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Herb Wiseman's avatar

I would like to hear “The federal debt is a private sector asset. My colleagues and I are working to make it an asset of the people.”

Actually that was pointed out in the Canadian parliament in 1942 when the MPs were discussing with the governor of the Bank of Canada, Graham Ford Towers. the growing war debt. He, Towers, agreed with an MP who asked if the debt was a private sector asset. The finance minister of the day who led Canada’s delegation to Bretton Woods, J. L. Ilsley, then said we need to discuss how to make it an asset of the people.

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Portlander's avatar

I like stopping the partisan finger pointing. But it wouldn't hurt to blame both Parties--i.e. Congress--for policies that have contributed to the supply-push inflation that we are experiencing, namely trade wars (e.g. with China) and economic sanctions (on Russia), as Stiglitz has pointed out. These policies have pushed the Fed into raising interest rates. Why not remind the American people of the elephant in the room--Congress itself?

If the trade and economic sanctions were accomplishing their objectives, that's one thing. But the trade deficit with China is actually increasing, and the Ruble is as strong as ever. We should be throwing in the towell but the hawks in Congress and the White House have other agendas than the health of the US/EU economies.

I wish Stephanie would help the American people understand the connection between the Trade Deficit, the wars of empire, and the government spending deficit. As Stephanie points out, the government must be in the "red" for the rest of us--including our trade partners--to be in the "black." The rest of the world strives to be "in the black" in dollar terms (the dollar being the global Reserve Currency) to keep the IMF off their backs. Who's the only player that can sustain "red" finance indefitely? Only the fiat creator of dollars via interest-bearing bonds. Where do those bonds come from? US federal spending deficits. This , in a nutshell, is "Triffin's Dilemma," first posited in the early '60's. It's the burden of the Reserve Currency sovereign for providing a growing money supply for the world at the expense of the domestic economy. In the current trade regime, the U.S. taxpayer is funding capital outflows via Treasury bonds in order for private wealth holders to invest abroad and privatize their profits from the sale of their goods back to U.S. consumers. In short, the US public debt is a "U.S. public money-->international private profit" scheme. It's a scheme that benefits international capital and the FIRE sector at the expense of U.S. workers, U.S. infrastructure, U.S. States and Cities, all of whom have experienced shrinking income and tax revenues for decades. We are financing the de-industrialization of America and turning the economy into a rentier economy.

We'd like to spend our public deficits in ways that help the U.S. economy. US public finance at the expense of workers, cities and States (e.g. via a strong dollar) would seem to be the height of stupidity and unfairness. Stupid because continuing on this path really does undermine the long term credit-worthiness of the U.S. by weakening its foundations. The unfairness is obvious, now, to all and is contributing mightily to political instability.

Ironically, there are indications we are headed into a recession. Excessive trade deficits hurt GDP, and is one reason why the US. economy is so anemic. So now we must increase deficits to help stabilize the economy. Cutting spending now would turn a normal recession into a deep recession.

Look up Triffin's dilemma to understand why we are in this awful position. There is a way to get out of it: let the dollar decline, endure the resultant moderate trade-induced inflation, and help the U.S. economy recover from its addiction to trade deficits. Let inflation provide a price signal to industry to raise domestic output. It really is Macro-Economics 101.

Growth in actual productive capacity and GDP is what we need to reduce the Debt/GDP ratio. That will then change the appetite (particularly by private business) to invest and incur debt for real growth. Then the Corporate sector will become net borrowers rather than net savers. They'll want to be "in the red". Only then (if I understand MMT correctly) can the public deficits start declining.

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