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Most Recent Stories

IS THE FEDERAL DEBT UNSUSTAINABLE?

Here is a must read paper by Professor James Galbraith.  It thoroughly debunks the ideas that have led to the beliefs that the US government’s balance sheet is even remotely comparable to that of a household’s and this idea that our Federal debt is “unsustainable”:

“Some people fear that there may come a moment when the government’s bond markets would close, forcing a default or “bankruptcy.” But this betrays nonunderstanding of both public finances and debt markets. The government controls the legal-tender currency in which its bonds are issued and can always pay its bills with cash. Apart (possibly) from the self-imposed politics of debt ceilings, a US government default on dollar bonds is impossible, and the word “bankruptcy”— which is a court proceeding to protect private debtors from their creditors—also does not apply.”

 

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