… How can the country remain strong with very little debt, without defaulting on Social Security, Medicare, or the federal debt itself?
There is a way. The government can reduce the debt by buying it – and ripping it up. The debt can be bought either with debt-free US Notes of the sort issued during the Civil War, or with US dollars issued by the Federal Reserve in the form of “quantitative easing.”
The vast majority of the money supply today is created by banks when they make loans, as the Bank of England recently acknowledged. Banks create money by “monetizing” debt, turning loans into the digital deposits that make up most of the circulating money supply. The government could push the reset button by monetizing its own debt, turning it into what it should have been all along – debt-free, interest-free dollars. As Thomas Edison observed in 1921:
If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. . . . It is absurd to say our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People.
That is not just a quaint idea from the 1920s. Credible authorities are making that argument today. In November 2010, Dean Baker, co-director of the Center for Economic and Policy Research in Washington, wrote in response to the debt ceiling crisis:
There is no reason that the Fed can’t just buy this debt (as it is largely doing) and hold it indefinitely. If the Fed holds the debt, there is no interest burden for future taxpayers. The Fed refunds its interest earnings to the Treasury every year. Last year the Fed refunded almost $80 billion in interest to the Treasury, nearly 40 percent of the country’s net interest burden. And the Fed has other tools to ensure that the expansion of the monetary base required to purchase the debt does not lead to inflation.
In 2011, Republican presidential candidate Ron Paul proposed dealing with the debt ceiling by simply voiding out the $1.7 trillion in federal securities then held by the Fed. As Stephen Gandel explained Paul’s solution in Time Magazine, the Treasury pays interest on the securities to the Fed, which returns 90% of these payments to the Treasury. Despite this shell game of payments, the $1.7 trillion in US bonds owned by the Fed is still counted toward the debt ceiling. Paul’s plan:
Get the Fed and the Treasury to rip up that debt. It’s fake debt anyway. And the Fed is legally allowed to return the debt to the Treasury to be destroyed.
Congressman Alan Grayson, a Democrat, also endorsed this proposal.
In February 2015, financial author Richard Duncan made a strong case for going further than monetizing existing debt. He argued that under current market conditions, the US could rebuild its collapsing infrastructure with quantitative easing without causing price inflation. Prices go up when demand (money) exceeds supply (goods and services); and with automation and the availability of cheap labor in vast global markets today, supply (productivity) can keep up with demand for decades to come. Duncan observed:
Quantitative Easing has only been possible because it has occurred at a time when Globalization is driving down the price of labor and industrial goods. The combination of fiat money and Globalization creates a unique moment in history where the governments of the developed economies can print money on an aggressive scale without causing inflation.
They should take advantage of this once-in-history opportunity to borrow more in order to invest in new industries and technologies, to restructure their economies and to retrain and educate their workforce at the post-graduate level. If they do, they could not only end the global economic crisis, but also ensure that the standard of living in the developed world continues to improve, rather than sinking down to third world levels.
Abraham Lincoln revived the colonial system of government-issued money when he endorsed the printing of $450 million in US Notes or “greenbacks” during the Civil War. The greenbacks not only helped the Union win the war but triggered a period of robust national growth and saved the taxpayers about $14 billion in interest payments (figuring an average of $300 million in outstanding US Notes over 150 years, at an average real interest rate of 2.6% compounded annually). The US federal debt has been growing ever since 1835, when President Andrew Jackson last paid it off and closed down the Second US Bank. If judicious use of US Notes had continued to the present, there might now be no federal debt at all. …
An accident? Seriously?
Europe is being overrun by refugees from Washington’s, and Israel’s, hegemonic policies in the Middle East and North Africa that are resulting in the slaughter of massive numbers of civilians.
The inflows are so heavy that European governments are squabbling among themselves about who is to take the refugees. Hungary is considering constructing a fence, like the US and Israel, to keep out the undesirables. Everywhere in the Western media there are reports deploring the influx of migrants; yet nowhere is there any reference to the cause of the problem.
The European governments and their insouciant populations are themselves responsible for their immigrant problems. For 14 years Europe has supported Washington’s aggressive militarism that has murdered and dislocated millions of peoples who never lifted a finger against Washington. The destruction of entire countries such as Iraq, Libya, and Afghanistan, and now Syria and Yemen, and the continuing US slaughter of Pakistani civilians with the full complicity of the corrupt and traitorous Pakistani government, produced a refugee problem that the moronic Europeans brought upon themselves.
Europe deserves the problem, but it is not enough punishment for their crimes against humanity in support of Washington’s world hegemony.
In the Western world insouciance rules governments as well as peoples, and most likely also everywhere else in the world. It remains to be seen whether Russia and China have any clearer grasp of the reality that confronts them. …