[ Follow Ups ] [ Post Followup ] [ Mosler dot ORG BBS ]
Posted by Uwe Burkheiser (81.210.153.20) on 10:29:28 03/27/04
Warren, in order not to be blamed for quoting out of context the following is a full paragraph from your article in
National Review Online, Feb 24, 2004
February 24, 2004, 8:46 a.m.
Debtor Nation, Without the Rhetoric
By Warren Mosler and Thomas E. Nugent
When foreigners hold Treasury securities, the U.S. government is said to have foreign creditors, and the U.S. is said to be a debtor nation. While this is true by definition, a look past the rhetoric at what the U.S. government actually owes the holder of Treasury securities is revealing. The government promises that, at maturity, the foreigner's security account at the Fed will be debited, and his bank's reserve account at the Fed will be credited for the balance due. In other words, the U.S. government's promise is only that, at maturity of the Treasury security, a non-interest bearing reserve balance will be substituted for an interest bearing Treasury security. This transaction is not a potential source of financial stress for the government. Remember, the U.S. is no longer on a gold standard meaning that the dollar is not redeemable at the government for gold or any other good or service. Holders of deposits or Treasury securities can't demand the surrender of our national parks, or any other U.S. asset.
I have highlighted the sentences to which my questions are related:
1. Let s forget the national parks. Why would a foreign holder of US deposits not be able to acquire US assets (and goods and services)?
2. How would his ability to do so affect the standard of living in the US?
3. Is it correct that the Treasury cedes future (tax-)income with the issuance of Treasury securities to the holder of that claim?
4. If tax increases are no option how will the Treasury pay for the Treasury securities at maturity? In other words is the Treasury simply able to credit the balance due on the Fed account (as outlined above) without issuing new Treasury securities?
5. Last not least: How would the standard of living in the US be affected if foreigners chose to put their savings lets say in Yen, RMB or Euro?
Thanks in advance
Uwe
[ Follow Ups ] [ Post Followup ] [ Mosler dot ORG BBS ]