Allow billions of investment dollars go into the real economy, where they are needed by businesses, states and localities. Let them reduce inflation-causing debt costs and eliminate supply bottlenecks.
Having just completed a series on the proposed re-introduction of debt-free United States Notes to reduce or eliminate the current-year deficit, we now examine the other side of the coin as our suggestion # 8 for strengthening the economy according to our four “economic sustainability criteria”:
- Use of targeted investments
- No increase in the national debt
- No damaging austerity today or tomorrow
- No sacrifice of tax revenues.
In our October 2013 newsletter, citing then-current information, we used the figure of $600 billion as a rough estimate of the FY 2014 deficit. So as to avoid confusion – and since the point is order-of-magnitude concept and not forecasting updates – we will use the same figure here. We pointed out that we can fund the deficit as we are doing it now – by simply printing fiat money, and then printing Treasury Bonds so the Treasury can borrow the fiat money Federal Reserve Notes (FRN’s) it has printed. In the alternative, we can print fiat money on the same presses in the form of historic debt-free United States Notes – US Dollars of identical value to FRN’s since 1913, backed by exactly the same fiat declaration (“Legal tender for all debts, public and private”.) Using this alternative for a miniscule portion of the total money supply, we can avoid the additional printing of Treasury bonds - which is the precise cause of our present long-term inflationary pressures and ever-increasing national debt.
We do understand the concern that with debt-free United States Notes we might print too many of them and prompt hyper-inflation. This is the reason we often stress that the level of current spending, whether based on Federal Reserve Notes or United States Notes, is determined by the current budget. Furthermore, with a US Notes safety valve it is feasible to institute something akin to a balanced budget amendment (a set of realistically achievable guidelines) as part of a “grand bargain” for debt control in future years. In fact, having such a formalized plan is far more likely to result in actually controlling spending than relying on the unnecessary debt creation required for government borrowing of Federal Reserve Notes as a very indirect, very theoretical tool for spending discipline. When, in the past, has this “discipline” of a debt burden dangerous in its own right resulted in good long-range spending control, for all the unnecessary debt we have incurred on account of the notion and with the rising percentage of the budget required for interest on the national debt? Throughout the deflation-wracked years of the Great Recession, we took on unnecessary debt on account of fear of “hyperinflation” on the part of a very few fat cats. As has been said but should now be actualized, “We can do better than this.”
Before progressing to new ground, let’s summarize: Controlling the debt – for which re-introduction of debt-free United States Notes is the most direct and efficient means – will have several benefits. It will minimize future interest payments. It will restore confidence in the US Dollar as the international trade reserve currency of choice. It will reassure investors, domestic and foreign. It will reassure business decision-makers about long-term investments in the expansion of their businesses. It will preserve the livelihoods of generations of third-world peoples whose lands would otherwise be destroyed in the pernicious search for gold. It will change the political climate so that hopefully, one day, we will return to the vision of those extravagant Republicans and Democrats who thought of long-term investments our country can prudently make in itself – the vision of Washington, Jefferson, Lincoln, T. Roosevelt, F.D. Roosevelt, Eisenhower and Kennedy among others – which has in no small part given us the economic assets we the public and we the private sector have to work with today. So getting the debt under control is a vital economy-spurring goal in and of itself.
But with that lengthy prologue we now turn to the other side of the coin concerning re-introduction of
debt-free United States Notes. Fortunately, it can be stated in just the balance of this page.
Using our above figure of $600 billion in debt saved, that means not only debt saved, but also another
$600 billion benefit. It is not too much to say that is a combined $1.2 trillion benefit. A time-honored,
classic objection to federal borrowing is that it constitutes a raid on the capital markets. If $600 billion less in Treasury bonds are sold, that will trigger a search by investors for alternative investments of a similar nature. This isn’t money people will go out and spend in a spree, prompting hyper-inflation. It is dedicated investment capital that will make credit more accessible, more affordable and less inflationary for businesses (reducing supply bottlenecks), state and local governments, and other entities important to the economy that sell high-quality bonds and securities. It will also lower the cost of debt to the federal government itself when it must replace matured Treasury bonds with new ones.
