“Debt-Free” Dollars? You Must Mean “Spending Without Bonds” – I Hope.

A bit of sarcasm today to get a point across to the general public as well as some students of MMT. If you teach and you are good at sarcasm and can deliver it without seeming to be a complete jerk, which means applying it in a beneficial way to advance understanding, by all means use it. I find it a great learning tool. Use comedy too. Make certain that your sarcasm is funny. Everyone likes to laugh, although not everyone has a sense of humour. So, if you get a majority of the class laughing, you can be certain that a majority of the class is both listening to you and probably learning as well. For a professor, associate professor, or even a high school teacher, laughter provides you with excellent feedback, letting you know that students are paying attention. That is, unless you’re unaware that your fly is down, or you have something gross hanging from your nostrils. In that case, I really can’t help you ascertain the effectiveness of the feedback you’re experiencing. My advice would be to make sure your fly is up and check the mirror prior to any lecture or classroom session.

At some point, we’re going to have to eliminate from our thinking the word “debt” as it relates to the cumulative deficits of sovereign currency-issuing governments. I do not mean to wax rhapsodic, but, O! For the day. Attend to my speech thine ears that it bloweth not hither and thither like a leaf carried upon a cold, desolate autumn wind, but that it might find some warm summer’s purchase, Hear me:

The word “debt” sucks.

The word is problematic when discussing cumulative deficits. It is an accounting term. Accounting means to “account” for something and to do so, accountants, well, they count. They’ve got this neat little string of numbers that they’ve added and subtracted, wonderfully organized in such a way that causes their clients to just give up hope and trust them. If you’re a chartered accountant, I do apologise should it seem that I am reducing your work to a juvenile exercise, or that I am implying that you are untrustworthy. It isn’t my intent. I’m simplifying to make a point. If, however, through your work, you’ve been convicted and sent to prison, I do not apologise. In that case it is clear that your conscience matches your talents, therefore, I am insulting you. Anyway, the term “national debt” is meaningless as it relates to governments such as the US, UK and Australia. Essentially, these governments are creating a bunch of “tickets” out of thin air, giving them to private entities enabling them to access goods and services, taking a few tickets away and then saying, “Hey, there are still some tickets in private hands. Whoops. I guess we’re in debt.” That doesn’t make sense and you know it. First, I would like to address the fiscally conservative and frightened public, if I may, then proceed to students of MMT. Naturally, any scorn that you detect in my sarcasm is directed at fiscal conservatives, that they might be shocked into thinking for themselves for once.

Consider your savings account. Do you have one? If not, that’s ok. I’m certain that you know what one is. So, you’ve got some dollars in that savings account and let’s say that account pays you interest. Perks! So, let me ask you two questions. First, count up every dollar in that savings account, then tell me: exactly how far in debt are you by having dollars in that savings account? Excuse me? Did you say “that doesn’t make any sense”? Exactly. It doesn’t make any sense. That’s your savings. Bear with me, I’ll explain what I’m getting at in a moment. But now, let’s shift gears and look at this savings account in another context: the context of hypocrisy.

Aren’t you worried that your bank will go broke paying you interest? Are you really willing to mortgage the futures of all these innocent children of the people who work at your bank? I mean, think of the children, right? What’s that? You’re not worried? It’s absurd, you say? Oh, I see now. Then let it be publicly known that you believe it is fine for a private entity that can go broke to offer savings accounts that pay interest, but let the federal government do it and by God, that is a mortal sin. We won’t stand for that, will we? “Stop. What are you talking about?”, you might ask. No, I shan’t stop. Let us push forward, even deeper into the hypocrisy.

Here we see a corporation. It issues corporate bonds. It pays the holder of its bond interest. The bonds are traded on Wall Street. Freedom. Liberty. “’Murica”. Clearly, this is just fine and dandy. You are giving a private entity, which can go broke, your dollars and you feel absolutely no torment nor the slightest bit of concern. You call it investing! Let the federal government issue some bonds and you scream, “Debt, debt, debt! Oh my God, just look at the debt! Witness the dangerous national credit card swiping to and fro! Mortgaging our children’s future. Shame! Think of the children!”

