The US Government cannot go broke.

Good Points! (4.00 / 2)

You made some very good points in an Excellent Blog.

You also might take into consideration the assets that the U.S. Government holds including property, equipment, investments, etc.  I'm sure that this adds up to many trillions of dollars.  In any case ending our involvement in Afghanistan and Iraq could save billions and billions of dollars.  So I agree that we are not going to go broke.

While it is never a good idea to waste public funds cutting needed programs is much worse and only serves a political purpose and hurts people.  We need to start putting people first.

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by: ProfessorMike @ Tue Feb 22, 2011 at 01:11:29 AM UTC

I couldn't agree more about the wasteful spending, (4.00 / 1)

and we've been witnessing the greatest looting of a national treasury in the history of mankind combining the war profiteering and financial crisis bailouts.  But wise investments in our future as a society have always paid huge dividends, and have always been opposed by the supply-siders.  They have been wrong so many times and for so long, that they no longer pretend that their policies help the economy.

What could be more immoral?

In the immediate aftermath of Since the start of the financial crisis, the Fed/Treasury lent, spent, or guaranteed $28 $29 trillion to save the banking system.

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by: StraffordDem @ Tue Feb 22, 2011 at 01:22:13 AM UTC

[ Parent ]

I think I get it (4.00 / 1)

But I'm missing something. How does the US government avoid going broke? It seems impossible to eliminate that possibility.

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by: JimC @ Tue Feb 22, 2011 at 01:38:05 AM UTC

Well, first we need to think about where (0.00 / 0)

the money comes from.  The US has a sovereign currency - we print our currency and can do so on demand.  Bernanke explained much of this on 60 Minutes a year or so ago, explaining that the Fed increases money supply by the flick of a keyboard stroke.  As long as the US does not borrow in a foreign currency (think Ireland, Greece) it is impossible for us to default unless we make a conscious decision to do so.  The key concept is that the money used to pay taxes and buy treasuries comes from government spending - who else could print the dollars?

Thus, in our sovereign currency economy, our taxes do not fund government spending.  Taxes serve only for two purposes; 1)to provide a need for the currency, giving it credibility, and 2)to serve as a governor on the economy - raise taxes when the economy is growing too quickly thereby reducing money supply, or lower taxes when the economy is sputtering, thereby increasing money supply.  

This is a self-contained system and the government runs the bank.  There are some dangers in government over-spending, but very few dangers exist when there are under-used resources in the economy.  Our current economic policy is based on a gold-standard economy, and designed to see more danger in potential inflation than real unemployment.

In the immediate aftermath of Since the start of the financial crisis, the Fed/Treasury lent, spent, or guaranteed $28 $29 trillion to save the banking system.

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by: StraffordDem @ Tue Feb 22, 2011 at 02:14:31 AM UTC

[ Parent ]

Hmm (0.00 / 0)

It still seems to me that a currency can lose value, and therefore move to nearly zero, and therefore be sovereign and yet bankrupt.

But I'm kinda talking out my elbow when it comes to this stuff.

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by: JimC @ Tue Feb 22, 2011 at 14:30:19 PM UTC

[ Parent ]

It can be complex. (0.00 / 0)

I'm not suggesting a free lunch - there are inflationary and deflationary dangers.  It would be possible for the US to spend recklessly and cause inflation, or to institute austerity measures that create a deflationary cycle, both of which could spark a severe currency crisis.  It's not impossible, but would almost need to be done with malice.

One of the questions Bernanke was asked by Congress recently (sorry -didn't have time to find the link) was if it was possible for the US to default on any treasuries.  His answer, paraphrasing, was "No", not unless Congress decides to do that, which he did not anticipate.  Provided we don't go back to a gold standard any time soon, there is no danger of default.

In the immediate aftermath of Since the start of the financial crisis, the Fed/Treasury lent, spent, or guaranteed $28 $29 trillion to save the banking system.

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by: StraffordDem @ Tue Feb 22, 2011 at 14:55:58 PM UTC

[ Parent ]

Nixon did the dirty float (0.00 / 0)

took us off gold standard with out first telling folks...what we could do next is devalue, just add a zero to all denominations and tell the world to in effect 'suck it Trebek'

note to close readers: this might be sarcastic so think twice before reading to candidates for use in their attacks on each other

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by: JonnyBBad @ Tue Feb 22, 2011 at 02:25:07 AM UTC

[ Parent ]

However, neighbor, (4.00 / 1)

one would never know any of this from the current conversation, would one?  So you are going to confuse the hell out of a lot of people.  But not me.  

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by: Lucy Edwards @ Tue Feb 22, 2011 at 20:26:49 PM UTC

Yes, so true, Lucy. I've been a little (0.00 / 0)

more careful to present this information in smaller pieces because confusion and fear reign.  We are the wealthiest country in the world and have chosen to spend our national treasure on destructive and negative policies.  

Concerning the "debt", I read the other day that if the Treasury liquidated the $14 trillion in treasuries, the disbursement would look something close to this:

$4.8 trillion to foreign investors
$4.8 trillion to US public investors
$5 trillion in inter-governmental agency accounting.

Makes me wonder if they all received checks from the US Treasury tomorrow, would we still call it debt?

In the immediate aftermath of Since the start of the financial crisis, the Fed/Treasury lent, spent, or guaranteed $28 $29 trillion to save the banking system.

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by: StraffordDem @ Tue Feb 22, 2011 at 20:44:56 PM UTC

[ Parent ]