Fiat Money

When I write about or discuss Government debt & deficit, I am often told that Government needs to balance its budget like "anyone else". Then is when I know that they know nothing about a Sovereign Currency.

Paying Taxes & Debt gives Money Value

1. The US is not "Anyone else". It is a Sovereign Nation with a Sovereign Currency. It is impossible for the Government to go Bankrupt unless Congress forces it into bankruptcy  by passing laws that prevent it from paying its Bills.  If Congress lets the Federal Reserve Banks finance Government spending at no interest it would make the taxpayer debt burden nonexistent and Government projects less costly.

2. The past Debt of the United States is the Money that is already in and has been circulating in the economy since it was borrowed and spent. The United States has not been Debt-free more than a single year in all of its history and that created one of the Greatest Depressions in the Nation's early years of its History. The greater the Debt the Greater the Money supply and greater the possible activity in the economy. Whatever inflation was caused by that debt is long since a part of the supply/demand equation and is effected only by the velocity that money is spent and not by the money amount itself.

3. Deficit Spending can create an expanding money supply and a  growing economy if it is spent on job-creating and Nation-building projects. It will not create inflation unless there is a shortage of needed labor, or productive capacity or input materials. That is why a Nation must increase spending during high unemployment and decrease spending during low unemployment. 

by William Hodge