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Who: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2016
Port: Lake Pleasant, AZ
09 April 2018 | Pago Pago, American Samoa
An Informed Atheist Re-Addresses Christianity
10 March 2018 | Pago Pago, American Samoa
A Progressive Reform Program for America
10 March 2018 | Pago Pago, American Samoa
Supply Side and Libertarians Are Wrong and Not Supported by the Data
10 March 2018 | Pago Pago, American Samoa
How Income Inequality Injures People and the Economy
22 August 2017 | Pago Pago, American Samoa
A Democratic Reform Program for America
22 August 2017 | Pago Pago, American Samoa
The Supply Side Libertarians Are Wrong and Not Supported by the Data
22 August 2017 | Pago Pago, American Samoa
The Rise of Economic Ignorance
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part VI)
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part V)
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part IV)
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part III)
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part II)
22 August 2017 | Pago Pago, American Samoa
The Rise of Corporate Dominance and the Rise of Income Inequality (Part I)
22 August 2017 | Pago Pago, American Samoa
Racial Hatred Is Confused
22 August 2017 | Pago Pago, American Samoa
What To Do About North Korea
22 August 2017 | Pago Pago, American Samoa
On Neoliberalism
22 August 2017 | Pago Pago, American Samoa
Ban Hate Marches and Assemblies
22 August 2017 | Pago Pago, American Samoa
On Miss Piggy and Mr. Pork
22 August 2017 | Pago Pago, American Samoa
The Demise of the Democratic Party
09 August 2017 | Pago Pago, American Samoa
On Elitism

On How the Federal Debt is Misunderstood

28 January 2013 | Pago Pago, American Samoa
Kimball Corson
On How the Federal Debt is Misunderstood

The federal debt is not like the debt of a household in several very key regards. First, it can be rolled over without limitation. Second, the government can manage monetary policy to reduce the interest rate it pays to service that debt. Third, the government can print as much money as it chooses subject only to the limitation of inflation which is not a problem in bad times or when there is a lot of idle plant, equipment and employees around. And it can use that printed money anyway it sees fit, including paying public debt.

Households cannot to any of those things. So government debt is not like household debt. The differences matter hugely. Here is why.

This nonsense that we are mortgaging our children's future by having high federal debt again assumes the federal government is like a household and has to pay its debts back. It doesn't. The US debt is rarely paid off in quantity. It is sometimes reduced to increase the money supply or control interest rates by Fed purchases of it. Typically, it is just rolled over. One note or bill is paid off and another is sold. There is still Civil War debt and WWII debt being rolled over. The idea we have to pay it back is mistaken. We could pay it all off tomorrow with printed money if we chose, but there is no need.

Federal debt is measured against GDP. That is how we gauge whether it is high or low. Usually national income grows relative to debt and the debt to GDP ratio drops and people who mistakenly believe in the household analogy calm down.

Presently, interest rates are so low on some of the government's debt instruments that, because of slight inflation, people are paying our country to borrow from them. Why? Because the dollar is relatively stable and US debt instruments are a good, stable and sound investment. A good place to safely park money. Millions world wide do it in a world were too little is stable.

The government is not limited with its debt like a household. It can even print money to pay the interest on the debt if necessary. It does have to roll it over, that is issue new debt to pay for old debt. It cannot default, both legally and in terms of the consequences. But our government does not default on either repayment or interest so there is no problem regarding borrowers. In fact, they clamor to buy US debt.

It should be mentioned, however, that there is a moderate tendency for countries to become financially less stable as their debt to GDP ratios become much higher. It CAN make borrowers worry, especially if they believe in the false household analogy. It can cause them to demand higher interest rates on the debt to be willing to buy it. But as long as borrowers do not become disturbed, there is NO PROBLEM with high federal debt. Debt itself is surprisingly neutral. But if debt repayment or interest is threaten, as when borrowers suspect or know about serious government financial problems that might effect them, then serious financial instability can and often does develop. The problem is usually related financial problems of the government which seem to threaten. Not the debt to GDP ratio itself.

Too many people, especially conservatives and Republicans, don't understand money, banking and debt and so they think the federal government is simply like a household, although a big one. That is just nonsense and leads to all sorts of mistaken conclusions and wrong public policies.
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Vessel Name: Altaira
Vessel Make/Model: A Fair Weather Mariner 39 is a fast (PHRF 132), heavily ballasted (43%), high-aspect (6:1), stiff, comfortable, offshore performance cruiser by Bob Perry that goes to wind well (30 deg w/ good headway) and is also good up and down the Beaufort scale.
Hailing Port: Lake Pleasant, AZ
Crew: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2016
About:
Kimball Corson: I am a 75 year old solo sailor, by choice. However, I did take on a personable, but high maintenance female kitten, now a full grown cat, named KiKiPoo when she is sweet, or KatKatPo after she has just killed something like a bird or bat. [...]
Extra:
Although I was a lawyer and practiced law with good success for thirty years, creating significant new law, I never really believed in the law, the politics of law or in the over reaching self-interest of most lawyers I met. Too much exposure to Nietzsche and other good and seriously thoughtful [...]
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Who: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2016
Port: Lake Pleasant, AZ