Epstein doesn’t seem to understand that the U.S. government doesn’t need to borrow what it creates. The U.S. government creates dollars. The U.S. government doesn’t need to borrow them to spend them. This seems so simple to me it’s hard to believe anyone would believe otherwise.
There is zero chance that the U.S. has a fiscal crisis like Greece, for example.
Greece collects taxes in euros, spends in euros and borrows in euros. Greece, however, does not create euros. Only the European Central Bank can do that. So Greece actually does have to get euros before it can spend them. It can have (and did have) a genuine fiscal crisis.
Not so for the U.S
There is an economist, Scott Fullwiler, who explained this in a post at the New Economic Perspectives blog site:Daily Reckoning
The US Debt Crisis that Will Never Happen
Chris Mayer
(h/t Charles Hayden)
However, commercial banks - in Greece and elsewhere in the eurozone - can create deposits for individuals, corporations and governments, that is, promises to pay in euros.
ReplyDeleteSuch deposits are accepted as means of payment throughout the territory of the Monetary Union.
A pity, really, that beleaguered governments of the eurozone failed to take advantage of this feature to settle their debts held abroad - and then exit the euro free of all burdens towards external creditors.