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Politics

Irrelevant either way - sm

Posted: Oct 23rd, 2017 - 8:26 pm In Reply to: I'm just trying to understand why it was - a big deal when the debt

It is a farce or lack of understanding of economics of today. We went off the Gold Standard in 1971.

The accounting category labeled debt/surplus was originally an advisory function that allowed Congress to know where it stood in currency supply balanced against the gold reserve. If the currency supply was less than the value of the reserve it could spend more or cut taxes without creating inflation. If the currency supply was more than the value of the reserve Congress had to cut back spending or raise taxes. Without the value of the gold reserve to measure this category against the number suddenly appeared much larger and it had an entirely different function. It now represents the total of currency in the private sector that hasn't yet been canceled by taxation, not an obligation that we must repay, even if that were possible. It is our aggregate savings represented in Treasury bonds. Without the value of the gold reserve to measure this category against the number suddenly appeared much larger and it had an entirely different function. It now represents the total of currency in the private sector that hasn't yet been canceled by taxation, not an obligation that we must repay, even if that were possible. It is our aggregate savings represented in Treasury bonds.

We don't "owe" $19 Trillion, we "OWN" $19 Trillion. We, the private sector, already paid for this currency when we exchanged it for the goods and services government needed to provision itself and pay for the programs it approved, and that is a completed contract, not a debt obligation. The use of this large number to scare us into submitting to very harmful austerity-based fiscal policy is the biggest con ever perpetrated, but it works because it resonates with our only other economic experience, our personal budgets. However, we are not "issuers" of the currency and only "use" it in our economy. The currency issuer has an entirely different set of rules that determine cause and effect in the economy, and they are almost always directly opposite to those we know from our experience.

If you believe the government should reduce spending to "pay" the debt you should ask your employer to reduce your pay because they will have the same effect and you can make your employer happy by taking less from him. Every dollar spent by the government becomes someone's asset in the private sector. "Balancing the budget" means removing/canceling a dollar for every dollar created and gives no consideration for the drains of wealth accumulation or trade deficits. It also provides no fuel for economic growth and it tends to drive people to leverage their private debt beyond their ability to pay in a currency starved economy. If your representative is beating you up with the debt and fear of America "going broke" (an impossibility with a fiat currency) s/he is either ignorant of how the economy functions or is corrupt and lying to you.

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