The U.S. Congress is gearing up for another debate on the “debt ceiling”. The WSJ is reporting that Mitch McConnell has said that there is a zero chance that the U.S. won’t raise the current level. However, we’ve seen what happens in Washington D.C., so assigning a zero probability to anything is rather foolish.
That there is even a debt level discussion highlights the fact that most Congressmen and Congresswomen have no understanding of how our monetary system works. The U.S. government has a fiat currency, which it issues under monopoly conditions and floats it freely on international currency markets.
The following points are from a recent blog post by Professor Bill Mitchell, a leading proponent of Modern Monetary Theory:
- A currency-issuing government cannot run out of the currency it issues.
- A government can afford, in financial terms, anything that is for sale in its own currency.
- There is no financial constraint on government spending, where that government issues its own currency.
Also according to Mitchell, “In that context, it is 100% correct to say that all policy choices are political rather than reflect any intrinsic financial constraint.”
I’m disgusted by what is and has been happening in D.C., so let’s finally get away from the politics, and begin to focus on the needs of our people, which include, education, healthcare, affordable housing, retirement benefits (Social Security), etc.