As the issuer of the dollar, the US government can never “run out of money”: there are no bills coming that it can’t afford to pay, nor can it become insolvent on its outstanding debt, regardless of how big it may be, in absolute terms or in relation to GDP. As Trump said in 2016: “This is the United States government. First of all, you never have to default because you print the money.” For all his other faults, on this he was right — even Bernie Sanders recently was forced to admit that “even a broken clock is right twice a day”. In other words, the recent crisis was entirely of the US’s own making, stemming as it was from a rule — the debt ceiling — that it imposed upon itself.
Indeed, the US is only one of two countries in the world with a rule of this kind — the other is Denmark, where it has never been used in political brinkmanship. In America, the debt ceiling was created in the early 20th century in the hope it would make government run more smoothly: Congress no longer had to ask for permission each time it needed to issue debt to pay bills. In recent years, however, several policymakers have suggested that the rule has become more trouble than it’s worth, insofar as it allows political bargaining over policies that Congress has already approved. In 2021, for instance, Yellen herself claimed that “it is very destructive to put the president and myself, as Treasury secretary, in a situation where we might be unable to pay the bills that result from those past decisions”. At least two other former Federal Reserve chairmen, Alan Greenspan and Ben Bernanke, as well as four former Treasury Secretaries, have expressed the same opinion. In short, there is no technical reason for the debt ceiling to exist, and it could have been legislated out of existence while the Democrats had full control of Congress.
But given that the debt ceiling does exist, does this mean that the risk of default was real? For much of the media, it was an open-and-shut case. “Because the United States runs budget deficits — meaning it spends more than it takes in through taxes and other revenue — it must borrow huge sums of money to pay its bills”, as the New York Times puts it. In fact, the US, like every currency-issuing country, doesn’t need to borrow its own currency to finance its fiscal deficit: from a technical standpoint, the government spends first and then issues bonds to “cover” the resulting deficit. This serves many purposes, largely pertaining to monetary policy — but “raising funds” is not one of them.
Much like the debt ceiling itself, the decision to match the deficit with debt is a voluntary choice, not a technical (or legal) one. Some years ago, for instance, former Fed chair Bernanke suggested that the Treasury could simply instruct the central bank to credit accounts on its behalf, without matching the fiscal deficit with debt issued to the private sector or central bank. It’s unclear why a similar measure couldn’t be adopted today to circumvent the debt limit. Another possible solution would be for the Fed to extend a line of credit — an overdraft — to the Treasury. There doesn’t appear to be any legal obstacle prohibiting the Fed from doing this. After all, if it can bail out the banks, surely it can bail out the US government?
And this is hardly the only solution: a number of creative remedies have been concocted in recent decades — perhaps none more tantalisingly inventive than the $1 trillion platinum coin. In 1997, a newly passed law gave the Treasury full unilateral authority to mint platinum coins of whatever value. Yellen could therefore instruct the Federal Reserve to create a coin worth $1 trillion, and then deposit it with the Fed, thus adding $1 trillion to the Treasury’s account at the central bank. The government could then draw on this account to pay its bills without having to issue new debt. The idea was first put forward by a blogger in 2011 — leading to the hashtag #MintTheCoin going viral on Twitter — but has since captured the imagination of academics, pundits and policymakers. Even Philip Diehl, the former head of the US Mint, has described it as “ingenious”.
Yellen, however, recently dismissed the trillion-dollar coin as a “gimmick” — and this may be true. But if the US is now in a position where it has to consider “gimmicks” to avoid a self-engineered default, it is only because it has chosen to impose upon itself a series of legal constraints that inhibit its ability to utilise its currency-issuing capacities.
Meanwhile, next time a debt ceiling crisis emerges, a less unorthodox, but potentially even more controversial, solution would be simply for the government to ignore it and continue to issue more bonds. In doing so, it would be violating the law, but the government would also be violating the law by refusing to honour public spending already authorised by Congress. As economist James Galbraith has noted, at that point, all such spending is an obligation: “The debt ceiling statute does not authorise the breach of any obligation,” he wrote.
Proponents of this solution also point to the 14th Amendment of the Constitution, which mandates that all the government’s financial obligations be met. According to a number of constitutional law experts, this renders the debt ceiling unconstitutional. Like the trillion-dollar coin, in recent years, the 14th-Amendment theory has gone from “fringe” to “mainstream”. In the past, Nancy Pelosi and former President Bill Clinton both urged Obama to invoke the 14th Amendment during his debt ceiling showdowns. For law experts Neil Buchanan and Michael Dorf, this would be the “least unconstitutional” option — that is, less unconstitutional than the US government defaulting on its obligations.
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SubscribeAlmost all of this article is false or seriously misleading.
The debt is short term obligations like your credit card, the more serious problem is long term obligations that amount to nearly $200 trillion. With a $16 T economy, these are both unsustainable. It’s as if a family had a credit card debt of 2x income and mortgage of 12x income.
