
What If We Paid Off The Debt? The Secret Government Report - joelhaus
http://www.npr.org/blogs/money/2011/10/20/141510617/what-if-we-paid-off-the-debt-the-secret-government-report?ft=1&f=93559255
======
hristov
Ahh, remember the good old times under Clinton when we were actually paying
off the debt. What happened then? They mocked Al Gore for his plans to pay off
the debt (remember all the "lockbox" stuff) and then we got a president that
promised tax cuts and drastically increased federal spending, and added a
couple of wars just for fun. Now there is absolutely no danger of paying off
the debt.

By the way that report is absolutely wrong. Nothing terrible would happen if
we paid off the debt. So there wouldn't be federal treasuries. BFD. Just set
the risk free return to zero and you can use all of your old formulas. Yes
several bank departments would not be able to make money for absolutely zero
risk as they do now. Oh well, I suppose the banks would have to do what they
are supposed to do, i.e., calculate risk properly.

But of course it is all academic now. Because it is unlikely to ever happen.
Paying off the debt means doing something to help the future generations of
Americans and it is doubtful any president would do such a thing, and if he
did he would probably have to face a lot of angry voters who do not give a
shit about the future generations as happened with Al Gore.

~~~
yummyfajitas
We were not paying off debt under Clinton.

<http://research.stlouisfed.org/fred2/graph/?id=FYGFD>

We were merely reducing one kind of debt, namely debt held by the public.
Total debt continued to increase.

~~~
yequalsx
Actually, we did start to pay off the debt but this was at the very end of the
Clinton administration. If you'll look closely at the graph you supplied
you'll see this. Note that the first Bush budget wouldn't be until 2001.

The debt wasn't being paid off at a great rate but it was being paid off and
the person's main point that you responded to is correct. We were well off
financially until some very irresponsible actions by the Bush administration.

I disagree with the point about us never being able to pay off the debt. It
can be done and there are historical examples of countries with higher
debt/GDP ratios that were paid off.

Note: When talking about debt of a country people generally mean the debt of
the government. There was a budget surplus at the end of the Clinton
presidency and this is what people usually mean when they claim a government
was/is "paying off the debt".

~~~
yummyfajitas
False. The closest he came was from 1999-2000 where he only _increased_ the
debt by $23B.

    
    
        DATE          VALUE 
        
        1990-09-30   3206.3
        1991-09-30   3598.2
        1992-09-30   4001.8
        1993-09-30   4351.0
        1994-09-30   4643.3
        1995-09-30   4920.6
        1996-09-30   5181.5
        1997-09-30   5369.2
        1998-09-30   5478.2
        1999-09-30   5605.5
        2000-09-30   5628.7
        2001-09-30   5769.9
        2002-09-30   6198.4
    

<http://research.stlouisfed.org/fred2/data/FYGFD.txt>

~~~
yequalsx
According to the Congressional Budget Office there was a decrease in
2000/2001. According to the NPR story and the original graph you linked to
there was a decrease at this time.

<http://www.cbo.gov/budget/data/historical.pdf>

According to the PDF there was a decrease in public debt for a number of years
during the Clinton administration.

NOTE: I think the chart you linked to includes private debt and isn't just
federal debt.

~~~
joelmichael
The other kind of federal debt is intragovernmental debt; that is, debt which
the federal government owes to itself. This category includes the Social
Security Trust Fund.

~~~
hristov
And that does not really count. If government department A owes 10 dollars to
government department B, the total net government debt does not change. So
yequalsx's data is correct for the purposes of the present discussion.

~~~
sixtofour
If you borrow from your 401K, you're borrowing from yourself, and you
eventually have to pay it back. It's money that you owe, to be paid with funds
that can either be used to buy jelly beans or put back in your 401K.

If the government borrows from Social Security, it takes that money out of
itself and spends it out in the economy. SS and the government has a smaller
pile of cash, and the government owes itself. When the money is put back, it's
with funds that could either be used to buy bullets or put back in SS.

------
darrennix
The basic premise of this article is suspect. The US would still issue enough
T-Bills to provide stability even in a zero-debt scenario... it would simply
buy other safe, long-term assets to hold.

If, for example, the US were borrowing money at 3% by issuing T-Bills, it
would just buy a basket of high-grade foreign and corporate debt at 3.5% and
earn a spread of 0.5% while continuing to provide adequate liquidity of
T-Bills.

