Using Past QEs to Pay off Our National Debt
The PlanTax the balance sheet of the Federal Reserve Bank so that when banks repay loans, the funds pay off the National Debt. Basically, we are converting all QE's to paying off the debt. I do not endorse starting new QE’s for this or any other purpose; however, the damage was already done. |  |
 | Definition of 'Quantitative Easing' Money that is not backed by things of real value is created thus devaluing all existing currency. This money buys bonds, which in turn frees other capital to buy more things. |
Monetizing the Deficit Taking the newly created money and just paying money to the government to cover the deficit. |  |
 | How Are They the Same? Creating unbacked-up money devalues all existing money whether buying mortgage-backed securities, bonds or just giving the money to the government. They will both leave the same amount of capital in the system, however monetizing the debt leaves The US with less overall debt. |
| Contracting the money supply also does great harm. QE has to be repaid where monetizing the debt does not. Like other forms of taxation, creating unbacked-up money creates the hidden tax of inflation. Capitalism takes capital and inflation taxes capital thus resulting in less capital. |  |
 | The Bad Effects Retirement planning is essential and people's knowledge that the dollar they save today will be worth a small fraction when they spend it results in fewer retirement savings. Long term projects, contracts, and employment agreements are very disrupted by the changing value of the currency in that contract. |
Fed’s balance sheet The Federal Reserve Bank balance sheet (unbacked-up money that was lent out) is uncertain. However, I believe it is around the 4 Trillion Mark. |  |
 | Explaining How Contracting the Money Supply is Bad When expansionary money policy (QE) creates inflation, the damage is done. It would be an interesting study (a very difficult study) to determine how long it takes. |
| I believe that the damage is started when the market thinks QE will happen a year from now and there is a steady progress of damage done all the way through. Once the damage of inflation is done, it is not repaired by doing more damage created by deflation. |  |
 | Taxing All the Repayments Would Keep the Monetary Supply Neutral Some could argue that taxing money would take it out of the system and I would counter that a tax does not take it out. Loans to the Fed must be repaid, that money would be taxed and applied to the debt, and thus less money will be needed to cover the debt, creating a neutral position. |
| Currently, $17.1 Trillion needs to be lent to the US government. Money taken out of the Fed’s bond-buying program will mean the same money not having to be loaned to the government to cover the debt. |  |
 | Stopping the Madness |
