The don't need to eliminate the debt, just keep it within a certain ratio of debt to GDP. The way the US system is set up, you could not get rid of the debt because it's the asset that the fed backs its currency with. No debt, nothing the issue federal reserve notes against. The basic design of the system requires and ever increasing money supply and ever increasing debt. I'm not saying they're keeping a good debt to GDP ratio right now, but it's worth understanding that they don't need to eliminate it, just control it's ratio to GDP.
I don't disagree with your explanation of the system, and yes, this is how it works, but I also think that it won't take much to skew the thinking in a completely different direction. The only reason why debt is seen as an asset that backs the currency is because of the power that the US exhibits onto the world. I think its highly likely that going forward, this breaks down. We already see a steady decline of foreign nations buying US debt. Japan and China own less than they did a decade ago. At the current rate, it will of course take decades to go zero, but if Trump keeps putting tarrifs on everyone, he gives more reasons to not own US debt. The deal is that China makes shit for the US, and in return, China buys US debt with the dollars that they accumulate. If Trump makes it very difficult for China to sell shit to the US, then China can dump US treasuries even faster. If the rest of the world stops wanting to play the game, the game being that US debt is seen as an asset, then this debt can very quickly fails to be an asset. If the only holders of US debt that are left are US corporations, citizens, and pension plans, the game is up. If the US has to print money just to buy US debt, its yet another death blow. We all know that debt being thought of as an asset is a complete joke. There is a new game in town that is more liquid, more transparent, and completely impervious to control by any one party. This asset is what will underpin the global financial system going forward.
Fair points but.... Fait currency has been around for a long time. Governments love it and not just the US government. If the US currency disappeared there would still be many others. There is more to it that just US China trade. It surprises me just how much people underestimate that ability of governments to get really nasty. It used to be punishable by death to just ask the price of something in other than the official currency of France. In the US we had a president (Jackson) who ran on eliminating the central bank and the banks caused a nationwide recession to fight against him. Of course debt is an asset. People have been loaning money for THOUSANDS of years. They haven't been doing that because being paid interest is dumb. The silly part of the US system is the government exchanging their debt instruments for currency the fed invents out of thin air. What a naive statement. Put yourself in the mindset of the people who came up with Operation Northwoods and ask yourself what you could do? Hell, I'll get you started... Pass a law that mandates a fixed exchange rate between Bitcoin and the USD and requires anyone to accept USD in lieu of Bitcoin. Bitcoin clearing requires that the servers publicly advertise themselves. Identity their locations and operators. Use your imagination here. Approaches could include: Fines/confiscation of assets Arrest Harassment, blackmail, kidnapping Bogus criminal and civil cases Murder/terrorism The weak point is not the crypto, it's the fact that the keys and networks are controlled by flesh and blood human beings that live on this planet.
Ummm maybe because a rate of inflation of 0% doesn't justify them to print yet more money ..... uhh I mean cut rates even further. BTW The Fed now considers "an average of 2% over the long run" as its target.
Let's stop saying "the Fed prints", because the Fed only prints in the trivial sense in service to the Congress. It's really the Congress that prints! The Fed prints in the same sense that your home computer prints. (The "printing" really occurs when the Congress decides how much to tax and how much to spend. When the Fed covers a Treasury overdraft, printing occurs only in a trivial, operational sense. But again, think of your home computer's printer. Who is really doing the printing here? Is it your printer, or is it you?
If you insist but how about a response to your "ask" why 2% and not 0% that I replied about in the first place.
Governments love it because its a form of control. But governments are supposed to work for the people. If enough people know that fiat is just a form of control, and if you find out that you are the 99% that is being controlled vs. the 1% who benefits from this control, then it would make sense the government, which works for the people, should abolish a form of currency that is designed to control. I really do think that we are at a point in history, given the nature of the internet, where hundreds of years of abuse are coming out. I think many people are learning in one form or another that things are changing. The information is out there, and most people have access to it. The old system will collapse. Think of how much of a hold the church had on the state hundreds of years ago. People were burned for suggesting the earth wasn't at the centre of the universe. Bitcoiners now proudly talk about the separation of money from the state. This will have as profound of an influence on the world as did the scientific method once it was allowed to flourish.
Even starting with the premise that the government works for "the people", you need to consider that many, many people actually want there to be control. They don't want loved ones getting kidnapped and being held for ransom, murder for hire, etc. Anonymous, instant, irrevocable, international payments are useful for buying a kidney from some black market, but they're just not needed to pay a guy to cut your grass. There's a legitimate debate to be had regarding "How much control is the right amount?" It's like how libertarians think we should just make everything legal and they just don't see that normal people won't tolerate a heroin dealer on their street. Because they're delusional. They might choose to ignore laws that say you can't send money to Iran, or that you have to pay taxes but that doesn't mean those laws don't exist. They think that just because someone can't freeze their assets with a mouse click they immune from control. They completely ignore the fact that the government can still do it the old fashioned way, by kicking down your door and taking your stuff.
Oh that. I guess you wanted me to comment on your remark: "Ummm maybe because a rate of inflation of 0% doesn't justify them to print yet more money ..... uhh I mean cut rates even further." Well, isn't your remark invalidated by the Fed not having anything to do with how much new outside money gets printed? That's why I didn't comment on your remark. The Fed does control rates, but that affects demand for "inside money," which is temporary money. When you refer to printing, you are referring to "outside money", which is permanent until it is taxed out of the economy. As I mentioned, I don't know why the Fed choose 2%. I was just guessing that it was because 2% is stimulative, since it results, on average, in real rates being 2% lower than nominal rates. That's purely a guess on my part however. And although I am virtually certain the rationale for choosing 2% versus 0% must exist somewhere in Fed writings, I have never personally found it. I have read, and probably even repeated, that the fed chose a target rate above zero because the Fed is so afraid of even a little deflation that a cushion was wanted. But is this true? The Fed's control of inflation via influencing the demand for "inside money" (credit money) via control of interest rates is only secondary. The primary control rests with the private sector since we are the one's who decide whether to borrow or not, i.e., it's our hands, not the Fed's, that are on the primary control for demand. Remember, inside money in the economy always greatly exceeds outside money. It is outside money that the Congress creates (prints). Recall Bernanke's frustration during the early phase of recovery from the "Great Recession" when banks were sitting on mountains of excess reserves they could potentially lend at historically low interest rates because the Fed had taken the fund's rate to near zero; yet no borrowers walked through the banks' doors. There were far too few folks who took advantage of the opportunity to borrow at extraordinarily low fixed rates to make Bernanke happy.
Governments don't work for the people. They work for the Oligarchy. Even in Russia you only hear about rich Russians dying that didn't support Putin. The ones that remain are the Government. Even in 1776, the US government only allowed one type of "citizen" to vote: rich white landowners aka the Oligarchs.