memes

Image 404, got it again?

Thanks jerkface!

https://www.history.com/this-day-in-history/andrew-jackson-national-debt-reaches-zero-dollars

TLDR: the last time someone that didn’t understand economics paid off the national debt, it didn’t end well.

If there is a finite amount of money you can print before suffering the effects of inflation, deficit spending allows you to increase the amount of money in circulation without just printing more. If I owe you 100 trillion dollars, you owe Japan 100 trillion dollars, and Japan owes me 100 trillion dollars, this is good for the economy. Yes, it probably sounds like voodoo magic. No, I’m not qualified to help with that.

Now, there is still an upper limit on how much debt is okay, generally tied to interest rates. We’re beginning to scratch that upper limit thanks to deficit spending during covid, but it’s by no means problematic and things would overall probably have been worse without the extra spending.

Except a nation with no debt and a negative trade balance has negative wealth.

The government debt is the private sector surplus when there a negative trade balance.

The government is literally the source of money. Every dollar created is part of that "debt".

Every dollar is an IOU issued by the federal government that it will be accepted to relieve tax obligations.

" Zero national debt " means zero dollars left in circulation after taxation.

Literally every Republican ever too.

This is Modern Monetary Theory (MMT). I recommend "The Deficit Myth" by Stephanie Kelton

It helped me to realize that a federal government that's in control of their own money doesn't use or even have money, and basic terms that we take for granted mean something different in that context. A federal government creates money through spending and destroys money through taxes. It is necessary for a federal government to spend money in order for money to exist in the economy. So a national debt just means that the federal government is creating more money that is destroying

Fiat money is basically an IOU of the government. It has its value because it is the accepted currency. It is the accepted currency, because you can pay your taxes with it.

In order to create money the government first needs to make debt that it hands out the IOUs for.

That is the core of the concept. It is then mediated through an independant central bank and all sorts of private actors and institutions in between. But the account of the government at the central bank cannot go into a plus. It is always a minus, which increases with the debt handed out to private entitities and it is deleted by the tax coming in.

Not very easily. Concise, easy to understand and correct explanations of how modern money (arguably since 1971) works are not easy to come by, and also the system just is a bit weird and counter intuitive. (Concise, easy to understand, but wrong explanations are, of course, all over the place. Almost everybody thinks they know how money works. Almost nobody actually does.)

One source that explains some of it would be "Debt: The first 5000 years" by David Graeber, but a) it's a fairly lengthy book with quite a lot of historical background and b) it has a fairly strong politicial spin to it.

Very short, commercial banks loan money from national banks. That creates money. It has to be paid with interested. Where does the money for that interest comes from? From other loans. So the whole thing becomes an ever increasing pile of loans.

And government loans from national banks to spend money, so creating and distributing money. If government pays back the loans, money disappears.

And because the whole thing is loans on loans, if population would decrease (what is starting to happen) and growth stops, loans decrease and the whole thing starts to wobble.