This creditor/debtor dichotomy is meaningless. It doesn’t change the fact that the debt is owed in dollars and can always be serviced. If foreign investors lose confidence in the US and sell off their treasuries, the central bank can just purchase them and nothing would change. In fact, that’s what Japan does, and that’s why they’re a net creditor. And no, this would not lead to inflation. Again, look at Japan for an empiric example.
I already wrote about how Japan is different from the US and why that changes everything.
> debt is owed in dollars and can always be serviced. If foreign investors lose confidence in the US and sell off their treasuries, the central bank can just purchase them and nothing would change
It changes everything for US citizens. Zimbabwe's debt is also serviced, but I'm not sure US citizens would like to pay one trillion dollars for bread and get cut off from the majority of products and resources that the US imports, because the dollar would be worth as much as the paper it was printed on. It would also mean that the whole stock market would collapse because no one would recycle the dollar anymore. It would be a devastating blow to the US economy. It's so obvious to anyone that knows anything about economy that at this point you are just spreading lies.
No, you didn’t explain how Japan is different. Because in fact it’s not. The key point is that a government that issues debt in its own currency can always service that debt, and this is NOT inflationary.
Zimbabwe’s inflation happened because the country had debt denominated in USD and CNY, along with massive political instability, a shrinking economy, and a war happening all at the same time. Couple that with a useless central bank and you have hyperinflation.
How is that in any way comparable to the US? It’s not. This is obvious to anyone arguing in good faith.
>> Zimbabwe’s inflation happened because the country had debt denominated in USD and CNY, along with massive political instability, a shrinking economy, and a war happening all at the same time. Couple that with a useless central bank and you have hyperinflation.
No mention of velocity or the role of human behavior in an inflationary environment.
> The key point is that a government that issues debt in its own currency can always service that debt, and this is NOT inflationary.
Hmm. Let's follow your argument to its conclusion. Why stop at 300% of GDP? Why stop at 300 times GDP? It seems that even a small nation with a sovereign currency can eliminate all taxation, borrow an infinite amount of money, buy an infinite amount of stuff, make all of its citizens infinitely wealthy, service its debt with printed money forever, and prices and interest rates will both be unaffected. It's amazing, then, that no nation has yet taken advantage of this exploit!
I feel confident that is not right. I think it may be right that (marginally?) there is not a big difference whether a fixed amount of government spending is financed by taxation or debt, because printed dollars and t bills are so easily interchangeable. But it seems that you are trying to use this argument to prove that if these things are equivalent that they are (in any quantity!) harmless, and that's a non sequitur.
Of course that’s not what I’m arguing, please don’t straw man me.
The constraint on public spending is the amount of real resources that can be utilized. Productive utilization of resources is not inflationary. For example, if you have 10% unemployment, a government can hire those people to build infrastructure regardless of the debt ratio. On the other hand, if you issue public debt to purchase commodities that’s obviously inflationary.
But in either case, the constraint is real resources and inflation, not the debt ratio.
You asked why countries haven’t done this already? They have, it’s called quantitative easing and they do it in financial crises to absorb the productive capacity that the private market isn’t utilizing anymore.
