The Federal Debt? Easy :) Get the Federal Reserve to buy it in over time.

[denem]

Buy it and retire it.

This is the biggest TABOO in economics. Any, any "printing money" will give us the Weimar Republic. Even say .0001% of the Federal Debt. Why?

Because "printing money" is something Private Banks DEMAND they keep to themselves. Want to buy a home? The bank puts $300,000 in your account- money they created, they "printed". You get money they conjured out of thin air, they get an asset, $300,000 on the books. And the banking system gets back the $300,000 paid in by the seller.

This is basic economics. There are some capital requirements that limit the process from going on ad infinitum, but the link to deposits is tenuous. Almost all $300,000 comes back to them pronto - at least in a growing economy. and multiplies as the house seller goes for a bigger loan. Add derivatives and the multiplier is turbo charged.

That's their business, 'printing money' to sell as debt. And they guard it jealously.

The one rule above all is the Central Bank does not 'print money'. ANY mention of it and the specter of Weimar is shouted from the rooftops - the currency is worthless paper, the exchange rate goes into free fall, the economy goes to hell.

There's a reason for this. Unlike private banks, there really is no limit on a Government's capacity to transfer $1 with lots of zeros after it i around the trading screens. Mainline some cash and there's no limit the addiction. Zimbabwe is a good example.

In recent times some Central Banks HAVE been pushing cash under the label 'quantitive easing' on the basis that private banks have been squeezing credit: NOT creating loans, not 'printing the money' that is the 'oil of wheels of commerce'. Small scale, but hugely significant on the foreign exchange markets. A crack in the dam. When the Federal Reserve began 'quantitative easing' a while ago, the Chinese were over in Washington in a flash. The last thing they wanted was to have to pull the plug on their $US exchange rate racket.

The point is, a private bank can create, "print" $10 million anytime without anyone blinking an eyelid. They are betting that the loan will be repaid. It has should have some basis in reality - but often does not.

The law of Central Bank is they MUST not do this. Never mind if it's Japan's lost decade of deflation, or their current foreign exchange operations, it's VERBOTEN.

In good times and in bad, whether it's fear of inflation, or whatever, the cry of Private Banks is 'Remember Weimar". We print money not you.

OK. Here's some crackpot economics. The Federal Reserves begins a long term program to reduce the Federal Debt. Buying and canceling 2% per year .
That's a bet on the economy of America, that the real economy will grown in concert with the credit created. That's what private bank do. Inflationary - well that depends on private bank lending, but it probably translates into 2% inflation off the bat. Private lenders with fixed rates won't like it. Borrowers will. Private Banks and Hedge Funds will initially go schizo.

It's one way to begin to address the National Debt, without cutting spending to those who can least afford it.

Yes I'm a crackpot. So? Tell me why not.

How a touch of inflation could boost the economy.
http://www.washingtonpost.com/wp-dyn/content/article/2010/09/17/AR2010091707049.html

[Skink]

1. to easy next.

Obama has interests.

[LAGC]

2. I wonder what would happen if the U.S. just stopped making interest payments on the debt?

Would China try to invade us to try to get its investment back?

Everyone holding U.S. Treasury bonds might find themselves out of luck, but really, what's the worst that could happen?

Of course, the U.S. would have to adhere to a strictly balanced budget from there on out, as no one would want to buy up any future debt once the U.S. had shown its willingness to default. But I honestly wonder how much longer foreign countries are going to keep buying our debt, surely they see the writing on the wall?

[denem]

4. A sovereign default is a different matter all together.

It basically says we are broke.

[Massacure]

9. Only 20% of the debt is financed by foreign entities.

The government would screw a lot of Americans if it refused to pay up. The Social Security trust fund would be the biggest loser.

[Hannah Bell]

10. the biggest chunk of us debt is owed to americans.

[denem]

14. No doubt Jobless americans

;)

[Holly_Hobby]

3. I remember reading about an economist who suggested

that Congress mint enough coin to pay off the debt. Congress doesn't have the power to print paper money, but does have the power to mint coin. She said it wouldn't raise inflation and it was the perfect answer to the debt. Let me see if I can find it...

[Holly_Hobby]

6. Here's the post about Congress minting coin:

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=389&topic_id=5201383#5207637

[girl gone mad]

5. Inflation is easy to combat.

Raise taxes to increase demand for dollars.

But we are a long way from needing to concern ourselves with inflation.

[denem]

7. REDUCING inflation ain't easy on people at all.

Tolerating a higher level of inflation is a different matter.

[whyverne]

8. You crazy, like me. I keep saying if you can make money out

of nothing, why can't you make it go back to nothing? Yeah, throw the debt away, a little at a time.
Actually I think that's what they're doing but they don't want anyone to know about it. That might shake people's confidence in the value of money, which is more tenuous than most want to admit.

[Hannah Bell]

11. it was my understanding they are already more or less doing that for the bankster bailout.

but only for the banksters...

[denem]

13. The bailout was classic debt financing.

The Private Banks got a $750 billion, the government added $750 million to its own debt. It was not the Fed issuing the banks $750 billion in new money.

[RandomThoughts]

12. Printing money is also a tax on the rich.

Any that are sitting on cash would lose in that position, spurring them to spend also.

[denem]

15. NB: Private banks 'print money' - all the time.

The fact that they are not 'printing' - making loans to commerce is part of the reason the economy is stalled. Spurring them to lend is more important.

[RandomThoughts]

17. They print money to give to themselves to loan and make money off of.

By creating credit that is not backed by anything.

If money was created then used to put money in average households that would be different.


Why should private banks be allowed to print the money of a nation?

[galileoreloaded]

16. Actually, there no longer are capital requirements either......pretty much a big Ponzi. n/t