I know very little about bitcoin, so I can’t address it farther than to state that it is logically just another commodity with a fluctuating value denominated in dollars. It may, like gold, serve to store value for some, but is hardly accessible to enough of the population to ever become more than that. The ultimate anchor for the economy will always be whatever currency the government accepts in payment of tax obligations.
What threatens the US dollar’s place in the economy is the widely accepted myths about deficit and debt now dominating all economic dialogue and politics. As MMT states, this is largely driven by voter ignorance and the willingness of politicians to pander to that ignorance in setting fiscal policy. The holy grail for politicians, a balanced budget that removes a dollar for every dollar created by the government (taxes don’t “fund” anything at the federal level) is very deflationary, both in nominal terms and resource allocation.
If the government doesn’t spend more into the private sector than it removes in taxation there is no currency left to compensate the private sector for the resources government extracts or to serve as a denomination of commerce/contracts as a store of value for savings able to retire private debt. With no peg or fixed exchange rate to artificially limit the currency creation the description of “debt”, previously determined by the gold reserve, becomes simply any currency created in excess of taxes collected. It should be obvious to anyone who is familiar with sectoral balances in dual entry spreadsheet accounting, the debt is a representation of our national surplus/savings.
The red ink of the government is the only source of black ink the private sector has. This fact has been successfully denied in political posturing and the voting population now views the government not as the monopoly source of the currency, but as just a “user” of the currency and competition for it by the private sector. This misconception greatly benefits those who make money from their money, but not so much for anyone else. It also creates animosity toward anyone who depends on government spending for their income in any portion as voters feel they are contributing to the livelihood of “takers” with their tax dollars.
This animosity has become the basis for policy for conservative politicians, so it isn’t going to be easily reversed in today’s political climate and is only empowered by the misery it creates as business cycles are insufficiently countered with any logical fiscal policy. MMT simply accurately describes the roles of the sectors in relation to the currency and how their balance affects the economy. With no numerical top limitation to debt (the private sector’s aggregate reserves), the limit to the creation of currency becomes full utilization of labor and resources, the point where inflation occurs with additional currency creation.
In fact, any accurate description of the source of net currency in the economy being deficit spending by the federal government shows that Treasury debt is totally a policy choice, not economic necessity. Reserves must first be created into the private sector to be available to purchase debt (or pay taxes). Bonds are only a liquidity swap for reserves and another method of spending currency into the economy via interest payments, albeit largely unproductive. Their primary function is to give leverage to the Fed to set interest rates and provide a floor for investors, not to provide revenue for a government that neither needs nor uses revenue from any source.