“Oh my God! Sweet Jesus, won’t anyone please think of the children?”

What about all of the children of the employees at the corporation whose bond you hold? Isn’t the corporation mortgaging the future of their employees’ children? “Oh, that’s absurd”, you say. “It’s only mortgaging the future of children when the federal government issues bonds.” Uh-huh. Do continue. This is the least intellectually fascinating conversation that I’ve ever had.

“No reason to get sarcastic.”, you might say. Well, yes there is and let me tell you why.

Ever bought a treasury bond? If you have, then why would you “mortgage our children’s future”? Don’t you “care about the children”? If you’ve owned a treasury bond, you’ve no right to complain about the national “debt”. By the way, does your employer hold treasury bonds? If so, why would you want to work for such an unpatriotic, insensible, simply “un-‘Murican” company that is willing to “mortgage our children’s future”? As former Texas Senator and so-called “economist” Phil Graham would say, your employer is causing the federal government to swipe “the national credit cord!” I say, don’t be a hypocrite. Resign now and find a job at a firm willing to “think about the children”.

[For those who are wondering – yes, I am laughing as I write this.]

If you haven’t ever owned a treasury bond, it’s still the same. You’ve no right to complain about the national “debt”. You’re just not a hypocrite in the context of contributing to the “coming financial Armageddon” (I’m laughing again), but you are guilty if you’ve had any savings accounts that pay interest and not verbally scolded your bank for allowing you to have one. At that point, you’re just as much of a hypocrite as the people who have purchased treasury bonds.

“I demand that you explain this nonsense you’re on about right now, Mr. Dr. of Nonsense! Why are people hypocrites for complaining about the national debt?”, you might say.


Because treasury bonds are nothing more than a bunch of savings accounts that pay interest and they are held at a really big bank called the Central Bank. In the US, that would be the Federal Reserve. In Australia, the RBA. In the UK, the Bank of England. And if you add up all cash, dollars in reserve accounts and dollars in these savings accounts, you will find that it equals the so-called “national debt” to the very last penny.

So, not hypocrites, but “unwitting” hypocrites, I should say. I do apologize.

Look, when we see the national “debt” perpetually rising on that stupid “debt clock” that should be dismantled and burnt, melted down and then formed into something that is actually useful to humanity, all it is really doing is keeping track of every dollar that the federal government has issued and decided to leave in private hands, regardless of the totally ridiculous meaning it tries to apply to the record keeping.

At this point, I am now also addressing MMT students who demand so-called “debt-free” dollars.

In this context of “the national debt”, bonds or no bonds, the “debt” will keep on rising when the federal government deficit spends. If you are confused by what I am saying, then clearly you need more time studying and less time proposing solutions. I am not being a big meanie here. I am simply telling you that you cannot possibly read one or two books, a few articles and then assume that you are ready to contribute to development. So, let’s use an example to clarify.

Consider a guy standing at a free throw line shooting baskets. Each basket he makes, we count as one and each that he misses, we do not count. Let us assume that he shoots 25 trillion times but makes only 19 trillion baskets. All we’ve managed to accomplish as observers, is to count to 19 trillion.


However, unbeknownst to the general public and some students of MMT as well, that is exactly what the national “debt” is. It is also what that ignorant “debt clock” is doing – counting dollars. The federal government has shot many trillion basketballs into the private hoop, then went around cleaning up a few trillion of the basketballs, leaving 19 trillion basketballs for everyone to use until it comes back and takes away a few more.

A different way to look at it is points. So far, the NBA team, “The Private Sector” has scored a whopping 19 trillion points. The federal government is Madison Square Garden. The economy is the basketball court. As the issuer of points, the federal government cannot run out of points and must supply the points necessary for the game to be played. If after a Lakers/Pistons game, we discover that the total points scored between the two teams is 182, does that mean then that the Staples Center is somehow in debt to someone for 182 points? Does the Staples Center have to borrow points from Madison Square Garden when its running out of points? Can it even run out of points? No. The notion is absurd.

