions$ if the US defaulted.

All these statements are self-evident facts. Any MS economists that denys them based on an economic theory that uses proofs based on assuming things that are self-evidently false --- are gaslighting you.

I'm saying all this in a new thread, because I want the lurkers to see this claim in the thread title.
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#15190661
What would happen if the US decided to pay off all its bonds over just 1 year?

I'm no expert, but these are my thoughts.
1] The US could change a few laws and do this. It would write a check to each of the bondholders and instruct the Fed. Res. to cash the check.
2] This would flood the US and the world with US dollars in bank accounts.
3] The ex-bondholders would scramble to find a way to earn interest or money with these dollars.
4] Right away, they would just open savings accounts at many banks.
5] Now would banks want these accounts?
. . . I don't think so. Whatever the low interest rate on these accounts is, it is still a net loss for the banks. The banks can't lend more money than borrowers want to borrow. Banks can already always lend money to *every* borrower who the bank thinks will repay the loan. So, maybe the banks will refuse to open these accounts or even accept deposits to existing accounts.
6] So, what will the ex-bondholders do? If they are smart they will not invest in real estate or stocks, because adding $25T to the supply of cash will make bubbles in all these markets. And, all bubbles will burst. Meaning many will loose their money.
. . . Many will not be smart and so they will invest in real estate and stocks. This will raise the prices of real estate and stocks, cause bubbles, and etc.
. . . IMHO, this will be a disaster for the world. Revolutions will sweep the world as the mass of the world's people find they can't get money to eat or a place to live.
#15191054
Another thought that undermines the idea that your grandchildren will suffer because of the borrowing we do now.

. . . Forty years ago Reagan began the new normal where the US Gov. deficit spends like crazy. I can say this because it took from 1837 until 1981 (144 years) before the debt reached $1T. This is an average of $6.94 B/yr. Since 1981 the debt has been increased by about $650 B a year on average. This is $0.65 T/yr.. If I did the math right, this is a 9366% increase in the average yearly deficit, or the average debt increase after 1981 has bee 93.66 times more than before 1981.
. . . Therefore, there are some people now who have grandchildren who are having to "pay" on the debt incurred by Reagan in 1982. So, grandchildren are already "suffering" to make the payments on the debt.

Now, I ask you, do you seem to be suffering much while the payments are being made? I don't suffer at all, do you?
Well, I suppose that some can truly feel that because of the Senators like Manchin, who are afraid to increase the debt, the US Gov. is being kept from spending to help them. However, this is not necessary, Manchin is wrong to resist spending. And besides, he is likely just using that as an excuse to stop spending that he doesn't want for other reasons. And besides, it isn't that taxes are too high, it is that spending is too low.

So, I claim that right now the grandchildren are not suffering to make the payments on the debt.
Why is this? It is because the payments are made 100% with newly borrowed money.
Is it possible for the rich of the world** to not be willing to buy new bonds at a reasonable interest rate?
. . . Yes, it is. However, the damage to the US's and the world's economy from selling the bonds directly to the Fed. Res. is about 1/10 the damage that would occur if the US defaulted on the payments. So, IMO, the US will always just sell the bonds directly to the Fed. or just create dollars without selling the bonds at all, IF this becomes necessary.
. . . Is there damage to the economy from either of those 2 choices? It is possible, but not certain. There are just 3 possible effects or outcomes.
1] There is little or no effect. [In Japan now, over 46% of all Japanese bonds outstanding are held by the Bank of Japan. This seems to have no effect on Japan.]
2] There could be some inflation. To fight this the Gov. can cut spending or raise taxes. Now you may think either of these 2 things is going to make someone suffer. This not true, because think about this analogy.
. . . Your boss gives you a raise, you work there for 10 years and one day he calls you to the office and tells you he needs to cut your pay by 1/2 of what the raise was. Would you rather that he never gave you the raise? Or, would you rather he gave you the raise and had to take 1/2 of it back 10 years later. Truly, this is like the Gov. spending now that increases everyone's income for the next 10 years, and then having to reduce the spending to control inflation but not by that all much. You just need to make sure that you, personally, get your share of the increased incomes before the super rich suck the money into their bank accounts.
3] The dollar could loose value on the international money market. This would have 2 effects.
. . . a] It would increase exports because our stuff would be cheaper for the rest of the world. This would increase the incomes of some in the US.
. . . b] It would make the stuff you buy from the rest of the world cost you more. But again, you have been earning more for years before this happened (if it happens at all) so over all you are still better off. Also, the increased incomes of those in the exporting industries off-sets the increased costs for everyone to some extent. Frankly, I'm not expert enough to know how much. Is it a little, or is it a huge amount?
. . . However, the IMF and the World Bank call for 3rd world nations to export more than they import to payback their loans. How can it be terrible for the US to import less and export more?

