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View Diary: The CBO may be good at math but they are terrible at economics (18 comments)

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  •  Not so! (1+ / 0-)
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    The Fed pays interest on reserves (IOR); and is free to set the IOR rate. Much of the interest on securities is currently paid to foreign governments, and financial institutions holding bonds. Most of the rest of the interest paid goes to SS and the Fed (which, in turn, remits most of that back to Treasury). If the Treasury paid off the national debt it wouldn't have much impact on 95% of the population. The interest on Bonds is risk-free welfare to the financially well-off. It was not always thus. But the days of WWII savings bonds are long gone.

    What would SS do if the Treasury paid off the debt. Well, Treasury would then just have to provide other funds for SS. Neither paying off the debt nor providing such funs is a problem. Here's how it can be done.

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