The thing is that there is a real consequence within the framework of the system. While they can issue infinite currency, the two problems they have are inflation and debt payments. Inflation devalues the currency, while higher debt payments mean that there’s less operational budget available. So, end result ends up being less money available for productive purposes as more and more of the budget ends up being allocated towards interest.
For what? Did you read the article? They care about:
Federal employees
Medicare
Social Security
Comparing government budgets to household budgets
Seriously? These are the “productive” purposes that are problematic?
If these cranks actually cared about debt, they’d be proposing taxes on the rich and ending the MIC. The article is complete shit and doesn’t actually present any material change in the US debt posture or their ability to “pay” interest on their debt level.
I did read the article, but I also understand other factors that the article doesn’t talk about. So, I can use that broader understanding to contextualize what high levels of debt mean in practice.
The key context is how the system actually works though. The government doesn’t just print cash and hand it out. Typically, they issue Treasury bonds instead with the understanding that the government will pay back later with interest. These bonds are then bought up by pension funds, foreign governments, big financial institutions, etc.
When the government prints too much money or issues too many bonds, the bond holders start getting awful nervous about their investment. They wonder if the dollars they get back in ten years will be worth the paper they’re printed on. So they demand a higher yield to cover the risk. It’s not unlike a credit card company jacking up your rate when you miss a payment.
Rising bond yields, in turn, make the government’s interest payments go up. Bigger and bigger checks need to be paid to the people who lent the money, which reduces the operational budget. Today, that sum is sitting at something like a trillion dollars a year. It’s money that’s just flowing out of the treasury and straight into the accounts of bondholders.
The recent historical money printing (bonds have to be repaid, and not technically printing) is QE = Quantitative Easing. The Fed makes up money, and uses it to buy real bonds, under the theoretical possible future of reselling the bonds later. It gives the interest paid on those bonds back to the treasury. While the activity is absurd, it tends to inflate bond prices (lower interest rates) because easy money is to buy bonds before Fed buys them back from you.
Fourteen years ago:
📺 Greenspan: “The United States can pay any debt it has because we can always print money to do that”
turns out empires aren’t forever
It’s just the usual trash from the usual suspects. It would be cool if this were a sign of the empire in decline, but it’s really not.
The thing is that there is a real consequence within the framework of the system. While they can issue infinite currency, the two problems they have are inflation and debt payments. Inflation devalues the currency, while higher debt payments mean that there’s less operational budget available. So, end result ends up being less money available for productive purposes as more and more of the budget ends up being allocated towards interest.
For what? Did you read the article? They care about:
Seriously? These are the “productive” purposes that are problematic?
If these cranks actually cared about debt, they’d be proposing taxes on the rich and ending the MIC. The article is complete shit and doesn’t actually present any material change in the US debt posture or their ability to “pay” interest on their debt level.
I did read the article, but I also understand other factors that the article doesn’t talk about. So, I can use that broader understanding to contextualize what high levels of debt mean in practice.
The debt, and payments on interest, might cause more inflationary pressure than eliminating it would cause.
I think they could just print 39 trillion dollar coins and instantly pay off the debt.
The key context is how the system actually works though. The government doesn’t just print cash and hand it out. Typically, they issue Treasury bonds instead with the understanding that the government will pay back later with interest. These bonds are then bought up by pension funds, foreign governments, big financial institutions, etc.
When the government prints too much money or issues too many bonds, the bond holders start getting awful nervous about their investment. They wonder if the dollars they get back in ten years will be worth the paper they’re printed on. So they demand a higher yield to cover the risk. It’s not unlike a credit card company jacking up your rate when you miss a payment.
Rising bond yields, in turn, make the government’s interest payments go up. Bigger and bigger checks need to be paid to the people who lent the money, which reduces the operational budget. Today, that sum is sitting at something like a trillion dollars a year. It’s money that’s just flowing out of the treasury and straight into the accounts of bondholders.
This seems like an entirely self-created problem by designing a system where the government doesn’t just print cash.
The recent historical money printing (bonds have to be repaid, and not technically printing) is QE = Quantitative Easing. The Fed makes up money, and uses it to buy real bonds, under the theoretical possible future of reselling the bonds later. It gives the interest paid on those bonds back to the treasury. While the activity is absurd, it tends to inflate bond prices (lower interest rates) because easy money is to buy bonds before Fed buys them back from you.