“Only the small secrets need to be protected. The big ones are kept secret by public incredulity.”-- Marshall McLuhan
Brace yourselves, the debt ceiling debate approaches. We’ll soon hear from dozens of dumber-than-a-bag-of-Krauthammers pundits saying America’s debt load is not just unsustainable, it’s cruel to children. Very Serious People like billionaire Pete Peterson will say that despite its current enthusiastic embrace of government debt, the bond market will stop lending America money unless we start cutting the modest safety net programs we have now, and we MUST cut them!
That’s all self-serving one-percenter propaganda.
In this discussion, even the word “debt” is deceptive. Families have debt as it’s ordinarily understood, but governments with sovereign currency (like the dollar, not the euro) have something else. If government “debt” is like families’ debts, then where are the families who can (legally) mint money to repay their creditors?
Dollars are valuable because we need them to pay taxes, but neither taxes nor borrowing fund our government. Government can issue dollars at will. Even more obviously: government must spend the dollars before it can retrieve them in taxes.
And this is not a theory; it’s an observation. After Lehman Brothers’ bankruptcy in 2007, the U.S. central bank’s first-ever audit disclosed that the Fed issued $16 to $29 trillion to fix the financial markets.
The big question: Why do the same guys who crashed the economy get insta-trillions, but their victims -- the unemployed, school children, etc. -- get the we’ve-got-too-much-"debt” excuse?
For skeptics who say government “debases the currency” in doing this: It’s been five years since that insta-trillions bailout. Where’s the inflation? Hint: Inflation occurs when an economy’s productive capacity is at its limits and more dollars can’t buy goods and services. Now, we have deflation, with plenty of spare capacity and workers; the insta-trillions just paid off bets, it didn’t demand goods or services.
The fact that Federal “debt” isn’t really like family debt means control of our public policy machinery is very valuable. That is why politics is so vicious. There’s a virtual war to control the power of money.
What would the economy look like if the public, not the one percent, controlled the Treasury or the Fed? Perhaps we could stop rewarding casino capitalism and fund productive work. Perhaps we could guarantee jobs for everyone willing to work, and rebuild our energy infrastructure to use renewables, instead of fracking and importing oil.
Perhaps we could stop worrying about thieves stealing our copper wiring and could stop making endless wars, and funding more military than the rest of the world combined just to keep the Military Industrial Complex the only vibrant sector of the economy. Perhaps...
State and Local governments could get this money too. All they need to do is open a bank that could borrow, like the too-big-to-fail banks, at incredibly low interest rates from the Fed. North Dakota has one now.
Worrying about government debt is like worrying about the monster under the bed. The issue isn’t debt, it’s power.
The author recommends the Modern Monetary Theory school of economics to those interested in more about this subject, and reminds skeptics that denial is not just a river in Egypt.