"There is a difference between money and debt."
Lately there have been many articles about debt and money, and if there is a difference between the two, its very slight in that its a temporary creation of money. Temporary because its supposed to be paid back.
You have seen charts of total debt (not just governmental) and if you look at the trend, it has almost never gone down and lately it has been exploding. If debt never goes down, the money stays in circulation as it isn't returned back to the lender who created it out of thin air. Besides, they don't want it back, they want the interest payments. The economy exists because of debt.
Even what you call money is created out of debt. The government doesn't have any "money", yet can issue treasury bonds which the FED buys by magically creating "money" which it gives to the government to spend. The new money is put on the books as government debt. If there is a difference between debt and money, you would need a magnifying glass to see it. Its for this reason some people argue for real money which can't be printed into existence, like gold.
Is there a difference between money created by government debt and money created by other debt? Both result in money expansion and inflation.
I agree we are in a severe deflationary period. You have won that debate long ago. The solution to deflation is inflation, which our masters are trying to accomplish using every trick in the book. Zero interest rates to get people to take on even more debt, get money flowing into the economy, delaying payments so that default isn't declared, and outright money printing and trillions of dollars in stimulus. I know your argument is that all of that will not work, and it will be interesting to see what transpires in the future.
Enjoy reading this thread and your blog Mish. |
