How did we end up in so much debt?

[Questionable]

I understand why austerity programs are being pushed to pay back the banks and prevent them from crashing, but how did capitalist nations end up in so much debt in the first place?

[TheEmancipator]

The reason why we're in so much debt is already answered in your question.

There was also the excessive spending before that, but most European deficits today are due to a constant propping up of the system by bailing out banks. Britain for example had the lowest debt of Western Europe until it had to start saving RBS, etc...

The main problem before this was down to too much borrowing from both private and central banks by governments to fund programmes. Giving a politician an option to spend as much as he wants is never a good idea. They essentially covered it all up (their spending).

[DROSL]

corporatism is the simple answer that comes to my mind.

[Questionable]

The reason why we're in so much debt is already answered in your question.

There was also the excessive spending before that, but most European deficits today are due to a constant propping up of the system by bailing out banks. Britain for example had the lowest debt of Western Europe until it had to start saving RBS, etc...

The main problem before this was down to too much borrowing from both private and central banks by governments to fund programmes. Giving a politician an option to spend as much as he wants is never a good idea. They essentially covered it all up (their spending).

Why did the banks need saving?

I also don't understand how my question is already answered. Where did the debt come from?

[Paul Pott]

corporatism is the simple answer that comes to my mind.

*capitalism

[Old Bolshie]

I understand why austerity programs are being pushed to pay back the banks and prevent them from crashing, but how did capitalist nations end up in so much debt in the first place?

The austerity programs are being pushed not to pay back the banks but rather to balance the national debt.


Why did the banks need saving?The capitalist justification was that letting a bank going bankrupt would destroy the entire banking system and launch the economy into chaos.


Where did the debt come from?As Armchair Philosopher said the national debt crisis came from the bailouts of banks by the governments after the 2008 Bubble crisis. The private debt came from the bubble itself.

[Questionable]

The austerity programs are being pushed not to pay back the banks but rather to balance the national debt.

Is it? Every leftist source I've read and heard has blamed the problem on the need to pay back the banks.

[Old Bolshie]

Is it? Every leftist source I've read and heard has blamed the problem on the need to pay back the banks.

Because that's the source of the problem. After the financial crisis of 2008 the governments rescued the troubled banks from going bankrupt in order to avoid a collapse in the banking system according to their perspective. The bailout of banks led to another crisis: the debt crisis. The austerity plans began to be implemented as a response to the debt crisis which involves the whole economy including the banking system. The purpose of the plans is to balance the national debt.

[DDR]

The question is very simple, in the 70s 80s industrial production move to underdeveloped countries the workers of the developed countries lost purchasing power, in order to counter that credit began to flow for buying stuff. The capitalist solution for a crisis is the base of the new crisis.


The austerity programs are being pushed not to pay back the banks but rather to balance the national debt.

The austerity is because the States acts as guarantors of their "national banks and business" who have lots of debt with German and French banks (mainly German ones).

[Old Bolshie]

The austerity is because the States acts as guarantors of their "national banks and business" who have lots of debt with German and French banks (mainly German ones).

While this may be true in Greece's case it clearly isn't in Portugal case. Once again, the austerity plans are being implemented to balance the debt of the public sector which skyrocket after the 2008 financial crisis.

[Crabbensmasher]

I think a lot of the politicians have this notion: "Let's borrow, spend a lot of money, and by doing so, revitalize the economy. When more people are working, they won't have to collect welfare or government services, and ta-da, we now have balanced books". This train of thought was apparently very popular in the Mediterranean, where you see so many problems today.

In reality though, this is absurd and just plain capitalist/keynesian idealism. There will be corporate handouts, and bloated government salaries, but unemployment or poverty aren't necessarily reduced at all.

[Tim Cornelis]

The notion that bailing out banks is causing public debt is ridiculous. Governments spend in excess of income because it allows to invest more in the economy and debt means multiple generations have to pay it back. Multiple generations use infrastructure, so multiple generations pay it back.

[Old Bolshie]

The notion that bailing out banks is causing public debt is ridiculous. Governments spend in excess of income because it allows to invest more in the economy and debt means multiple generations have to pay it back. Multiple generations use infrastructure, so multiple generations pay it back.

Ridiculous was your attempt to devaluate the 2008 crisis and the subsequent government intervention which is something that the neo-liberals like to do to justify the austerity.

