3 thoughts on “Finally, Mexico’s check to pay for the Wall

  1. I’ve been reading your missives for some time but I’m confused. If what you say is true, why do we issue Treasury securities and where does the cash go when people the securities are purchased? What of the limits of the spending you advocate and what happens with inflation?

    I must confess that this all sounds a lot like the Dire Straights riff of “Money for nothing and the chicks for free”.

    I having lunch with a group of right leaning friends and I need to be able to coherently be able to explain.

    Many thanks!


    1. “ . . . why do we issue Treasury securities . . . ?
      The purpose of T-securities is:
      1. To provide a safe storage place for unused dollars, which helps stabilize the dollar
      2. To assist the Fed in controlling interest rates, which helps control inflation.

      “ . . . and where does the cash go when people the securities are purchased?”
      The cash goes into T-security accounts, similar to savings accounts. The money stays there until maturity at which time it is returned to the owner, plus interest.

      What of the limits of the spending you advocate . . . “
      The limit of deficit spending is an inflation that cannot be controlled via interest rate control. We never have had that amount of inflation.

      “. . . and what happens with inflation?”
      The Fed controls inflation with interest rate control. Raising rates strengthens the dollar by increasing demand for the dollar.

      Read, “Lunch can be free.” It will help answer your questions, but you will find your friends difficult to convince. Most people are.

      Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
      Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
      Warren Buffett: Those who regularly preach doom because of government budget deficits (as I regularly did myself for many years) might note that our country’s national debt has increased roughly 400 fold during the last of my 77-year periods. That’s 40,000%!


  2. The other thing I have understood about bonds is that Congress says they should match the deficit, which is why it is about $21T. The con is that we are supposed to think bonds pay for the spending. However the lie has two problems: One is that deficit spending eliminates the debt behind it in the same operation, so there is no debt for the bonds to match and 2] the federal government has no need of the bonds for revenue. It’s corporate welfare.


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