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View Diary: Modern Monetary Theory vs the Fiscal Cliff (65 comments)

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  •  I do think I mean "deficit," in the same way that (6+ / 0-)

    LetsGetItDone uses it here, "A fiscal policy that measures its success or failure in reducing deficits, rather than by its impacts on public purpose, is fiscally irresponsible and unsustainable. The deficit is a meaningless measure because the US Government has no limits on its authority to create/spend money other than self-imposed ones...." because I am talking about the budgeting process and the imaginary fiscal cliff and not the actual accounting structure of the federal books or the federal debt which is held in both the private and in the non-domestic sectors.

    "When in doubt, do the brave thing." - Jan Smuts

    by bunnygirl60 on Sun Nov 25, 2012 at 12:18:35 PM PST

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    •  Well, the federal government does have debts (3+ / 0-)
      Recommended by:
      jellyyork, Letsgetitdone, semiot

      in the sense of obligations. But, those debts are owed to the people who paid into the pension program and those who have paid into the medical insurance program. Some debts are also owed to employees for services provided, to military pensioners and to private sector producers of goods we have contracted to purchase. But, all those debts can be paid with the dollars the Treasury issues, regardless of the dollars collected in the interim. We could provide pensions for the elderly regardless of whether they paid in but keeping accounts makes it easier to estimate efficiency and need.
      Currency is much like the alphabet, a script for communicating value. Without letters we can't write, but the number of letters used is not directly related to the value of what we write. On the other hand, the alphabet employed by English, as well as the language itself seem more conducive to communicating universal ideas than, for example, Cyrillic script and/or the Russian language or Chinese, as evidenced by the fact that more and more people are using it. And the dollar serves as a universally appreciated currency because the U.S. has a reputation for keeping its word.

      We organize governments to provide benefits and prevent abuse.

      by hannah on Sun Nov 25, 2012 at 12:58:58 PM PST

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      •  Yup, I agree with all of that but I think (1+ / 0-)
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        my post was truly discussing deficit and not debt. No question that debt exists but with our particular fiat currency there is also no question that we can meet all of our debt obligations - hence the bond rate.

        "When in doubt, do the brave thing." - Jan Smuts

        by bunnygirl60 on Sun Nov 25, 2012 at 01:05:28 PM PST

        [ Parent ]

        •  We certainly can (0+ / 0-)

          And even if we run into a debt ceiling due to an obstreporous Congress, all we need to do is this!

        •  Isn't "deficit" the yearly shortfall, and (0+ / 0-)

          "debt" the cumulative (total) amount?

          -- We are just regular people informed on issues

          by mike101 on Sun Nov 25, 2012 at 05:01:04 PM PST

          [ Parent ]

          •  Yes (1+ / 0-)
            Recommended by:

            The National Debt is the accumulation of deficits.

            It also happens to equal exactly, the accumulated savings (net financial assets) of the private and foreign sectors.

          •  Not quite (3+ / 0-)
            Recommended by:
            psyched, semiot, mike101

            The deficit is the gap between Federal Spending and Tax Revenues. The debt is the cumulative total of outstanding debt instruments issued since 1835 when we last paid off all our debt instruments. At various times since then we have "paid for" deficit spending by issuing money without debt issuance. We did that during the Civil War ("Lincoln's Greenbacks"), and if I recall we did it to some degree in WWII.

            There is a law on the books that allows the Executive to mint platinum coins with face values having no specified relationship to the value of the metal in the coins. For example, a $60 Trillion face value one oz. platinum could be issued by the Mint and deposited at the Fed, whereupon the Fed would be forced to credit the Mint's account with the $60 T. Assuming that happened and most of the amount was then transferred to the Treasury General Account, then the Treasury would be able to pay back all outstanding debt as it comes due and deficit spend rather liberally for 15 -20 years without issuing new debt. So, there's another example where the accumulated deficit would not equal the debt.

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