~~~
cube13
>The basic premise of this article is suspect. The US would still issue enough
T-Bills to provide stability even in a zero-debt scenario... it would simply
buy other safe, long-term assets to hold.

The US has no reason to issue T-Bills in a zero-debt scenario, through. The
only reason that the US government has to sell bonds like T-Bills is to make
up for the difference between income(taxes and fees) and costs. If the budget
is completely balanced, there is no reason for the government to sell off
bonds of any form, since they would need to pay them off with interest at a
later date.

~~~
anigbrowl
True, but if you had zero debt it might well be appropriate to issue some. for
example, suppose you want to build a vast new infrastructure project; it may
make more sense to borrow to do so if the cost of capital is lower than the
opportunity cost of waiting for the money to accumulate.

~~~
cube13
You're right. State and city-level governments do bond sales for this exact
reason.

However, I was assuming that the size(and budget) of the federal government is
large enough that if it were completely balanced, and all debt was paid off,
they would have enough surplus cash(or the ability to redirect funds) to
invest in a large-scale project like that. Short of another world war, I don't
think that there are really any projects that would absolutely require this
kind of immediate investment by the public.

~~~
mortenjorck
To lift a line from one of last year's best films: You mustn't be afraid to
dream a bit bigger, darling.

You can _always_ go bigger, and in such an incredibly desirable position as
you describe, the potential economic feedback loop from going even further
with investment in infrastructure and public services is too big to ignore.

Imagine an alternate universe in which there is still a Glass-Steagall act,
the Bush tax cuts were never passed, the Afghanistan and Iraq wars were never
started, the financial crisis was limited to a few isolated dominoes, and the
US is on track to pay off its sovereign debt completely by 2016. We could
build a competent, national network of high speed rail without borrowing
anything. Or, we could borrow again and build a world-class rail network,
invest heavily in education, transform the nation's healthcare system,
revitalize NASA... There is _always_ room for more investment.

Also, this is a really depressing fantasy to return from.

~~~
tsotha
That's a fantasy which could never have come to pass in any universe. The only
reason the budget was in surplus (technically) is the economy was so white hot
revenue was coming in faster than Congress had anticipated. As soon as this
was apparent, our legislators were falling all over themselves to spend money
on their pet pork projects.

We would have ended up in the hole anyway, since the revenue burst was bubble
induced and destined to go down. But even if that wasn't true they would never
have allowed the surplus to continue.

Even then it was imaginary, because the growth in Social Security and Medicare
spending was always going to outstrip revenue under the rosiest of scenarios.

------
brc
Australia paid off all of it's federal public debt in the mid-2000's. By 2007
the Federal government had no net debt. That is - the net position of the
governement (savings-debt) was zero.

This didn't mean that there were no securities on issue - the need for an
active market in government debt meant that there were still securities
outstanding, but these were offset by liquid assets that could be sold to buy
back the debt if necessary. I don't know what the surplus money was invested
in, but one of the leftovers from that period is a 'Future Fund' which is a
very large pool of investment funds held in trust for the future pension needs
of the public service. That is - the money was separated out from the general
revenue pit and put aside to pay out the retirement benefits of the people
employed by the government itself. I do know that this fund is a diversified
fund like any other, and invests in different styles and classes of
securities.

Of course, a change in government since that period and a drop in revenues
from the financial crisis means this is no longer the case. But for that brief
period it was a very good place to be - income tax rates were going down every
single year and the economy had an unbroken 13 year period of real growth in
wages and productivity.

You don't need public debt to function properly. Australia is a perfect
example of this. In fact, a lack of public debt is a good thing as it allows a
government to either return taxes via lowering tax rates, or invest the
surplus for the inevitable rainy day, or, to build productive infrastructure
if that is what they choose to do.

~~~
ohashi
I think that's great for Australia but isn't the central question what would
happen without US public debt? Australian public debt isn't a pillar of the
world economy.