Before the financial crisis broke and the bailouts began in 2007 the public debt of Portugal was at 63%, Ireland at 24.9% and UK at 43.6%. After the crisis and bailouts, the Portugal debt skyrocket to 83.2% in 2010, Ireland's to 94.2% and UK's to 76.5%.

[Popular Front of Judea]

Fascinating to find communist militants sounding like Austrian economics devotees. The short answer to the question is the global slump that started in 2008. Which in turn is the latest manifestation of the capitalist crisis that started in the early 70s.

The question for everyone here to ask is to ask who benefits from the calls for austerity -- when in fact the measures demanded are counterproductive. Why are countries that have their own sovereign currencies -- the US, UK etc. -- being compared to Greece, which does not? (The Euro is one of the best arguments against the return of the gold standard.)

There is nothing inherently wrong with public sector debt. It only becomes an issue when economies are intentionally hobbled and the currency cannot be devalued.

[DDR]

While this may be true in Greece's case it clearly isn't in Portugal case. Once again, the austerity plans are being implemented to balance the debt of the public sector which skyrocket after the 2008 financial crisis.

It is also true for the spanish state, the housing and building boom was financed, in part, by german banks. Here live a lot of retired germans and is also a main place for them to go on holiday.

[Klaatu]

I understand why austerity programs are being pushed to pay back the banks and prevent them from crashing, but how did capitalist nations end up in so much debt in the first place?
(A) reckless tax-cutting
(B) money being moved out of the country (by wealthy capitalists and other criminal elements)
(C) Über-expensive wars and military 'toys'
(D) taxpayer subsidies (spending) to already enormously-profitable industries (e.g. BIG OIL)

I think the reason Soviet Union collapsed was their unsustainable military spending... and the USA is going right down the same hole.

[Old Bolshie]

It is also true for the spanish state, the housing and building boom was financed, in part, by german banks. Here live a lot of retired germans and is also a main place for them to go on holiday.

You are referring to the financing of the banks which is being done through the financing of the states. In return these states are compelled to follow an austerity plan to balance their budgets.

Austerity means cuts in the government spending and tax increases.

[Lucretia]

The national debt is the flipside of fictitious capital. Capitalism is so thoroughly decayed at this point that it requires such things to continue even malfunctioning.

[Red Commissar]

If you take the pundits answer they'll slam social programs or some variation on that (more takers than earners), or use colorful and idiotic comparisons like "if you can't credit card your way to live beyond your means neither should the government", or blaming people who couldn't afford their mortgages. They blame the spending levels primarily.

Neoliberals are trying to use the above to advance the case for a further dismantling of social programs of course. Honestly a lot of the problem comes out of the fact that there were some highly suspect and dumb banking practices (like derivatives) whose mismanagement spread into other parts of the economy like a cancer. Neoliberalism became the norm after the 80s for all countries in varying amounts and this entailed laxer bank rules to free up capital flow for investment, alot of which flowed into housing and start ups.

[Klaatu]

The national debt is the flipside of fictitious capital. Capitalism is so thoroughly decayed at this point that it requires such things to continue even malfunctioning.
And yet, Fox News, et al, continue to provide moral support to a clearly-unsustainable collapsing capitalist system

[VDS]

And yet, Fox News, et al, continue to provide moral support to a clearly-unsustainable collapsing capitalist system

Never underestimate the ability of money to get people to tell you that the ship is alright, while it's clearly sinking. As long as they're profiting, it's not their job to concern themselves about reality and the implications it holds for the rest of us. Remember, there's ALWAYS an ideology that attempts to justify the system as to make it appear natural. Fox is just riding that theory for all it's worth.

[Sinister Cultural Marxist]

I think Marx gives a good explanation in Capital. Money is the fuel of all enterprise, but most money is held in the hands of private, productive enterprise or individual savers. That money needs to get to the hands of future businessmen, future homeowners, and so on. The banks are the institution which can take the savings and finance capital of businesses in operation and lending it to those making new capital or expanding. That lending is obviously limited by the amount of money already in people's bank accounts. However, Marx talks about how the rates of return on capital decrease over time. The banks need to continue making the same levels of profit to remain competitive with each other as a place for people with savings to place their deposits while the actual profits on the investments and loans which are given go down. This is going to drive up the amount of debt in relation to the amount of actual wealth in the economy to the point where the debt can no longer be paid back and banks are left without the ability to loan more money or return any deposits. This is where the state needs to step in and take the debt for the banks. The question obviously arises, however, of who is lending the money to the government and when the government will face the same situation which the banks faced.

