How Congress Could Fix Its Budget Woes, Permanently

[BridgeTheGap]

As Congress struggles through one budget crisis after another, it is becoming increasingly evident that austerity doesn't work. We cannot possibly pay off a $16 trillion debt by tightening our belts, slashing public services, and raising taxes. Historically, when the deficit has been reduced, the money supply has been reduced along with it, throwing the economy into recession. After a thorough analysis of statistics from dozens of countries forced to apply austerity plans by the World Bank and IMF, former World Bank chief economist Joseph Stiglitz called austerity plans a "suicide pact."

Congress already has in its hands the power to solve the nation's budget challenges - today and permanently. But it has been artificially constrained from using that power by misguided economic dogma, dogma generated by the interests it serves. We have bought into the idea that there is not enough money to feed and house our population, rebuild our roads and bridges, or fund our most important programs - that there is no alternative but to slash budgets and deficits if we are to survive. We have a mountain of critical work to do, improving our schools, rebuilding our infrastructure, pursuing our research goals, and so forth. And with millions of unemployed and underemployed, the people are there to do it. What we don't have, we are told, is just the money to bring workers and resources together.

But we do have it. Or we could.

Money today is simply a legal agreement between parties. Nothing backs it but "the full faith and credit of the United States." The United States could issue its credit directly to fund its own budget, just as our forebears did in the American colonies and as Abraham Lincoln did in the Civil War.

http://readersupportednews.org/opinion2/279-82/16020-how-congress-could-fix-its-budget-woes-permanently

[yaakov.eban]

1. One public Centralized bank with subsidiaries

This article was surprisingly good and to the point. What is needed not only in the USA but across the world is the recognition that banking institutions must be converted into public utilities. The idea that central banks allow for the creation of "magic money" simply because of fractional reserve banking is completely false. It is the existence of private banks within a fractional reserve system that allow for the artificial expansion of the money supply.

[Mattias]

2. The problem lies

in the full faith and credit. Fiat money is soley based on the faith system as no tangible asset is atached to it, this do not imply that a gold standard would be better as gold is in my opinion based as much on faith as anyting else.

A policy to print or create money enough to repay the entire debt could be passed into law, as the US have the entire debt in dollar this would give the treasury ability to repay all debt. The next step would mean that todays dollar supply would reach markets + 16 000 billions. Whith that amount extra and no increase in demand for US assets the increase in dollar would reach the US domestic market in some way. With multiplier effects this could mean more than dubble the amount of dollars in circulation that would give even without confidence effects a highly increased pricing preassure upwards on everything dollar domesticated. Likely another real estate boom and stockmarket boom in combination, with demand for US products for exports increasing exponentially.

Taking into account that the world would react the faith in the dollar would likely at minimum be reduced as a global standard meaning an increased supply beeing followed by a decreased demand.

A not unlikely scenario would be a turn to other currencies or baskets thereof. In the end causing the purchasing power of wageearners in the US plumet or more likely a wave of inflationary wageincreases. In the end when the dust settle making the rich with assetholdings richer and the rest with wageearnings as primary income alot poorer.

To pay debt for any country with the printing press is much the same as defaulting, with the diffrence that it might take a little longer. To cure a hangover by shooting yourself isnt a longterm solution. Better to look at actual problems as income destribution and balance the economy by taxing the ones that have made the most from living of the poor last 30 years.

Keeping the full faith in the dollar full faith is more valuable to the destitute than the welloff in the end.