Go to the web sites of the major think tanks and you will find papers theorizing the return on proposed government investments and arguing for the long-term benefit that would come from the near-term forfeiture of tax revenues through various tax credits and deductions. There is nothing wrong with such idea-generation and analysis. But isn’t it a better first step to simply stop unnecessarily raiding the capital markets in the first place? Why is it that while there would be no United States of America today without the Continentals of the Continental Congress or the United States Notes introduced by the Lincoln Administration, when hundreds of economists from such institutions as Harvard, Yale, Princeton and the University of Chicago advocated their use during the Great Depression and scholars of the rank of Ben Bernanke believe Roosevelt so erred in the course he did take as to precipitate the Second Depression of 1937, that when Nobel Prize-winning economists of each generation have advocated the use of debt-free United States Notes, there is so little written on this subject so obvious in the panorama of history while so much is written on plans with debatable risks, costs and benefits on which government can spend money, forfeit revenues or take on credit exposure? Let’s first go for the low-hanging fruit!
There are cleverer and more complicated ideas than the simple re-introduction of debt-free United
States Notes, which could be done with an afternoon updating past legislation. But are there any more
effective ones for getting hundreds of billions of investment dollars back into the real economy rather
than in Treasury paper that burdens us all with unnecessary debt and does nothing in the real economy?
This article puts forth the eighth among twelve ideas for strengthening the economy according to the
four sustainability criteria mentioned in our opening. At this time a real budget for the near future is
before us. Both Congress and the Administration are willing to talk about realistic multi-year strategies for getting our debt under control and getting the economy fully in gear. We can afford no more of the “nothing good can be expected to happen in the present political climate” malaise that dogged us through the long trough of the Great Recession. There is a thaw in Washington, and with it a season approaching for the waters to flow again. Let’s make sure they are allowed to do so as they normally would, through the workings of the free market, in those cases where government intervention serves no useful purpose. Allowing nature to act restoratively is part of what sustainability is all about.
Having just completed a series on the proposed re-introduction of debt-free United States Notes to reduce or eliminate the current-year deficit, we now examine the other side of the coin as our suggestion # 8 for strengthening the economy according to our four “economic sustainability criteria”:
- Use of targeted investments
- No increase in the national debt
- No damaging austerity today or tomorrow
- No sacrifice of tax revenues.
In our October 2013 newsletter, citing then-current information, we used the figure of $600 billion as a rough estimate of the FY 2014 deficit. So as to avoid confusion – and since the point is order-of-magnitude concept and not forecasting updates – we will use the same figure here. We pointed out that we can fund the deficit as we are doing it now – by simply printing fiat money, and then printing Treasury Bonds so the Treasury can borrow the fiat money Federal Reserve Notes (FRN’s) it has printed. In the alternative, we can print fiat money on the same presses in the form of historic debt-free United States Notes – US Dollars of identical value to FRN’s since 1913, backed by exactly the same fiat declaration (“Legal tender for all debts, public and private”.) Using this alternative for a miniscule portion of the total money supply, we can avoid the additional printing of Treasury bonds - which is the precise cause of our present long-term inflationary pressures and ever-increasing national debt.
We do understand the concern that with debt-free United States Notes we might print too many of them and prompt hyper-inflation. This is the reason we often stress that the level of current spending, whether based on Federal Reserve Notes or United States Notes, is determined by the current budget. Furthermore, with a US Notes safety valve it is feasible to institute something akin to a balanced budget amendment (a set of realistically achievable guidelines) as part of a “grand bargain” for debt control in future years. In fact, having such a formalized plan is far more likely to result in actually controlling spending than relying on the unnecessary debt creation required for government borrowing of Federal Reserve Notes as a very indirect, very theoretical tool for spending discipline. When, in the past, has this “discipline” of a debt burden dangerous in its own right resulted in good long-range spending control, for all the unnecessary debt we have incurred on account of the notion and with the rising percentage of the budget required for interest on the national debt? Throughout the deflation-wracked years of the Great Recession, we took on unnecessary debt on account of fear of “hyperinflation” on the part of a very few fat cats. As has been said but should now be actualized, “We can do better than this.”