Printing money is a fools answer because that seriously debases the currency – see Weimar Germany. And the defense budget has been shrinking as a fraction of total spending – that’s why this charlatan compares it to discretionary spending.
Only a balanced budget Amendment can save the US from ruin, and that ain’t happening as long as DC spends like crazy.
What amusing ignorance, Tel! Individuals debt has nothing whatever to do with the US Treasury bond market, or the Weimar money printing.. Do your research and learn before making yourself look very silly in public, please?
Please explain
Please explain
A debt ceiling is absolutely imperative. Inventing more money is unsustainable. If it really was the way to proceed, then it wouldn’t matter one jot if any of us was deep in debt.
The “debt” is the consequence of lowering taxes on the rich who have in turn “lent” the money to the country with interest. All of these crocodile tears over the debt ceiling is pure theatre: the “debt ceiling” drama gives them the excuse to blackmail the country into inducing more suffering on those left out of the economy by them in the first place. More debt means more interest for them. If the country doesn’t cut their taxes they cry they can’t hire people, boo hoo, which they don’t do anyway as 40 years of wage stagnation will attest. For 40 years the government has paid them to stash their tax cuts in overseas accounts, buy back their own stocks, lend the money back to the government, buy politicians and the political power to establish laws that benefit themselves and screw everyone else – basically to do anything to enrich themselves at the expense of the working and middle classes. The massive amount of “spending” they wail about is on THEM, on their military-industrial complex, on their corporate and bank bail-outs, on their tax write-offs, corporate jets, luxury villas, on and on and on. The only time anyone hears whining about spending is if it is to keep some little old grandma somewhere from starving to death! This fascist “austerity” is getting old, from Reagan onwards old. Don’t even bother to repeat your “fiscally conservative” hogwash. We’ve heard it a billion times before and we know it is total BS.
What amusing ignorance, Tel! Individuals debt has nothing whatever to do with the US Treasury bond market, or the Weimar money printing.. Do your research and learn before making yourself look very silly in public, please?
A debt ceiling is absolutely imperative. Inventing more money is unsustainable. If it really was the way to proceed, then it wouldn’t matter one jot if any of us was deep in debt.
The “debt” is the consequence of lowering taxes on the rich who have in turn “lent” the money to the country with interest. All of these crocodile tears over the debt ceiling is pure theatre: the “debt ceiling” drama gives them the excuse to blackmail the country into inducing more suffering on those left out of the economy by them in the first place. More debt means more interest for them. If the country doesn’t cut their taxes they cry they can’t hire people, boo hoo, which they don’t do anyway as 40 years of wage stagnation will attest. For 40 years the government has paid them to stash their tax cuts in overseas accounts, buy back their own stocks, lend the money back to the government, buy politicians and the political power to establish laws that benefit themselves and screw everyone else – basically to do anything to enrich themselves at the expense of the working and middle classes. The massive amount of “spending” they wail about is on THEM, on their military-industrial complex, on their corporate and bank bail-outs, on their tax write-offs, corporate jets, luxury villas, on and on and on. The only time anyone hears whining about spending is if it is to keep some little old grandma somewhere from starving to death! This fascist “austerity” is getting old, from Reagan onwards old. Don’t even bother to repeat your “fiscally conservative” hogwash. We’ve heard it a billion times before and we know it is total BS.
Almost all of this article is false or seriously misleading.
The debt is short term obligations like your credit card, the more serious problem is long term obligations that amount to nearly $200 trillion. With a $16 T economy, these are both unsustainable. It’s as if a family had a credit card debt of 2x income and mortgage of 12x income.
Printing money is a fools answer because that seriously debases the currency – see Weimar Germany. And the defense budget has been shrinking as a fraction of total spending – that’s why this charlatan compares it to discretionary spending.
Only a balanced budget Amendment can save the US from ruin, and that ain’t happening as long as DC spends like crazy.
Two points for a bit of perspective. Mandatory spending (social security, medicare, medicaid, other similar programs) dwarfs discretionary spending as a whole, let alone defense spending. An excessive defense budget is hardly the key spending problem. Second, Democrats certainly also played the debt ceiling game when Trump was in (and Fazi noted that Dems did not eliminate the ceiling when in control). Everything is not Dems wearing white hats Fazi!
Agreed. The vast majority of the federal budget doesn’t even get a vote each year. Mandatory dwarfs discretionary 3:1
https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/
Also, US defense spending is near a 100 year low as a percent of GDP.
https://www.macrotrends.net/countries/USA/united-states/military-spending-defense-budget
Perhaps that’s a good thing. Maybe we spend far more than we should. Maybe we can close a few dozen of those military bases we have scattered around the world. I’m open to all of that. But let’s not pretend that “we just passed the largest defense budget in our nation’s history” because that’s just a lie.
