From page 15 of The Economic Expansion of the 1990s (at Google Books):
The ratio of the interest-bearing national debt to GDP is frequently used by economists as a measure of the burden of a national debt to a nation's economy.
That sentence is footnoted. Here is the interesting part of the note:
The non-interest bearing debt of the United States consists of currency and coin in circulation.
I never think of coin and currency as a form of government debt. I'm not sure it's right.
4 comments:
In addition to being "interest-bearing", a debt is something that has to be repaid.
Does currency and coin in circulation have to be repaid?...by the issuer, I mean.
If I print a dollar and spend it, there is nothing to be repaid.
If I borrow a dollar and spend it, I do have to pay it back. But that's part of the transaction which created the "interest-bearing" debt. Doesn't apply to non interest bearing coin and currency in circulation.
If I tax a dollar and spend it, government services are expected in exchange. But there is nothing to be "repaid". (Money is always "spent" in exchange for something. Repayment of a debt is different. When I print a dollar and spend it, the transaction is completed. But if I borrow a dollar and spend it, I need a second dollar so I can repay the debt.)
If I take some gold out of Fort Knox and use it to make new gold coins, and spend them, is there anything to be repaid? Not if it was my gold in the first place.
I don't see coin and currency as a form of government debt.
In the context of federal debt, the term debt refers to IOUs.
Currency and Coins are non-interest paying claim on dollars - federal money.
Federal debt, aka US Treasurues are interest paying claim on dollars - federal money.
Federal money, aka US dollars are federal IOUs that settles federal taxes, fees or fines. Hence, Mosler’s claim - US dollars are nothing but an advance federal tax credit, a form of federal IOU - federal government owes you a dollar’s worth of tax settlement.
Ultimately the only way currency and coin in circulation gets repaid, is when the federal government collects all of them back as taxes. Federal taxes ultimately destroys currency.
Federal spending creates currency
Federal taxes destroys currency.
As long as the non-federal government entities want to save & hoard currency(in all forms - non-interest bearing & interest bearing), the federal government will have federal debt. End of story, get over it. Federal debt is not the boogeyman in our bedroom - private set is.
"Ultimately the only way currency and coin in circulation gets repaid, is when the federal government collects all of them back as taxes"
No that's absurd. The govt would have to first take all the bank deposits away in taxes and long before that was accomplished the population would revolt. Currency is the dollars that the govt can never tax away. That is why currency is the monetary base. It is the money the govt cannot touch without probable cause of criminal activity. Its the money that makes you believe your money in the bank exists because you can always withdraw it as currency.
The way currency can be returned to the govt is people take it to the bank and deposit it. If all people did that with all their currency then the money would flow back to the Fed. The Fed would give the banks back the govt securities and the govt would start paying interest on those securities to banks instead of paying it to the Fed who just returns most of it to the treasury.
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