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<p>[QUOTE=&quot;Numbers, post: 1209096, member: 11668&quot;]Okay, I&#039;m finally starting to see what you mean by &quot;debt&quot; and &quot;not debt&quot;.&nbsp; You&#039;re using these words in a way that doesn&#039;t agree with the dictionary, but we&#039;ve been through that already.&nbsp; You&#039;re calling the USNs &quot;not debt&quot; because there&#039;s no requirement to pay them off, or make interest payments, <i>at any particular time</i>, unlike Treasury bonds which have a fixed maturity date.&nbsp; The dictionary still calls them &quot;debt&quot;, but in this certain sense they don&#039;t create the &quot;debt bondage&quot; you were talking about.</p><p><br /></p><p>The USNs do still involve a lender (the public), a borrower (the Treasury), and an interest rate (zero is a perfectly legitimate number).&nbsp; But you&#039;re correct that they don&#039;t have a scheduled repayment.&nbsp; People are perfectly content to hold small quantities of zero-interest paper money <i>for convenience</i>, because it&#039;s easier to have a wallet full of paper than a pocket full of heavy silver dollars.&nbsp; As long as the total quantity of USNs in circulation stays reasonable (and as long as the people trust the government to *keep* it reasonable), there&#039;s unlikely to be any pressure to redeem them all quickly.&nbsp; (Historically, there *was* such pressure after the Civil War, but it can be considered the result of a lack of trust in the government&#039;s willingness and ability to keep the issue from getting too large.&nbsp; Once the Treasury had a few decades&#039; track record of managing the money supply well, resistance to the USNs largely vanished.)</p><p><br /></p><p>But...none of that has any bearing on your larger point.&nbsp; First, in all of these respects, FRNs differ from USNs only in technical details.&nbsp; The government pays no interest to the bankers on the USNs, true.&nbsp; But for FRNs, the government pays interest only to the central bankers at the Fed--and that interest, as I explained above, becomes profit to the Fed, which is transferred to the U.S. Treasury.&nbsp; Paying interest to yourself is just as good as paying no interest....&nbsp; Also, as you said, the USNs need not be redeemed or retired at any particular time.&nbsp; But the same is true of FRNs.&nbsp; And while the Treasury bonds which back the FRNs do have maturity dates, there&#039;s no doubt about the Treasury&#039;s ability to &quot;roll over&quot; these bonds when they mature, as the Fed will then need new bonds to back the existing FRNs.&nbsp; On the whole, the FRN-based system is exactly like the USN-based system, except with one additional layer of separation between the politicians in Congress and the day-to-day monetary policy.&nbsp; That layer is the whole point of the Federal Reserve--it serves as one more check to keep the politicians from succumbing to short-term self interest, and thus it helps to maintain the people&#039;s trust in the currency, which is vital to the stability of the whole system.</p><p><br /></p><p>Second, the need to keep the total value of outstanding USNs within reasonable limits, which you acknowledge, is precisely what prevents us from using USNs to pay off the (interest-bearing) debt.&nbsp; Under our present system, the quantity of FRNs in circulation is not decided by the Fed; it&#039;s decided by the individual private banks who daily order currency from the Fed to meet their needs, and return currency to the Fed when they have excess.&nbsp; Thus, the quantity of FRNs in circulation is exactly sufficient to meet the public&#039;s demand for zero-interest paper money.&nbsp; (Another benefit of the Fed system, by the way.&nbsp; In the old days, Congress decided how many USNs would be issued, and problems could arise if they willfully or inadvertently picked a number too high or too low.)</p><p><br /></p><p>What this means is that, if the Treasury started using USNs to pay off the debt, there&#039;d be an excess of paper currency in circulation.&nbsp; The first $1T of the excess would be offset by the retirement of the FRNs.&nbsp; After that, we&#039;d be stuck.&nbsp; The remaining $13T of interest-bearing debt couldn&#039;t be replaced by USNs without massively devaluing the USNs.&nbsp; This is the problem you&#039;re ignoring: there&#039;s a limit to deficit spending, and there&#039;s a limit to USN issues, but <i>those limits are not the same</i>.&nbsp; The government can get away with issuing far more interest-bearing Treasury bonds than zero-interest USNs, because the interest payments are what motivate investors (financial institutions, foreign nations, &amp;c.) to want the bonds in the first place.&nbsp; From observing the current position, we can see that the market will bear at least $14T in Treasury bonds (possibly much more, though I wouldn&#039;t like to bet on it), but no more than about $1T in non-interest-bearing FRNs/USNs.</p><p><br /></p><p>We *may* be able to go deeper into (interest-bearing) debt without collapsing the whole system.&nbsp; We *may* be able to cut spending and/or raise taxes enough to pay off the (interest-bearing) debt without sinking the entire economy.&nbsp; We *certainly* can&#039;t replace the (interest-bearing) debt with zero-interest USNs (what you call &quot;not debt&quot;) without destroying the value of the currency.&nbsp; Now do you see why people keep arguing against your plan?[/QUOTE]</p><p><br /></p>

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