While there might be a discussion to be had about how money gets apportioned in mandatory spending (which is needlessly bloated in part because America is incapable of understanding that healthcare shouldn’t be a business), the data you provide isn’t quite up to date (it ends in 2021, before the war) and I’m sure the percent of GDP for “defense spending” is about to go up quite a bit after all the “donations” Ukraine got.
This is beside the fact that the Pentagon and Intelligence agencies have black budgets running into the trillions – as recently pointed out in an audit of the Pentagon where 2$ trillion got “misplaced”.
Side note: GDP is (for the most part) a worthless statistic that doesn’t really give you proper insights into the state of the economy other than whether it’s growing or shrinking, which lets governments basically get away with anything as long as the numbers go up.
Federal authorities issue their own bonds!
They need a buyer, right? Otherwise money becomes “unsound”. So they are limited by the appetite of the buyers?
They need a buyer, right? Otherwise money becomes “unsound”. So they are limited by the appetite of the buyers?
While there might be a discussion to be had about how money gets apportioned in mandatory spending (which is needlessly bloated in part because America is incapable of understanding that healthcare shouldn’t be a business), the data you provide isn’t quite up to date (it ends in 2021, before the war) and I’m sure the percent of GDP for “defense spending” is about to go up quite a bit after all the “donations” Ukraine got.
This is beside the fact that the Pentagon and Intelligence agencies have black budgets running into the trillions – as recently pointed out in an audit of the Pentagon where 2$ trillion got “misplaced”.
Side note: GDP is (for the most part) a worthless statistic that doesn’t really give you proper insights into the state of the economy other than whether it’s growing or shrinking, which lets governments basically get away with anything as long as the numbers go up.
Federal authorities issue their own bonds!
Actually, the excessive “defense” budget is the root of not just Americas, but most of the worlds problems.
But hasn’t that always been the case from Ötzi onwards?
You’re right to put the word ‘defense’ in sneer marks. Unless you count the small-but-fierce Battle of Wake Island (a square mile or two of volcanic rim in mid-Pacific) and one, battalion-sized action on a remote, desolate, fog-shrouded island in the Aleutians – both against the Japanese in WWII – the USSA hasn’t fought a ground battle against a foreign enemy on any part of its its own territory since the War of 1812.
By contrast, US has itself over that period invaded 68 separate countries, ranging from Algeria and Argentina to Vanuatu and Vietnam.
Argentina?
Plus Texas, 1846?
Argentina’s Government bonds were the equivalent of US Treasury loo paper and not US treasuries!
You miss my point. I was curious to know when Mr Joy thought the US had an actually ‘invaded’ Argentina.
I am also curious to know why he ignored Mexico’s invasion of the US in 1846.
Re TexMex, wasn’t Mexico responding to the US invasion of Texas, which was actually before then part of Mexico?
Texas joined the Union in 1845, so there was indeed a ‘casus belli’.
Texas joined the Union in 1845, so there was indeed a ‘casus belli’.
Re TexMex, wasn’t Mexico responding to the US invasion of Texas, which was actually before then part of Mexico?
You miss my point. I was curious to know when Mr Joy thought the US had an actually ‘invaded’ Argentina.
I am also curious to know why he ignored Mexico’s invasion of the US in 1846.
Argentina’s Government bonds were the equivalent of US Treasury loo paper and not US treasuries!
Argentina?
Plus Texas, 1846?
But hasn’t that always been the case from Ötzi onwards?
You’re right to put the word ‘defense’ in sneer marks. Unless you count the small-but-fierce Battle of Wake Island (a square mile or two of volcanic rim in mid-Pacific) and one, battalion-sized action on a remote, desolate, fog-shrouded island in the Aleutians – both against the Japanese in WWII – the USSA hasn’t fought a ground battle against a foreign enemy on any part of its its own territory since the War of 1812.
By contrast, US has itself over that period invaded 68 separate countries, ranging from Algeria and Argentina to Vanuatu and Vietnam.
The other thing I found conspicuously missing in the debt ceiling/14A discussion was Article 1, Second 8. That’s where the Constitution grants the power to borrow to Congress. That’s why Congress used to have to authorize the Treasury every time we wanted to issue some bonds, and why we switched to a debt ceiling.
I am not a Constitutional scholar but it seems pretty clear to me if we eliminated the debt ceiling, we’d have to revert to the pre-1917 mode where Congress has to approve more things, not fewer.
It’s all well and good to want to give the Treasury unlimited authority to borrow but I think you’re in amendment territory.
I also found it surprising to see no mention of how minting a $1 trillion (well, $10 trillion these days; my God, a trillion here, a trillion there and pretty soon you’re talking real money) coin might affect inflation. I know there are people who think it will do nothing but that’s still a controversial position.
Thank you for pointing out one of many whoppers in Fazi’s article.
For FY 2022, the Congressional Budget Office (CBO) pegged defense discretionary spending at $751B. Non-defense discretionary spending was ~$900B.