~~~
jacques_chester
If you'd read it properly, you'd notice that Australia kept a pool of debt-in-
name-only turning over to serve local financial market needs. About 100
billion AUD IIRC, or ~10% of GDP at the time. The money raised through those
particular bonds was never used. It just came in, sat around for a while, and
went back out with a very small interest payment attached.

The US could have done the same and I understand that is what this "secret
report" recommended.

------
tptacek
This is such an interesting story, it's too bad politics are going to destroy
our ability to talk about it on HN.

------
morsch
The money supply, ie. the amount of money in existence, fluctuates. Obviously,
paper money is only a small fraction of the total amount of money "stored" in
checking acccounts, etc. Money is created through debt. If nobody is in debt,
the amount of money in circulation is much lower otherwise.

Does anyone know how much of the money supply is government debt?

I always get dizzy when I try to understand the monetary system. It seems
insane. It really shouldn't work at all.

If you want to get a headache, too, try reading
<http://en.wikipedia.org/wiki/Money_supply>,
<http://en.wikipedia.org/wiki/Fractional_reserve_banking> or watching _Money
as Debt_.

~~~
jganetsk
Government debt and fractional reserve banking are two totally unrelated
concepts. The latter is what increases money in circulation. Government debt
only increases the debt instruments in circulation. Debt instruments, as far
as I know, cannot be used to meet reserve requirements.

China, however, has a currency which is pegged to the dollar and backed by the
US treasury. As a result, our government debt increases their money supply.

~~~
morsch
Well, obviously they're not totally unrelated, but I agree they are
orthogonal. However, I was asking an honest question, how much of the money
generated through fractional reserve banking is public debt? Ie. what's the
ratio private/public debt?

------
sudonim
As a private citizen, it's my goal to have no debt, and savings in excess of
my future debts.

Can someone explain why it's good to have a global economic system that is at
great risk if the United States gets rid of it's debt?

~~~
rdtsc
I think that should make you think about how there is a systemic failure in
the global monetary system.

Many crazies advocate abolishing the Fed as they see it enslaving and
controlling the entire economy without much supervision and control by the
citizens of this country. Not saying they are completely right or anything,
but it this is basically a warning or a symptom that something is perhaps
fundamentally wrong (I sure don't know well enough how it works, it is just a
feeling).

Think of it as what would the drug companies do if all of the sudden there
were cheap easy un-patent-able cures for all the chronic diseases. Would they
start selling herbal supplements? Go into homeopathy business? Would they
invent more 'restless leg syndromes' type diseases. I think it is a bit like
that. It shows perhaps there is something wrong with the system & the
constraints and incentive are not working they way we'd expect.

~~~
vacri
I used to work as a technologist in a sleep lab. 'restless leg syndrome' is
not some disease to shill drugs. It fucks people up quite badly by preventing
them from sleeping properly.

Whether it was either just enough to stop them from getting to the deeper,
restorative levels of sleep, or bad enough that they had to get out of bed and
walk around for a couple of hours, restless leg syndrome is a clear blight on
quality of life. Sure, it may not be fatal (except where increased tiredness
is generally), but it's still a significant health issue to be afflicted by.

~~~
rdtsc
Hmm interesting. I understood it to be a made-up disease so people can 'talk
to their doctors about it' and pay for medications. Basically pharma companies
drumming up business by inventing diseases. How common is it? I had _never_
heard of it. I heard of heart disease, cancer, other things, I have plenty of
doctors and nurses in my family. Never heard of RLS, until I started seeing
commercials about.

Also wouldn't you working in a sleep clinic skew your perspective on how
widespread the thing is? In other words you would only see people who have
problems sleeping.

~~~
vacri
Sleep medicine is an extremely young field, beginning in earnest only in the
80s and 90s. It's not surprising that folks haven't heard of sleep disorders.
Go back 10 years and ask if people had heard of sleep apnoea and you'll get a
lot of puzzled looks too.

Also, I didn't say anything about how widespread it was - I said it fucked
people up and it's not a pseudodisease.

It's not to say that there aren't overprescription issues, just don't fall
into the Prozac trap - just because something's overprescribed doesn't mean
there isn't a real disease around.

