There never was a fiscal cliff.
There will be no fiscal cliff.

I'm trying to cover all the tenses because some Con "thinkers" seem to have a peculiar or non-existent relationship to time. Some apparently exist in an ineffable present in which all reality is simultaneous and, therefor, insignificant.

The United States federal government is not running out of money. Can't run out of money. But, you don't have to take my word for it. The current head of the Federal Reserve Bank, Ben Bernanke, and the former head of the Federal Reserve Bank, Alan Greenspan, agree.

For those who can't watch Youtube, I'll try to provide a transcript:

Video from CNN:
"In a recent interview, President Obama was asked about the 1.7 trillion dollar debt the government has racked up, along with an eleven trillion dollar defict, and had this sobering respons:
Interviewer on C-SPAN:
At what point do we run out of money?
Well, we're out of money now. We are operating in deep deficits.
Interview with Ron Paul:
Do you agree that short-term spending is OK?
Well, he contradicts himself. He wants to spend more money but he admits we don't have any money. So, the question is where does he get the money.
Interviewer to Ben Bernanke:
Is that tax money that the Fed is spending?
It's not tax money. The banks have accounts with the Fed, much in the same way as you have an account in a commercial bank. So to lend to a bank we simply use the computer to mark up the account they have with the Fed.
The United States can pay any debt it has because we can always print money to do that since there is zero probability of default.
On screen:
UNDERSTAND the "money" that government creates.
Richard Nixon, August 15, 1971
I've directed Secretary Connoly to suspend temporarily the convertability of the dollar into gold or other reserve assets, except in the amounts and conditions determined to be in the interest, the monetary stability and the best interests of the United States. I am determined that the American dollar must never again be a hostage in the hands of international speculators.
On screen:
lets say that again....under a fiat money system, the government is the only reason there is any money in circulation; the government does not need to finance its spending because it is the source of all money.
the government
does not need to tax before it can spend
it does not need to borrow before it can spend
it does not need to dig holes to look for gold
it does not need to move into war to gather
the government (We the People)
by definition has all the money it could possibly need
lets all work to build a better world and
not fight for money
(since 1971 money is no longer a commodity)
How long will it take before all understand
that Life can be better?"
The following is an excerpt from a presentation by Randall Wray in which he asks why the President lies about the availability of money.

The answer, I suspect, is because from the perspective of the Executive branch, there is no money, if the Congress, which is in charge of the purse, refuses to dispense any to the government, unless and until, what has been previously dispersed comes back.
The Richard Nixon quote, I think, is of particular interest because he, no doubt, did not envision that the dollar would be held hostage by the denizens of Capitol Hill and their henchmen, the speculators on Wall Street.

The real question that should be asked needs be addressed not to the President, but to the Congress. Why would the Congress seek to deprive citizens of the currency the economy needs to thrive?
The answer, I would suggest, is power. Ever since 1971, when the dollar was released from the bands of gold, another signal event has bedevilled the Congress -- universal suffrage.  That both events, the dollar being set free and all adults getting the right to vote occurred in 1971 was probably a coincidence. In any event, as so often happens, good intentions gang awry.  In this case, the prospect of citizens taking the reins of self-government into their hands, instead of being content to let some people and some select individuals decide for them, was scary. And the election of Jimmy Who? in 1976 probably didn't help, especially since the former nuclear engineer turned out to be a peacenick. So, some new way had to be found to control the populace and the manipulation of the dollar was it. Nixon already tried price controls and failed. Reagan witnessed the ballooning of interest rates. Then the savings and loan industry collapsed as a result of inflating housing lots unconscionably. Finally, in the early nineties, Greenspan determined that the value of American households, the equity they had accumulated in their homes, should be "liberated for the market" -- i.e. people should be encouraged to sell, spend and borrow to churn the economy, so investors could continue to rake in in excess of 8% for doing not a lick of work. And everybody got hooked on money.

President Clinton believed the line about a balanced budget being Nirvana, persuaded Congress to increase taxes and started filling the supposedly empty federal coffers. And then Greenspan announced this surplus was bad, accounted for the falling federal interest rate on bonds and Bush/Cheney rushed to reverse the generation of surpluses. Of course, the Congress, feeling its oats with a do-nothing executive in charge went along and spent like drunken sailors on two wars. Until the wrong guy got elected!

Suddenly, what was probably a limited exercise to get McCain into the end-zone became a four-year effort to teach the electorate that electing the wrong guy has consequences. If the electorate doesn't behave as demanded, it's got to be punished. Besides, the money mavens still haven't got their traditional vig back. Recall that in 1991, the return on thirty year Treasuries was 8.1%. That's a nice cut out of every tax dollar spent. Some people might call it just a trickle, but compared to the 2.77% they're getting now, it was a flood.

Originally posted to hannah on Sat Nov 10, 2012 at 08:40 AM PST.

Also republished by Money and Public Purpose.

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