FY 2022 mandatory (dictated by law) spending was $4.1T.
Fazi doesn’t know what he’s talking about.
Agreed. The vast majority of the federal budget doesn’t even get a vote each year. Mandatory dwarfs discretionary 3:1
https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/
Also, US defense spending is near a 100 year low as a percent of GDP.
https://www.macrotrends.net/countries/USA/united-states/military-spending-defense-budget
Perhaps that’s a good thing. Maybe we spend far more than we should. Maybe we can close a few dozen of those military bases we have scattered around the world. I’m open to all of that. But let’s not pretend that “we just passed the largest defense budget in our nation’s history” because that’s just a lie.
Actually, the excessive “defense” budget is the root of not just Americas, but most of the worlds problems.
The other thing I found conspicuously missing in the debt ceiling/14A discussion was Article 1, Second 8. That’s where the Constitution grants the power to borrow to Congress. That’s why Congress used to have to authorize the Treasury every time we wanted to issue some bonds, and why we switched to a debt ceiling.
I am not a Constitutional scholar but it seems pretty clear to me if we eliminated the debt ceiling, we’d have to revert to the pre-1917 mode where Congress has to approve more things, not fewer.
It’s all well and good to want to give the Treasury unlimited authority to borrow but I think you’re in amendment territory.
I also found it surprising to see no mention of how minting a $1 trillion (well, $10 trillion these days; my God, a trillion here, a trillion there and pretty soon you’re talking real money) coin might affect inflation. I know there are people who think it will do nothing but that’s still a controversial position.
Thank you for pointing out one of many whoppers in Fazi’s article.
For FY 2022, the Congressional Budget Office (CBO) pegged defense discretionary spending at $751B. Non-defense discretionary spending was ~$900B.
FY 2022 mandatory (dictated by law) spending was $4.1T.
Fazi doesn’t know what he’s talking about.
Two points for a bit of perspective. Mandatory spending (social security, medicare, medicaid, other similar programs) dwarfs discretionary spending as a whole, let alone defense spending. An excessive defense budget is hardly the key spending problem. Second, Democrats certainly also played the debt ceiling game when Trump was in (and Fazi noted that Dems did not eliminate the ceiling when in control). Everything is not Dems wearing white hats Fazi!
Does anyone have any explanations for Fazi’s alternatives written in language that I could understand? I admire people who understand this, but I think many of us who do not have the education in finance feel that it is beyond our grasp. I read very carefully through the first part, understanding most of it, and then he gets to his alternatives to a debt ceiling and lost me. I thought if the government keeps printing money any time it needs to or wants to that would cause inflation and quickly lead to very bad results.
You understand well enough. “America can never go bankrupt”, trillion dollar coins, and Modern Monetary Theory are all comparably barmy ideas. The Weimar Republic, Zimbabwe and Venezuela didn’t go bankrupt, it’s true. Their economies collapsed,instead. Small consolation, though. Thomas Fazi can be as tiresome a read as Paul Krugman. His takes on political economy are reliably nine parts political and one part economics.
Thats because whether or not its Fazi saying it, this situation is predominantly political.
Perhaps other parts of the press who don’t understand the economics bit don’t get that
but, and God this is SO simple, they did NOT have Governments bonds regarded as as good as cash, and the world’s most stable investment instrument!
MMT might be the most underevaluated theory in existence. The meaning of debt and transfers gets completely muddled. Its basically a brilliant Socialist infiltration tool.
Comparing their debt to US treasuries is staggering ignorance.
Thats because whether or not its Fazi saying it, this situation is predominantly political.
Perhaps other parts of the press who don’t understand the economics bit don’t get that
but, and God this is SO simple, they did NOT have Governments bonds regarded as as good as cash, and the world’s most stable investment instrument!
MMT might be the most underevaluated theory in existence. The meaning of debt and transfers gets completely muddled. Its basically a brilliant Socialist infiltration tool.
Comparing their debt to US treasuries is staggering ignorance.
Don’t worry. Like most pseudo-academics, Fazi doesn’t understand it himself either – though he pretends or imagines that he does.
His assertion that the USSA can always keep on spending whatever it wants, regardless of the real economy, is pure Krazy Krugmanomics. The biggest problem – of which he and Krugman show no awareness – is that to keep this colossal debt mountain serviceable, the Fed has artificially to suppress interest rates, which forces up inflation, deprives prudent savers (including pensioners) of any return on their investment, encourages bad, high-risk investments (‘unicorns’ such as WeWork, Theranos and the like) in a desperate search for returns and, though excessive ‘financialisation’ and speculative bubbling of the system, drives asset prices sky-high and encourages – in fact forces – businesses to take on huge debts to buy back their own shares so as to maintain share prices and ‘profits’ per share, rather than investing in new plant and R&D.