------
drallison
An interesting read, but disquieting since it's mostly speculation and opinion
without any real data or any models of debt and the dependencies of the
economy on debt. And white papers of this sort appear to be the basis of
policy decisions with far-reaching consequences.

~~~
commieneko
Welcome to economics. Trying to model real, functioning economies is a lot
like trying to model natural language. We think we understand a lot about it,
but there is a level at which we really don't know what's going on. And it
doesn't help there _everyone_ involved in an economy is not only willing, but
eager to game it.

~~~
drallison
Economics could (and should) be much more of an engineering science than it
is. The math and theories are rather beautiful, but do not have much to do
with the real non-linear chaotic world in which we live. For some reason, no
one expects that economic theory be predictive in the same sense that we
expect of theories in the physical sciences.

It seems to me that a bit of data and a little bit of modeling would have
greatly improved the opinion piece this document describes.

As for Economics, it is really time to rethink the field. I rather liked Eric
D. Beinhocker's book, _The Origin of Wealth_ ([http://www.amazon.com/Origin-
Wealth-Evolution-Complexity-Eco...](http://www.amazon.com/Origin-Wealth-
Evolution-Complexity-
Economics/dp/1422121038/ref=sr_1_2?ie=UTF8&qid=1319160726&sr=8-2)). See also
his Wikipedia bio: <http://en.wikipedia.org/wiki/Eric_Beinhocker>.

~~~
commieneko
It _can't_ be totally an engineering field anymore than language communication
can. Trade and marketing are not about maximizing profits or reducing costs,
though those are important aspects. It's as much politics and power and sex
and violence as it is anything to do with prices and shipping costs. No matter
how "good" your models are, people will get funny ideas in their heads and do
something completely unexpected.

When Asimov posited his Pyschohistory in the Foundation books he indicated
that it could only be statistically useful on populations measured in the
_trillions_. And even then it could only work if the methodology were kept
absolutely secret from everyone in the modeled society.

~~~
drallison
What passes today as economic analysis is, in truth, modeling in which the
assumptions and the data are implicit and only the conclusions are expressed.
Moreover, projections are frequently based upon simple extrapolation of a
constructed macroeconomic indicator and rather than exploring the underlying
structure. It seems to me that "politics and power and sex and violence" and
resource depletion,innovation, FUD, and all the rest is amenable to modeling
and that a composite economic model based on systematic analysis is likely to
better reflect reality than the process used now.

Asimov's Foundation Series books are enlightened works of science fiction, but
they are fiction, not fact. I find is strange that you cite them as if they
were seminal works in societal modeling.

~~~
commieneko
I said Asimov "posited", which seems pretty clear to me. FWIW, Asimov has a
certain cachet these days among some Keynesian economists.

When you are able to usefully, and predictively model "politics and power and
sex and violence" then you will be doing extraordinary work and I'll look
forward to you getting your well deserved Nobel Prize. :)

------
refurb
This sort of makes no sense. The Province of Alberta (in Canada) balanced
their budget, then paid off all debt in the early 2000s.

They still had the ability to issue debt (and did) because it was the belief
that they were a good credit risk that was the reason behind the AAA rating.

~~~
borism
Province is not a country - they don't issue their own currency. Comparing
Alberta's AAA to US or whatever sovereign AAA is nonsense.

~~~
skylan_q
Ok, but what difference does this make?

~~~
yardie
It's the difference of knowing what a dollar is worth. Imagine if the US
devalued the dollar and paid off their debts immediately with some other
currency. All of those bondholders would be mightily pissed. Because their
bonds are worth pennies.

Provinces and smaller countries can't do this. The value of their bonds will
always be compared to the dollar (unless another currency becomes the
standard).

------
chris_dcosta
I read the article thinking it was about the following idea, the principle is
almost the same, just it's about govt debt not personal debt.

It would of course be too outrageous for most polticians but here's a thing:

When the UK govt bailed out the banks they spent 500billion. The outstanding
mortgage debt of everyone in the country at the time was 368billion.

