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View Diary: Guess Who’s America’s Largest Creditor (Hint: It’s NOT China) (160 comments)

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  •  America doesn't have something like a household (3+ / 0-)
    Recommended by:
    trkingmomoe, muddy boots, ozsea1


    Households are currency   USERS, so must earn dollars and balance a check book.

    The fed gov is a monetarily sovereign currency   ISSUER, it doesn't need to earn dollars, as it creates them out of thin air.

    It's supposed to balance the 3 financial sectors:  Public, Domestic Private and Foreign Trade, which is in deficit:

    Public Sector -1  =  (Domestic + 1/2) - (Foreign Trade + 1/2)

    The fed gov is like the card dealer, issuing cards to players so they can play a game.

    Dealer -1  =  Players +1

    Or like the bowling issuing points.  We never owe the bowling alley the points it issues so we can play the game.

    Dollars are an IOU from the fed gov to you.

    It owes you a tax credit.  

    Thus, it must issue more tax credits than it issues tax liabilities.


    Public Sector $0  =  Private Sector $0

    The total deficit ("debt") is merely accounting marks keeping count of how many dollars are in the non-government sector.

    •  So what is the money in offshore accounts? (1+ / 0-)
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      I understand corporations are sitting on a boat load of cash that would be taxed if they spent it in the US, and there are trillions of dollars involved.

      Is that private money, foreign trade, or no-mans land?

      And how much of that money is out there?

      And isn't that money at the mercy of the IRS rules on taxation?

      •  It is foreign trade stuck in limbo. More (0+ / 0-)

        specifically, it is hoarding, likely for purposes of market manipulation or tax dodging by some means when the money re-enters the US. If it's all active in those countries it is foreign investment. None of that by itself invalidates katiec's argument that I can see.

        That said, I don't understand the bit about "tax credits" and "tax liabilities". Taxation is an alternative to the direct use of force or reliance on whim to acquire the resources necessary for providing services not otherwise available (such as a value-stable currency). As far as I can make out, if there were such a thing as a "tax credit" (excluding the meaning "refund due to error or exceptional circumstances") it would be the provision of those services.

    •  That doesn't quite work. They money issued by the (0+ / 0-)

      US govt is backed by real assets. Not to give it value, but to protect the value. The points at a bowling alley are maintained by the scoring computers (or by the players, typically by consensus or by a consensually determined method, and by precedent). Similarly in a card game. The US govt cannot arbitrarily issue currency, it only has a wide range of discretion in doing so.

      The discrepancy between assets held and the value of the currency issued should not sensibly be called the debt, though. It should be called the stability sufficiency ratio, or something of that kind. Altering it is consequential, both forcing it to be too small (thus making currency regulation impossible and increasing instability) or too large (thus preventing further issuance to deal with fluctuations).

      It is a form of government power, and as such may be wielded for good or ill. The large debts Reps run up is not just because Republicans are irresponsible (though they are as individual representatives) but that they (including their owners) are keen to exert as much power as possible during their term to achieve their objectives, and to decrease the power of the inevitable incoming administration.

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