I don't know if this explanation could be articulated in more detail by someone else but it seems to be the simple version of what Marx is arguing in Capital regarding finance capital and the decreasing rate of returns on capital.

[Prof. Oblivion]

For all intents and purposes the national debt is meaningless.

I don't understand how leftists can believe that there is such a thing as a "national debt crisis" going on.

[Crixus]

I understand why austerity programs are being pushed to pay back the banks and prevent them from crashing, but how did capitalist nations end up in so much debt in the first place?

Falling rate of profit.




Right now China is doing more harm to labor than Thatcher ever did. Places like China, Mexico etc give capitalists safe havens and access to cheap labor. In turn this eats away at leverage workers in Britain and the US might have once had. No leverage = less pay, less pay = less consumption. Less consumption= declining profits. It's part of why Marx said capitalism was doomed. That it would dig it's own grave. Everything they do (politicians/the public face of capital) is done to prevent this. Everything they do is done to keep the market (profits) expanding. This can only now be done via a cycle of attacking labor, printing money, creating massive lines of credit and debt. It doesn't matter who's in office. It doesn't matter what their public rhetoric is. The capitalist system will demand what it needs to survive.

[Lucretia]

And yet, Fox News, et al, continue to provide moral support to a clearly-unsustainable collapsing capitalist system

Why single out Fox News? MSNBC, CNN, the New York Times, and every other major news outlet rallies around capitalism as the best possible economic system to which there is no viable alternative. Why wouldn't they? They're all capitalist businesses.

[Prof. Oblivion]

I think Marx gives a good explanation in Capital. Money is the fuel of all enterprise, but most money is held in the hands of private, productive enterprise or individual savers. That money needs to get to the hands of future businessmen, future homeowners, and so on. The banks are the institution which can take the savings and finance capital of businesses in operation and lending it to those making new capital or expanding. That lending is obviously limited by the amount of money already in people's bank accounts. However, Marx talks about how the rates of return on capital decrease over time. The banks need to continue making the same levels of profit to remain competitive with each other as a place for people with savings to place their deposits while the actual profits on the investments and loans which are given go down. This is going to drive up the amount of debt in relation to the amount of actual wealth in the economy to the point where the debt can no longer be paid back and banks are left without the ability to loan more money or return any deposits. This is where the state needs to step in and take the debt for the banks. The question obviously arises, however, of who is lending the money to the government and when the government will face the same situation which the banks faced.

I don't know if this explanation could be articulated in more detail by someone else but it seems to be the simple version of what Marx is arguing in Capital regarding finance capital and the decreasing rate of returns on capital.

The government is lending money to itself. The government will not face the same situation because the government has the power to create currency and control monetary policy.

[Klaatu]

Why single out Fox News? MSNBC, CNN, the New York Times, and every other major news outlet rallies around capitalism as the best possible economic system to which there is no viable alternative. Why wouldn't they? They're all capitalist businesses.
I am not 'singling out' Fox. I put the adjective 'et al' (meaning: "and others") there.

[Zealot]

I'll use the example of the United States but this was the general pattern in many countries. In short, the profitability crisis of the 1970s was solved by tax cuts, squeezing the working class and smashing social programs (i.e., the neoliberal "solution"), which was able to stem the falling rate of profit for a while. However, its commitment to expansionism all over the world in pursuit of even more profit was financially draining considering that less taxes were being taken in and most of it was from a working class that itself was using easy credit to maintain a comfortable standard of living. Moreover, a massive corporate shift to developing and underdeveloped countries was taking place. Debt obviously became an even bigger problem in the wake of the financial crisis.

[Workers-Control-Over-Prod]

I understand why austerity programs are being pushed to pay back the banks and prevent them from crashing, but how did capitalist nations end up in so much debt in the first place?

Systemic debt has increased because of the constant falling rates of profitability under capitalism.

[Sinister Cultural Marxist]

For all intents and purposes the national debt is meaningless.

I don't understand how leftists can believe that there is such a thing as a "national debt crisis" going on.

Debt crises are an important part of Marx's critique of Capital. Understanding why the State takes on the debt of banks is important, and this can be a bad thing for the State.


The government is lending money to itself. The government will not face the same situation because the government has the power to create currency and control monetary policy.

Just creating money out of thin air leads to inflation which is just another form of instability in the market. The point that Marx is making is that there's no solution for these kinds of debt crises within Capitalism.

[Prof. Oblivion]

Debt crises are an important part of Marx's critique of Capital. Understanding why the State takes on the debt of banks is important, and this can be a bad thing for the State.