Whilst I know there are many people without mortgages (because they rent) the
knock on effect of paying off all the oustanding mortgages instead of
recapitalising banks would have done some amazing things: it would have given
the whole economy an enormous payrise which would have had an immediate
positive effect on high-street retail.

Also because people would not immediately spend all of their new found money
it would have gone into savings: recapitalised the banks indirectly. They were
always using everyone's savings anyway.

It would have resolved the thing that caused the crisis: that being risky
mortgage debt on the banks books. No more mortgage debt, no more unstable
banks.

Lastly and probably most importantly, it would have allowed govts to raise
taxes to refill their coffers because absolutely nobody would notice, and
probably nobody would even care.

------
mc32
"What do you do with the money that comes out of people's paychecks for Social
Security? Now, a lot of that money gets invested in –- you guessed it —
Treasury bonds. If there are no Treasury bonds, what do you invest it in?
Stocks?"

So why couldn't we buy other sovereign debt --obviously stable/safe. It's not
as though we're the only ones with debt or safe debt. I don't imagine Germany
or Japan or France defaulting.

~~~
Newgy
This part of the article got it wrong. SS money is spent, it is not invested.
The SS Trust Fund gets an IOU but there's no asset backing it. That's
different from a Treasury bond, which is a real financial asset that is
tradeable and marketable.

Also, the US wasn't really running a true surplus, it was still borrowing from
SS during this period. The feds use SS to mask the true size of the deficit,
and it was only by this phony accounting that the budget was "balanced".

~~~
brc
Didn't I read recently that treasury or someone similar basically admitted
that Social Security isn't asset backed? That it's a case of funds-in, funds-
out?

I know the republican guy got hounded for his 'ponzi scheme' comment but there
is an element of truth in that hyperbole. Without new workers contributing SS
payments, the recipients wouldn't have anything coming in. So it's not a ponzi
scheme as such, but it's certainly not an investment fund either.

~~~
tsotha
That's correct. The Social Security "trust fund" is really just an accounting
fiction. Most of the money paid in SS taxes always went right back out to
recipients. For awhile the government was collecting more than it was paying
out (for demographic reasons) and the surplus was borrowed by the government.
But I believe at this point the program has a negative cash flow, so the
government will have to issue new bonds to pay off the bonds in the "trust
fund".

It's really a lot like your right pocket borrowing from your left pocket.

------
hugh3
Linkbait title from NPR. It's clearly not a _secret_ government report, since
if it was then it couldn't have been obtained via a FOI request.

It is a genuine concern, though, what would happen if US Treasury Bonds ceased
to exist. There's a good argument to be made for the US not completely paying
off its debts.

~~~
morsch
Well, the word _secret_ has multiple meanings. I think it's fair to call this
a secret memo, in a fairly broad sense of secret. But I agree that it's
misleading, since secret has an additional sense specific to government
documents.

------
darksaga
The fallacy of the article is if we paid off the debt that we would never
incur any debt in the future. Just not realistic to consider in any case.

------
shn
This is the most ridiculous idea I have ever heard of. It was probably a
project for fun within some circles, that would be all. Here's the reason. US
empire like many of her predecessors taxed her subjects. However unlike any
other empire in history US has been able to tax her subjects indirectly. When
I say subject I do not mean US citizens living within the borders in Northern
America, but I mean anyone who carries US dollar bill in his pocket, does
trade with US dollar terms and especially buy US treasury bills. These
subjects literally subsidize US economy doing just that. Even if US could be
able to pay off its debt they would not have stopped issuing loans, why would
one want to stop influx of easy money. By creating inflation of money (a.k.a.
printing money) US will always be able to pay her debt with lesser value. Same
amount but less value.

~~~
shn
I wish those that down voted what I said could dispute and write something,
and show some intellectual engagement. Pity.

------
jxcole
"What do you do with the money that comes out of people's paychecks for Social
Security? Now, a lot of that money gets invested in –- you guessed it —
Treasury bonds. If there are no Treasury bonds, what do you invest it in?
Stocks?"

Perhaps this is a ridiculous question, I admit I haven't taken a lot of econ.
But couldn't they just take the money that comes out of people's paychecks
and, you know, keep it? I know that treasury bonds have a very slight overall
interest rate, but that interest is paid by tax payers anyway, so if I'm not
mistaken it's a net gain of zero.

