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View Diary: Modern Monetary Theory vs the Fiscal Cliff (65 comments)

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  •  Yup, I agree with all of that but I think (1+ / 0-)
    Recommended by:

    my post was truly discussing deficit and not debt. No question that debt exists but with our particular fiat currency there is also no question that we can meet all of our debt obligations - hence the bond rate.

    "When in doubt, do the brave thing." - Jan Smuts

    by bunnygirl60 on Sun Nov 25, 2012 at 01:05:28 PM PST

    [ Parent ]

    •  We certainly can (0+ / 0-)

      And even if we run into a debt ceiling due to an obstreporous Congress, all we need to do is this!

    •  Isn't "deficit" the yearly shortfall, and (0+ / 0-)

      "debt" the cumulative (total) amount?

      -- We are just regular people informed on issues

      by mike101 on Sun Nov 25, 2012 at 05:01:04 PM PST

      [ Parent ]

      •  Yes (1+ / 0-)
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        The National Debt is the accumulation of deficits.

        It also happens to equal exactly, the accumulated savings (net financial assets) of the private and foreign sectors.

      •  Not quite (3+ / 0-)
        Recommended by:
        psyched, semiot, mike101

        The deficit is the gap between Federal Spending and Tax Revenues. The debt is the cumulative total of outstanding debt instruments issued since 1835 when we last paid off all our debt instruments. At various times since then we have "paid for" deficit spending by issuing money without debt issuance. We did that during the Civil War ("Lincoln's Greenbacks"), and if I recall we did it to some degree in WWII.

        There is a law on the books that allows the Executive to mint platinum coins with face values having no specified relationship to the value of the metal in the coins. For example, a $60 Trillion face value one oz. platinum could be issued by the Mint and deposited at the Fed, whereupon the Fed would be forced to credit the Mint's account with the $60 T. Assuming that happened and most of the amount was then transferred to the Treasury General Account, then the Treasury would be able to pay back all outstanding debt as it comes due and deficit spend rather liberally for 15 -20 years without issuing new debt. So, there's another example where the accumulated deficit would not equal the debt.

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