Jerry A. Loc: California

Since 1981, trickle-down economic and I.R.S. tax reforms passed in our U.S. Congress and signed into law by President Ronald W. Reagan our U.S. Federal deficit increased every year, and the devaluation of our U.S. dollar, causing the inflation we have. In 2001, President George W. Bush, Jr. proposed even more I.R.S. tax cuts to help the wealthiest american, businesses, corporations, and speculators in Wall St. and our U.S. Congress passed the law that he signed into law increasing even more the Federal deficit, later we had the economic catastrophe in 2007 - 2008 that President Barack H. Obama inherited in 2009. U.S.A. is bankrupt now, mayor U.S. manufacturers moved to 3er. world countries looking for cheap labor and no I.R.S. taxes supported by our U.S. Congress to destroy organized labor in U.S., now everything we buy is made in China, India, Mexico, Africa, etc. etc. and the Federal deficit is almost 18 trillion U.S. dollars and the U.S. Congress majority hurt the poor and feed the rich only.

MarvinSussman

Q1: For taxpayers, is our “national debt” really a burden that must be repaid?
A1: No. For taxpayers, it is not a real debt. It’s a “Debt In Name Only”. It’s a “DINO”

THE DINO IS NOT NOW AND NEVER WILL BE A BURDEN FOR TAXPAYERS. It is rather the buyers of newly-issued bonds who, in a virtual rollover, pay for redemption of mature bonds and for the interest expense. Auction revenue equals the deficit and exceeds it by about the annual debt interest expense. When an Asian exporter buys a US bond, her dollars are deposited into her individual Treasury bond account at the Fed. At the bond’s maturity, her principal is returned to her by the Treasury, not by Congress, not by the taxpayer.

New treasury issues recapture all net Treasury payments so that they do not add to the money supply. As no physical resources are consumed, there is no inflationary effect. For those reasons, CBO budget economists prefer to deal with the “primary” budget, which excludes the annual debt interest expense.

THE DINO WILL NEVER BE REPAID AND SHOULD NEVER BE REPAID. Only a budget surplus can reduce the DINO. Since Truman, every President has left office with an increased DINO and no annual budget surplus is now in sight. To supply enough risk-free US bonds used for trade collateral, insurance, pensions, bank reserves, etc., the DINO MUST GROW with the economy! Our world needs the DINO!!

Q2: Could ‘’bond vigilantes’’ go out on a strike against US treasuries?
A2: Yes, when they can get risk-free returns from the Wall Street casino or from GM bonds, Illinois bonds, or Detroit bonds. Safety is not everything. Safety is the ONLY thing! That’s why the whole world relies on US bonds.

In every auction, more bonds are demanded than are available. Auction winners get the safest, most liquid US dollar instruments; the losers are stuck with bank risk. If it were ever necessary, the Fed could increase the demand for bonds and reduce the DINO by buying treasuries in the open market with cost-free keystrokes, collecting the proceeds, and returning the required 94% of its profit to the Treasury.

Q3. Could savers prefer another nation’s bonds?
A3. Yes, indeed! SAVERS WILL ALWAYS WANT THE SAFEST BONDS. To beat the competition, we need the world’s highest productivity based upon the world best infrastructure. And if another nation’s infrastructure and productivity become better than ours, its bonds could become safer than ours and we could then lose our bond-buyers. But that could happen only if US v**ers let their DINO concerns stop the repair of falling bridges, failing schools, creaking railroads, etc. Money can be printed, but infrastructure has to be built with real resources over time, which has no substitute. We have 60,000 bridges in critical need of repair. There are over 50,000 dams that have to be removed or fixed. The entire power grid has to be renewed and put safely underground. Our entire school system must be redesigned and rebuilt. We are slipping into obsolescence. Worry about that!

The US bond will be only as good as the US dollar and the US dollar will be worth wh**ever it can buy. If exporters want to sell us their goods, they will have to accept our dollars. If they stop selling us goods, unemployed American will get full-time jobs and start looking for cars and homes. But exporters will never stop selling us goods and trading their US dollars for the safest bond available. Wise spending will keep the US bond on top.

Q4: Are not deficits and debt bad for the economy?
A4: Every federal dollar spent and not retrieved by the IRS is saved by the private sector. Yes, Deficits = Savings! The Treasury has a “National debt” and the private sector has a “National asset”. The bad “Debt Clock” is also the good “Asset Clock”. Since, with our trade deficit, we export money, deficit spending is our economy’s SOLE source of savings! In fact, if large budget deficits don’t replace our vanishing cash, deflation will freeze our economy solid. Who would spend a dollar today if it would buy more tomorrow?

While a bank holding too many bad loans can certainly hold too many maturing CDs, our non-lending Treasury cannot hold too many maturing bonds unless its deficit spending causes harmful inflation. And that happens ONLY in a war or emergency requiring rationing. It NEVER happens during a recession. During prosperity, banks are ALWAYS the main cause of inflation, creating over $6 of credit for every $1 of deficit spending. To curb inflation, regulate the banks before stopping work on infrastructure projects!

Our economy is suffering from acute anemia. Our (DINO + total bank deposits) / GDP ratio is less than half of China’s figure. Our M2 (money supply) / GDP ratio is half of Switzerland’s ratio and one fourth of Hong Kong’s ratio. To become and stay prosperous, we need to DOUBLE the DINO / GDP ratio to return it to the World War II level that was followed by 35 years of prosperity without harmful inflation.

Wealth ine******y worsens the anemia. Most of our paltry money supply circulates among the rich who bribe Congress for estate laws to endow wealth used to bribe Congress for laws that enrich the rich. Wealth is power and inherited wealth is inherited power: aristocracy, always the enemy of meritocracy!

