I’ve been trying to explain to people for years already that since the federal government creates the currency, it cannot go bankrupt and can, in theory and practice, finance anything it chooses. However, it’s been difficult to defend this position, especially since the government and Wall Street marketing machine is always trying to convince people of the exact opposite, i.e. that taxes and government bond sales finance our federal government. This marketing nonsense is spewed in order to steer more capital away from the 99.9% of the population. It’s as if people really believe that money objectively exists, and there is some finite amount of it in our economic system. Of course, this is entirely false, as our current monetary system makes capital creation unlimited, and it’s only politics/theft that makes capital seem scarce. In theory, there should never be a financial or economic crisis.

In any case, today I came across a great post on the Deficit that should be required reading. It’s called: What is Responsible Fiscal Policy. It does a good job of debunking myths surrounding the deficit and explaining why deficits are a good thing! You can read the article here. It’s really a question of where we choose to spend the deficits. If it goes to bail out banks, it’s called a bonus for bankers and is applauded by both Republicans and Democrats, alike. If the deficit goes to pay for healthcare, jobs or anything else that 99.9% of the population needs to live, it’s suddenly a big problem and both political parties demand higher taxes to pay for these necessities.

As Pavlina R. Tcherneva in the article:

“Wall Street knows all too well that the government cannot go bankrupt, which is why it never objects when the government socializes its losses. Notice how financial gurus temporarily suspend their own deficit phobia until Wall Street’s balance sheets and incomes are restored. The average person, however, does not know that deficits are forever sustainable and that the government is not obligated to raise anyone’s taxes to ‘pay’ for them (see here a discussion on the role of taxes). And so the taxpayer does not demand from its government what the taxpayer genuinely wants and needs: more jobs, more infrastructure, better education, higher quality public services, and a standard of living that only a resource-rich nation as the U.S. can provide. It is time to stop buying into the deficit phobia and demand that the government deficit spend … responsibly. “