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<p>[QUOTE=&quot;Numbers, post: 1210054, member: 11668&quot;]As I pointed out above, that&#039;s exactly why your plan doesn&#039;t work.&nbsp; Ask yourself the question: <i>Why do these &quot;holders of the debt&quot; choose to hold the debt?</i>&nbsp; Obviously, a big reason is that they like getting those interest payments.&nbsp; If we replaced their interest-bearing bonds with USNs, very few of them would choose to hold on to those USNs the same way they hold on to the bonds.&nbsp; They&#039;d all want to exchange those new USNs for some other assets that *do* bear interest.&nbsp; That leads to a huge glut of USNs on the market, and their value plummets.</p><p><br /></p><p>If we tried to retire the whole debt with USNs in one go, they&#039;d instantly become near-worthless: for all practical purposes, we&#039;d be defaulting on the debt, paying it off with currency that&#039;s not worth the paper it&#039;s printed on.&nbsp; If we tried to do the same thing gradually over time, then the USNs would lose their value gradually over time, instead of all at once--so the lucky folks who got the first batch of USNs might just make out okay.&nbsp; But as I explained in the previous post, if we wanted to stop the USNs from losing value, we&#039;d have to retire the excess from circulation at roughly the same rate we were using them to pay off debt--and that&#039;d require huge spending cuts or tax increases, exactly the same as would be needed to pay off the debt *without* using USNs.&nbsp; Again, the use of USNs doesn&#039;t make the process any less painful for the American taxpayer or the American economy.</p><p><br /></p><p><br /></p><p><br /></p><p>I don&#039;t disagree with your general point here.&nbsp; Clinton&#039;s tiny budget surplus wasn&#039;t nearly big enough to have triggered the recession on its own, but the large budget surpluses we&#039;ll need to put a serious dent in the debt probably will be.&nbsp; IMHO, the debt is a bad enough problem that it&#039;s *worth* a recession (or more likely several) to get out from under it.&nbsp; Most people don&#039;t agree, which is why we still have the debt.</p><p><br /></p><p>Where you&#039;re wrong is in your assertion that, by using USNs, we can escape that problem.&nbsp; That&#039;s what I&#039;ve been explaining for the past few posts: the USNs will not somehow allow us to eliminate the debt without exactly the same pain.&nbsp; Let me summarize it all one more time:</p><p><br /></p><p>Under our current system (no USNs), we basically have two ways to get rid of the debt.&nbsp; First, we can cut spending and/or raise taxes to create a substantial budget surplus, and then maintain that surplus for enough years that the whole debt is paid off.&nbsp; (Or just most of the debt is paid off, if we decide to keep some around.)&nbsp; This is very likely to knock the economy for a loop, and could even get us into Great Depression territory if we tried to be too aggressive about it.&nbsp; We&#039;d have to be careful to go slowly enough to keep things at &quot;fairly severe recession&quot; at the worst.&nbsp; (Even then, once the people realized just how bad things were going to get, I strongly suspect they&#039;d vote in a new Congress that would just go back to deficit spending again.)</p><p><br /></p><p>Second, we could just repudiate the debt, default on it.&nbsp; People don&#039;t usually discuss this option seriously where the U.S. is concerned, because it&#039;d seriously wreck not only our economy but the global economy.&nbsp; Look at what chaos is being caused by the possibility that a small country like Greece might default, and then multiply that by several orders of magnitude.&nbsp; This would make the Great Depression look positively cheery by comparison.&nbsp; Clearly this is *not* a viable option.</p><p><br /></p><p>Now, under your USN system...we have essentially the same two options.&nbsp; We start paying off the debt using USNs, and an excess of USNs begins to build up in circulation.&nbsp; Our first option is to retire them through tax payments; to do so, we need spending cuts and/or tax increases to keep the government functioning while a substantial fraction of tax receipts are arriving in the form of USNs that can&#039;t be spent again.&nbsp; This will be just as painful for the economy as it would be under the existing system--we&#039;d have to be careful not to cause a Depression by doing it too quickly, and even if done slowly it&#039;d likely cause enough of a recession that the people wouldn&#039;t allow it to go on for long.</p><p><br /></p><p>Our second option is to allow the excess USNs to build up in circulation without retiring them.&nbsp; This avoids the need for tax increases or spending cuts: if somebody pays their taxes using USNs, the government just spends those USNs again in the course of its ordinary spending.&nbsp; But wait--before long, the USNs lose much of their value because of the great excess of supply.&nbsp; This greatly annoys all the countries whose Treasury bonds we&#039;re paying off in USNs, and in the end has pretty much the same awful consequences as the default scenario above, though perhaps the collapse takes longer to unfold.&nbsp; Not only that, but the government soon finds itself unable to spend those near-worthless USNs that it&#039;s taking in as tax receipts: if government contractors and employees are legally required to accept them, then no one will choose to do business with the government.&nbsp; We&#039;re right back to needing massive spending cuts or tax increases to get the government enough funds to function.</p><p><br /></p><p>My point is that there are no easy solutions to the debt.&nbsp; There are no easy solutions while the Federal Reserve exists, and there are no easy solutions once the Federal Reserve is eliminated.&nbsp; There are no easy solutions if we don&#039;t introduce a new currency, and there are no easy solutions if we do introduce a new currency.&nbsp; Playing around with the Fed and/or the currency will not make debt reduction any easier, any less painful, or any more politically palatable; it&#039;s just a distraction.</p><p><br /></p><p>Earlier I explained why FRNs are better than USNs.&nbsp; But I&#039;ll admit that, in relative terms, they&#039;re not <i>all that much</i> better.&nbsp; If we switched to USNs and *didn&#039;t* try to reduce the debt, then we probably wouldn&#039;t be much worse off than we are now.&nbsp; It&#039;s only when we seriously try to reduce the debt that the pain happens--no matter what currency we&#039;re using.</p><p><br /></p><p>Good grief, it&#039;s depressing explaining this stuff.&nbsp; Can we talk about sunny days and cute fluffy bunny rabbits for a while, or something?&nbsp; <img src="styles/default/xenforo/clear.png" class="mceSmilieSprite mceSmilie1" alt=":)" unselectable="on" unselectable="on" />[/QUOTE]</p><p><br /></p>

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