This is why productivity is stagnant and real wages and living standards are in decline across the West, and Japan.
Artificially low interest rates are economic poison: State debt – caused by bloated States living beyond their real means – makes them inevitable.
Fazi is out of his depth here. For someone who isn’t, and has an in-depth understanding of economic history, how today’s system works and the harm it is wreaking on the real economy – and can explain it in clear and convincing terms, with ample real-world evidence – I strongly recommend former investment banker Edward Chancellor’s excellent new book ‘The Price of Time’.
You are not alone on this medium: and debt capital markets are not that complex otherwise I would not understand and have views on them, and I can’t even work the simplest of IT..
NO!!! Investors and institutions have to want to buy that debt in the form of US Treasury bills, that are quoted on an open market like shares, and have a value ( price) and a coupon/ yield ( interest paid) and a date, which is when the debt can be repaid, and this can be between days and 30 yrs +. Holders of the bonds can borrow against them and sell them at any time they wish, and this debt/instrument makes up a large part of most peoples pension funds and life insurance investment.
It’s hard to do because money is a much squishier concept than we normally realize.
We ordinarily think a dollar is valuable. Of course it is! But it’s only valuable in that if you give me one, I’ll give you something you actually want in return. It’s not the dollars which are valuable, it’s what you can do with them that matters.
That makes hard to explain why minting a $1 trillion coin matters. It’s really just a legal fiction, it doesn’t actually do anything. Better, IMHO, is to think about who’s producing things and who’s consuming them.
What the government does is take resources from people who have them and give them to other people. There’s a lot of steps in between but at the end of the day, that’s what happened. Budgets, taxes, debt ceilings, loans, all those are just mechanisms to control how (and how much) wealth is transferred from whom to whom.
i’ll give you one….
i’ll give you one….
it does lead to inflation, which is why the UK is in such awful trouble. Our government and the Bank of England printed vast amounts of funny money during 2020-2022 and now the ordinary people of the UK are paying the price.
The debt in the form of bonds is bought by investors… is this really so difficult to understand? Look up US Treasury bond market on Google?
You understand well enough. “America can never go bankrupt”, trillion dollar coins, and Modern Monetary Theory are all comparably barmy ideas. The Weimar Republic, Zimbabwe and Venezuela didn’t go bankrupt, it’s true. Their economies collapsed,instead. Small consolation, though. Thomas Fazi can be as tiresome a read as Paul Krugman. His takes on political economy are reliably nine parts political and one part economics.
Don’t worry. Like most pseudo-academics, Fazi doesn’t understand it himself either – though he pretends or imagines that he does.
His assertion that the USSA can always keep on spending whatever it wants, regardless of the real economy, is pure Krazy Krugmanomics. The biggest problem – of which he and Krugman show no awareness – is that to keep this colossal debt mountain serviceable, the Fed has artificially to suppress interest rates, which forces up inflation, deprives prudent savers (including pensioners) of any return on their investment, encourages bad, high-risk investments (‘unicorns’ such as WeWork, Theranos and the like) in a desperate search for returns and, though excessive ‘financialisation’ and speculative bubbling of the system, drives asset prices sky-high and encourages – in fact forces – businesses to take on huge debts to buy back their own shares so as to maintain share prices and ‘profits’ per share, rather than investing in new plant and R&D.
This is why productivity is stagnant and real wages and living standards are in decline across the West, and Japan.
Artificially low interest rates are economic poison: State debt – caused by bloated States living beyond their real means – makes them inevitable.
Fazi is out of his depth here. For someone who isn’t, and has an in-depth understanding of economic history, how today’s system works and the harm it is wreaking on the real economy – and can explain it in clear and convincing terms, with ample real-world evidence – I strongly recommend former investment banker Edward Chancellor’s excellent new book ‘The Price of Time’.
You are not alone on this medium: and debt capital markets are not that complex otherwise I would not understand and have views on them, and I can’t even work the simplest of IT..
NO!!! Investors and institutions have to want to buy that debt in the form of US Treasury bills, that are quoted on an open market like shares, and have a value ( price) and a coupon/ yield ( interest paid) and a date, which is when the debt can be repaid, and this can be between days and 30 yrs +. Holders of the bonds can borrow against them and sell them at any time they wish, and this debt/instrument makes up a large part of most peoples pension funds and life insurance investment.
It’s hard to do because money is a much squishier concept than we normally realize.
We ordinarily think a dollar is valuable. Of course it is! But it’s only valuable in that if you give me one, I’ll give you something you actually want in return. It’s not the dollars which are valuable, it’s what you can do with them that matters.
That makes hard to explain why minting a $1 trillion coin matters. It’s really just a legal fiction, it doesn’t actually do anything. Better, IMHO, is to think about who’s producing things and who’s consuming them.