My conclusion is that our grandchildren will *not* suffer to make payments on the debt, ever.
This means that a reasonable amount of deficit spending now will give the US benefits like improving the infrastructure and winning the fight on ACC, AND will increase the incomes of the working class as a whole, which, in tern, will let the rich sell them more stuff or services. It is a win-win-win.

. . . Note: I didn't say the US can deficit spend $10 T/yr. I said a reasonable amount of deficit spending is fine, even necessary to fight ACC.

. ** . Note: the US doesn't borrow from China. OK, how can I say this? Obviously, we are.
It is because you need to look at the entire transaction. The full transaction is ---
1] China makes a thing.
2] China exports it to the US and gets dollars for it.
3] Someone in the US looses dollars to buy the thing, the dollars went to China.
4] China uses the dollars to buy a US bond.
We don't need China to buy our bonds. We can let China do whatever it chooses to do with the dollars.
If the thing China does with its dollars is damaging to the US, this damage has nothing to do with the debt or bond sales. It is caused by the US giving dollars to China to buy its things. In fact, for China to buy our bonds keeps China from hurting the US with the dollars.

It is instructive to think about this. If dollars are replaced with gold then the transaction becomes --
1] China makes a thing.
2] China exports it to the US and gets gold for it.
3] Someone in the US looses gold to buy the thing, the gold went to China.
Now, I think that everyone can see that the US can't keep sending its gold to China to buy things.
Why does everyone think it is OK to keep sending dollars to China to buy things? Maybe because we can make more dollars quite easily, and can't make new gold at all.
How does the US make new dollars? It does it with deficit spending. This is why I keep claiming that the Gov. needs to deficit spend to replace dollars inside the US economy that are used to buy things from overseas.
#15192706
If you-all can accept that the US "national debt" is no longer a 'debt, then what is it?
And, what should it be called? Also, should all it's holders be paid the same rate of interest?

I will use the word 'gift' because functionally that is what it is.

I'm not a great wordsmith.
I suggest that the "so-called deficit" be called "America's annual gift to Americans". [=AGA ?]
I suggest that the "so-called national debt" be called "America's total gift to Americans and the World". [=ToGAW ?]

You might think that the larger the annual gift the better. Well, this is one way that gift is a better word, because it is true that larger gifts are better. However, there are constraints and limits.
. . . This is just like gifts to your children. If they are too big, they spoil the child. Like, Bill Gates giving has children each $100M/year (year after year) is going to be bad for them.
. . . In this case, the limit is the 'inflation constraint'. As long as inflation is not happening, the size of the gift is fine.
As for the ToGAW, there may be some limit. However, right now in this time of crisis there are reasons why we should spend up to the inflation constraint limit each year. There reasons include spending on ---
. 1] Deferred maintenance of our infrastructure.
. 2] Deferred spending to fight ACC, aka AGW.
. 3] Other things on Biden's agenda.
OTOH, I'm the only one suggesting that rationing of carbon usage (in a WWII like way) should be used to fairly spread the pain of fighting ACC.

IMHO, there should be 2 different rates of interest paid on the ATGTA&W.
1] Most American people and corps (incl. banks) should not get over 0.1%/year.
2] Certain US corps and all foreign people and nations should get somewhere around 1.5%/year.
. . a] The US corps include pension plans and insurance comp., because they need to have risk free assets that earn good returns. Most corps can swing in the wind, they need to invest in America, in Green Tech for example. They don't need free money from the US Gov. They already get the benefit of the yearly gifts that add to their profits eventually. They don't need more.
. . b] The foreigners should get this also, because I want them to hold it and not use it to hurt America in some way. For example, buying a lot of real estate in America and pricing Americans out to the market.
. . . . These numbers are just to show you my thinking. Experts can suggest better numbers.
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#15192982
I wrote: OTOH, I'm the only one suggesting that rationing of carbon usage (in a WWII like way) should be used to fairly spread the pain of fighting ACC.

