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June 14, 2010


Ralph Musgrave

Many years ago Milton Friedman set out an economic / monetary system that involved NO NATIONAL DEBT. He was spot on. Such a system is perfectly feasible. See http://www.jstor.org/pss/1810624 .

It costs $10 to download from that site, but I think his paper is obtainable for free if you look hard enough.

How do we convert from the present system to a national debt free system? Easy. Proceed as follows.

Cease rolling over national debt and or cease creating it in the first place. Print money to make up the short fall. The effect of that alone would be too stimulatory and inflationary. Ergo mix it with a deflationary method of National Debt reduction, i.e. getting the money for same from increased taxes and/or government spending cuts.



"In the calendar year of 1948, debt interest payments were 4.3% of GDP."

Tell me, were we engaged in any large scale projects to invest money in social justice, healthcare, schooling at that time, do you know? Or did that crippling interest burden put a crimp on things?

Richard W

Nick Clegg asks:

'How will we pursue social justice with billions of pounds of taxpayers' money disappearing down a black hole every year, just to pay the interest on Labour's debt while our schools and hospitals fall apart? '

Someone ought to tell him to stop making comments like this as it makes him sound like an idiot. Yeah the coupon payments from the Treasury just disappear into a black hole. Absolutely none of the interest represent a transfer to pay pensions and annuities. Of course, the pension recipients stick the income under the mattress and none of them spend the income supporting employment for the people paying the tax in the first place. On planet Clegg, it just disappears into a black hole.


To some extent Richard W, your criticism of what Clegg said isn't the right way to go - while a good portion of government debt is own by pension funds and so on(funny how it's only BP that's allowed that defence from Cameron and the press isn't it?), but some portion of the debt is owned by people abroad.

Chris, you can take an even longer view, and make your point even better:


"but if action isn't taken to cut debt, rates will rise"

If recovery comes and investors regain confidence and flee AAA-rated government debt, sure. If recovery doesn't come, and uncertainty gets worse, and with the financial securities still crippled, then simple supply and demand will see rates fall.

Richard W

It is irrelevant that some gilt holders are overseas buyers in the context of interest payments, Alex. The gilts are denominated in sterling and the gilt-edged promise is to make coupon payments in sterling. Since the UK economy is the only place to use sterling the payments find their way back here buying UK goods, services and assets. In contrast, when Greece make debt payments to external holders of their debt in euros, those euros could end up anywhere in the euro zone.

Coach Bags Outlet

Just spent a long weekend away on two trips: one to see a friend and one to see family. Felt like I was far, far away on vacation all weekend. At a friend's who lives on Lake Michigan, we walked along the beach, collected sea glass, lounged on the deck, ordered in Chinese, started watching "From Paris with Love" but felt lost from Minute 1 so we gave up and watched Tommy Boy instead! Spent Saturday at an art show, chatting with artists and buying some art.

On Sunday, I went to see family where our two days together included playing cards, watching the Squeakquel movie while five year old Mimo dsadfanced to all the songs, eating out for my birthday dinner, going for long walks and getting to watch the three year old, five year old and twelve year old get their first swim lessons!

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