And you can pretend that tax revenues are irrelevant all you want and it still won’t become true.

Here’s reality, and it’s simple:

If the US doesn’t make it’s payments on its bonds, the world economy crashes.

If the US stops collecting taxes to use, in part, for the payments on its bonds, the world economy crashes.

I can see we are never going to find a consensus because we are operating in different realities. The government “HAS NO” tax or bond revenues because it doesn’t need them. This is not to say we can just suspend taxes for any length of time because they still have a purpose. It’s just that revenue denominated in dollars for the monopoly issuer of the dollar is a completely illogical concept. If you say you have a fear of inflation if taxes don’t draw down the demand (currency) in the economy then we can have that conversation, but to say that the government needs to “get” the currency that it can create at will before it can spend to retire bonds, or anything else, should be obviously false, no matter what school of economics you lean toward. The government has no use for its own currency, which is why it never has, or doesn’t have, any of it. It needs the goods and services that the private sector trades for the currency Congress creates so it can satisfy its tax obligation.

The monopoly issuer of a currency cannot “EVER” involuntarily fail to pay any obligation that is denominated in the currency it creates. It’s operationally impossible, even without taxes or borrowing. This fact is one reason that the Fed never misses its target rate for bonds, as investors that already hold dollars in reserve never have to place those dollars at risk to earn interest. They will always get exactly what they were promised. The bonds are strong because they aren’t needed. In the reserve system the choices are leave currency in reserve (checking) or move it to Treasury (savings). It is not a matter of the government begging for other people’s dollars so it can keep the doors open. If anything, it is welfare for investors that provides a backstop for their portfolios.

What we should be concentrating on is rebuilding an economy that investors want to invest in. If we have a weakness it will be in our productive capacity and the infrastructure, including education, that supports that, not in a meaningless number that doesn’t even represent what you think it does. I think Alan Greenspan might be someone you would trust for economic advice. Watch this brief video from when he schooled Paul Ryan on the future of Social Security, as it makes my point quite well and is applicable to the economy in general. It also somewhat fits into your view of money as a placeholder for resources, so maybe it is the common ground.

If human beings, the ones that buy our bonds, look at the state of our economy, our projected tax receipts, our projected future growth, our existing deficits, and decide they want a half point higher on the 10-year to take that risk……..then we have to pay it. Or risk the whole house of cards coming down.

Nonsense. There is zero risk in buying bonds, which is why they will always be the preferred vehicle for parking excess reserves. If there is ever any doubt about our economy it will show in reduced reserve positions, not securities. Investors buy bonds because they already have dollars. As long as we make the proper investments in our economy and society that assure us of a top position in the world, meaning both hard and soft infrastructure, the debt means nothing. If imports become more expensive we will simply make more stuff here, but that’s unlikely. China has pegged its currency to our dollar and that should say all you need to know about its future. If we continue to service a “number” with our fiscal policy instead of the economy we do stand to lose our position in the world, but its causation will be just the opposite of what conservative pundits and economists are preaching. We could double deficits for a decade without incurring appreciable monetary inflation and bond traders would snatch up every bond we produce at the rate the Fed wants, mostly because we don’t need them.

Here’s some light reading you may enjoy as well.

Meandering to a different drummer.

Meandering to a different drummer.