Vlogbrothers is a popular channel on YouTube. This week, John Green discussed the national debt and budget deficits. Thoughts? I figured it'd be a good video to discuss.
Just awful. I couldn't even make it all the way through. "We owe the debt to ourselves." Yeah, that is so much more honest than, say, how a politician would put it. Oh wait, no, that's exactly how the politicians are spinning it. I guess this time, they're really telling the truth (fingers crossed). Wink, wink.
Clayton -
I no longer call it the "National Debt" because it will not be repaid except through hyper-inflation. I like the term National Grant. In fact the US treasury will need high inflation just to pay the interest on these bonds, by issuing new bonds of course.
Back to not being paid: As the burden of interest increases and the value of the currency falls, the Gen-X (to a lesser degree), Gen-Yers and those afterwards will simply stop payments to foreigners first, then any new expenses for Empire and the security state, and lastly the old folks. These people did contract for this and when they collectively realize it, they will default.
What is really amusing is that the poor saps in China and Japan (They should be smart enough to bow out of this disaster) will be wiped out as TRILLIONS in their assets Treasury Bonds will be/are worthless. But thanks for nothing because the people in the USA will have at best a generation of stagnation to work all of this through.
And if you really want amusement. The Germans and other North EU countries are really much worse off as their government is going to go down fighting to keep the theft from them to more indebted nations accumulating.
The arguments used here are common and dangerous: 1. We owe it to ourselves, and 2. Well money is really really cheap so we should loan it. The problem is that with most faulty economic logic it begins with faulty accounting logic. When the Federal Reserve creates money out of nothing and then purchases these bonds, the other side of the accounting ledger, anyone with dollars or expecting to receive dollars in some contract, already has the debit in the form of lower valued currency. So that money exists until the bond expires and the Fed redeems it for cash from the Treasury. And it is just a matter of time until prices reflect that or worse, that prices don't reflect the loss in purchasing power but people unknowingly absorb the loss in opportunity and/or mucked up economic calculation.