There have been many regrettable moments in the 2016 Presidential Election. At a time when we could be having a national conversation about how to create a sustainable and broadly shared prosperity for ourselves and future generations, we seem instead to be subjected to something closer to a reality TV show.
We should be debating some very important questions this election. There is a growing recognition that our political and economic systems are not serving the general public in the way they should, but rather have become tilted more and more toward serving a few powerful interests. Our current version of capitalism is not healthy. It is not sustaining good communities, promoting a vibrant and inclusive economy, or stewarding and regenerating our life-supporting ecosystems. We have been down this road before, and we have, and can again, change course. Our best days are ahead of us if we choose wisely which way to turn.
It’s no secret that our media plays an immensely influential role in shaping public opinion. In nationally televised debates and the social media chorus that follows, the topics raised and questions asked make a difference. While I have been disappointed with what topics have not been discussed, it is the issue nobody questions that troubles me most.
Is the worst kind of debate question the one we don’t even realize is a false premise, and which drains our nation of hope?
Here is moderator Elaine Quijano leading off a discussion on the economy with Vice Presidential candidates, Senator Tim Kaine (D-VA) and Governor Mike Pence (R-IN):
“According to the non-partisan Committee for a Responsible Federal Budget, neither of your economic plans will reduce the growing nineteen trillion dollar gross national debt. In fact, your plans would add even more to it. Both of you were governors who balanced state budgets. Are you concerned that adding more to the debt could be disastrous for the country?”
First, did anyone spot the basic flaw in the comparison being drawn? I have written about this in past articles. As the currency issuer, the federal government simply cannot operate like Virginia or Indiana, both of which use the national currency. States must tax or borrow in order to spend. The US federal government has a different responsibility: to maintain a right balance of its currency in the economy as a whole, taking into account foreign trade balances and saving desires. It would simply be disastrous, as history has shown, to seek to balance federal taxes and spending. It’s a false comparison.
However, there is an even bigger problem here.
Notice that it is simply assumed that $19 trillion in US government bonds outstanding is a bad thing. In fact, the question implies that if non-government entities were to hold more of our currency in the form of such bonds, it could be “disastrous for our country.”
Are current savings of US Dollars bad? Would more savings of US Dollars be disastrous? What if we collectively held that $19 trillion in cash or checking account deposits instead of Treasury bonds? In that case we wouldn’t even call it our “national debt,” but it would still exist just the same. Is there a real difference? Of course not. It’s fiction.
America does not have a national debt problem.
There is no national debt crisis in the US. Not now. Not next year. Not in 100 years. We didn’t have a debt crisis when bonds rose $200 billion during World War II, nor when they reached $1 trillion, nor $10 trillion. We won’t have a debt crisis when we reach $20 trillion or $100 trillion. What matters, and what always matters, is our nation’s access to real resources and how they are shared across our population.
What matters is the living standards of our poorest citizens, not the numbers recorded in accounts at the Central Bank.
Unlike Greece, which is a currency user, the US cannot become bankrupt. We cannot become insolvent. We cannot be threatened by bond vigilantes – just ask those who tried to bet against the solvency of Japan, another sovereign currency-issuing nation. Our nation can always keep any financial promise it makes using its own currency. Always. Including making any interest payments to bondholders, funding our highways, paying the salaries of teachers and civil servants, caring for veterans, and keeping promises to provide a living income to our seniors.
However, there is a real debt we can leave to our children, and it’s not measured in US Dollars.
We can leave a very real deficit of those things that will make our shared future better. We can leave current and future generations with tremendous burdens that are much harder to solve that any financial woes. A deficit of education, a debt of poor health and inadequate care for the sick, a shortage of fertile soils and clean water supplies, a second class or crumbling infrastructure, a decade of joblessness and lost earning potential and a lack of scientific and medical advancement from underfunding research and development. The list can go on and on.
It’s time we expose this so-called “national debt burden” for the impoverishing fraud that it is. We sacrifice a large portion of our nation’s productive potential and our children’s future well-being to it every day, but it’s never satisfied. We have a sovereign currency that can and should be used to unleash the full potential of our nation and our people but we’ve locked it up.
This is a bipartisan problem.
As you can see from this video montage, both our major political parties are responsible for pushing this fraudulent mindset. Both leading presidential candidates seek to outdo one another as to who will sacrifice the most to the mythical national debt god:
“Trump’s tax plan would blow up the debt by five trillion dollars,” said Democratic Presidential Nominee, Secretary Hillary Clinton.
“Our country is losing so much … in terms of paying off our debt – you can’t do what you’re [Clinton] looking to do with twenty trillion in debt. The Obama administration from the time they’re come in has … over 230 years of debt and he’s topped it – he’s doubled it in the course of almost eight years,” said Republican Presidential Nominee, Donald Trump.
Why have we become so afraid of investing in our nation and people to the fullest?
From national debt to national savings.
Let me shine the light in the closet so we can see that the phantom is just a shadow of our own fears. Or to use a Kansas metaphor, let’s pull back the curtain on the Wizard of Oz and see what is really going on.
I’ll try to explain this phenomenon in the simplest terms I know. Here is what we are so afraid of*:
- Whenever our federal government spends or makes payments it does so by creating new currency: US Dollars. These days this is done mostly via authorizing a credit to the recipient’s bank account.
- When we pay our federal taxes, we return some, not all, of those US Dollars back to the issuer, which removes them from the economy. Again, this is done usually via debiting a bank account.
- All US Dollars that remain in the economy are saved, for the most part, in bank accounts of households, businesses, pension funds or foreign entities.
- For those saving our currency, our government offers interest-earning accounts called Treasury Bonds, Treasury Bills or government securities. Buying a government bond is similar to moving money from your checking account to a bank CD to earn interest.
Naturally, over the years as our population, economy and trade has grown, the total number of US Dollars our government has created and not yet taxed has grown to almost $20 trillion. This number will keep growing. The number represents the amount of US currency being saved around the world. It has nothing to do with whether the US government is running out of money, and it’s nothing to fear. We could even call it our “global currency savings balance” if that makes people feel better.
America’s best days lie ahead.
We have so much potential and so much prosperity just waiting for us to take action. We can do so much to improve the lives of not just our own citizens, but people all over the world with the good we can do together. We have the tools to unlock the creativity, innovation, compassion, and vision of our people. It’s time we lift the artificial restraints of a broken economic paradigm from our shoulders and learn to lead again.
* There are other technical details related to the way the Fed manages interest rates that I am leaving out for simplicity and length of this article. You can learn more about the details here and here.
Geoff Coventry is a founding member and owner of Tradewind Energy, Inc. Prior to this position, Geoff was a co-founder and vice president of NetSales, Inc. Additional postings by Geoff can be found on his blog “It’s The People’s Money.”