Monday, February 13, 2012

United States Debt Crisis? What Debt Crisis?

It’s been some time since I stopped by Leonard’s blog Unruled, mostly because it has been some time since he put up a new post, and I missed that when it went up on January 31st.  But I stopped by just a bit ago and noted his most recent post which is filed under the title of National Debt Considered Stupid, which links to a post at the blog Intellectual Detox, written by Devin Finnbar, titled Europe’s Wile E. Coyote Moment.

Leonard quotes an excerpt from Finnbar’s post dealing with the subject of whether or not a country needs to go into debt, but I want to draw your attention to another point Finnbar makes in his post regarding the United States’ debt.

There is not enough money in the world to pay back America’s national debt. Total United States currency (paper and electronic entries in reserve accounts) sums to about $2 trillion. The national debt sums to over $14 trillion. If people ever really suspected that the U.S. monetary printing press was broken, there would be the mother of all bank runs. Bond holders would redeem their U.S. debt instead of rolling it over. Savers would hold tightly to any real currency. The entire banking system would collapse. But such a crisis has no chance of happening because the Federal Reserve promises to buy up government debt with cash as demand for currency rises. American government debt is thus risk less. Since it is both risk less and it pays interest, nobody actually redeems their treasury bills for real currency, and the ratio of $14 in ‘debt’ to $2 trillion in currency can be maintained forever.

The reality of American treasury “debt” is that it is not really debt. Treasury bills should be considered part of the money supply - TBills are simply dollars with not valid dates. T-Bills are equivalent to restricted shares in a company.

Interesting thought.

Posted by John Venlet on 02/13 at 02:29 PM
(3) Comments • (0) Trackbacks • Permalink
Page 1 of 1 pages