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The National Debt: A THING OF BEAUTY.

April 4, 2016

The National Debt: A THING OF BEAUTY.

When a Monetary Sovereignty spends more money than that which it has taken out of its own currency circulation: it must “borrow” (as per US Constitution). This creates the debt of the entire sovereignty,that debt being in that currency.When a Monetary Sovereignty has a debt in its own currency that debt is a deposit in its Central Bank. The owner of the “Debt Deposit” may withdraw upon demand; however the owner then loses the protections and safety of the credit of the sovereignty.
Why is there a problem?
SO where did we go wrong ?
“Its the INTEREST, stupid.”

A deficit that grows exponentially MUST over time destroy the quality and quantity of the currency.Period. MMTers ignore this fact, this fatal flaw. With no additional spending, while asleep at the wheel the present debt will go from $19trillion to $38trillion, then to $76trillion, to $142trillion…maybe then, perhaps your great-grand children will ask,
“What were you thinking?”
MMTers are correct that the debt NEED NOT be paid, but we must FIRST correct the fatal “exponential flaw.” READ: National Debt becomes money deposited in the Central Bank as US TREASURY BEARER BONDS at 0% Interest (USTBB) need only be paid on demand by each holder.

“To those who “own” the debt (80% is owned by the top 10%ers), it is really just a very safe savings account, identical to a bank CD but totally safe.”

EXACTLY, why China will not convert its $3.5trillion and be happy with USTBB – and we will no longer have to give them @ $200billion of new money. And would the 10%ers allow the commercial banks to hold their lifetime saving, knowing that they will be subject to risk,fraud and whatever the banks could monetize?

That is fine ZIRP forever. Stop paying interest on bank reserves, and stop issuing Treasury bills and bonds with interest payments attached.
Issue USTBB, allow the holders the safety of the American Dollar being held for them until they seek redemption.

Then proceed to pay off the entire Federal Debt?
***The ease with which the government’s debt could be paid in this way was demonstrated in January 2004****
As the chairman of the Coinage Subcommittee observed in the 1980s, the entire federal debt could actually be paid in this way. The Federal Reserve has already established that it can issue $4.5 trillion in accounting-entry QE without triggering hyperinflation. In fact, it has not succeeded in triggering the modest inflation the exercise was designed for. As with QE, paying the federal debt in this way would just be an asset swap, replacing an interest-bearing obligation with a non-interest-bearing one.(” A better aset swap would be “US TREASURY BEARER BONDS” (USTBB)!!!!! The market for goods and services would not be flooded with “new” money that would inflate the prices of consumer goods, because the bond holders would not consider themselves any richer than before. They presumably had their money in bonds in the first place because they wanted to save it rather than spend it. They would no doubt continue to save it,…(surely they would realize safety versus risk concerns.)

The ease with which the government’s debt could be paid in this way was demonstrated in January 2004, when the US Treasury called a 30-year bond issue before its due date. The bonds were redeemed “at par” to avoid a 9-1/8% interest rate, which was then well above market rates. The Treasury’s January 15, 2004 announcement said that payment would be made “in book entry form,” meaning numbers were simply entered into the Treasury’s online money market fund (Treasury Direct). In effect, the money just moved from an online savings account to an online depository account, converting interest-bearing bonds into non-interest-bearing cash.
Where did the Treasury get the money to refinance this $3 billion bond issue at a lower interest rate? Whether it came from the private banking system or from the Federal Reserve, it was no doubt created out of thin air. As Federal Reserve Board Chairman Marriner Eccles testified before the House Banking and Currency Committee in 1935:
When the banks buy a billion dollars of Government bonds as they are offered . . . they actually create, by a bookkeeping entry, a billion dollars.
The US government can just as easily create this money by a bookkeeping entry itself. It can and it should, to avoid the interest charges that compound the national debt and make it unrepayable.


Quote Thomas Edison, “…Whereas the currency, the honest sort provided by the Constitution pays nobody…” But the owners of the debt that is now on deposit.



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