Quora is a site where people ask questions, and other people answer them. Many people ask about the U.S. federal “debt,” and I’ve tried to illuminate the world, one candle at a time.

Here, for example, is a typical question and answer, with a follow up by one reader. The original question and answer were:

Why would Trump state “I Won’t Be Here” when asked about the looming debt crisis?

Answer from Rodger Malcolm Mitchell: Contrary to what others are telling you, there is no “debt crisis.”

The federal government, unlike you and me, is Monetarily Sovereign. And unlike you and me, it never can run short of dollars with which to pay its debt. In fact, paying debts is the method by which the federal government creates new dollar.

In fact, the so-called “federal debt” isn’t even debt. It is the total of deposits into Treasury Security accounts, similar to savings accounts.

To “lend” to the federal government, you instruct your bank to send your dollars to your Treasury Security account.

There your dollars remain – they are not used by the federal government. Then when your account matures, your dollars, plus interest are returned to you.

Image result for federal reserve

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
Ben Bernanke: “The U.S. government has a technology that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
St. Louis Federal Reserve: “The government is not dependent on credit markets to remain operational.”

It is not a burden on our Monetarily Sovereign government, nor is it a burden on federal taxpayers.

Federal taxing does not fund federal “debt.”

People who worry about the federal debt do not understand Monetary Sovereignty.

The so-called “debt” has increased an astounding 40,000% since 1940, and here we are, with the economy healthy and growing, and inflation near the Federal Reserve target.

Pay no attention to the debt Henny Pennys who have been calling it a crisis for 78 years. These people don’t learn from reality.

Then came the follow-up question and its answer:

Chamchadik
You’re right- being fiat, the us federal reserve can just print as much currency as it wants and settle all debt: I would like to hear your reasoning on why they haven’t done this already?

————————–Reply——————————————-

Rodger Malcolm Mitchell
The so-called federal “debt” is merely the total of outstanding Treasury securities (T-bills, T-notes, T-bonds). It isn’t “debt.” It is “deposits.”

The government does not issue T-securities to obtain dollars. It creates all the dollars it needs.

Issuing T-securities has two primary purposes:

1. To provide a safe, interest-paying, storage place for holders of dollars. This helps stabilize the dollar.

2. To assist the Fed in controlling interest rates. This helps control inflation.

Yes, the government could eliminate all federal “debt” tomorrow, if it wished, simply by returning the dollars in the T-security accounts, back to the owners.

But, there is no reason why the government would want to reduce the “debt.” These T-securities serve valuable functions, and the “debt” is no burden whatsoever on the government, on taxpayers or on anyone else.

The word “debt” confuses people. If instead, it was properly called “deposits,” no one would want it reduced.

Perhaps, the next time someone tells you the federal “debt” should be reduced, you might answer, “Why would the government want fewer deposits into Treasury security accounts? These deposit accounts are valuable to the government and are no burden on anyone.”

Just a thought.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. Eliminate FICA

2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY