Running a budget deficit doesnt create money.
The gov sells t bills etc to fill that gap hoping it can pay the interest on them then at maturity pays it back.
They are bought with existing buyers cash locally and overseas.
The bonus for the USA is debt sold is in USD
I see your point, but that is not technically true.
Admittedly, it’s been a long while since I’ve taken an economics course.
The Fed controls monetary policy: that’s the money supply, printing or destroying money, and interest rates.
Congress controls fiscal policy: spending.
Deficit spending neither prints nor destroys money. However, it is inflationary in the sense that government is creating more demand for goods and services, and more employment through spending.
On the other hand, government has trained several generations of welfare recipients through deficit spending that work is optional; that they can live off government programs. So do the defense contractors.
As the deficit grows larger, so does the interest on government bonds. Debt service is now a huge portion of government spending. The government is borrowing money to make interest payments.
Just like a household living off high interest credit cards, we are approaching a breaking point where it will no longer be possible for government to borrow enough without drastic. I mean really drastic massive spending cuts.
QE creates money as the central bank prints money to buy local assets
Welfare payments to individual are not the big a part of US spending unless you count the cost of feeding children. About 50% of the people who receive some form of welfare have jobs.Many US military members recieve welfare, SNAP, CHIPS etc. Programs grouped under ‘welfare’ range from Medicaid aid to states, Earned Income Tax credit among several others.
Defense is the largest part of the budget and although required to produce an annual audit has never passed an audit with many billions unaccounted for.
Interest on US government bonds is not that high or I would buy more of them. I consider buying government bonds a convoluted income tax refund.
The interest rate on government bonds is not that high, but the amount of government bonds outstanding is increasing rapidly. The amount of debt service, bond payments, as a percentage of the total US budget is at a historic high and growing.
If the government wanted to decrease the price of food at the grocery store, it could easily do so with spending cuts:
Stop paying farmers not to plant crops,
Stop sending food overseas as foreign aid,
Stop buying surplus food from agribusiness,
Stop food stamps (debit cards) and similar federally funded food programs that are rife with inefficiency, fraud, and abuse, and drive up food prices.
farmers vote
Stop food stamps (debit cards) and similar federally funded food programs that are rife with inefficiency, fraud, and abuse, and drive up food prices.
I’m sure you’ll provide with evidence to back this up.
Farmers vote but the reality is the farm lobby is handed enough cash by giant agribusinesses to buy the votes of a corrupt congress. The American Gothic image they would like to implant in the public vision is far from what really describes the American “farmer”.
Tugsailor got it right except for that bit of right wing propaganda about food stamps. If you really want to get rid of welfare queens, start with overturning Citizens United and completely rewrite the election finance laws. Make Bribery A Crime Again.
As somebody once said, Congressman should wear Nascar style jackets with all the sponsors listed on them.
There are countrys where every cent a politician gets is on a register for the public to see
this is primarily due to the fed increasing the interest rates - supposedly to combat inflation -
what this really is - in practice, is a boom money give away to the wealthy investors who now get a risk free rate of 4 - 5% -
In my ( and MMT) economic view the goverment should just esatblish the rate zero and leave it there - like Japan.
Instead of a D,R or I after their name, congress critters should be known by their top 25 campaign contributors and that list should be legally required to be shown on every publication or appearance. Ditch Citizen’s United for Bribery, prohibit corporations from all forms of campaign financing, limit contributions to only those voters on a candidate’s ballot, and limit the total amount of contributions from any voter to any party, candidate, or campaign in cash or in kind to only 5 percent of that voter’s after tax income or $1000. Stop the kleptocrats and take government back from elected criminals, corporations, and oligarchs.
Haven’t you heard?
“Welfare Queens” drive their Cadillacs to tje “welfare office” to pick up their cheques.
At least that’s what Reagan said
When interest rates get to zero your economy is stagnant and banks will charge you to deposit money. Its slow death of your economy.
yea - the theory is low interest rates frees up capital for investment to stimulate the economy - but then again after decades of doing that Japan is walking away - slowly - but walking away from thier zero interest policy.
But if low interest means low inflation then you cant use inflation to reduce your payments so nobody borrows as tomorrows cost of cash is same as todays
Japan tried every economic tool ever written about and none worked
in fairness - i think Japan’s economic results are better characterized as mixed
I think the sole benefit of any economic analysis accrues only to the economists it employs.
There was a famous Governor of HK years ago.
He worked out the best thing for the economy was not tell the UK what was happening, he just went down the street and asked the shop owners how was business, do you have any issues.
He guessed if he reported back the gov would cock it up.
IMHO all gov market data should be live every day
True. Japan has had very little growth in their GDP for many years even though they have about the 4th largest economy. They had to keep interest rates low in an attempt to prop up the economy that has been stagnating due to an aging population and a resistance to immigration which would help with the declining productive age workforce. Recently inflation has caused the interest rate to go to about .5% to combat inflation.
As a comparison Russia’s policy rate is around 21%.
The US may well have to raise rates again if inflation doesn’t cool. Current US rates at 4.5 are not bad considering the average over the last 50 years is around 5%. The average from 1950 to 2025 is 6.5%.
Stock market speculators love low Fed rates and the “quantitative easing” the Fed practiced after the 2009 crash helped create the current bubble as the too big to fail banks got near free money to gamble with…again.
Thankfully the Fed finally woke up.