Before progressing to new ground, let’s summarize: Controlling the debt – for which re-introduction of debt-free United States Notes is the most direct and efficient means – will have several benefits. It will minimize future interest payments. It will restore confidence in the US Dollar as the international trade reserve currency of choice. It will reassure investors, domestic and foreign. It will reassure business decision-makers about long-term investments in the expansion of their businesses. It will preserve the livelihoods of generations of third-world peoples whose lands would otherwise be destroyed in the pernicious search for gold. It will change the political climate so that hopefully, one day, we will return to the vision of those extravagant Republicans and Democrats who thought of long-term investments our country can prudently make in itself – the vision of Washington, Jefferson, Lincoln, T. Roosevelt, F.D. Roosevelt, Eisenhower and Kennedy among others – which has in no small part given us the economic assets we the public and we the private sector have to work with today. So getting the debt under control is a vital economy-spurring goal in and of itself.
But with that lengthy prologue we now turn to the other side of the coin concerning re-introduction of
debt-free United States Notes. Fortunately, it can be stated in just the balance of this page.
Using our above figure of $600 billion in debt saved, that means not only debt saved, but also another
$600 billion benefit. It is not too much to say that is a combined $1.2 trillion benefit. A time-honored,
classic objection to federal borrowing is that it constitutes a raid on the capital markets. If $600 billion less in Treasury bonds are sold, that will trigger a search by investors for alternative investments of a similar nature. This isn’t money people will go out and spend in a spree, prompting hyper-inflation. It is dedicated investment capital that will make credit more accessible, more affordable and less inflationary for businesses (reducing supply bottlenecks), state and local governments, and other entities important to the economy that sell high-quality bonds and securities. It will also lower the cost of debt to the federal government itself when it must replace matured Treasury bonds with new ones.
Go to the web sites of the major think tanks and you will find papers theorizing the return on proposed government investments and arguing for the long-term benefit that would come from the near-term forfeiture of tax revenues through various tax credits and deductions. There is nothing wrong with such idea-generation and analysis. But isn’t it a better first step to simply stop unnecessarily raiding the capital markets in the first place? Why is it that while there would be no United States of America today without the Continentals of the Continental Congress or the United States Notes introduced by the Lincoln Administration, when hundreds of economists from such institutions as Harvard, Yale, Princeton and the University of Chicago advocated their use during the Great Depression and scholars of the rank of Ben Bernanke believe Roosevelt so erred in the course he did take as to precipitate the Second Depression of 1937, that when Nobel Prize-winning economists of each generation have advocated the use of debt-free United States Notes, there is so little written on this subject so obvious in the panorama of history while so much is written on plans with debatable risks, costs and benefits on which government can spend money, forfeit revenues or take on credit exposure? Let’s first go for the low-hanging fruit!
There are cleverer and more complicated ideas than the simple re-introduction of debt-free United
States Notes, which could be done with an afternoon updating past legislation. But are there any more
effective ones for getting hundreds of billions of investment dollars back into the real economy rather
than in Treasury paper that burdens us all with unnecessary debt and does nothing in the real economy?
This article puts forth the eighth among twelve ideas for strengthening the economy according to the
four sustainability criteria mentioned in our opening. At this time a real budget for the near future is
before us. Both Congress and the Administration are willing to talk about realistic multi-year strategies for getting our debt under control and getting the economy fully in gear. We can afford no more of the “nothing good can be expected to happen in the present political climate” malaise that dogged us through the long trough of the Great Recession. There is a thaw in Washington, and with it a season approaching for the waters to flow again. Let’s make sure they are allowed to do so as they normally would, through the workings of the free market, in those cases where government intervention serves no useful purpose. Allowing nature to act restoratively is part of what sustainability is all about.