Marx was also writing before the dollar became floating. A debt crisis is significant when the currency is pegged against gold. Floating currency essentially makes national debt meaningless. The national debt in the US is almost entirely an accounting calculation due to the institutional separation of fiscal and monetary policy.


Just creating money out of thin air leads to inflation which is just another form of instability in the market. The point that Marx is making is that there's no solution for these kinds of debt crises within Capitalism.No, it doesn't. It is essentially impossible to create inflation out of money creation.

[Paul Pott]

No, it doesn't. It is essentially impossible to create inflation out of money creation.

So they lied to me in econ 101? That when you have a greater number of dollars/euros/yuan/whatever used to purchase a stagnant number of goods and services, you have inflation?

[Tim Cornelis]

Ridiculous was your attempt to devaluate the 2008 crisis and the subsequent government intervention which is something that the neo-liberals like to do to justify the austerity.

Before the financial crisis broke and the bailouts began in 2007 the public debt of Portugal was at 63%, Ireland at 24.9% and UK at 43.6%. After the crisis and bailouts, the Portugal debt skyrocket to 83.2% in 2010, Ireland's to 94.2% and UK's to 76.5%.

Correlation does not imply causation.

[Old Bolshie]

Correlation does not imply causation.

If you are talking about the current national debt crisis then it's a case of causation and not correlation as I showed through the statistics.

[Prof. Oblivion]

So they lied to me in econ 101? That when you have a greater number of dollars/euros/yuan/whatever used to purchase a stagnant number of goods and services, you have inflation?

There is a relation between the money supply and the price level, but the level of increase required to cause inflation merely through printing money first off would require a ridiculously large amount of money creation, and second this money once created would need to travel through the economy at such a velocity that is impossible. Neither of these would ever happen in reality.

Your econ 101 class also probably did not cover the relation between the Fed and the government, monetary and fiscal policy, the money creation process or the role of federal debt securities in this process.

[ckaihatsu]

Never underestimate the ability of money to get people to tell you that the ship is alright, while it's clearly sinking. As long as they're profiting, it's not their job to concern themselves about reality and the implications it holds for the rest of us. Remember, there's ALWAYS an ideology that attempts to justify the system as to make it appear natural. Fox is just riding that theory for all it's worth.


This practice also reveals the default societal economic "leadership", such as it is within a quasi-aware, capitalist system now on the downslope.

The system -- in the shape it's in -- is *so* foundering and impotent in its fundamentals that one is hard-pressed to even find a coherent statement of merit that describes it -- can a proponent's ideology even be said to exist for the real world and the path it's on -- ?

In this sense whatever rhetoric is belched forth more resembles a kind of brute, crude cheerleading than an ideology per se. Basic salesmanship for the economic world does not a politics or theory make.

[Popular Front of Judea]

Again it's amusing to see nominally Marxist individuals opening their mouths and sounding very much like Ron Paul.

There is nothing inherently inflationary about fiat currency. There is no inevitable slide to hyperinflation.

Furthermore inflation is not the boogieman that you and others make it out to be. Arguably a mild inflation is a good thing as it favors debtors over creditors. We do want a currency policy that favors the working class, right?

@Bill Cosby has quite capably demolished your arguments.


Just creating money out of thin air leads to inflation which is just another form of instability in the market. The point that Marx is making is that there's no solution for these kinds of debt crises within Capitalism.

[Sinister Cultural Marxist]

Cosby-could you post an article or something like that explaining this in greater detail? If the government could print money without causing inflation, and then use that money to pay off debts, then Capitalism could just grow indefinitely. Unless the State can literally create value out of thin air, that will cause inflation. Real value comes from labor and means of production, not from money, and if you introduce more money into an economy without an increase in that real value then it seems logical that the value of the currency would go down.

If what you're saying is true, then the state could literally just grow the economy by just printing money without a possible cost. This doesn't seem to be the case because money isn't a commodity with a fixed value, and one of the things that can change that value is the supply of money out there.


but the level of increase required to cause inflation merely through printing money first off would require a ridiculously large amount of money creation

Well there is a ridiculously large debt to pay for.



There is nothing inherently inflationary about fiat currency. There is no inevitable slide to hyperinflation.

No but just printing fiat currency can cause inflation once that money enters circulation.


Furthermore inflation is not the boogieman that you and others make it out to be. Arguably a mild inflation is a good thing as it favors debtors over creditors. We do want a currency policy that favors the working class, right?