I'll elaborate.

It is not fair for the working poor to suffer 100 times as much as those who are well off because the make 100 times or 100 times more.
All market based solution like a carbon tax without a UBI will have this effect. And even with a ubi it is still not going to be fair, IMO.
"Making predictions is risky, especially about the future."

It is especially unfair because it is the well off who have burned the most carbon in the last 30 years.

Rationing lets the political system determine how much pain each class of people will suffer as a result of winning the fight against ACC.

My suggested system has 3 classes by income. The middle one gets twice the carbon to burn as the lowest if they pay a lot for it, and the highest gets 3 times what the lowest gets if they pay much more than a lot for it. This seems fair to me. It may not be politically possible but it would be easier than all being equal.
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#15198752
I'm going to restate my original point another way.

All debts have 2 POV. From the borrowers POV the loan is a liability. And from the lenders POV it is an asset.
In this sense, the US national debt has always been an asset of the people or corps.
Before the end of the gold standard in 1971, it was actually a sort of liability of the US Gov.

Have you ever seen anyone talk about it also being the assets of the people? No, why not?
. . Is it because the rich control the message and they want everyone to worry about the Gov. liability side POV.
They might do this to keep you from knowing that deficit spending has just one limit, and this limit is, 'is it causing high inflation'?

After 1971, the POV of the national debt being the Gov.'s liability became much more iffy. This is because the Gov. could now kick the can down the road forever. It can roll the debt over, or it can spend without issuing more debt. [If a simple law is changed.] It can sell bonds to the Fed. directly. [If a simple law is changed.]
. . The damage from defaulting is always 100 times worse that just changing the law and spending without selling bonds to the public. So, the rich will never make the Gov. do the 100 times worse thing.

You can find different numbers for the US national debt because some include things like the Soc. Sec. Trust Fund and others don't. Here such things are not included.
Starting in 1981 the Repuds ran up the national debt from $0.9T to about $3.2T in 1990. Bush added another $4.3T and his recession added at least $2T more. Then, Trump added another $7.3T. Now, it is about $28.5T.
. . I point out how the Repuds have deficit spent like drunken sailors, to show you that they know that the debt is not going to burden your children and grand children any more than it has people in the past, or now.

So, the national debt must be seen from 2 POV, as a liability and as an asset.

Now, my next point is that the US national debt can never be paid-off with tax revenue dollars that are a surplus.
This is because a Gov. surplus is, by definition, causing a non-gov. deficit. The non-gov. being the sum of the Private and Foreign sectors.
This means that if you graph the Gov. debt/surplus and the private sectors surplus/debt, you will see that they are always opposites.

This means that when the gov. has a surplus it must, by definition, be draining dollars out of the private sector's hands.
This can not go on long before, the people stop spending because they have no money to spend. This starts a Recession. If the surplus is continued, then there will soon be a Depression. This can be seen in history. It is just a fact.

This means that if --- Paying-off the national debt can only be properly done by raising taxes and cutting spending to have a surplus, and this means the surplus must automatically be used to retire bonds as they come due, then this will also automatically cause a Recession and then a Depression.

It follows that the voters (and for that matter, the rich) will not make the Gov. continue the surplus. Instead, like FDR and every Pres. since has done, the Gov. will begin to massively deficit spend to end the Recession or Depression.

Therefore, the US national debt can never be paid-off with tax/surplus dollars. It can only be paid-off with newly created dollars, that are created out of thin air.
I'm pretty sure that flooding the economy with $28T newly created dollars would be worse than learning to live with the national debt and NEVER WORRYING ABOUT IT AGAIN.

So, I have proved that we should never worry about the size of the US national debt again.

{Before anyone talks about Greece, I must point out that Greece uses the euro, and the euro is issued by the ECB, and not by Greece.
This is the difference that makes the US and Greece totally different.
BTW--- this is the reason the EU & EZ are doomed to 'die' or be reformed.}
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#15198785
Steve_American wrote:

All market based solution like a carbon tax without a UBI will have this effect.




That depends largely on how we handle it.

One option I like is a Carbon Tax rebate for any adult with a family income under 40 or 50K. An individual would have a lower cutoff.

Nothing against UBI, but the rebate would be politically possible. To make it work, expanding Obamacare to cover more poor better should also be part of it. Again, relatively easy to do.

