If you step back, as governments have the power to destroy debt just as easily as they create it, all while retaining the "assets" of the country, its easy to see that this is a moot point ( and I don't even think a correct one). You talk about debt creation as if equity matters, but then you say governments don't have equity to speak. There's a contradiction here. If debts are denominated in an internal currency, ultimately the country can manipulate its balance sheet as it prefers.
I'm talking about real tangible assets, not monetary assets. The Federal reserve could come out tommorow and make the balance sheet have $1 on each side (effectively dividing the value of every outstanding US $ by 2 billion), and it wouldn't mean the productive assets of the country were affected (although it might certainly have effects the following day just due to wealth redistribution effects).
Interesting take on this: http://www.nber.org/papers/w10291 The idea that since governments have a claim to tax revenues, which are derived of course from equity value (which itself is derived from long term dividend streams/yields), governments are inherent equity holders. And arguably, the US public collectively represents the government equity.
Really, so the Fed could zero out its debt and not affect privately held Assets?? So now we get to argue about what an asset is or what debt is?? Great.
Give me an example where in an economic transaction that an net asset can be created without an equal change in debt.
<b>Anaconda's Comment: Being that our tax paying ability is essentially collateral for the whole system, I think we have a right to know what exactly is going on.</b> No. The 'collateral' for the whole system is merely <b>faith</b> that those we elect won't run it into the ground (and will sufficiently maintain its military hegemony). Taxes and monetary units, being completely malleable depending on who is elected, have much less to do with this. The meaningfulness of a Fed audit is a canard for simpletons that fail to understand basic concepts of political economy, and who instead think the collective asset/value of a country (and its citizens) is what is on its malleable accounting books. They don't believe in malleability, but it is in fact precisely the reason a Fed audit would be unproductive.
Not true. All debt service relies on a revenue stream. Tax revenues are the revenue stream. The tax revenue stream is the collateral for the system.