Here is quick economic primer for many of you for whom the working of our Federal system seems to be a mystery. I keep hearing people say, "But what about our deficit?", or "We can't afford to keep borrowing money to run the government." When I hear these type of statements, it indicates to me the speaker does not understand how our treasury system works. Work through this slowly and carefully. Think long and hard about the parts you don't understand, or don't agree with. This isn't opinion, it's cold hard fact, and basic macro economics. We have known, and proven, these concepts over time and have used them successfully since the inception of the Federal Reserve System.
First of all, resources like water, minerals, food, labor, wood, and animals are of course finite. However, money is only a marker, or replacement for these resources and is infinite (not really, but for the purposes of any individual it is infinite). So, when you have resources, but it doesn't make sense to move them to where they are needed, or you don't need them now, you trade them for money, and then buy them later when and where you need them. The treasury of the federal government has the power to print more money at any time.
So, when you have potatoes, but need something else, you trade the
potatoes for money and then trade the money for what you need. People
who had those things you needed traded money for them at some other time
in some other place, etc.
Now, if more money is needed, the treasury has methods of determining when and where and printing more money to meet this need. They have long ago established mechanisms to put the money into circulation, and remove money when necessary. It works very well, and has been proven over time.
One of these methods is a recursive technique called "Quantitative Easing", by which the treasury buys back bonds it had previously issued in the form of a loan. These accumulated bonds are our "National Debt". We have about $16 Trillion of these bonds issued on average.
However, since November of 2008 the treasury has conducted three rounds of "Quantitative Easing", totaling about $5.1 trillion. Basically, they have printed $5.1 trillion dollars and removed this from the debt by buying these bonds back from bond holders who were holding this debt, primarily US banks. They are scheduled to conduct several more rounds through 2014 perhaps reducing the debt by another $3.4 trillion. Basically, they can keep this up indefinitely, selling bonds and many years later buying them back with interest.
So, here is the kicker; there is no "National Debt". Quit your whining please. It is just a tool to move money around when and where it is needed. We could effectively reduce it to zero if we wanted, it would just take this other tool away from the treasury. We need this volume of money and loans in float around the world to buy the things we need and control the parts of the world economy we need to control.
Now, if more money is needed, the treasury has methods of determining when and where and printing more money to meet this need. They have long ago established mechanisms to put the money into circulation, and remove money when necessary. It works very well, and has been proven over time.
One of these methods is a recursive technique called "Quantitative Easing", by which the treasury buys back bonds it had previously issued in the form of a loan. These accumulated bonds are our "National Debt". We have about $16 Trillion of these bonds issued on average.
However, since November of 2008 the treasury has conducted three rounds of "Quantitative Easing", totaling about $5.1 trillion. Basically, they have printed $5.1 trillion dollars and removed this from the debt by buying these bonds back from bond holders who were holding this debt, primarily US banks. They are scheduled to conduct several more rounds through 2014 perhaps reducing the debt by another $3.4 trillion. Basically, they can keep this up indefinitely, selling bonds and many years later buying them back with interest.
So, here is the kicker; there is no "National Debt". Quit your whining please. It is just a tool to move money around when and where it is needed. We could effectively reduce it to zero if we wanted, it would just take this other tool away from the treasury. We need this volume of money and loans in float around the world to buy the things we need and control the parts of the world economy we need to control.
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