My point is that our economy is actually being propped up by the rest of the world. If the rest of the world stopped investing in our debt, we would be in big trouble.
All of the words associated with our monetary process are terribly misleading and it is our assumptions from those words that keep us from understanding those processes. Please consider the context in which those words are used and apply logic to your thinking.
1) DEBT
The US dollar is a sovereign fiat currency that is available to Congress in unlimited quantity to fund the "public purpose", or the "common welfare" as it is stated in our Constitution. It is self funding when it is created by authority of those documents, so neither taxation nor borrowing are actually "funding mechanisms".
They both limit the excess reserves in the system, but taxation is final while bonds are temporary and offer interest dividends to entice investment. The currency/reserves must be created in the private sector via government's deficit spending before either collections or borrowing can take place.
When bonds are purchased they destroy the "liquidity" of the reserves and are nothing more than an asset swap. To those who hold excess reserves, they are the only option other than simply sitting on reserves or investing in the economy which means much higher risk and tax exposure. Investors use them to provide secure parking and guaranteed returns.
Those who purchase bonds are concerned far more with protecting wealth already earned than with earning more. There is a secondary market that many traders engage in, but that demand has no bearing on our Treasury's ability to sell its bonds or the Fed's ability to set the rate paid on those.
In the proper context of the system processes "debt" only applies to the Treasury and refers to it "owing" the holders of its currency an equal amount of tax credit or ownership of bonds. When bonds mature they are converted back to reserve/currency with their interest earnings added. This is just a matter of marking up the accounts of their owners with keystrokes on computers.
As it applies to the private sector it refers to the store of value from commerce with its government. It is the net savings of our country and its money supply, not a mortgage it is responsible for. One sector's debt is always another's asset in dual entry accounting.
We need to come up with another way to “borrow Money on the credit of the United States.”
Beyond the propaganda value of the language used, there is nothing wrong with the way we are doing it now. Even those countries that are ideologically opposed to us own our Treasury debt and use the Fed as their clearing bank for dollar denominated payments and receipts.
That is a good thing because "we" control it and can never be held hostage for it. US dollars only exist within our banking system and other countries only have them because they do business in US dollars. We don't need another system, but we do need voters to be more knowledgable about the system we have.