Q5: Won’t we need higher income tax rates to pay for infrastructure?
A5: Congress NEVER asks the Treasury if it has enough money. The only rational reason to increase taxes or to reduce deficit spending is the onset of harmful inflation. Until then, Congress can hire the resources left idle by industry to repair, rebuild, and renew our much-needed infrastructure. Every day, you fill your sink with water AND also prevent it from overflowing. Why can’t Congress fill our economy with money by building infrastructure AND also prevent harmful inflation? China manages to build 24/7 without harmful inflation. Why can’t we do that?

Q6: How much should Congress spend and tax?
A6: Ideally, Congress should spend almost enough to cause harmful inflation and should tax only enough to prevent harmful inflation. Congress’ fiscal goal should be the onset of harmful inflation.

Instead, bribed by Wall Street, Congress spends as little as possible, impoverishing most of us by restricting deficits / savings and taxes as little as possible, enriching the rich. Just as quacks k**led George Washington by bleeding his “bad blood”, Congress is destroying our younger generations by reducing (possibly to zero!) our annual budget deficits / private sector savings increase / consumer demand. Wall Street’s austerity budgets create and nurse a huge army of unemployed labor to suppress the wages and working conditions of the shrinking middle class.

Q7: “I have to balance my budget. Why doesn’t Congress balance its budget?”
A7: If you could legally print money in your attic, why would you balance your budget? You would only need to balance your desires against your family’s well-being. Congress only needs to balance full employment against harmful inflation. Why is something so simple so hard to see?

Q8: How should one v**e?
A8: Never v**e for a deficit hawk. V**e only for someone who worries about the millions of unemployed and underemployed drawing benefits instead of building needed infrastructure for their grandchildren.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The above essay was inspired by works by:
Frank N Newman, former Deputy Secretary of the US Treasury, author of: ‘’Freedom from National Debt’ (Two Harbors Press);
Francis X Cavanaugh, US Treasury economist for over 30 years, author of: ’’The T***h about the National Debt: Five Myths and One Reality’’ (Harvard Business School Press);
Warren Mosler, economist, author of: ‘’Seven Deadly Frauds of Economic Policy’’ (Oxfod University Press);
Mark Blyth, Brown Univ. Prof. of International Political Economy, author of “Austerity”, (Oxford University. Press)
Dr. Stephanie Kelton, Chair of the UMKC Economics Department, blogging at NewEconomicPerspectives.org.

© 2014 Marvin Sussman All Right Reserved. Permission granted only to copy entirely.

Super Dave Loc: Realville, USA

Your childish title assumes that money made belongs to the government and wh**ever they back to the worker that earned it should be met with gratitude.

This isn't Cuba.

Dave Loc: Upstate New York

With just one point we can show how misinformed you are or are trying to misinform others. The tax cut you say Bush put through for the rich was a temporary tax cut that ran out in 2010 - Obama with total control over Congress extended for two years and then made 99% of it permanent after that. Someone calling themselves independent while damning Bush for a temporary tax cut while praising Obama for making it permanent is either deceptively partisan and remarkably misinformed.

Super Dave Loc: Realville, USA

Or both.

Dave Loc: Upstate New York

Once again we hear from the guy who thinks the government can borrow to infinity - and who tags his posts with indications of his egocentric delusion.

rkevin Loc: florida

The liberal [Dodd/Frank] Congress in 2006-2008, Jerry, with the help of then Senator from Illinois, BHO, with the help of ContryWide Finance, [Frank's boyfriend] and ACORN, initiated the $0.00 down loans to minorities who were instructed by ACORN's liberal progressive employees how to lie on their applications to get houses that would start to fall short on mortgage payments about the time 2008 e******ns were heating-up.

Just as "W" got the blame for the housing and financial crash in 2008, the housing and financial crash coming for the 2016 e******ns [that is just getting started by BHO] with the 3% minority loans, will certainly all be blamed on the Republican Congress.

That's how liberal progressives work - or try not to!!! It's always blamed on the Republicans; and all the credit is taken by the liberal progressives for getting in there to straighten [it] all out!!!

Ever since the MSM got in bed with the liberal progressives at the turn of the 19th century, any fault was Republican, and credit was always due to Democrats straightening-out the mess!!!

Jerry A. Loc: California

You are an ignorant who don't know what you are talking about, I am sorry.

cSc61 Loc: Austin

Marvin, you list several references at the end of your essay. I believe all these gentlemen come from the same ilk of economists who believe our only problem is that government isn't spending enough. Might I suggest a book by James Rickards called The Death of Money. He refutes, in great detail, almost every point you've made here. Just thought you might want to balance out your knowledge base a bit before committing to one economic religion over the over.

MarvinSussman

Stop borrowing! Print the money!

Jerry A. Loc: California

You are an ignorant who don't know what you are talking about, I am sorry.

Dave Loc: Upstate New York

Welcome to the new world of infinite wealth bought to you by infinite expansion of the money supply made necessary by infinite deficits by the government bought to you by folks who live in a wonderful world of fantasy and dancing wizards.

Super Dave Loc: Realville, USA

You don't know the difference in money and wealth, do you?

cSc61 Loc: Austin

rkevin, what you say is all true ... except it began much earlier under the Clinton administration. Gingrich's Congress had an opportunity to repair the damage of Dodd/Frank before it got started but he let the opportunity slip away. I will try to research the bill Clinton signed that was the genesis of the sub-prime mortgage crisis of 2007.

MarvinSussman

Everybody worries irrationally about money until there is a crisis. Suddenly, when half of your fleet is on the bottom of Pearl harbor, only time and physical resources are important. Everything else is BS. Full employment trumps everything. EVERYTHING!

Print the money. Fix the bridges. Put everybody to work and the increase in tax revenue will drown the deficit.