Consumer debt is the lifeblood of our economy. All modern nation states are built on deficit spending. Debt has come to be the central issue of international politics. But nobody seems to know exactly what it is, or how to think about it.
-- David Graeber
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Hypolite Petovan
This is why most talks of reducing the US deficit are dangerous: in practice this means private citizens and companies would have to give back some of the money they currently use to the US government to be immediately destroyed in order to reduce the US deficit number.
Unlike households, cities and states, the US government isn't sitting on a limited amount of money to budget their expenses: it creates the money itself. Federal taxes aren't replenishing a treasure chest, they simply remove some of the money from circulation, as a wealth redistribution tool but also as an inflation c... show more
This is why most talks of reducing the US deficit are dangerous: in practice this means private citizens and companies would have to give back some of the money they currently use to the US government to be immediately destroyed in order to reduce the US deficit number.
Unlike households, cities and states, the US government isn't sitting on a limited amount of money to budget their expenses: it creates the money itself. Federal taxes aren't replenishing a treasure chest, they simply remove some of the money from circulation, as a wealth redistribution tool but also as an inflation control tool.
The bottom line is that in a growing US economy, it is normal that the amount of money in circulation (= US deficit) increases because activity is growing as well, and shortage of cash isn't a situation we should look forward to.