Re: About National Debt (was For Trucker)

> Equating government debt to family debt is a serious mistake because
> it leads to false conclusions. The analogy fails because government
> debt is denominated in the very currency that it issues -- assuming it
> has not borrowed in a foreign currency. The US has no need to borrow
> in a foreign currency and does not do so. On the other hand,
> households, firms, and state and local governments cannot issue their
> own currency. They must balance their spending against tax revenues
> on average or eventually go bust. The federal government has no such
> constraint.

EVERY analogy has sameness and difference between the example and
the subject. The key is whether the sameness outweighs the differences.
In this example, the sameness far outweighs the difference. Even though
the government debt is denominated in the currency it issues, its value
is determined by the exchanged value. The exchange rate of most
currencies are determined by the open market. Most other currencies are
pegged to another currency. Thus a government cannot determine the
value of its currency. In the mean time, a government cannot issue
currency at will to cover its debt.

According to http://en.wikipedia.org/wiki/U.S._government_debt:
"Every dollar of increased U.S. public debt, and every rise in
interest rates, and every shift in pricing of a major industrial
commodity, decreases the cushion available, and increases the potential
that the U.S. might default on its own bonds. This would likely mean
that U.S. dollar savings would be worth drastically less. Far-fetched
as this seems, it happened in Argentina when International Monetary
Fund-required measures forced an economic austerity regime that was
widely blamed by economists as leading to a meltdown in its
currency."

Thus there IS constraint to the government in issuing its currency.
Your assertion is wrong.

> Your comments reflect the mistaken notion that the publicly held debt
> must be paid back. Individual securities must of course be redeemed
> as they mature, but the Treasury can roll over its debt indefinitely
> selling new securities to pay for those being redeemed.

You have a tendency to make false assumption about other's belief
then prove it wrong. (You have committed this mistake about 5 times
throughout our dialog, and I don't find it amusing). This is yet
another leap of faith. I did not say that publicly held debt must be
paid back. The reason I propose a government should reduce its debt is
simply to increase the tax money available for the national expense.
According to http://en.wikipedia.org/wiki/U.S._government_debt, "Over
47% of the personal income tax (but not of total tax revenue) collected
in 2003 was spent on paying interest on the debt." How much higher can
this ratio go? Why shouldn't a government try to manage precious tax
money better? As to the risk part, see the quotes in the previous
section.

.

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