Universal Pre-K (which Biden is working towards) would be a big help, etc, etc.

There's a lot we can do to help...

But don't think that continuing to largely ignore climate change comes without it's own, massive, price tag. Look at Vancouver...

Climate change is beating the crap out of us, and it keeps getting worse. It will make cities uninhabitable, make large areas of the country useless for farming, drive up the costs of living, and require insane expenditures to adapt everything from roads to hospitals to electrical power systems able to handle the extremes.

Our political incompetence is moving from self destructive to suicidal...
#15198796
@late,
Anything is better than nothing.
OTOH, I have seen reports that the top 1% of families and corps in the world are responsible for close to 40% of all carbon emissions. IMHO, it would take a carbon tax close to $1000/ton to make the 1% stop flying their private jets. So, a carbon tax will not change the behavior of the 1% and they are a huge part of the problem.
#15198798
Steve_American wrote:
@late,
Anything is better than nothing.
OTOH, I have seen reports that the top 1% of families and corps in the world are responsible for close to 40% of all carbon emissions. IMHO, it would take a carbon tax close to $1000/ton to make the 1% stop flying their private jets. So, a carbon tax will not change the behavior of the 1% and they are a huge part of the problem.



That is lumping what their businesses generate with their personal consumption. Which, frankly, is a silly statistic.

A Carbon Tax hits everything, their jets, their businesses. I can guarantee you they would respond to that.
#15199255
late wrote:That is lumping what their businesses generate with their personal consumption. Which, frankly, is a silly statistic.

A Carbon Tax hits everything, their jets [the top 1%], their businesses. I can guarantee you they [the top 1%] would respond to that.


I didn't mean to say the top 1% would not respond at all, I meant they would not respond much, and therefore, not enough.

The top 1% have millions to spend, why do you think that they would change their behavior much at all?

I suppose that their corps would change more, however, based on their current behavior, the 1% don't care about the effects of ACC, aka AGW. If they cared, they would have already have changed the behavior of their corps. They have not done so yet.
. . . All the 1% care about is how much profit they can make. If they can make a profit by using a lot of fossil fuel they will do it. If they will make more profit by using a little less fossil fuel, they will use less. This 'less' is why I just said their corps will change more than the billionaires.
#15199281
Steve_American wrote:
I didn't mean to say the top 1% would not respond at all, I meant they would not respond much, and therefore, not enough.

The top 1% have millions to spend, why do you think that they would change their behavior much at all?

I suppose that their corps would change more, however, based on their current behavior, the 1% don't care about the effects of ACC, aka AGW. If they cared, they would have already have changed the behavior of their corps. They have not done so yet.
. . . All the 1% care about is how much profit they can make. If they can make a profit by using a lot of fossil fuel they will do it. If they will make more profit by using a little less fossil fuel, they will use less. This 'less' is why I just said their corps will change more than the billionaires.



It's still a silly statistic...

You've wound up chasing a tiny fraction while ignoring the over 99% of the consumption that is the bulk of the problem.

Take cars as an example, and look at how Europe responded to high gas taxes... not exactly rocket science.
#15199289
late wrote:It's still a silly statistic...

You've wound up chasing a tiny fraction while ignoring the over 99% of the consumption that is the bulk of the problem.

Take cars as an example, and look at how Europe responded to high gas taxes... not exactly rocket science.

It is possible that you misunderstood me.
I said the 1%, this is a reference to the common usage where it means the top 1% of income earners. I.e., the super rich.
IIRC correctly, that the top 1% and the corps they own emit about 40% of the CO2, then the other 99% emit 60%, not 99%.
#15199291
Steve_American wrote:
It is possible that you misunderstood me.
I said the 1%, this is a reference to the common usage where it means the top 1% of income earners. I.e., the super rich.
IIRC correctly, that the top 1% and the corps they own emit about 40% of the CO2, then the other 99% emit 60%, not 99%.



So I will rephrase it, you won't be able to single out the rich. Besides being an absurd policy, it's a loser of a fight; and a fight there is no need to make.

High gas taxes in Europe resulted in less emissions. But to drive the point home, look at per capita energy consumption...
#15199549
late wrote:So I will rephrase it, you won't be able to single out the rich. Besides being an absurd policy, it's a loser of a fight; and a fight there is no need to make.

High gas taxes in Europe resulted in less emissions. But to drive the point home, look at per capita energy consumption...

