Sunday, April 1, 2012

What is our biggest problem?

The two chairs of the Commission appointed to develop a plan for reducing the Federal deficit agreed that the debt was the nation's biggest problem and unsustainable. We have to cut defense, social security and medical care they say. But, they know it won't happen.

This has become conventional wisdom. Why does not anyone raise the question of what the real economy of people and factories is capable of producing. Have we lost the knowledge needed to produce? Have the factories rusted?

No. This is an institutional failure, not a physical problem. There is an alternative to borrowing more money in the market. The Treasury could borrow from the nation's own bank,the Federal Reserve. Tell me why it is OK to create money every time a private corporation borrows money from a bank, but not OK if the government does the same thing??

1 comment:

The Arthurian said...


Actually, I think people are justifiably angry at government for letting things get so bad. And they've been told so often that government debt is the problem that they just accept it.

As for myself, I say private debt is the problem that holds the private sector down.