The US Treasury Department is now accepting Venmo and PayPal payments from those who want to donate money to reduce the nation’s ballooning $36.7 trillion debt.
National debt is also important because higher interest payments reduce the operational budget for the government. That directly translates into cuts in public services.
They choose to cut the operational budget. Also the solution to lower interest payments is to set the interest rate to zero, something the Congress can easily do since Fed itself was created by the Congress.
Btw interest on reserves which is also a liablitity of the Gov (fed, not treasury) is never mentioned. Interest on Treasuries is only ever mentioned because it’s a line item on the Gov budget.
yea my point was that the amount of sovereign debt to GDP doesn’t really matter. In the 1990s during the time when Clinton was destroying welfare and trying a budget surplus, the amount of sov debt to GDP was much lower than it is currently, yet they did austerity anyways, it was more ideology than any arbitrary ratio. And even if the Government ran so much surpluses (say, due to external surplus which will not happen with the U.S.), the capitalists will still demand their risk free assets, since 2008 that has been interest on reserves, but reserves and treasuries are equally risk free (longer term ones have interest rate risk but if you hold till maturity you will get paid).
what i’m saying applies to all countries with their own currencies, not just the U.S. U.S however has a special privilege of the rest of the world ‘wanting’ to accumulate Dollars. However, most first world currencies are extremely privileged w.r.t. rest of the world wanting to accumulate them, i.e. high on the ‘currency hierarchy’. this isn’t just about the exchange rate movements but the structural power that comes from geopolitical situation. Among third world countries, larger ones have more privilege e.g Indian Rupee, Indonesian Rupiah, Brazilian Real etc while say, Mozambican metical would be much lower in the hierarchy.
Because the dollar is the global reserve currency and the government creates this currency arbitrarily and in any quantity it desires the US does not need to collect revenue in order to spend money. You’re thinking of this as a household budget where you save a bit on the food budget to pay off your student loans, but the money comes into existence by the US spending it, and when the US collects it as tax the money functionally disappear. The purpose of taxation for the US is limiting the money supply, and that is why it’s deflationary because the whole world has a demand for dollars.
No I’m not thinking about a household budget here, and I understand how fiat currencies, and the global reserve work. What I’m explaining to you is that what actually happens within the system is that the government will use this as an excuse to do austerity. You’re describing how a fiat currency could work under a different financial system as opposed to the capitalist system that’s actually in place in the US.
No. You seemingly dont understand how fiat system works because instead of talking about money supply and money demand you are acting as if the US has a finite amount of dollars and it needs to collect revenue to service debt and might have to cut services to service said debt.
What you are saying is wrong. You are not “explaining” things, you are wrong on a fundamental level.
Ok then what are you saying. Because you are disgreeing with fairly basic explanation of monetary politics, I.e. supply and demand of money, and countering with something about the US having to spend less because they have too much debt to service.
National debt is also important because higher interest payments reduce the operational budget for the government. That directly translates into cuts in public services.
They choose to cut the operational budget. Also the solution to lower interest payments is to set the interest rate to zero, something the Congress can easily do since Fed itself was created by the Congress.
Btw interest on reserves which is also a liablitity of the Gov (fed, not treasury) is never mentioned. Interest on Treasuries is only ever mentioned because it’s a line item on the Gov budget.
Of course it’s all a choice. The whole economic system is a choice. I’m just pointing out what ends up happening in practical terms.
yea my point was that the amount of sovereign debt to GDP doesn’t really matter. In the 1990s during the time when Clinton was destroying welfare and trying a budget surplus, the amount of sov debt to GDP was much lower than it is currently, yet they did austerity anyways, it was more ideology than any arbitrary ratio. And even if the Government ran so much surpluses (say, due to external surplus which will not happen with the U.S.), the capitalists will still demand their risk free assets, since 2008 that has been interest on reserves, but reserves and treasuries are equally risk free (longer term ones have interest rate risk but if you hold till maturity you will get paid).
what i’m saying applies to all countries with their own currencies, not just the U.S. U.S however has a special privilege of the rest of the world ‘wanting’ to accumulate Dollars. However, most first world currencies are extremely privileged w.r.t. rest of the world wanting to accumulate them, i.e. high on the ‘currency hierarchy’. this isn’t just about the exchange rate movements but the structural power that comes from geopolitical situation. Among third world countries, larger ones have more privilege e.g Indian Rupee, Indonesian Rupiah, Brazilian Real etc while say, Mozambican metical would be much lower in the hierarchy.
oh yeah very much agree with all that
Not for the US actually.
How so? The way the system currently works in practice is that the government cuts productive spending in favor of paying interests.
Because the dollar is the global reserve currency and the government creates this currency arbitrarily and in any quantity it desires the US does not need to collect revenue in order to spend money. You’re thinking of this as a household budget where you save a bit on the food budget to pay off your student loans, but the money comes into existence by the US spending it, and when the US collects it as tax the money functionally disappear. The purpose of taxation for the US is limiting the money supply, and that is why it’s deflationary because the whole world has a demand for dollars.
No I’m not thinking about a household budget here, and I understand how fiat currencies, and the global reserve work. What I’m explaining to you is that what actually happens within the system is that the government will use this as an excuse to do austerity. You’re describing how a fiat currency could work under a different financial system as opposed to the capitalist system that’s actually in place in the US.
No. You seemingly dont understand how fiat system works because instead of talking about money supply and money demand you are acting as if the US has a finite amount of dollars and it needs to collect revenue to service debt and might have to cut services to service said debt. What you are saying is wrong. You are not “explaining” things, you are wrong on a fundamental level.
Nowhere am I saying anything of the sort. Perhaps try reading what I actually wrote and then address that?
Ok then what are you saying. Because you are disgreeing with fairly basic explanation of monetary politics, I.e. supply and demand of money, and countering with something about the US having to spend less because they have too much debt to service.
What part of what I wrote is unclear to you?