is america really going broke?, page-9

Hi,

I know almost everyone here is not going to like me explaining this, and most will simply disregard it and keep preaching rubbish, but if you want to understand how America is not actually broke by any definition please listen, i'll explain briefly and I will point you in the right direction to further your understanding.

The main point you need to understand is that America CAN NOT RUN OUT OF MONEY.
Ok, got that? Guess what, Australia CAN NOT RUN OUT OF MONEY EITHER.

But JohnAus, just look at Europe, those countries are going bankrupt, they have too much debt. -CORRECT
Now look at all America's debt, they too must be heading toward insolvency. -INCORRECT

So what's the difference, how could America possibly forever fund the growing interest on it's debt, whilst Euro countries need bailing out?

--The difference lies in the different currency systems.--

You see, European countries are currency USERS, America (Australia etc.) are currency ISSUERS.

Eurozone countries can not create their own euro's to finance their spending, they have a set amount of revenue and expenditure, if they spend more then they tax, they have to borrow from some one else.

Now i'm sure everyone has heard of the US 'printing money' right? Ever heard of eurozone countries 'printing money'?
Nope? Maybe that should raise some questions.

The US is a sovereign currency ISSUER, they create USD, when and however they like.
THEY DO NOT HAVE TO TAX IN ORDER TO SPEND.
The US is never revenue or expenditure constrained.
WHHAAATTT? THAT CAN'T BE TRUE.
It is.
So why then, does the US have so much debt? If it doesn't need to borrow money from others to spend?
When the US sells treasuries, it 'soaks up' excess banking reserves held by foreign banks (in USD) by offering them an interest bearing treasury as opposed to non interest bearing cash. It does this to soak up excess liquidity in the banking system, otherwhise cash would be virtually interest free (as there would be too much of it), they do this so the fed can maintain it's target rate.

You can think of this as a checking account offering no interest (cash reserves), and a savings account offering 5% (treasuries), now if you were China which option would you take??
How easy can you transfer funds between your cheque and savings account? Instantly right? You don't need to add more money into your bank account to get all the money in your savings account (debt) into your cheque account.
Well guess what? It's the EXACT same for America, they can pay off their debt, here I drew a picture to help you visualize

http://img94.imageshack.us/i/chinawg.jpg/

What about their huge deficit, surely that'll push them off the face of the Earth.
Well no.
Where do you think the first dollar came from?
It could ONLY come from the government first spending that money into existence. The government can not tax before there is any money to tax!
So clearley a deficit IE. Government spending more money then it taxes ADDS money to the system.

This is the beauty of being a sovereign currency issuer, when you are in recession, you deficit spend to add more money into the system, and by defintion a surplus will REMOVE money from the system.
Think about it, if the government had a 1 time 100% tax on ALL money, there would be NO money left. They would have to spend some in order for people to have some.

Eurozone countries are insolvent because when in recession they can't afford to deficit spend and add money to the economy, they have austerity cuts etc. This removes MORE money from the system.
It DOES NOT WORK, AND NEITHER I REPEAT NEITHER NEITHER NEITHER DOES THE GOLD SYSTEM.
THE EURO AND A USD BACKED BY GOLD ARE THE SAME.


So if America can just print up money not backed by anything, then why would anyone use it, it's just paper, you can't conver it to gold any more.
The answer is taxation, by FORCING citizens to pay their taxes in USD you have created demand for USD, you can't pay your taxes in Euro's!
You will then come to realize that US citizens will work for USD (to pay their taxes), and what can US citizens produce with their labour and resources?
REAL GOODS AND SERVICES

Is it kind of coming together, the wealth of a nation is what it can produce, the value of the USD is how much can be produced (bought) with it, and how much is needed to be used to buy other stuff.
So no one is going to throw away the US dollar, it might not be convertible to gold, but it sure as hell can get someone to make you a table!



Ok I've waffled on too long, it's time you all head toward one of the most respected teachers of MMT, and truly get your head around the function of money in a society.

Thanks, that took too long and I tried to cram 10 books into a post, but hopefully it was enough to get you intrigued enough to seek the truth, i'm going to bed lol. (no thumbs up for me because most people refuse to accept reality and are happy to go on talking about the imminent US bankruptcy ;) )

Adios!


http://moslereconomics.com/