MarvinSussman wrote:
First, printing money causes not debt. But let's talk about today:
For some unknown reason, conservatives seem to think that the federal debt is a bad thing. The federal debt is the sum of private assets, the wealth of individuals and corporations. It is exactly what makes the future look prosperous. The alternative is extreme poverty.
Conservatives are also concerned that foreigners own about half the debt. That ownership is exactly what makes the US dollar a reserve currency. Without the foreign ownership of much of the US debt, it would not be a reserve currency. It is absolutely necessary that the issuer of a reserve currency have a large debt and that much of the debt belong to foreigners. The large foreign ownership is not a source of worry. It should be a source of p***e.
For well over a century, the British pound was a reserve currency and they had a very high debt/GDP ratio, sometimes over 1,000 and they didnt worry about it.. And the debt ratio was not the cause of fall of the pound. It was World Wars I and II that ruined the pound.
Banks issue CDs. The owners of the CDs are glad to have those assets. The banks that grant the CDs are glad to have the debt. Otherwise, they would not offer the CDs. But to stay solvent, the banks have to lend the principal of the CD to a performing borrower at a higher interest rate.
The Treasury doesn't have to lend the principal to make a profit. It just has to pay the interest. It does that by auctioning more debt, ad infinitum.
Meanwhile, the Fed buys a lot of the debt on the open market with cost-free keystrokes, pockets the interest and returns 94% of it to the Treasury, thus eliminating the debt. The Treasury trades bonds for real dollars while the Fed trades keystrokes for the same bonds. So the Treasury-Fed combo gets real dollars for keystrokes. Pouf! The debt is sequestered in the combo.
In theory, the Fed could buy all the treasuries outstanding but that would make no sense. Everybody with a treasury wants that asset; otherwise, being perfectly liquid, it would be sold. The alternative is to hold dollars, which lose their value at a faster rate than the treasury.
In summary, the Fed, by buying treasuries, decreases the supply and increases their value and lowers their interest rate. Currently, the interest rates are extremely low and the value of the treasuries is extremely high. The Fed can ALWAYS keep it that way.
Stop worrying and learn to love the debt. It's part of your 401 (k). Kwitcherbellyakin!
First, printing money causes not debt. But let's t... (
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Marvin, you live in denial; did you even read what I posted or just continue to espouse your never changing opinion no matter what the facts say. Go back and read how the debt is destroying our economic growth (I laid it out for you in simplistic terms) and then tell me not to worry. Economic growth is the engine against unemployment and without it we are doomed. You previously had a whole post on how much revenue we were foregoing due to unemployment and underemployment. Open your eyes man, we are now in negative growth due to the debt and at some point we will pay by loosing our Reserve Currency Status. The war had nothing to do with the pound loosing it's Reserve Status it was the value of the pound at the end of the war; can you see the difference and conversely the value of the Dollar ergo the change. History will repeat itself