The United States National Debt is the Amount of Money the United States has Created not Borrowed

Thanks for the debate akphidelt Try not to call your opponent an idiot next time - it's rude. ==Can the government simply create money? == Yes. My opponent is smart enough to know how they can do this. The Fed can "create" money and increase the money supply by changing the Fed Funds Rate (the interest rate that they lend to banks) or by changing the Reserve Requirement. Both of these increase the money supply and allow banks to "create" more money on their balance sheets, by giving out more loans, without having to accept more deposits. They can also print money (my opponent never says what law requires them not to). ==Can the government pay down the debt== My opponent has successfully proven that Clinton's entire surplus came from Social Security revenue, which by law, must be invested in Treasuries (because otherwise, if it just sits there, inflation decreases its value, so it needs a safe rate of return). However, Clinton's way of saving money is not the only way. We could privatize Social Security (20% of our budget) or cut military spending and use that money to pay down the debt. This is the core of the Paul Ryan plan - to cut Medicare and Social Security, however the Democrats put huge defense cuts in the debt ceiling bill. This is so obvious it shouldn't need to be proven - that the government can pay off the debt if it wants to. If you believe I won this point, I win the whole debate, since my opponent believes that if we paid off our debts, money would just start randomly vanishing out of the economy. This is not true. The money would leave our economy only if the person owning the Treasury bond lived in another country and the money doesn't just vanish either - it still exists. ==Greece== My opponent's only real response to this is arrogance. I know that since Greece doesn't control the central bank, it cannot devalue the currency like it would like to in order to pay off its debt, while the US can use inflation to pay off our debts (although it's not a good option because it leads to a death spiral of markets reacting badly, forcing more inflation and ultimately hyperinflation). My point here was merely that investors wouldn't be worrying about either Greece or the United States' ability to pay them back if borrowing money just created new money, rather than creating debts. We do owe the money to people, otherwise the S&P downgrade of our debt wouldn't be a big deal. Once again, my opponent creates a red herring and doesn't respond to the main argument: we "borrowed" because we owe the money to someone. My opponent says, "==The government can OBVIOUSLY create money without issuing debt. == This is not true otherwise they would do it. Which is why all these shenanigans have to take place for them to create money. " Lol. The government takes on debt because it needs to borrow money to pay its bills (which is why we needed the debt ceiling raised). If it JUST wants to create money, say, to increase the money supply, it changes the Fed Funds Rate. I didn't realize until NOW that my opponent seriously believed there was NO OTHER WAY to create money. He keeps waffling on his advocacy in this debate - backing off extreme statements, then remaking them. ==Clinton== Lol. He now says, "There is no dollar in existence that is not backed by debt. " I thought he was using the billions in gold to show that nearly half our money supply is backed by gold. If there is no dollar in existence not backed by debt, then there must not have been money before debt existed. Look to 1980 - how was the number of dollars in circulation nearly TWICE what the debt was? Answer: because debt is NOT the only mechanism used to create money, it is just the one the government uses when they need it, and they are not really "creating and NOT borrowing" money; they are creating money on a balance sheet, the same way that the bank does when you BORROW money. Creating money, in this sense, should mean printing money, since that is the only way the government can create money without borrowing it and owing it to someone. ==M2 does not include loans== My opponent is just sketchy. Read wikipedia. M2 includes notes and currency, traveler's check, demand deposits, other deposits, time deposits, and large time deposits. There's even a chart. Nowhere does it say loans. My opponent seems so sure of himself that he probably didn't bother reading his own source. M2 does not include loans, which means that it's pretty telling that the total amount of money in circulation is not even close to our debt number. 9 does not equal 14.5. ==Warren Buffet== Appeal to authority. And the S&P downgrade was to show that people are worried if we can pay them back, showing that debt is "borrowed. " Buffet even says we can pay off our debt, supposedly something my opponent denies. ==Why do we need primary dealers? == My opponent claims to create money. However, firstly, if this was the case, why do we even allow 30% to directly purchase, since this doesn't create money. Why not require all purchases to go through primary dealers? Because that 30% matches the 30% of debt purchased by foreign central banks. The other 70% is bought by small investors, mostly in the US. When the government needs to sell debt QUICKLY (like right after the debt ceiling raise, when they had less than 24 hours to pay our bills), they need money fast and don't want to wait on small time investors to bid at auction, so they require a bank to purchase the T-bond, and then flip around and sell the T-bond. However, cash is paid for the Treasury bond at the end point, meaning money is TEMPORARILY created by the bank to pay for the T-bond, but that created money is then erased off their balance sheets when someone gives them real money for it, hence the money is borrowed and owed to than investor. My opponent asks this question: "why would a country that has it's own made up currency need to borrow it's own made up currency? " Simple, same reason they need to tax us. They can make up more of the currency in OTHER ways, but this causes inflation because money markets aren't stupid. My opponent next lists 4 things I'm supposedly wrong about. This is petty, especially since he was wrong about M2, he was caught with his pants down double and triple counting when he was doing his math (so if there is a real ethical violation here, it's him), 2 of the other points I'm also not wrong about, if you take my arguments back IN context, and the last (Clinton) I'm still right about since my opponent said, during his little sketchy calculation, that intragovernmental debt should be excluded from our debt calculations, since no ones worries about the government's ability to pay ITSELF back, so technically Clinton reduced the debt we do care about. Dropped Voters. Vote Con if you agree that: 3) You believe the government can pay off its debt whenever it chooses to, without shrinking the amount of money in circulation. 4) You believe that Treasuries are sold for cash at the END POINT. Cash is traded for Treasuries, ultimately, and we use that cash to deficit spend (example, China buying our debt). 6) You believe that the Fed doesn't even need to issue debt to print money. It could just use a printing press or change the Fed Funds Rate, which is the whole point of the floating currency. The government can OBVIOUSLY create money without issuing debt. Other voters: money supply doesn't match debt - 9 doesn't equal 14.5; we obviously owe money to China, so we did "borrow"; QE2 did not force banks to lend more money, so debt purchases by the Fed FAILED to increase the money supply, in spite of that actually being the goal of their policy for once (they couldn't change the Fed Funds Rate since it was already near zero). My opponent says he learned nothing from this debate - probably because he refused to believe I could be right about even something so simple as defining M2, in spite of having a degree in Economics. Arrogance. .