So what?
The CO2 emissions did not stop increasing. In fact, the rate of increase was not effected enough to be visible on the graph of ppm of CO2 vs time.

We don't need to reduce CO2 emission a little, we need to reduce them a lot.
We have not yet done anywhere near enough.

My assertion was and is that what we have done so far is about 1/100 of what we need to do.

However, this thread is supposed to be about why the US national debt doesn't matter a quart of beans.

That therefore, when politicians like Joe Manchin worry about inflation because the national debt is increasing they are likely lying, and if not lying then they are using an economic theory that is 50 years out of date. [If they are lying, then they have other reasons that they don't want to make public.]
#15199577
Steve_American wrote:
So what?
The CO2 emissions did not stop increasing. In fact, the rate of increase was not effected enough to be visible on the graph of ppm of CO2 vs time.

We don't need to reduce CO2 emission a little, we need to reduce them a lot.
We have not yet done anywhere near enough.

My assertion was and is that what we have done so far is about 1/100 of what we need to do.

However, this thread is supposed to be about why the US national debt doesn't matter a quart of beans.

That therefore, when politicians like Joe Manchin worry about inflation because the national debt is increasing they are likely lying, and if not lying then they are using an economic theory that is 50 years out of date. [If they are lying, then they have other reasons that they don't want to make public.]



Image

Europe uses about half what we do, per capita. That is massive, and I could type all day listing all the ways about how they got there. And they're still improving. What's more, in the countries that aren't poor, the people live better lives than we do. Our whiny Excuse Addicts like to complain about it, the reality is you can do it while making things better. The same people that want to do one, want the other.




Mancin is part owner of a coal mining company. He's also in bed with Big Oil.
#15223297
Lurkers note that,

This thread got away from my assertions about the national debt.

To try to get back to the main point,

All debts have 2 sides. A debt side and an asset side. When you by a car with a loan, you incur a debt when you take out the loan, AND at the same time, a bank gets an asset in the form of the repayment contract.

The national debt is like all other debts in that way. The bond buyer gets an asset in the form of the bond and the nation incurs a debt with the same bond. However, the US issues the dollar. This means it is not like a start gov., household, or corp, because it can sell a bond to the Fed. to get dollars to make the principal and interest payments (if it can't roll the bond over by selling a bond to someone).

This situation means that the only way that future taxpayers can be hurt is if there is inflation. Their taxes will never go up to pay off the national debt. I can say this with 100% certainty because taxing $27 T out of the economy will result in the worst depression ever when about $3 T have been taxed out of circulation in the economy. The US Gov's surplus, by accounting definition, is exactly equal to the non-gov's deficit. The economy will not function after the non-gov sector has totaled a $3 T deficit.

Now, assuming that the national debt can never be paid off, what is the effect of letting it continue to increase? Increase like it has since about 1835 when the US went back into debt after it had paid off the national debt which caused the worst ever depression from 1835 to 1843 (IIRC the dates). So, since about 1835 the US has had a national debt and it has mostly risen every year since then. In say 1960 nobody on earth could have imagined that it could be as high (without causing any sort of problems) as the $28 T that it was in 2019 before covid caused economic shortages and a recession, followed by inflation that is caused by covid and the shortages. [The SF Fed. has calculated that just 0.3% of current inflation is a result of the massive covid spending to "stimulate" the economy. So, I'm assuming that the Fed is correct that very little of the inflation has been caused by the massive deficit spending of 2020 and 2021. If you disagree with the Fed I'd like to hear why you disagree. ]
. . . So in 1960 nobody could have imagined that the current $31 T national debt was not ging to be a disaster. MMTers assert that in the same way nobody now can imagine that a $100 T debt in 2060 is not going to be a disaster, but why is that total much different from the current total?

Now, lets look at the asset side of the national debt. Why is it bad for the people, corps and foreigners to have these assets? Why is it bad for you personally to have such assets? Do you think the Gov. should tax your assets away to reduce the national debt? NO?!
. . . Then why do you want the Gov. to tax away the assets of everyone else but not you? And, how can the Gov. do that?

I'd bet my life that nobody can reply here ITT and explain why it is fine for the Gov. to tax away those $31 T of assets to pay off the national debt. Nobody has tried yet, anyway.

This a challenge for all you fiscal conservatives to take my life by showing how it can be done and why it is a good thing.
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