Issuing United States Notes allows the federal government to function without raising the debt limit or defaulting. Raising the debt ceiling would increase our structural deficit, making it harder to return to surpluses after the depression. Defaulting is not only unnecessary, since the federal government could simply issue US Notes make debt payments, but supports the fallacy that governments need to borrow, making our federal government more dependent on foreign financiers. Only the issuance of pure fiat currency breaks our government out of the self-destructive cycle of borrowing to spend and spending on debt service.
This policy is more budget neutral than our current one of creating debt instruments, "treasuries", and selling them to pay for deficits. By issuing United States Notes and depositing them in the Treasury's account, the federal government incurs no future obligation to pay coupon interest or redemption principal as current policy does. Debt increases future deficits and decreases or eliminates future surpluses; issuing United States Notes does not. Budget negotiations can therefore be disjoined from financing by this change of policy.
It is probably best at this point to dispel some common myths about the issuance of pure fiat currency, chiefly that of inflation and hyperinflation. A moment's fearless thought will reveal that deficits add money value and surpluses remove it. Thus, regardless of the financing involved in government expenses and receipts, deficits have an inflationary effect and surpluses a deflationary effect. Further reflection will reveal that deficits and surpluses are not the only factors producing inflationary and deflationary effects or even the only factors producing general monetary effects. Indeed, the level of bank lending has a much greater impact on the money supply than annual deficits or surpluses of the federal government. The payment of federal government expenses through revenues and United States Notes, by limiting the inflationary impact of a deficit to that of the current one, is the least inflationary way of financing a deficit both now and and in the future. The current policy of issuing treasuries is, by contrast, more inflationary in the future because of debt service and at all times because of bank lending off of debt reserves.
As for hyperinflation, that is caused by speculation on the near certainty of continued deficits and great doubts that future taxes could be paid with current money. The war reparations debt of the Weimar Republic and the certainty that the costs of waging the Revolutionary and Civil Wars would exceed the revenues which could be collected at the time, indeed the doubt that future revenues could be collected by a government honoring the money in which the expenses were paid, these were the reasons for hyperinflation in Germany between the world wars and in America during the Revolutionary and Civil Wars. The financing in these cases was ancillary to the resulting hyerinflation, the use of fiat currency being, in fact, an attempt to ameliorate the fiscal crisis and thus dampen inflationary speculation.
Our situation is not nearly so dire. We are starting to back away from foreign conflicts; the public is more inclined to let the people of these areas resolve their own conflicts and fight their own battles. Our problems at home can be fixed by our own ingenuity and love. There are no reasons other than the size of the federal debt to believe that we cannot create surpluses when it makes good economic sense to do so. That is why it is so essential that we start moving away from debt as a way to pay the expenses of government , especially the expenses of the federal government. That is why it is so essential that you immediately issue United States Notes for federal government expenses and suspend indefinitely the issuance of debt securities.
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