This comment displays that you view Treasury debt as a “funding” source, which it isn’t. The proceeds from bond sales are not available to Congress to “spend” any more than are tax receipts. Once they encounter the debt that created them in the government sector both cancel each other to zero and cannot “fund” anything. Keeping this money and debt separated until the money is used to pay a federal tax obligation or purchase Treasury bonds is the purpose of keeping the Fed private as the clearing bank of Treasury.
Treasury bonds are just another form of money except not counted in the total supply, just as they were not convertible to gold when we did that nonsense. Investors trade liquidity for interest, which was only useful with a gold reserve to defend. They require existing reserves to purchase and those reserves can only come from deficit spending by Congress. They now serve only to provide leverage to the Fed to allow it to set interest rates and as welfare for banks and investors.
No new bonds were issued during Clinton’s much-touted surplus budgets even though the world had a glut of cash needing a safe harbor. If Treasury wanted to float debt it probably could have done so at a net negative rate to inflation. However, doing so would have further depleted the money supply, making the currency drain even worse than the ill-advised surplus position taken by Clinton and Congress when trade deficits were extreme in the tech boom. In case you missed it, it created a recession and some economists believe it started the mortgage bubble.
You can’t borrow what doesn’t exist and you can’t increase the money supply by destroying money to decrease/pay down a mostly meaningless tracking entity labeled debt.
The US dollar is a self-funding commodity by a mandate of our Constitution on Congress to create it “for the common welfare”. It never has to be “paid for” and cannot be borrowed until it is created. (Deficit) Spending funds Treasury bonds, not the reverse. With a fiat currency and floating exchange rates, we should probably stop issuing bonds just to rid our economy of the political propaganda value they add. You appear to be a fairly smart and savvy guy, but if even you are getting this all wrong what does that say for the ability of the average voter and the ease of manipulating their opinion? This is not theory or conjecture. It is easily found in simple Fed reports and sectoral balances.