What the government does is take resources from people who have them and give them to other people. There’s a lot of steps in between but at the end of the day, that’s what happened. Budgets, taxes, debt ceilings, loans, all those are just mechanisms to control how (and how much) wealth is transferred from whom to whom.
it does lead to inflation, which is why the UK is in such awful trouble. Our government and the Bank of England printed vast amounts of funny money during 2020-2022 and now the ordinary people of the UK are paying the price.
The debt in the form of bonds is bought by investors… is this really so difficult to understand? Look up US Treasury bond market on Google?
Does anyone have any explanations for Fazi’s alternatives written in language that I could understand? I admire people who understand this, but I think many of us who do not have the education in finance feel that it is beyond our grasp. I read very carefully through the first part, understanding most of it, and then he gets to his alternatives to a debt ceiling and lost me. I thought if the government keeps printing money any time it needs to or wants to that would cause inflation and quickly lead to very bad results.
The US printing as many dollars as it wants, and issuing trillion-dollar coins, only works while other countries have confidence in the US dollar. What was that golden goose story again?
The wilful ignorance of capital markets on this medium is literally frightening!
The wilful ignorance of capital markets on this medium is literally frightening!
The US printing as many dollars as it wants, and issuing trillion-dollar coins, only works while other countries have confidence in the US dollar. What was that golden goose story again?
Bob Mugabe agreed with the author. Out of money? No problemo, just print more. They say before it winked out completely, the Zimbabwe dollar was asymptotic with zero value and they were printing 500 trillion dollar bills — that were worth less than a penny. As in Germany in the 1920s it was better to burn money for heat than to use it to buy wood or coal.
Bob Mugabe agreed with the author. Out of money? No problemo, just print more. They say before it winked out completely, the Zimbabwe dollar was asymptotic with zero value and they were printing 500 trillion dollar bills — that were worth less than a penny. As in Germany in the 1920s it was better to burn money for heat than to use it to buy wood or coal.
Putting aside the real economic concerns underneath–which I don’t claim to understand at an advanced level–both parties use the debt ceiling and looming defaults as an occasion for political theater. Their party-wide attitudes shift according to who has the House and Senate majority or White House. Is there any real thought of freezing the 31.7 TRILLION debt, wildly inflated under both party’s leadership, let alone paying it down?
I must say that McCarthy looks re-energized and very pleased with himself to have more of the national spotlight, especially around his one-on-one performances alongside Joe Biden.
The debt is investors assets and probably is what your pension plan and life assurance is made up of?!!!!
Maybe in part. But I have neither a pension plan nor life insurance, let alone life assurance–where can I buy that?
As I said, the whole thing seems like more of a performance than a real intervention or something motivated by true fiscal conscientiousness. I do think you can end up with a genuine national financial meltdown like Zimbabwe 15 year ago or Venezuela more recently, but it seems clear that is not what the US is faced with at present.
Good shot. I want one of those policies too.
I can point you to eternal life assurance…
I can point you to eternal life assurance…
Neither would I want my retirement to rest on negative equity.
As I said, the whole thing seems like more of a performance than a real intervention or something motivated by true fiscal conscientiousness. I do think you can end up with a genuine national financial meltdown like Zimbabwe 15 year ago or Venezuela more recently, but it seems clear that is not what the US is faced with at present.
Good shot. I want one of those policies too.
Neither would I want my retirement to rest on negative equity.
Maybe in part. But I have neither a pension plan nor life insurance, let alone life assurance–where can I buy that?
Of course it’s theatre. That’s what happens when your culture decides to embrace Socialism. Everything becomes an existential emergency of inequality which means every Political Act is of dire importance. But the Hoi Polloi don’t understand technicality, they just understand a power struggle is taking place and that power struggle becomes about personality…not public service.
Under this formula, the last thing a Politician wants to do is offend the downtrodden by cutting an existing benefit. Once a benefit is created it is almost impossible to take away because the Politician gets branded as an Oppressor. So the Personality Contest is all that’s left. The Right is a marginal check on the Left but the Left is driving the ship. The only question is HOW MUCH additional spending.
Meanwhile the Left sees the remnants of Market Capitalism and automatically assumes it’s the cause of rising prices. We don’t have anything resembling Shareholder Laissez-faire Capitalism. Its all Stakeholder Capitalism and MMT which is Crony Corporatism fused to the State.
The U.S. still has a free market with mostly privatized health care, some for-profit prisons, next-to-no rent control or price protections and many open billionaires. How many open billionaires exist under true Socialism? This is a pretty laissez-fair economy, though that underwent a temporary shift during the pandemic with the eviction freezes, plus Trump-signed stimulus checks, generous unemployment, and no-pay-back business loans I don’t remember too many ordinary conservatives complaining about.
