In the 1930s, the global economy looked like this. One nation was the world’s largest debtor state, by a very, very long way. Why? It owed steep “reparations” to France and Britain for starting and losing World War I. As a result, in plunged into stagnation. Its elites totally mismanaged its economy. To pay off the debts, they had to destroy whatever was left of the social contract. Then they began to print money by the bucketload.
There is an important distinction between the debt Germany owed to France and Britain and the debt America owes. Germany owed its debt denominated in Francs and Pound Sterling, neither a currency it could create or control. Consequently, it was dependent upon exchange rates in making payments, and the more of its own currency it created to satisfy the bond traders the more it devalued its own.
Every dollar the US owes is, well, a dollar. This means that America can never involuntarily fail to pay its obligations. It can always create whatever number of dollars it needs, and since those dollars created to satisfy a debt obligation are not likely to be in circulation, that money creation is also not inflationary. A fiat currency cannot devalue monetarily. Prices of goods that become scarce can increase on a commodity by commodity level, but never across the board of all commodities simply because we hit some magical number limit of dollars.
America owes its external debts mostly to China, and a smattering of other developing countries.
All we ever owe China is a bank statement. China has dollars because it sells us its stuff, choosing to use America as the primary market to enable its own job and economic growth. Bonds can’t be sold for Yuan, Yen, or any currency other than dollars. If you want US Treasury bonds you must first acquire dollars. This means that Treasury debt can never be a “funding” operation for US spending at the federal level as the dollars required to purchase them must already exist.
US Treasury bonds are just another form of money that pays a small rate of return to satisfy the public’s need for secure savings. Investors who have dollars in excess of what they need to purchase other goods priced in dollars are offered a liquidity swap for their reserves, meaning the bonds can’t be converted back into cash reserves until their preset maturity date. Bonds “take money out of circulation”.
This only had any real utility when we were constrained by a gold reserve, as they allowed Congress to anticipate taxation and overspend the reserve by what it believed it would collect prior to the bond’s maturity date. Evolving to a fiat monetary system removed this utility and bonds now represent socialism for the wealthy by offering them interest for its own sake alone. We always hear the fear-mongering over the national debt when any spending on the public purpose is proposed, but we never hear an objection to the money created to present the wealthy with an income stream from simply holding more dollars than they can spend already.
The US Congress is Constitutionally the monopoly holder of the patent on the US dollar, not restricted by revenue, and mandated to create as many as is required to best serve the “common welfare” (Article 1: Section 8). As the first spender of the dollars created it is also the “price setter” for any goods or labor it purchases that are available for sale and priced in dollars barring any unusual scarcity (oil embargo) or supply chain glitches. Can Congress spend too much and cause inflationary pressure? Sure, but not until all the available resources and labor are deployed in the private sector, a condition we haven’t seen since WWII.
So just like Weimar Germans, modern day Americans have been plunged, suddenly, over the course of a decade or two, into shattered, bizarre, disorienting lives of newfound poverty.
Even if America can never technically suffer the fate of Weimar, it can be pushed into conditions that mimic that so well that it is difficult to discern any real difference. How? By simply promoting the lie that the people “fund” their government with their taxes and that any spending above tax collections must be borrowed and increases a tracking number at the Treasury mislabeled as “debt”, which implies that it must be repaid someday, by someone. This was rather easy because it resonates with everything most people know about money, having learned it from their perspective as “users” of the currency. If we create our own money, as Congress can, we will go to jail for it.
It’s difficult to know exactly who is knowingly promoting the greatest con in history and who are simply misinformed, but that makes little difference. America, since the Carter administration, has not had a good track record of electing world-class thinkers. We can make a good guess that those who make money by having money are aware of how money works. Starving the economy of the high power money needed to retire private bank debt while also increasing the need for that debt, or to provide a store of value in commerce, is simply a cruel, but effective, way to recreate the conditions that pushed Weimar into fascism.
Take note that no media pundit ever asks a politician “How will you pay for it?” when the subject is war or bailing out the banks. They know their role, even if they don’t understand the plot entirely. These are spending items that shovel the most public money directly to the top echelon of the oligarchy, so money is never in short supply to benefit them. Most of those in a position to ask such a question of a politician are themselves, members of the elite club, so they have their own reason to fear any devaluation of the currency.
Are you seeing how close to the precipice of world war we really are now?
Not all supporters of fascism in America, just as in Weimar, are doing so knowingly, but that hardly matters to kids in cages or people losing their loved ones for lack of money to afford the most basic medicines. The National Debt will not get us there, but the reversal of the way we, and our politicians, see the process by which the US funds itself can. The federal government never “needs” your money. It simply needs you to need its money and to occasionally have a bit less of it.
The monopoly issuer of the currency can never “borrow” its own currency without creating it first, and a “balanced budget” is another way of saying 100% tax rate that steals private resources to provision the government and allows no means to retire private debt or provide a means of storing value/saving. If you can remember these things, and make your representative understand them you will be in an elite group of anti-fascists.
