{"id":388,"date":"2013-03-16T07:22:36","date_gmt":"2013-03-16T07:22:36","guid":{"rendered":"http:\/\/www.globalbuzz.net\/us\/?p=388"},"modified":"2013-03-16T11:18:46","modified_gmt":"2013-03-16T11:18:46","slug":"fake-debt-and-funny-money","status":"publish","type":"post","link":"https:\/\/www.globalbuzz.net\/us\/news\/fake-debt-and-funny-money","title":{"rendered":"Fake Debt and Funny Money"},"content":{"rendered":"<div id=\"attachment_389\" style=\"width: 550px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/www.globalbuzz.net\/us\/files\/2013\/03\/us.fed_.jpg\" target=\"_blank\"><noscript><img decoding=\"async\" aria-describedby=\"caption-attachment-389\" class=\" wp-image-389 \" title=\"US Federal Reserve\" alt=\"US Federal Reserve\" src=\"http:\/\/www.globalbuzz.net\/us\/files\/2013\/03\/us.fed_.jpg\" width=\"540\" height=\"360\" srcset=\"https:\/\/www.globalbuzz.net\/us\/files\/2013\/03\/us.fed_.jpg 600w, https:\/\/www.globalbuzz.net\/us\/files\/2013\/03\/us.fed_-300x200.jpg 300w\" sizes=\"(max-width: 540px) 100vw, 540px\"><\/noscript><img decoding=\"async\" aria-describedby=\"caption-attachment-389\" class=\" wp-image-389  lazyload\" title=\"US Federal Reserve\" alt=\"US Federal Reserve\" src=\"data:image\/svg+xml,%3Csvg%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%20viewBox%3D%220%200%20540%20360%22%3E%3C%2Fsvg%3E\" width=\"540\" height=\"360\" srcset=\"data:image\/svg+xml,%3Csvg%20xmlns%3D%22http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg%22%20viewBox%3D%220%200%20540%20360%22%3E%3C%2Fsvg%3E 540w\" sizes=\"(max-width: 540px) 100vw, 540px\" data-srcset=\"https:\/\/www.globalbuzz.net\/us\/files\/2013\/03\/us.fed_.jpg 600w, https:\/\/www.globalbuzz.net\/us\/files\/2013\/03\/us.fed_-300x200.jpg 300w\" data-src=\"http:\/\/www.globalbuzz.net\/us\/files\/2013\/03\/us.fed_.jpg\"><\/a><p id=\"caption-attachment-389\" class=\"wp-caption-text\">US Federal Reserve<\/p><\/div>\n<p>The US Federal Reserve\u2019s policy of buying debt instruments with money it\u2019s creating out of thin air \u2013 currently at the extraordinary rate of more than a trillion dollars\u2019 worth every year \u2013 is the right thing to do, because it doesn\u2019t add to the net amount of US debt outstanding, argues the famous mega-speculator George Soros. \u201cIt\u2019s about as close to a free lunch as you can get.\u201d<!--more--><\/p>\n<p>What\u2019s he talking about? Is he right?<\/p>\n<p>He is certainly correct that the growth in public debt in the US and other major nations \u2013 contrary to the obsessive interest in the subject by conservative commentators and almost all the financial media \u2013 is of no importance in itself.<\/p>\n<p>It is a free lunch for the political classes, as it provides resources for governments to continue over-spending. Supposedly, that\u2019s to stimulate economic growth. But in practice it allows them to pursue their particular concerns, such as sustaining mega-banking and vote-rich zombie businesses, promoting the global warming mania, and spreading around enough welfare to keep the lower orders politically anaesthetized.<\/p>\n<p>Public debt is a straw dog. Ordinary folk instinctively realize that too much debt is bad, because personal debt is a painful burden. It encourages them to give their reluctant support to politicians who say they want to contain the growth of public debt.<\/p>\n<p>This distracts almost everyone from the real scandal &#8212; which is money creation on a mindboggling scale. As ordinary folk cannot \u201cprint\u201d money, they don\u2019t understand the process and its consequences. It even seems vaguely OK (wouldn\u2019t it be nice if we could do that?)<\/p>\n<p>Public debt isn\u2019t the danger. The bubble in money supply is.<\/p>\n<p>Much of the large and still fast-expanding public debt is fake. It\u2019s not real. It can be made to disappear overnight. The experts know this, but don\u2019t want you to know what\u2019s coming down the line.