Your characterization of the reigning attitude and system is a pretty over-the-top caricature: “Once a benefit is created it is almost impossible to take away because the Politician gets branded as an Oppressor. So the Personality Contest is all that’s left. The Right is a marginal check on the Left but the Left is driving the ship. The only question is HOW MUCH additional spending” Wow: You’ve only fairly captured maybe the most extreme 3% of the left with that noise! Also, many states are run by Republican governors such as Abbott and DeSantis, and US States Rights allow them to turn the wheel pretty hard right, with or without popular support, which I guess you’re glad about. No?
Plus, the 6-3 conservative Supreme Court took away protected abortion rights and continues to protect corporate interests at almost every turn–after all “corporations are people”, remember? In closing: If the US is Socialist, what are the UK and Canada?!
Do you think profiteering quasi-monopolies like Walmart and Amazon are more in line with state-socialism or free-market-fundamentalism? Or aside from which side it belongs to (and it’s not just one, since many leftish over-reachers have supported an unregulated internet) Do you think corporate wealth concentration, cost-outsourcing, and disrespect for the natural world is no big deal?
The U.S. still has a free market with mostly privatized health care, some for-profit prisons, next-to-no rent control or price protections and many open billionaires. How many open billionaires exist under true Socialism? This is a pretty laissez-fair economy, though that underwent a temporary shift during the pandemic with the eviction freezes, plus Trump-signed stimulus checks, generous unemployment, and no-pay-back business loans I don’t remember too many ordinary conservatives complaining about.
Your characterization of the reigning attitude and system is a pretty over-the-top caricature: “Once a benefit is created it is almost impossible to take away because the Politician gets branded as an Oppressor. So the Personality Contest is all that’s left. The Right is a marginal check on the Left but the Left is driving the ship. The only question is HOW MUCH additional spending” Wow: You’ve only fairly captured maybe the most extreme 3% of the left with that noise! Also, many states are run by Republican governors such as Abbott and DeSantis, and US States Rights allow them to turn the wheel pretty hard right, with or without popular support, which I guess you’re glad about. No?
Plus, the 6-3 conservative Supreme Court took away protected abortion rights and continues to protect corporate interests at almost every turn–after all “corporations are people”, remember? In closing: If the US is Socialist, what are the UK and Canada?!
Do you think profiteering quasi-monopolies like Walmart and Amazon are more in line with state-socialism or free-market-fundamentalism? Or aside from which side it belongs to (and it’s not just one, since many leftish over-reachers have supported an unregulated internet) Do you think corporate wealth concentration, cost-outsourcing, and disrespect for the natural world is no big deal?
The debt is investors assets and probably is what your pension plan and life assurance is made up of?!!!!
Of course it’s theatre. That’s what happens when your culture decides to embrace Socialism. Everything becomes an existential emergency of inequality which means every Political Act is of dire importance. But the Hoi Polloi don’t understand technicality, they just understand a power struggle is taking place and that power struggle becomes about personality…not public service.
Under this formula, the last thing a Politician wants to do is offend the downtrodden by cutting an existing benefit. Once a benefit is created it is almost impossible to take away because the Politician gets branded as an Oppressor. So the Personality Contest is all that’s left. The Right is a marginal check on the Left but the Left is driving the ship. The only question is HOW MUCH additional spending.
Meanwhile the Left sees the remnants of Market Capitalism and automatically assumes it’s the cause of rising prices. We don’t have anything resembling Shareholder Laissez-faire Capitalism. Its all Stakeholder Capitalism and MMT which is Crony Corporatism fused to the State.
Putting aside the real economic concerns underneath–which I don’t claim to understand at an advanced level–both parties use the debt ceiling and looming defaults as an occasion for political theater. Their party-wide attitudes shift according to who has the House and Senate majority or White House. Is there any real thought of freezing the 31.7 TRILLION debt, wildly inflated under both party’s leadership, let alone paying it down?
I must say that McCarthy looks re-energized and very pleased with himself to have more of the national spotlight, especially around his one-on-one performances alongside Joe Biden.
I thought that this happened every year.
Then try and learn?!
Learn what? It happens with monotonous regularity – It’s part of the great game.
Learn what? It happens with monotonous regularity – It’s part of the great game.
Then try and learn?!
I thought that this happened every year.
It is naïve to assume that the President could just mint a coin or invoke the 14th amendment so he could continue issuing debt, and that would be the end of it. There would be a constitutional crisis that would last months, the Republicans would sue, the Supreme Court would become involved, the President may have to defy a restraining order, impeachment would be in play. In short it would be a mess and we still might end up defaulting.
It is also wrong to think the Democrats could have gotten rid of the law when they controlled both houses. Manchin and Sinema would not have been on board so they wouldn’t have had the votes in the Senate.
Dems controlled the whole show for the first two years of Obama (including Senate by reasonable majority). Didn’t fix the debt ceiling or many other things they now complain about. Would just urge a healthy bit of skepticism of any claims advanced by obvious partisans like Fazi (or his conservative equivalent for that matter).
