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The opening comments about the Federal Reserve trying to inflate US debt out of existence caused me to stop reading, as it was immediately obvious that the auth

• fsk 13y ago
  In a paper monetary system, you can have unlimited national debt. It's just a number. The US Federal Government is the issuer for dollars, and its debt is denominated in dollars. So, they can always print more money/bonds to refinance the debt. (Unlike Euro countries, where their debt is in Euros but no single country controls the Euro.) When their is inflation, existing debt is worth less, because it can be repaid with inflated dollars. Right now, the Fed Funds Rate is 0.25%, while real inflation is much higher than that. (The CPI is a lie.) That creates a perverse incentive, where (due to the financialization of the economy), it's profitable to load up on debt, buy tangible assets, then wait for inflation and repay the debt with inflated money. There is no limit to the amount of the US Federal government debt. There is a risk that Congress could refuse to raise the debt ceiling. More national debt causes more inflation. If inflation is too high, there is the risk of a hyperinflation collapse of the monetary system. Until that point is reached, there is no limit to the national debt.
  • pessimizer 13y ago
    Unless you have some evidence that CPI is a lie, it's important to mention that the idea that increasing the money supply must lead to inflation is completely counterfactual. We have massively increased the money supply. Inflation is still too low, rather than too high. http://www.tradingeconomics.com/united-states/inflation-cpi http://www.tradingeconomics.com/united-states/inflation-cpi