Garbage in, garbage out. If your basic assumptions about money are flawed it is impossible to accurately describe or predict how a complex economy works.
Both the US and UK are sovereign issuers of their own fiat currencies and their debts are denominated only in their own currencies. However, neither actually incurs “debt” as it is commonly thought of when they issue investment instruments from their Treasuries. They simply swap excess liquid reserves (cash or electronic credit) for less liquid instruments. Investors forego the advantage of having the currency on demand for a small guaranteed interest premium.
Why would a monopoly issuer of a nation’s currency ever need to “borrow” its own currency to fund its spending? The short answer is “they don’t”, and actually can’t without first creating that currency in the private sector to be available to borrow. Treasury debt instruments protected the gold reserves for most modern economies by allowing the issuing government to anticipate taxation and spend into the policy space it would create below the total value of those reserves by making excess reserves non-convertible. With a fiat currency spending “funds” bonds, not the other way around.
They simply issued debt instruments to delay the deployment of currency in the private sector until taxation drew down a compensating amount of currency in circulation or gains from the spending could be realized. Moving to a fiat currency made this function obsolete, but the concept of a safe haven for excess reserves has been very stabilizing for fiat-based economies and the practice was retained. However, thinking of it as a necessary “funding” operation is completely in error and the gain from the practice doesn’t make up for the misunderstanding and propaganda it generates.
Both countries should stop issuing debt instruments and just create money directly to reserves and call it good enough, or even pay a small premium on excess reserves in their central banks. The political ignorance and hand wringing over the word “debt” is literally killing people by forcing political decisions aimed at “balancing” a budget, regardless of the need of the greater economy. It also presents the opportunity for capitalists to develop and profit from “markets” that only serve needs unmet by the government out of econ illiteracy.
A market-based healthcare system is responsible for thousands of deaths each year in America, but it persists because voters conflate their household budget process with their government’s spending and were easily convinced that the currency-issuing government couldn’t “afford” to pay for everyone’s healthcare as a right of citizenship without either heavily taxing the citizens or accepting unsustainable amounts of debt. The reality is that the US government can afford anything that is for sale denominated in US dollars without incurring “monetary” inflation. Any inflation realized below 100% productivity and employment would be isolated to resources that became rare or supply chain deficiencies.
