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

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  •  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-)
      Recommended by:

      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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