~~~
Newgy
Former budget staffer here-- this part of the article is factually incorrect.

The government borrows SS taxes but spends the money, and provides a Treasury
IOU to the Trust Fund. That IOU is not traded and is unrelated to the Treasury
bond market in every way.

~~~
yequalsx
I don't know much about the bond market but is a Treasury IOU in the sense you
mention really much different than a Treasury bond? I suppose the ability to
reneg on the IOU without disrupting the bond market would be a difference.
Provided this is true. That is, if the Treasury does not pay the IOU to the
Social Security wouldn't there be a repercussion in the bond market? I don't
see how a Treasury IOU would be different than a Treasury bond.

~~~
pessimizer
Your confusion is based on the fact that there's no such thing as a "Treasury
IOU." It's a made-up prejudicial term to trivialize the Treasury bonds held by
Social Security, used by people who argue that SS is insolvent.

If the US government selectively defaulted on the Treasury bonds held by
Social Security, would there be repercussions on the bond market? I don't
know. It depends on whether you would continue to loan money to someone who
was stealing from their children's piggy bank to pay off their bills. Maybe,
if every other option for storing money was worse. What it would absolutely be
was a theft of funds disproportionally levied from low income people to give
as a gift to all other bondholders.

~~~
dmm
Treasury bonds can be sold on the open market. "Treasury IOU"s cannot be sold.
SS money just goes into the general fund. SS deductions are just a plain ol'
tax.

~~~
pessimizer
That's just a meaningless assertion. SS money doesn't just go into the general
fund, bonds are issued. That's what the entire discussion was about. When you
buy bonds, the money goes into the general fund, too. Is buying bonds a "plain
ol' tax?"

~~~
dmm
> That's just a meaningless assertion.

Whether something is marketable is meaningful. US bonds are traded on an open
market. The securities issued to the SSA cannot be sold on this market or to
anyone.

If APPL issued me a promised to pay me back for pizza last night I have... a
promise. But if they issue me a bond I could turn around and sell it the next
day, depending on whether I trusted APPL or had better uses for my money.

The securities issued to the SSA are functionally equivalent to "IOU"s.

> Is buying bonds a "plain ol' tax?"

The SSA has tons of assets, in non-marketable bonds. What's the point of an
asset that can't be sold? It's just an accounting detail. If the bonds never
existed the situation would not be functionally different.

~~~
pessimizer
I didn't know the difference between an IOU and a bond is that IOUs can't be
sold. I'll need a reference to IOU law for that, because I always thought that
they only existed as a talking point from the Heritage Foundation dating from
somewhere around the beginning of the Bush administration.

edit: You know what functions of government _don't_ hold any bonds? Almost all
of them. Are the roads a pyramid scheme? Is all government a pyramid scheme? I
still find it tough to believe that there's a group of people who say that:

1\. Because the government can selectively default on the bonds held by Social
Security if it votes to selectively default on the bonds held by Social
Security.

2\. Therefore, Social Security is an unsustainable pyramid scheme,

3\. Therefore, the government should default on the bonds held by Social
Security.

The government can also selectively default on the bonds held by me
personally, or by China, or by anyone not named Todd. I can also collect their
shares of the rent from all of my roommates, deposit it into my general fund
at the bank, spend all the money on crack, then set the house on fire. The
point of view of the "IOU" people is that _my roommates_ should vote for me to
do that, because once the money was in my bank account it transformed into
whimsy and unicorns and at least the commitment to the crack binge and
imminent homelessness gives them the certainty to plan for the future.

If the government is defaulting on any bonds, as an American, you have more to
worry about than your retirement, namely roving bands of cannibals in the
street and nuclear fallout, or that the Peter Peterson Foundation has finally
taken back the White House.

~~~
dmm
LOL you win! I should have known better than to go up against an IOU law
expert.

I'm just a simple, evil republican bush-sucker. Does that help you categorize
me and thereby ignore anything I'm saying?

Enjoy your Social Security!

