Home > Main > Ron Paul hearts MMT! And then goes crazy again.

Ron Paul hearts MMT! And then goes crazy again.

July 5, 2011

Ron Paul wants to destroy the bonds the Fed has purchased in QE, so we can avoid the debt ceiling limit!

But then he makes a huge error, and thinks we should declare bankruptcy.   He doesn’t understand that you cannot owe yourself money you can create at will.   I cannot be in debt to myself for any Traders Crucible Bucks.   I cannot hold a bond denominated in TC Bucks and ever fail to get paid back. ,Therefore I cannot be bankrupt in TC bucks, especially if I owe these TC bucks to myself.

Canceling the bonds we owe ourselves doesn’t mean bankruptcy.   It demonstrates the monetary sovereignty of the United States.

Ron Paul: U.S. should declare ‘bankruptcy’

 

 

 

 

 

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  1. beowulf
    July 5, 2011 at 1:48 pm

    Ron Paul’s argument is connected to something in that Orszag’s Bloomberg op-ed that bugged me to no end…
    “The 2050 deficit problem is different. Over the long run, most of the fiscal adjustment will have to come from reducing expenditures. We simply can’t raise enough revenue to offset projected spending increases. Those increases are disproportionately due to health care.”

    No those increases are disproportionally due to net interest (check out what CBO projects in net interest cost by 2050). The Tsy expenditure to cut is net interest.

    As I suggested at Warren’s site, what Congress should do is expand the Fed rebate of interest on Fed-held debt by requiring FRB to refund the interest on ALL publicly held T-bonds to Tsy. The Fed could drop FFR to 0 and keep it there, impose a bank asset levy, hike existing transaction fees, issue Fed bonds and/or just print it. The FRB can work out the details so long as net interest (and any IOR costs) are added to Fed’s tab.

    After all, DC is hellbent on cutting 10 yr deficits by $4 trillion, GOP wants to cut spending with no new taxes and Democrats don’t want Medicare or SS touched. Offloading net interest spending to Fed would save $5 trillion this decade, win-win (with a bonus win due once they figure out it’d be so deflationary, we’d need to both hike spending and cut taxes just to keep a positive inflation rate).

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