Letter to the Editor: The National Debt?

The United States’ debt concerns people; they look aghast at the numbers — trillions. That is a lot of money you say and it is. How do we pay that debt? It will bankrupt the entire citizenry of the country you say and it will not.

The United States dollar is the planet’s currency. There are very few places on earth that you can go and not use a dollar bill to pay for something. This is quite a feat and one that works to our benefit in many ways. Have you heard of the term “Eurodollar?” Look it up sometime. It constitutes a vast number of dollars existing outside the boundaries of this country that are used by other countries to trade with each other, such as in oil. Dollars are everywhere and lots of them.

If we were to pay off our debt, foreign and internal, the earth would be awash with trillions of new dollars instantly. And I say instantly because what we forget, especially those of us who worry the most, is that the United States makes its own money. The debt both foreign and internal could be paid in minutes with computer key strokes; money, after all, is nothing but electronic blips. Think of credit or debit card purchases. Or you had $50,000 in government bonds and suddenly you don’t have any bonds, you have an electronic deposit in your account of $50,000. There would be no national debt but a whopping amount of new money. It is expected that the amount of money that would be created and floated would cause tremendous inflation. Money will be there to spend and lots of it and spent it will be.

Just think of all the interest that the government is paying out annually. That is money that is added to the purchasing power of the economy along with the money it borrows which is immediately spent. What you may or may not realize is that other countries hold a lot of our debt; when an individual, corporation, mutual fund, hedge fund, foreign country buys U.S. treasury notes or bonds, they are buying our debt. China holds a lot of U.S. debt. They buy our debt because it is a safe investment; when everything else is going into the tank, you can always buy treasuries.

These hysterical comments about our national debt are simply that — hysteria. All countries have debt; unfortunately very few have the ability to pay their debt that we do. We have thousands of economists graduating every year from our universities and tens of thousands of business graduates; The national debt is not a secret; anyone with slightest background in either economics or business understands that debt, per se, is not something to be hysterical about; it is useful.

The money that our government borrows is used and spread throughout the country; and, as I said above, that money is added to our economy: it in many ways controls the supply of money as well. Not only does the government of the United States create our money (much of it); your local bank when it loans you a thousand dollars has created a thousand dollars that did not exist before it loaned you the money. Along with the government, the more money loaned by banks, the more money there is to spend on stuff you don’t need. Money is being created constantly. To be fair though, if you make a payment back to the bank on the money it loaned you, you are in fact decreasing the money supply, so we can only hope you had a good time with it when you had it. The effect is just the opposite with Uncle Sam, for every treasury note or bond he redeems, dollars are available for use in the economy that were not there before the redemption and Uncle Sam’s balance sheets have improved.

So there you have it folks, the national debt.

Richard E. H. Phelps II

Mingo