<\/p>\n<p>Let me explain\u2026<\/p>\n<p>According to the investment bank CLSA Asia-Pacific Markets, this year the Fed will pour more than half-a-trillion dollars into buying US Treasury bonds. Money raised from the private sector and others (mainly foreign central banks) will finance only about 40 per cent of the fiscal deficit, with all the rest, 60 per cent, financed with Fed \u201cbubble money.\u201d<\/p>\n<p>Although Fed holdings of Treasury paper still only account for 15 per cent of US national debt, the proportion is rising fast, mainly because the private sector\/foreigners are losing their enthusiasm for Treasuries. Increasingly, the Fed is having to \u201cprint\u201d money to buy the stuff.<\/p>\n<p>The US is following the trend set by central banks elsewhere. In the UK the Bank of England now owns 28 per cent of government bonds; in Japan, it\u2019s about 40 per cent.<br>\nThose holdings are an important part of those scary debt-to-GDP ratios that financial conservatives, and politicians posturing as financial conservatives, keep quoting to frighten us into supporting the policies they favour, especially austerity.<\/p>\n<p>But they are not true debt. They are what one agency of the state, the treasury, owes to another agency of the state, the central bank. (Yes, I know the US Fed is technically a private bank, but the reality is quite different; and elsewhere central banks are clearly state-owned).<br>\nBy a simple legislative act, a nation\u2019s parliament can cancel the state\u2019s liability to itself at any time, wiping out the fake debt. The scary public debt ratio would plummet.<br>\nIt gets better (for the ruling elites, that is\u2026)<\/p>\n<p>The rest of a nation\u2019s public debt is genuine in that it\u2019s what the state owes to its private citizens and foreigners who own its bonds.<\/p>\n<p>But there is nothing to prevent governments that control their own currencies, as most of them do, from discharging those genuine debt liabilities denominated in their national currencies, over time, or in a crisis, by borrowing the money from themselves \u2013 their central banks \u2013 to pay them off.<\/p>\n<p>They can convert genuine debt into fake debt, then make the latter disappear as if by magic.<\/p>\n<p>see the next article on TheBizSense &#8211; <strong><a title=\"Business Views and Forecasting\" href=\"http:\/\/www.thebizsense.com\/views\" target=\"_blank\">Views &amp; Forecasting<\/a><\/strong> &#8211; <a title=\"Financial Forecasting\" href=\"http:\/\/www.thebizsense.com\/views\/just-a-matter-of-time\" target=\"_blank\">Just a matter of time before it starts happening<\/a><\/p>\n<p>CopyRight \u2013 OnTarget 2013 by Martin Spring<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The US Federal Reserve\u2019s policy of buying debt instruments with money it\u2019s creating out of thin air \u2013 currently at the extraordinary rate of more than a trillion dollars\u2019 worth every year \u2013 is the right thing to do, because it doesn\u2019t add to the net amount of US debt outstanding, argues the famous mega-speculator [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":389,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[188,681,1,652],"tags":[787,683,682,794,418],"class_list":["post-388","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-finance","category-news","category-views","tag-business","tag-currency","tag-federal-reserve","tag-finance","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/posts\/388","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/comments?post=388"}],"version-history":[{"count":4,"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/posts\/388\/revisions"}],"predecessor-version":[{"id":391,"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/posts\/388\/revisions\/391"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/media\/389"}],"wp:attachment":[{"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/media?parent=388"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/categories?post=388"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.globalbuzz.net\/us\/wp-json\/wp\/v2\/tags?post=388"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}