I really appreciate what you are doing here. I've long spoken out against much of the neoliberal approach, especially they claim of free markets when actually markets are greatly skewed by subsidies, tax structure, special interests, etc. The US especially is more a corporatocracy than a functional democracy or republic. I do have a question for you. What is your take on national debt? The interest on the mind-blowingly large US national debt is one of the biggest expenditures in the federal budget.
Thanks Cylvia. As I say in my 'Government Debt' definition - there are two sides to every story. The government might be in debt but the country isn't. When the government spends - most of that spending goes into the private sector. So, if you could just as easily call it 'private sector savings'. And because the government is the currency issuer - they can never run out of money - so it's not 'debt' as you or I understand the word. It has no bearing on current or future spending. All spending is new money - for governments, like the US or UK. They are currency issuers.
I've been intrigued with MMT for a while and appreciate this consideration. I understand what you are explaining here, but why do nations pay interest if the debt is not actually debt? Other than the inflation scare why not just print more money and pay the debt off?
It is still an accounting debt on the governments spreadsheet - but it's not the same type of debt the you or I have. It can stay on the governments spreadsheet for ever. There's no need to pay it off. The interest paid on bonds is a safe investment for savers, particularly pension funds. Here's Richard Murphy writing about it, "But, historically, what happened was that the whole edifice at the City of London, and all the banks located in it, got incredibly used to having these things called gilts available to them to save in. And in fact, the big advantage of gilts for the banks was that they could place their money safely with the government who could guarantee repayment when they had excess funds available." They also have a role to play in ensuring the safety of the financial industry - which you can also read about in Richard's article: https://tinyurl.com/yfz6ttnb Selling bonds and paying interest on them has a role to play in the financial sector.
I really appreciate what you are doing here. I've long spoken out against much of the neoliberal approach, especially they claim of free markets when actually markets are greatly skewed by subsidies, tax structure, special interests, etc. The US especially is more a corporatocracy than a functional democracy or republic. I do have a question for you. What is your take on national debt? The interest on the mind-blowingly large US national debt is one of the biggest expenditures in the federal budget.
Thanks Cylvia. As I say in my 'Government Debt' definition - there are two sides to every story. The government might be in debt but the country isn't. When the government spends - most of that spending goes into the private sector. So, if you could just as easily call it 'private sector savings'. And because the government is the currency issuer - they can never run out of money - so it's not 'debt' as you or I understand the word. It has no bearing on current or future spending. All spending is new money - for governments, like the US or UK. They are currency issuers.
I've been intrigued with MMT for a while and appreciate this consideration. I understand what you are explaining here, but why do nations pay interest if the debt is not actually debt? Other than the inflation scare why not just print more money and pay the debt off?
It is still an accounting debt on the governments spreadsheet - but it's not the same type of debt the you or I have. It can stay on the governments spreadsheet for ever. There's no need to pay it off. The interest paid on bonds is a safe investment for savers, particularly pension funds. Here's Richard Murphy writing about it, "But, historically, what happened was that the whole edifice at the City of London, and all the banks located in it, got incredibly used to having these things called gilts available to them to save in. And in fact, the big advantage of gilts for the banks was that they could place their money safely with the government who could guarantee repayment when they had excess funds available." They also have a role to play in ensuring the safety of the financial industry - which you can also read about in Richard's article: https://tinyurl.com/yfz6ttnb Selling bonds and paying interest on them has a role to play in the financial sector.