United States, Federal Reserve, Federal Government discussed on Hear the Bern
I've already placed ten dollars. In the economy. My deficit click the dollars in? That can now be tried out for the Treasury's here's the really important part of the story. I don't have to. Why would I need to borrow my own? Currency Selling Bonn is not an imperative. It's Detroit they don't need to borrow order to spend already spent the dollars in so I do they so I think there are a couple of different answers one is we used to be on a gold standard when the US was on a gold standard we had what was known as a convertible currency. This used to be a convertible currency. It was convertible on demand into goal. Law Gold is a finite resource. There's only so much in your gold reserves so if you start making lots of these available and your gold reserves are growing then you potentially have problem. People want to convert bees into something that you can run out of gold so what the government would do was to take some of these out of people's hands and them with treasury bonds which were not convertible I had to wait until the bond matured and get your cash back so one reason is a historical legacy of the gold standard and then the other is that treasuries were really important for carrying out monetary policy until fairly recently the Federal Reserve relied on. Us government bonds to conduct. We call open market operations to set interest rates. So this is a really good story to talk about this in my book or listeners could find out on their own just by using the Google machine and learn a little bit more about this but very briefly when Bill Clinton was president the Federal Government's budget moved into surplus for the first time. I leave in my lifetime. Nine hundred ninety eight ninety nine two thousand two thousand one. The federal government's budget surplus now. Democrats celebrated this as a great achievement. A sign of fiscal responsibility. I this was tremendous. The Congressional Budget Office looked at these federal government surpluses and they projected in their annual budget outlook that the government was on track to run surpluses bars. The I could see and that we were going to retire. The national debt it would all be paid off completely gone eliminated. Cya Okay so the Clinton administration is looking at this. Their Council Economic Advisers publishes a report every year called economic report of the President in. That report was a chapter while they were supposed to be a chapter was drafted and it was called a life without debt and they were writing this chapter and plan to include it as this. Wow look at where we're headed right. We're going to run budget. Surpluses pay off the national debt and we will be as a country debt free magnificent until they started writing the chapter and thinking things through and then they realized. Oh we're can pay off the national debt. So they went into panic mode. And so why would they go into panic mode at the thought of retiring all of the national debt? Wouldn't that be great? Well you and your viewers can check this out of the reason that we know about this chapter is because NPR's planet money did a foia request and they got that chapter four stout into the public domain. So that now we can all have a chance to look at it otherwise they pulled it. They buried it. They were not going to publish it because they were so concerned about what it would mean if we ran out of. Us Treasuries if we basically eliminate them so when people talk about paying down the debt or eliminating the dead. It sounds like a good idea because it means you know if I could off all my debt. I'd be happy right. I want to be debt. Free no mortgage debt no card payment or student line gray but if the federal government pays off its dead it means there are no more. Us Treasuries because that's what the national debt is is just the outstanding outstanding stock of government bonds assets people. Hold them there in pensions right there. In portfolios so the Federal Reserve was using treasuries to set interest rates so they would buy and sell treasuries to change the level of reserves in the banking system and thereby set the key policy interest rate. That's a long way of saying without treasuries. The Fed couldn't set interest rates which is basically carrying out mind policy so they panic and they decided to just you know the. Fed does not rely on treasuries to set interest rates in the modern era. We stopped doing that so now to change key policy rate the Fed just announced a new rate and they pay interest on reserve balances if the Fed wants to pay a higher interest rate at announces higher interest rate and that becomes the new interest rate. They WANNA cut rates zero announce that they will begin paying zero on reserve balances. They don't need treasuries to carry out monetary policy as they once. Did they're doing we and so they're still buying treasuries today but there's no use said. Why are we still issue? Why do we still borrow? We don't have to do it for historic we don't have to to protect gold reserves. We don't have to do it to set the overnight interest rate. I'M NOT SAYING THAT. We should eliminate them. I'm just saying that it's a problem that we call it the national debt because it makes anti panic. So how's everyone getting away with this? How how is it that? Whenever a politician stands up and says austerity we have to cut social security. We have people on both sides of the aisle. My saying things things like this with the national debt is a problem. There's a national debt clock that comes to have taken up on websites all over the place and whatnot. Why is it that nobody at principally? I'm looking at Democrats because I feel like it's our responsibility. Who's standing up and waving the flag and saying this is all specter. We don't have to be doing this. Actually know mega tive implications for US having a significantly high national it's meaningless. Why is it from a political perspective that we're letting everybody continue with this misunderstanding of how things work and that there's not some more effort to political reeducation economic reeducation to focus? Start winning some of these. Some of these battles. You're preaching to the choir. LemMe Tell Ya you know. I've had conversations and continue to have conversations most of them. I can't talk about a very generic terms. I was on the hill not too long ago and the good news from my perspective is that there are Democrats who are undergoing rethink and they have reached out and we are having conversations about how to begin to shift the public narrative and to help with the education process and so I feel in many respects hopeful because they see a willingness on the part of some to recognize that the stories that they've been telling our have problems that they could be helpful in terms of providing a better understanding. Sometimes I'll say to people you know it's not what you say but what you don't say so. Just don't volunteer thing is like Oh. And then they're adding to the deficit and they're increasing the debt by say that because when it's your turn right if you end up in the White House and with the Senate and the House you're going want you're going to end up running deficits to and the debt is going to increase while your in charge so you might as well not vilify these things. Now you might as well begin to talk in terms of how would we redeploy that deficit so that it is being used to help the people who most need the help right? Now we've got billion dollar deficits that are largely engineered to people for tell people who listening how we're GONNA inherit those. We don't want to try to eliminate them and give it to US territory and all that kind of stuff. But we can re-jigger the budget again ways that put the resources where there can do the most good and so we may continue to run trillion and a couple of. I Dunno you know what the economy will call for in the future what it can sustain but we need to be talking in those terms. It's hard for any politician to go first on this. Because who? Who's going to ally with you. If you step out first and start talking in ways that are such as ignificant departure from the way that everybody else in Congress talks the way all pundit class talks and you know it would take a certain Gravitas a lot of courage to go out there and try to reshape public understanding so anyway that I think it's GonNa take you know guy that we both know pretty well says change doesn't come from the top down always comes from the bottom up so I believe that I think that ultimately we're gonNA force that narrative to Chang. Just going to be the people who went at next politician after this pandemic is over and our politicians start talking about the need to go after social security or why we can't have programs we can't afford things. I think we need groundswell people to say no no. Don't do that. We could. We can afford it as I understand enough to know that your budget doesn't work like ours so I'm not going to accept these talking points and I got to be from us. Thank you for that political education to the extent that it's from the bottom up. There are a lot of people. Listening to this podcast. That are going to be much more able to have those arguments because of your willingness to join US go two days. I really do appreciate it. Can You let folks who are listening or watching? No were they can hear more from you where they can read or find your book anything else they should know about your outfit. Yeah yeah sure you can. I mean I'm on twitter at Stephanie. Kelton and if you WANNA see a quick oppy of it is coming out June ninth so you can find it You can pre-order available for preorder the deficit. I'm going to say the name in case people are only listening to the podcast version. Thank you thank you thank you. Yes thank you so much okay. Great Thank You. I appreciate it. I have a lot since she went. I will definitely begin a copy of that. So that the knowledge that you have to some party me stays longer than the duration of a treadmill session. Thanks.