DEBT past present future

npr.org/  3/8/2021 The Time the US Paid Off All Its Debt – The Indicator from Planet Money   by Stacey Vanek Smith, Darian Woods

The United States federal government currently has over 28 trillion dollars of debt and there are concerns about the ever-increasing debt level. The majority of that national debt is issued in the form of bonds and bonds are considered among the safest investment assets in the world. However, the U.S government once paid off all of its interest-bearing debt.

President Andrew Jackson was a staunch opponent of the existing banking system. He also wanted to get rid of the national debt. In fact, his administration paid off all the interest-bearing debt on January 1, 1835. Historian Ann Daly lists three reasons for this to happen. The federal government collected many millions in tariffs, sold massive amounts of public land, and President Jackson vetoed spending bills left and right. Then he decided to give the surplus back to the states. Jackson’s actions though and the zeroing out of the US debt contributed to the Panic of 1837, one of the worst recessions in American history.


wsj.com/articles/buy-borrow-die-how-rich-americans-live-off-their-paper-wealth-11625909583


fabians.org  GMcopy  4/2020  Out of Thin Air: Public Debt, the Pandemic and Beyond

Governments around the world are currently creating vast quantities of money ‘out of thin air’ to fund their emergency responses to the coronavirus pandemic.  As this happens, we can safely disregard scaremongering about a  ‘crippling burden of debt’   supposedly being left to our children.  The truth is, this money never has to be paid back in any meaningful sense and can cost us basically nothing. Crucially, this could also be the case for money created to fund other things we might choose to prioritise in the future, such as de-carbonising our economy.

Significantly, the Bank of England and the US Federal Reserve have already taken the next step by creating money out of thin air to purchase government bonds directly from their governments, on the ‘primary market’. This practice is known as ‘monetary financing’.  The Governor of the Reserve Bank, Dr Philip Lowe, has emphasised that Australia’s approach is, for now, strictly QE and not monetary financing. But whether it’s QE or monetary financing, the outcome is the same, with one part of the government (the central bank) creating new money and effectively loaning it to another part of the government. The ABC’s Alan Kohler asks the inevitable question:  “The Reserve Bank might be independent but it is part of the government. What happens when that debt has to be repaid – to the Reserve Bank? Well, no one knows […]”  The renowned economic historian Robert Skidelsky is less coy, explaining exactly what happens:  …

… As Alan Kohler went on, “What [Reserve Bank Governor] Dr Lowe won’t be keen to do is give politicians the idea that there’s a magic tree of printed money. There sort of is… just don’t tell the politicians.”  It is true that when new money is created and spent into the economy faster than the rate of growth in productive output then price inflation occurs.  The times when the spending of publicly created money has resulted in high inflation or even hyperinflation in this way are well known, resulting in the widespread and strongly held misconception that money creation by the governme …

… While the fear that if “central bankers lose their ability to say no to treasuries, things could turn out badly” is a valid concern, it is not so valid that we need to tie ourselves up in a straitjacket of false narratives and false constraints; especially with such urgent need for investments in health, education, energy and the environment.
The government’s ability to create money is a great power and there are different schools of thought about precisely how it should best be used and monitored. One comes from the UK advocacy group Positive Money, which suggests that we need an independent committee …

A system like this was once proposed by the great economist Irving Fisher in the 1930s.  Fisher argued that it would dramatically reduce business cycles, end bank runs and drastically reduce public debt. A 2012 study by International Monetary Fund staff found this plan could work well now.  The Financial Times chief economics commentator, Martin Wolf agrees …

… The groundwork is already being laid for the government debt to be used as a pretext for austerity and other ideological projects when we emerge from this public health crisis. A proper understanding of government finances will be a powerful tool to push back with.  We should also keep it firmly in mind when attention returns to the other great challenges of our times, such as fighting climate change.  If we can finance our response to one public emergency in this way, then we could finance our response to another, without debt, without interest, without inflation and without austerity.  If the public comes out of the crisis with a greater understanding of this and puts it at the centre of policy moving forward, it will be a silver lining. 

@Zann_A_Duu


carnegieendowment.org  10/2020  Why Foreign Debt Forgiveness Would Cost Americans Very Little  MICHAEL PETTIS

It is easy to assume that sovereign debt forgiveness involves a collective transfer of wealth from the creditor country to the debt-owing country, but this is only true under specific—and unrealistic—conditions. In today’s environment, sovereign debt forgiveness mainly represents a transfer within the creditor country. It benefits farmers and manufacturers in the creditor country at the expense of the country’s nonproductive savers.


 

Visualizing the Snowball of Government Debt


The State of Household Debt in America


brandeins.de   2020  Wer steht bei wem in der Kreide?  Sarah Sommer  Die Kurve, an der sich die weltweite Verschuldung ablesen lässt, steigt und steigt. Die Ökonomen internationaler Organisationen sehen darin eine Gefahr für die Weltwirtschaft. Welches Ausmaß hat der seit Jahrzehnten anhaltende Trend zum Geldleihen?


bennettinstitute.cam.ac.uk

 3/ 2021. Sovereign debt downgrades in store for many nations unless they act on climate crisis  New study uses artificial intelligence to simulate first climate smart sovereign credit ratings. Fred Lewsey.

…” Dr Matthew Agarwala : “As climate change batters national economies, debts will become harder and more expensive to service” …  The first sovereign credit ratings to directly include climate science show many national economies can expect downgrades within a decade unless action is taken to reduce emissions. …  Sovereign ratings assess the creditworthiness of nations and are a key gauge for investors. Covering over US$66 trillion in sovereign debt, the ratings – and agencies behind them – act as gatekeepers to global capital. …”…


Debt: The first five thousand years