My point is that the borrowing can be curtailed immediately by the issuance of non-debt-backed dollars to fund the deficit and slowly pay down the national debt. Any adverse consequences of overspending will then be felt in the near term, with no additional mess left for our “grandchildren” to clean up at a later date.

Any catastrophe brought on by excessive spending and borrowing will be much worse and harder to correct than a catastrophe brought on by excessive spending alone.

The government borrowing money from itself is a means of inflation. It is not the same process as borrowing, but they do mix them together to different degrees.

A "gradual" increase in inflation paying for even current borrowing would be enormous. That is not a solution.

If the spending and borrowing are not curtailed there will ultimately be a catastrophe. There is no sustainable method for continuing this.

For all practical purposes they are part of the same process, as described by the St. Louis Fed:

“Deficits can be a source of inflation if they are accommodated by monetary policy-that is, if the Federal Reserve responds to higher deficits by increasing the growth of money. The Federal Reserve has two ways of responding to higher deficits:

1. The central bank directly purchases the securities issued by the government to finance the deficits.
2. The private sector purchases these same securities; then, the central bank attempts to limit any potential interest rate increases.

Under either scenario, deficits lead to greater money base growth, which can create inflationary pressure.”

https://www.stlouisfed.org/Publicatio...

So an excessive deficit will be inflationary regardless of whether the money is “printed” or “borrowed”. The difference is that “printing” the money does not create a huge national debt and its accompanying interest burden on the taxpayers.

The inflation required to wipe out the debt would not be catastrophic unless it was done all at once. Paying down the debt gradually with non-borrowed dollars could be done quite easily without anywhere near catastrophic consequences. Would you prefer to allow the debt to grow until default is inevitable? An inflationary default would truly be catastrophic to the world economy.

Bond values drop when interest rates rise above the bond's rate. They are keeping interest rates artificially near zero. That has the direct effect of 'protecting' bond values. It also makes it artificially easier for government to pay the interest costs for its borrowing.

It also leads to an 'easy money' policy that is inflationary (which reduces the value of the principle of any fixed investment -- like cash in the bank -- from what it otherwise would be). The easy money policy is a major factor in why the stock market has risen so much despite the economy not being nearly as good as you might otherwise think it is from stock market values. Price inflation is not uniform across the economy; prices go up first where the new money is being spent. As the effects build up over time inflation wrecks the whole economy; a large monetary inflation is even worse.

The are so many gimmicks in place now with spending, borrowing, inflation, and controls that is practically impossible to track what is happening while we wait for a the inevitable chickens coming home to roost.

I read something about the whole system right now is geared to prevent bonds from going negative. That is supposed to be in some form of control of inflation so the yields stay positive, though I don't know how they plan to manage that trick.

No it isn't. The inflation that would be required to wipe out the debt, and the bond holders along with it, would be immediately catastrophic.

Borrowing existing money and inflating the money supply through the Fed are two different processes.

Re: "Borrowing through sale of bonds does not inflate the currency." Then we haven't had any inflation for the past 50 years. Who would have guessed?

Borrowing through sale of bonds does not inflate the currency. Printing money does. Yes the debt is a big problem. Inflation is not a solution.

The same things I don't like about taxes make it hard to cut taxes-- once gov't is this big it's naturally for groups to work out winners and losers in the game of gov't taxing and spending. NYT front page has an in-depth analysis of who would gain or lose a couple thousand bucks a year. Of course this is the natural consequence of any simplification of the taxes.
https://nyti.ms/2icXs4P

It's not even the increased borrowing that makes it hard to pass. It's everyone with their hand out, "hey, why did my neighbor get a cut and I didn't?" It's so bogus b/c your tax situation changes every year. Simpler and lower taxes are generally better.

The winners/losers chart in the NYT article shows exactly why we need lower and simpler taxes.

Of course massive inflation is destructive, and massive inflation accompanied by a huge unpayable national debt is way more destructive than massive inflation without that debt.

I do not advocate inflation. But if we are going to have a fiat currency, “printing” money directly is preferable to issuing spendable IOUs and interest-paying bonds. Both forms of fiat money are inflationary, but “printed” money doesn’t put taxpayers on the hook for endless rising interest payments, which currently amount to thousands of dollars per taxpayer per year.

I have explained. Massive inflation is destructive. I have no need to discuss the rest.

You advocated printing unbacked paper money in massive amounts instead of borrowing. That is monetary inflation. You tried to dismiss the danger of inflation by saying "hyperinflations were the products of special circumstances", as if it were not destructive by principle for what it is. Your long arguments of "points" do not address or justify the inflation you advocate and require no further discussion.

My point was that a large and unpayable debt leads to hyperinflation. Debt-free fiat money avoids that particular pitfall. Debt-based fiat money does not.

That was my point, our glorious leaders do not need to lose a war to totally screw us all....greed works for them...

My "lengthy arguments" explained my own proposed policies and why I think they are better than the current ones. You haven't responded to my arguments or explained yours.

I never said it was. You haven't addressed any of my points.

The Fed's inflation and the borrowing are not the same thing. We do not pay interest on inflation. The borrowing is not inflation.

You don't need hyperinflation to know that even inflation was terrible under Carter and Nixon. Inflation is not a solution.

You posted lengthy arguments mostly criticizing current policies and which do not address the essence. Inflation deliberately replacing borrowing is worse.

The German (1921-23) and Hungarian (1945-46) hyperinflations were the products of special circumstances and were not triggered by a political desire to spend recklessly. Each country was on the losing side of a world war and found itself weighed down by a huge and unpayable war debt imposed by the victors (the Soviet Union, in the case of Hungary). Reparations had to be delivered in the form of gold, goods and hard currency. In an attempt to pay off these debts, each country printed massive amounts of its official currency to purchase the assets required to pay these reparations. Neither country had any alternative. This practice directly triggered both ruinous hyperinflations.

The more recent bout of unrestrained money printing in Zimbabwe, which led to hyperinflation, was facilitated by massive government corruption, draconian political and economic controls, and widespread expropriation and destruction of farms and other productive enterprises. These preconditions for hyperinflation do not exist in any advanced market-based economy. If such circumstances do arise someday in the U.S., backing our fiat money with government bonds will not save the country from a financial meltdown; it will likely make matters worse.

It’s worth noting that the U.S. today has one thing in common with postwar Germany and Hungary: the presence of a government debt that we are increasingly unable to pay back. We can continue “kicking the can down the road” as our national debt continues to become more unmanageable, or we can begin to gradually pay it down. Given our present political and economic circumstances, the only way we can accomplish this is by breaking the link between the federal deficit and the national debt.

CBJ, I would have to lean towards ewv's point, if just because we have historical fact to prove it happens, Germany in the late 20's, Zimbabwe and venbeuzuela all did the money printing thing, with Zimbabwe being the biggest winner in note department, with a 1 billion unit note that was worth like 3 cents only a few years ago, and we know 3 cents is pretty worthless today. It will invariably lead to a revolt to get the wages to match the costs, or a reset with a new currency. Either is bad for us. My question is, if the government knows how much it prints, but with held or masked the data, could they get away with it for a while? The Feds opted for "qualitative easing" which was just a new take on it using bonds instead.