Wednesday, March 30, 2011
Winning the, "How are we going to pay it back?" argument
If you're an adherent of MMT like me, then you've probably gotten into arguments about debt and deficits with members of your family or maybe your friends or colleagues from work and I'm sure at some point in those discussions you've been asked the question, "How are we going to pay it back?" when it comes to government debt.
I have come up with a way to answer this question, which will at the very least, make the person you are arguing with sit up and think.
Here's a hypothetical conversation that you are having with a typical debt monger:
Debt monger: How are we going to pay it back?
You: The government exchanges dollars for those Treasuries. Holders of the debt give back their Treasuries to the gov't in exchange for dollars and Voila! no more debt.
Debt monger: You mean "print money" to pay off the debt?
You: That's precisely what I mean!
Debt monger: Are you serious?? That will create hyperinflation!
You: No it won't.
Debt monger: What?? Are you crazy??
You: Not at all. You are taking away one form of money--the Treasury--and simply replacing it with another form--US dollars.
Debt monger: But Treasuries are not money!
You: Oh really? If I had $10 million in cash and you had $10 million in Treasuries, would you consider yourself poorer than me?
Debt monger: (Confused look, but you can tell he's thinking.)
You: I rest my case.
Try it next time you're at a party.