Deficit Owls | But Isn't Overspending Reckless And Dangerous????? @deficitowls5296 | Uploaded November 2016 | Updated October 2024, 11 minutes ago.
Professor Stephanie Kelton (UMKC and economic adviser to Bernie Sanders and the Senate Budget Committee) answering a question about spending more than your income. For a currency-user, this is a disaster: you will be digging into your bank account, then after that goes to zero you are becoming more and more indebted, and might have to default and go bankrupt. Creditors will be very weary to lend a currency-user who might not be able to pay back.
But for the currency-issuer, the story is totally different. The issuer cannot run out of the currency they issue. There is no "bank account" that can head towards zero. Although most governments keep track of money in the Treasury's "account," the fact is that the government can always spend more of the currency it issues, even if the "account balance" is zero or even negative. (Which really makes you wonder: why do they even bother keeping track of an "account"? It's really only for political and historical reasons, not economic ones.)
So there's no danger of the currency-issuer going bankrupt in the currency it issues. If the currency issuer promises to take your money then return it later with interest (ie sells you a "Treasury Bond") then it can ALWAYS make good on this promise, unless it simply decides not to. There is NO danger of the currency-issuer being unable to pay back its debts. Absolutely none.
(Note that this doesn't apply to countries that don't issue their own currency, such as nations in the Eurozone. It also might not apply to nations that peg their exchange rate, in which case introducing too much currency into the economy might jepoardize the exchange rate commitment.)
Watch the whole interview here: youtube.com/watch?v=c0qmv8iGB5A
Follow Deficit Owls on Facebook and Twitter:
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Professor Stephanie Kelton (UMKC and economic adviser to Bernie Sanders and the Senate Budget Committee) answering a question about spending more than your income. For a currency-user, this is a disaster: you will be digging into your bank account, then after that goes to zero you are becoming more and more indebted, and might have to default and go bankrupt. Creditors will be very weary to lend a currency-user who might not be able to pay back.
But for the currency-issuer, the story is totally different. The issuer cannot run out of the currency they issue. There is no "bank account" that can head towards zero. Although most governments keep track of money in the Treasury's "account," the fact is that the government can always spend more of the currency it issues, even if the "account balance" is zero or even negative. (Which really makes you wonder: why do they even bother keeping track of an "account"? It's really only for political and historical reasons, not economic ones.)
So there's no danger of the currency-issuer going bankrupt in the currency it issues. If the currency issuer promises to take your money then return it later with interest (ie sells you a "Treasury Bond") then it can ALWAYS make good on this promise, unless it simply decides not to. There is NO danger of the currency-issuer being unable to pay back its debts. Absolutely none.
(Note that this doesn't apply to countries that don't issue their own currency, such as nations in the Eurozone. It also might not apply to nations that peg their exchange rate, in which case introducing too much currency into the economy might jepoardize the exchange rate commitment.)
Watch the whole interview here: youtube.com/watch?v=c0qmv8iGB5A
Follow Deficit Owls on Facebook and Twitter:
facebook.com/DeficitOwls
twitter.com/DeficitOwls
