Today's money is not gold, livestock, gems, or slaves as it has been for thousands of years.
Fractional reserve banking (and the modern electronic economic system) virtualizes currency in a way that would be called a dupe bug in any MMORPG. In our case, it is just a feature of the design.
Local and State governments in the US are dependent on tax dollars (property, sales, excise) in addition to federal subsidies, but the federal government doesn't need taxpayers to fund most of its activities.
Accruing balances of paper is fine, the fiat money is imaginary and propped up by usage convention and some other, stronger things.
Not soon. The US can maintain its current fiscal suicide approach for a minimum of three decades.
The US is far richer than Japan was when it embarked on a similar fiscal suicide path, there are far more USD assets to chew through via debasing the dollar, and the US has (for now) the global reserve currency which provides even more room for abuse. The US is also still adding wealth to its pile, which furthers the runway, furthers the total amount of treasure the irresponsible monsters in DC have to eat. Although US growth will grind almost to a halt this decade, coming in even worse than the prior decade was. Last decade 3% became the ceiling they couldn't push annual growth over, next it'll be more like 2-2.5% as a ceiling they'll struggle against.
That's before we get to any extension schemes, instigating various outcomes that drive people into the dollar globally to prop up its position for longer, and or otherwise extend US hegemony. Dividing the world into the West + allies vs China (and to a lesser extent, Russia), with lots of scary tension and confrontation (without actually starting WW3), would possibly work. It would enable the US to attempt to redraw lines in its favor once more. China now holds a trivial share of the US treasury market, so they no longer matter when it comes to US debt (eg dumping it); China is turning off their company IPO spigot, so that's not going to matter any longer; and we'll gradually separate economically more and more, with mostly basic manufacturing remaining, and the US sending China agriculture and energy exports. I'd put my money on that, a new cold war to divide the world.
The US can take the national debt up to $60 to $75 trillion, at a minimum. Possibly $100-$120 trillion with a few stretches of sustained growth and some more (real) asset growth.
They can drive the interest rate on that debt down to ~1%-1.5%, or roughly $600b to $1t per year. 20 years from now $1t per year in interest is where we're already at now, adjusted. That's the same process that has been going on for the past several decades, as we've been reducing the interest rate on our national debt. They'll keep pressing down on that. At somewhere around $90-$120t in debt, and call it ~$1t-$1.5t in interest, it'll begin to break the government's ability to function, its ability to fund itself. At $60t in debt 15-20 years from now, it can still operate almost exactly as it is now.
The continued decline of growth, implosion of demographics (population contraction and or stagnation), and tens of trillions of dollars of capital being locked up in very low yielding debt, will remove large amounts of inflationary pressure that would have otherwise been present. Which is again quite similar to the Japan scenario.
All of that adds up to the Fed & Co. being able to continue to play the asset bubble game for decades to come yet. Interest rates will remain hyper low by necessity (they couldn't raise rates meaningfully even if they wanted to), and the beforementioned will largely prevent those low rates from causing classic runaway inflation problems (for exactly the same reason we didn't see runaway inflation last decade). There will be brief periods of spikes of inflation though, because it won't all go smoothly (eg global pandemics happen). One consequence of all of this will be far higher tax rates, targeting the richer classes, and generally enormous pressure to hike taxes on the top 1/3 along with attempts to implement some form of wealth taxes (that pressure is already there, just not high enough yet; but it'll get there).
I have been waiting for the Fed to conjure up a bad bank and put the Fed's underperforming assets and some treasuries into it then have it go insolvent.
Seems like the easiest way to cut the Fed balance sheet.
Curious how many of the respondents have read MMT literature. Seems to be a theme of believing MMT ignores inflation, which is not at all the case and is addressed directly in Stephanie Kelton's The Deficit Myth.
Credit is created at the point of contract. This was revealed in a 2014 Bank of England report. The current economic arrangements bake in certain percentages of unemployment. MMT suggests reimagining the model to focus on full employment through civic programs that compensate for slow downs in innovation and lending.
Puzzling to see such a staunch offense against alternatives when the present arrangements clearly favor a small few at the expense of the many.
How old is a '3% of GDP trade deficit'? Also far younger than taxation?
The nature of capital and it's relationship to political states is rapidly evolving due to technology and globalization. I'm not saying MMT is the whole cloth correct response to that evolution, but implying that the supply and demand for capital resembles the state of affairs even 25 years ago is myopic.
In terms of Austrian economics, Modern Monetary Theory is really just improving the past 50 years of money printing by directing some of the proceeds to go to individuals. At least it is intellectually consistent, which is more than can be said about the past few decades of Wall Street welfare plus Main Street austerity.