Comment: How to Avoid the Debt Ceiling

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How to Avoid the Debt Ceiling

Agreed. Quantitative Easing appears to be nothing more than a fig leaf for plain and simple money printing. However, contemplate this. When the Treasury issues debt, it doesn't collect anything. Sales of Treasury debt and payment of taxes do not "fund" the government even though it is accounted for as if it does fund government spending. The only thing that Treasury debt sales and tax collections do is extinguish currency reserves. The law that requires the Treasury to sell debt when the federal government runs a deficit is a carry over from when the US operated on a gold standard. How do you think the federal reserve notes that you carry around in your pocket got there in the first place? The government had to spend them into existence via the fiscal channel. The Fed simply clears the checks. If you have doubts about this then consider that if you bought a Treasury bond and paid for it with folding cash i.e. federal reserve notes, or paid your tax bill to the IRS with folding cash, upon receipt the Treasury would shred it. It took me a long time to get my head wrapped around this concept.

Ed Rombach