~~~
pessimizer
I don't think Republicans are evil. I think people who make arguments that
rely on renaming something that already has a name, then rely on the
connotations carried with that new name to imply that which is to be proven
are misguided. I feel I've responded to everything you've said.

None of what I said was intended to imply that Social Security will exist next
year. There is a resurgent philosophical contagion that intends to whittle
away all government functions until it is purely a police force to protect
private property. They could easily succeed.

------
kingkawn
Why pay off all the debt? What are we saving our credit for? Of course the
burden can rise so high that it is prohibitive to growth, but in general
credit exists to be used.

~~~
tsotha
Well, for one thing you have to pay interest on the debt, so in theory you can
afford more by not borrowing for it.

~~~
kingkawn
But for cashflow. There are investments that need to be made that are beyond
the bounds of money on hand, not to mention that even if you can afford to pay
up front you might deplete your ability to continue other programs services.
This is why we have housing loans, credit cards, and car loans. This is
commercial paper. this is national debt.

~~~
tsotha
Well, sure. But the reason we don't have "money on hand" to pay for anything
is we're servicing all the debt we racked up in previous years.

Over the long term people who pay off their credit cards every month are in a
better cash flow position, which is why I laugh when people say they _need_
cards to maintain their standard of living. Countries are no different.

Now, if you're making an _investment_ sometimes it's worth borrowing money.
Businesses do that all the time. Governments do it too, but only very rarely,
and they usually end up spending far more past the point of diminishing
returns.

------
maigret
The report may have been secret, but the fact hasn't been anymore for quite a
few years. Greenspan already mentioned it in his autobiography.

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Shivetya
I think it is odd they would consider still selling bonds regardless of our
debt load. Who never heard of a rainy day fund?

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afdssfda
And if all of us stopped using credit cards, the credit industry would fail to
catastrophic effect. Support your credit card company by going into massive
debt. It's for the economy.

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borism
US Dollars = US Treasury Bonds.

they are freely interchangeable!

money IS debt!

~~~
nhaehnle
I'm not sure why you got voted down for that - perhaps because you just wrote
things as if they were stupid slogans. Since what you write _is_ true (well,
except you neglect to mention the difference in maturity and interest rate
between US$ and Treasuries), let me elaborate.

Both US$ paper bills and US Treasury Bonds are liabilities of the government
(where I consider the Fed as part of the government for obvious reasons). I
use liabilities in an accounting sense, but you really need the basics of
accounting down solidly to understand the monetary system.

Another term for liabilities is debt. So when you have a 1$ bill, the
government "owes" you something. Here's where things get a bit confusing,
because what exactly does it mean that the government "owes" you 1$?

Well, they have to extinguish the liability in the agreed-upon way. Usually,
you extinguish a liability by moving a corresponding asset that is on the same
level or higher up in the pyramid of liabilities (see here:
[http://neweconomicperspectives.blogspot.com/2011/09/mmp-
blog...](http://neweconomicperspectives.blogspot.com/2011/09/mmp-
blog-15-clearing-the-pyramid-of.html)). When I owe you something, I extinguish
my liability to you by giving you paper money.

But the government is at the top of the pyramid, so their liabilities can only
ever be transformed into either another form (exchanging cash for bonds or
reserves or vice versa) or they can be extinguished when you pay taxes.

That takes some getting used to, but nobody said economics was always
intuitive.

~~~
borism
thank you!

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smogzer
Report From Iron Mountain is similar:
[https://secure.wikimedia.org/wikipedia/en/wiki/The_Report_fr...](https://secure.wikimedia.org/wikipedia/en/wiki/The_Report_from_Iron_Mountain)

Anyway money is just a tool to keep the populus occupied. And since without
problems or debt there would be no need for governments and banksters, they
shall exist to create problems(government) and debt(money) and therefore
assure they survival.

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swaits
> The Federal Reserve — our central bank — buys and sells Treasury bonds all
> the time, in an effort to keep the economy on track.

And how's that working out? This is all FUD, FUD, FUD..

~~~
burgerbrain
_opens up refridgerator_

Yup, that little light still comes on. And yup, there's still food in there.

It might be a bullshit system, but it _is_ functional.

