Sunday, February 20, 2011
The real truth is, when it comes to the government there is no debt.
All we hear about is the debt, the mountain of debt. Debt, debt, debt...it never ends. My question is, what debt? What's the debt that everyone is talking about?
Okay, the so-called, "debt" is $14 trillion or thereabouts. That's the amount that the non-government holds in Treasuries. That's what's considered to be the debt.
So let me ask you this: what if the government had just sent out $14 trillion worth of checks to everone or better yet, $14 trillion dollar bills and just spread it around?
It would break down like this:
$9.5 trillion in checks or cash to the public, with about half of that going to foreigners like the Chinese, Japanese, Opec, etc.
$4.6 trillion in checks or cash that the government gives to agencies of the government.
In other words, the public would have gotten $9.5 trillion in checks or cash and agencies of the government would be holding $4.6 trillion of the same, checks and/or cash.
Would that be considered a debt? Would the government be considered in debt to these entities? Better yet, would these entities be considered as having a liability?
Anyone with half a brain would see that the recipients of the checks or cash would be the recipients of a windfall of new assets.
And this is exactly what has happened. The $14.1 trillion that people see as a debt of the government is really a distribution of $14.1 trillion in assets to the non-government.
And if the government sent it out as cash (Federal Reserve Notes) or checks, no one would be saying the government was in debt.
So why do we continue to hear this?
We hear it because that's the amount the non-government holds in Treasuries and people believe Treasuries to be a debt obligation, when in fact there's very little difference between a Treasury note or bond and a dollar bill. They're both accounted for the same way--as liabilities of the Federal Government--however, one has no duration (cash) and the other has some duration and pays interest.
How hard, then, is it for the government to pay that interest?
Not any harder than it is to send you a check or distribute dollar bills to you. In other words, pretty much effortless.
So why all the hysteria about the debt?
One reason: ignorance.
It's the ignorance that is killing us. The Treasuries held by the non-government is exactly the same thing as if the non-government had received checks or cash from the government, with one exception: they get paid interest. And the ability of the government to pay that interest is as easy as its ability to send you a check or some cash. There is never any problem.
So now when you hear that the Republicans or the president or Tea Party people want to "pay down the debt" you should understand that to mean they want the government to take back that check or cash that they distributed to you. That's the only way to pay it back. The government must take back those assets. And for what reason? Does it need to collect what it has already distributed and what it can freely distribute in order to function?
Think about it.
The whole thing is absurd.