I don't think that there's a value judgement good or bad, just that capitalist economies are prone to debt crises, regardless of whether there is a gold standard or not. You can't escape this by just having the state take on the debt and print money.

[ckaihatsu]

[C]apitalist economies are prone to debt crises, regardless of whether there is a gold standard or not. You can't escape this by just having the state take on the debt and print money.


Yes, it's a crisis, but the crisis is rooted in the lack of real growth (GDP), which results from the declining rate of profit. Attempts to spur the economy with repeated quantitative easing may help the *numbers* a little bit, in intervals, but it doesn't help the real economy at all and only spurs the continuing separation of the fictitious capital (new stock market highs), from the real economy of goods and services, and jobs.

So it's not so much a *debt* crisis, as it would be for a business or a household, since the continual expansion of the money supply -- incurring debt -- isn't under any kind of regulation since it's all financialized, and doesn't cause hyperinflation because it's still a major world power that continues to receive international financing and political support.

Finally, since we're obviously talking about the U.S. in particular, it enjoys the imperial power of owning and issuing the world's de facto reserve currency, the U.S. dollar. It's been having to increasingly rely on militarism to retain this position, though, with countries like Iraq, Iran, Libya, and now Australia, moving to displace the petrodollar from their usage for trading.

[Popular Front of Judea]

I am not Cosby but this is a good start:

http://neweconomicperspectives.org/p/modern-monetary-theory-primer.html

'Modern Monetary Theory' is one of the best frameworks to understand the economic reality that we entered into when we (the US) left the gold standard in 1971. (IMHO) There are any number of constraints on capitalist economies including the ultimate one, ecological damage and collapse. Public sector debt -- for nations that have sovereign, fiat currencies -- isn't one of them.



Cosby-could you post an article or something like that explaining this in greater detail?

[Prof. Oblivion]

Cosby-could you post an article or something like that explaining this in greater detail? If the government could print money without causing inflation, and then use that money to pay off debts, then Capitalism could just grow indefinitely.

The creation of money is something that happens in line with the expansion of production. As I said before, there is a relationship between the money supply and the price level. And in a purely academic, theoretical sense, sure, it's theoretically possible to cause a lot of inflation by printing money. But in reality it's impossible, based on the physical limitations of the system. Even if the Fed wanted to willingly commit economic suicide, it would still not be able to do so because of these limitations.


Unless the State can literally create value out of thin air, that will cause inflation. Real value comes from labor and means of production, not from money, and if you introduce more money into an economy without an increase in that real value then it seems logical that the value of the currency would go down.How does money enter the economy?


Well there is a ridiculously large debt to pay for.The debt is meaningless. It's an accounting trick. The only reason the federal government issues debt securities is because it cannot create money to fund its operations, as money creation is dictated by the Fed. This is the separation between fiscal and monetary policy to which I was referring in an earlier post. The national debt is entirely due to this fact.

If the government was in control of printing money, there would be no budget surplus/deficit because the government would just create whatever money it needs.

Also, didn't you hear about the whole platinum coin debacle before? It was completely unrealistic and ridiculous, but it plainly showed how meaningless the debt actually is. All the Fed has to do is have the Treasury print a one trillion dollar platinum coin, deposit it into its account at the Fed, the fed reduces the debt by a trillion dollars and destroys the coin. Poof, no more debt.


I don't think that there's a value judgement good or bad, just that capitalist economies are prone to debt crises, regardless of whether there is a gold standard or not. You can't escape this by just having the state take on the debt and print money.I don't think that capitalist governments are necessarily prone to debt crises, and rather that the creation of fiat is a measure that allows capitalist governments to absorb crises that normally would have been played out in the broader economy. Indeed, this was one of the purposes of going off the gold standard, and can be seen directly in the example of QE where the Fed purchased and essentially destroyed toxic MBS product.


I am not Cosby but this is a good start:

http://neweconomicperspectives.org/p/modern-monetary-theory-primer.html

'Modern Monetary Theory' is one of the best frameworks to understand the economic reality that we entered into when we (the US) left the gold standard in 1971. (IMHO) There are any number of constraints on capitalist economies including the ultimate one, ecological damage and collapse. Public sector debt -- for nations that have sovereign, fiat currencies -- isn't one of them.

This is true, though MMT also has its limitations.

[ckaihatsu]

Not that I'm suggesting anything here, but here's how another culture handled it:





A strong sense of indebtedness was connected with this worldview. Indeed, nextlahualli (debt-payment) was a commonly used metaphor for human sacrifice, and, as Bernardino de Sahagún reported, it was said that the victim was someone who "gave his service".