Dems controlled the whole show for the first two years of Obama (including Senate by reasonable majority). Didn’t fix the debt ceiling or many other things they now complain about. Would just urge a healthy bit of skepticism of any claims advanced by obvious partisans like Fazi (or his conservative equivalent for that matter).
It is naïve to assume that the President could just mint a coin or invoke the 14th amendment so he could continue issuing debt, and that would be the end of it. There would be a constitutional crisis that would last months, the Republicans would sue, the Supreme Court would become involved, the President may have to defy a restraining order, impeachment would be in play. In short it would be a mess and we still might end up defaulting.
It is also wrong to think the Democrats could have gotten rid of the law when they controlled both houses. Manchin and Sinema would not have been on board so they wouldn’t have had the votes in the Senate.
It always seems to come down to two groups – those that pretend the numeric value of the debt isn’t real (they often think inflation is a way out), and those that see this massive sword of damocles that is the risk in debt servicing.
Debt is fundamentally stealing from the future, it should only be done for infrastructure where the return on capital expended is baked in over long periods eg Dams, Transport Networks.
The outcomes of excessive debt are default, collapse or transfer of ownership (such as dispossession of the nation). I’d sooner take the former two than the latter, but the latter is what the very rich want.
It always seems to come down to two groups – those that pretend the numeric value of the debt isn’t real (they often think inflation is a way out), and those that see this massive sword of damocles that is the risk in debt servicing.
Debt is fundamentally stealing from the future, it should only be done for infrastructure where the return on capital expended is baked in over long periods eg Dams, Transport Networks.
The outcomes of excessive debt are default, collapse or transfer of ownership (such as dispossession of the nation). I’d sooner take the former two than the latter, but the latter is what the very rich want.
Monetary debasement is inflation, it has consequences. They aren’t the advertised consequences as we live in opposite world where reality cannot be discussed as it is, only through the prisms of doublethink may reality be touched. But consequences there are and lives are affected.
Monetary debasement is inflation, it has consequences. They aren’t the advertised consequences as we live in opposite world where reality cannot be discussed as it is, only through the prisms of doublethink may reality be touched. But consequences there are and lives are affected.
If financial debt can simply be negated by printing more money, why bother taxing people at all?
By imposing a tax liability on the non-government sector the currency issuer provides an incentive for the currency users earn some of the currency they issue. If we were all happy to receive carrots or goats as wages then the currency issuer would struggle to get people to work for them to build national infrastructure or whatever. Taxation also works to dampen inflation. The currency issuer can use this effect to free up resources. If there was a shortage of public school teachers then a government might choose to hit private education with a heavy tax burden. The private sector might then shrink and shed employees, freeing them up for government to employ on the cheap. Tax can also be used to ‘level up’ wealth disparities by using things like progressive income tax rates. And tax can be used to alter our behaviour (taxes on tobacco, alcohol, sugar etc.).
By imposing a tax liability on the non-government sector the currency issuer provides an incentive for the currency users earn some of the currency they issue. If we were all happy to receive carrots or goats as wages then the currency issuer would struggle to get people to work for them to build national infrastructure or whatever. Taxation also works to dampen inflation. The currency issuer can use this effect to free up resources. If there was a shortage of public school teachers then a government might choose to hit private education with a heavy tax burden. The private sector might then shrink and shed employees, freeing them up for government to employ on the cheap. Tax can also be used to ‘level up’ wealth disparities by using things like progressive income tax rates. And tax can be used to alter our behaviour (taxes on tobacco, alcohol, sugar etc.).
If financial debt can simply be negated by printing more money, why bother taxing people at all?
How many people on this medium have no idea that a large part of their savings, pensions and life assurance are actually the debt that they are so ignorantly claiming should be stopped or paid back? Very few, I hazard a guess? How cretinous is that?…. and I do not mean the debt…
Sounds like you’re describing a ponzi scheme.
You have certainly hit the nail on the head (although probably not in the way you intended). The next crisis (which will make the Great Depression seem like a good laugh) will be the reversal of this ‘flip’ wherein sovereign debt, due to its seemingly riskless nature, is repackaged as an asset further down the money river.
I give up…. pig headed stupidity from those who cannot even be bothered to research a subject upon which they are happy to express asinine ” views” that are embarrasing nonsense.
I give up…. pig headed stupidity from those who cannot even be bothered to research a subject upon which they are happy to express asinine ” views” that are embarrasing nonsense.
Sounds like you’re describing a ponzi scheme.
You have certainly hit the nail on the head (although probably not in the way you intended). The next crisis (which will make the Great Depression seem like a good laugh) will be the reversal of this ‘flip’ wherein sovereign debt, due to its seemingly riskless nature, is repackaged as an asset further down the money river.
How many people on this medium have no idea that a large part of their savings, pensions and life assurance are actually the debt that they are so ignorantly claiming should be stopped or paid back? Very few, I hazard a guess? How cretinous is that?…. and I do not mean the debt…