(Editor’s note: I’m re-posting this here from moslereconomics.com with a follow-on commentary of my own with the permission of Warren Mosler)
From Warren Buffet to Alan Greenspan,
And from all the responses to the S and P downgrade by
economists and financial professionals from the 4 corners of the world,
THE WORD IS OUT!
The US government is the issuer of the US dollar.
So no matter how large the federal deficit might be:
The US government can always make any payments in US dollars that it wants to.
There is no such thing as the US govt. running out of US dollars.
The US government always has the ‘ability to pay’ any amount of US dollars at any time.
NOW CONNECT THE DOTS TO:
The US is not dependent on tax revenue or foreign borrowing to be able to spend.
whereas Greece is not the issuer of the euro,
much like the US states are not the issuer of the US dollar,
THERE IS NO SUCH THING AS THE US BECOMING THE NEXT GREECE
There is no such thing as the US getting cut off from spending
by the financial markets and forced to go begging to the IMF
to get US dollars to spend.
Nor is the US government subject to market forces driving up interest rates on US Treasury bills.
EVEN AFTER BEING DOWNGRADED US TREASURY BILL RATES REMAIN NEAR 0%
Why, because, any nation that issues its own currency also sets it’s own interest rates.
So in the US, the Federal Reserve Bank votes on the interest rate
WHAT IS THE POINT OF DEFICIT REDUCTION?
Suddenly, it’s NOT solvency.
The US is suddenly NOT going broke.
Social Security is suddenly NOT broken.
There is suddenly NO risk the US will not be able to make all payments as promised.
the deficit hawks must CHANGE THEIR REASONS FOR DEFICIT REDUCTION
or shut up!
they must FLIP FLOP
or shut up!
Yes, there is a new reason they can flip flop to.
They can start claiming the current path of deficit spending will lead to inflation.
Bring it on!
First, they need to do the research,
as they haven’t even thought about this yet.
Then they have to convince Congress to cut social security and medicare
Not because we might become the next Greece
Not because the US government checks might bounce someday
Not because the deficit will burden our grand children
But ONLY because some day,
if we don’t do something when the time comes
and even though we don’t have an inflation problem now,
and haven’t had one in a very long time,
SOME DAY far in the future,
inflation might go from x% to y%.
Do you think Congress would take draconian steps now,
during this horrendous recession,
to make things worse
by cutting Social Security?
and by cutting funding or public infrastructure?
and by raising taxes?
How about we get the word out and find out, thanks!
I’ll try my best to spread the news that THE WORD IS OUT! And also spread the further news that the Government can’t run out of money, no matter how much it owes and that there is no solvency problem.
So there is also no deficit reduction problem, no national debt problem, or any Social Security, Medicare, or Medicaid problems, or grandchildren burden problems based on fears of, or claims about, insolvency unless we pay our debts back!
I have to say however, that even though THE WORD IS OUT that solvency is not a problem, and that the austerity/human sacrifice crowd must now either fall silent or flip flop to inflation as their new rationalization for driving working people into poverty; I don’t think for a minute that they will do either one.
Instead, I think they will assume that the news will never get out to most people and that they are free to go on with their same old narrative about possible insolvency making austerity necessary, without people either laughing at them or calling them liars. The MSM is unlikely to notice that the Government can create currency whenever it wants to, and they will just forget about the admissions made this week after the S & P downgrading, and reinforce the old money scarcity story, without missing a step, to please the Peter Petersons, Kent Conrads, Alice Rivlins and David Walkers of this world. The president already did this in a speech he made today.
So, I think that besides doing our best to spread THE WORD, we also need to pressure the President to prove that the United States Government has no solvency problems, and can never run out of money. In other words, we need to call for the President to use very high value Proof Platinum Coin Seigniorage (PPCS) to begin to pay back the national debt and also to create a balance in the Treasury General Account (TGA) that is so large that no insolvency claims are even thinkable.
The basic idea is to mint a $60 Trillion platinum coin, turn it into electronic credits at the Fed, use the money, first to pay down $6.2 Trillion in debt immediately and the rest as it falls due, and confront Congress with a balance of of about $52 Trillion in the Treasury General Account (TGA). Then, facing that $52 Trillion in available financial resources, and with the President using the bully pulpit, let’s see the austerity/human sacrifice crowd, even with all the money in the world behind them, try to justify voting for spending cuts in entitlements and other much needed areas of domestic spending.
(Cross-posted from Correntewire.