Human sacrifice was in this sense the highest level of an entire panoply of offerings through which the Aztecs sought to repay their debt to the gods. Both Sahagún and Toribio de Benavente (also called "Motolinía") observed that the Aztecs gladly parted with everything: burying, smashing, sinking, slaying vast quantities of quail, rabbits, dogs, feathers, flowers, insects, beans, grains, paper, rubber and treasures as sacrifices. Even the "stage" for human sacrifice, the massive temple-pyramids, was an offering mound: crammed with treasures, grains, soil and human and animal sacrifices that were buried as gifts to the deities. Adorned with the land's finest art, treasure and victims, these temples had become buried offerings under new structures every half a century.




The 52-year cycle

The cycle of fifty-two years was central to Mesoamerican cultures. The Nahua's religious beliefs were based on a great fear that the universe would collapse after each cycle if the gods were not strong enough. Every fifty-two years a special New Fire ceremony was performed.[24] All fires were extinguished and at midnight a human sacrifice was made. The Aztecs waited for the dawn. If the Sun appeared it meant that the sacrifices for this cycle had been enough. A fire was ignited on the body of a victim, and this new fire was taken to every house, city and town. Rejoicing was general: a new cycle of fifty-two years was beginning, and the end of the world had been postponed, at least for another 52-year cycle.




http://en.wikipedia.org/wiki/Human_sacrifice_in_Aztec_culture

[Sinister Cultural Marxist]

Bill Cosby - if I get what you're saying, the limitations on getting the money into actual circulation would prevent there from being inflation, no? This makes sense, but presumably if the government is printing money to pay off people's treasury bills and any interest accrued on them, those people will look to spend that money on other commodities, be they financial or otherwise. Wouldn't that eventually end up increasing the amount of money in circulation without a comparable increase in the amount of goods being bought and sold? If you throw 50% of a country's GDP at a bunch of investors to pay off state debt, it seems inevitable that those same investors would look for new investments with that money, be that in stocks, the commodities markets or some other form. Or am I misunderstanding something about your argument or the way government debt works?

[Prof. Oblivion]

The budget deficit is like a bank account the government has at the Fed that has a negative balance. In theory, the US Treasury could mint a $1T platinum coin and deposit it at the Fed account to have the deficit removed. The coin would then be held in a vault at the Fed indefinitely and as an asset on the Fed balance sheet. The deficit is gone and the money never enters the economy. Because of this, the money supply does not increase and there is no inflation.

Here is a better interpretation of how this could be done at essentially zero cost:
http://www.correntewire.com/end_the_austerity_war_against_the_people_mint_the_ platinum_coin

The reason this is not done is not economic, but political. The creation of such a coin by the Treasury would strip the Fed of its monetary power, essentially rendering it useless. By doing so, the government would be taking over monetary policy, which is a separation that will not be reconciled any time soon.

I realized that I didn't answer your question directly. The purchasing of privately held public debt is known as Quantitative Easing, however this is not inflationary because of the fact that banks can't do anything with this money as this would be reserve balances which can't be used for lending. Reserve balances are only used in the fed funds market, which is set by the Fed anyways. QE, then, is not inflationary at all but simply an asset swap between the Fed and banks of cash and federal debt for the purpose of lowering long term interest rates.

And as for non-bank private holdings, these can already be bought or sold on the market, so such investors are never constrained in their spending by holding of public debt. There are also other considerations, such as the use of leverage on Federal debt securities in the repo market or the fact that selling of Federal Debt does not imply an increase in spending. Money doesn't spend itself.

[Old Bolshie]

However, we can't have the same analyses about the European countries which are going through a much worse crisis than the US since they don't have monetary sovereignty like the US do. Even if countries like Portugal or Greece wanted to solve the problem by printing more money they couldn't do it by themselves.

[Popular Front of Judea]

Quite true -- until if/when they leave the Euro.


However, we can't have the same analyses about the European countries which are going through a much worse crisis than the US since they don't have monetary sovereignty like the US do. Even if countries like Portugal or Greece wanted to solve the problem by printing more money they couldn't do it by themselves.

[ckaihatsu]

However, we can't have the same analyses about the European countries which are going through a much worse crisis than the US since they don't have monetary sovereignty like the US do. Even if countries like Portugal or Greece wanted to solve the problem by printing more money they couldn't do it by themselves.


Monetary *hegemony*.