The dollar is a point. $200 is 200 points. The federal government provides the points making it possible for you to play the game.

Given the fact that the national debt is all cash, dollars in reserve accounts and dollars in securities accounts, the government can deficit spend without bonds all it wants and we can still continue adding up all cash and dollars in reserve accounts without let or hindrance. But the ability to do so is apparently so worrisome to some people studying MMT that they are demanding we find a way to issue “debt-free” dollars. Hopefully they mean “issuing dollars without bonds”, which I support, because otherwise, they need to understand that the dollar is the federal government’s liability. If you are demanding a dollar “debt-free”, meaning “no longer a liability of the federal government”, then you are not getting this point. In this context, a “debt-free” dollar is a non sequitur. There are instruments of “debt”, such as treasury bonds and the dollar itself and then there is this stock of the government’s liabilities sitting within the private sector that we choose to call the “national debt”. They are two different concepts entirely.

As far as “debt” instruments, whether it’s a dollar or a treasury bond, which is nothing more than a dollar that pays interest, it’s all debt. These are the liabilities of the federal government. In this context, you cannot possibly have a “debt-free” dollar. If that is what you are asking for, sit down and continue studying. You’re not understanding and your insistence on social media that we need “debt-free” dollars which are “no longer a liability of the federal government”, is only confusing those who are trying to learn.

As to the stock of liabilities point, the cumulative deficits of a national government that issues its own sovereign currency is a stock we ignorantly refer to as “debt”. It is not an instrument of “debt”, it is a stock of instruments of “debt” with an irrational label. Whilst I’m on the subject of stocks and flows, as an aside, I cannot tell you how many economics students that I’ve encountered who confuse stocks and flows. For those reading this article who are confusing the two, a federal deficit is a flow and the national debt is a stock. Print that out and paste it to your refrigerator so you don’t get confused again. Deficits are dollars flowing into private hands from the government and the sum total of all deficits that remain in private hands after taxes is the stock of dollars that private entities have net saved. We then, for stupid reasons label that stock, “the national debt”. The word “debt” is errant and does not describe in any way that stock of net savings. We might as well label it “The National Fruity Pebbles”:

“Where? I don’t see any cereal around here.”
“Oh, trust me. It’s there lurking in the shadows.”

Or, let’s just make up a word and call it “The National Clerm”:

“What’s ‘Clerm’?”
“I do not know, but it’s destroying our children’s future.”

Fruity Pebbles and “Clerm” (whatever the hell that is) are about as useful for defining the stock of dollars in private hands as the word “debt” is. If private entities have net saved this stock of dollars, clearly it is some sort of savings. It is the national savings. In fact, it is both the national and the rest of the world’s net savings in dollars, not the national “debt”; hence, the savings account example.

Now, I speak again only to the general public.

As the owner of a savings account, who are you in debt to exactly by having a savings account? Nobody. And since the federal government, which issues dollars and has an infinite supply of dollars on hand, denominates its so-called “debt” only in those dollars, we must ask, who then is it in debt to? Nobody. You could say that it is in debt to you, but then again, it first had to create dollars out of thin air then give those dollars to you, so you could make that claim. Furthermore, it can also tax them from you, so you are indeed a very strange creditor by allowing the entity who supposedly owes you dollars to just seize more dollars from you.

In short, if you fancy yourself as some sort of a “dollar creditor” to the federal government, then you’re not doing it right. To be a creditor, you’d have to actually lend the federal government something which it does not create and issue. Were “the national debt” denominated in Japanese Yen, we’d be having a different discussion. But, it’s not. It is denominated in the dollars that only the federal government issues, so we are having this silly discussion.

Now then, back to MMT students.

I do applaud your efforts to help us find a way to end bond issuance. But frankly, this area has already been explored. Look into ZIRP, IOR and the Trillion Dollar Coin. And further, ending bonds and just issuing currency (which is how we should be doing things) simply will not stop what is essentially nothing more than a counting exercise and unless you change what you label that counting exercise, or just say, “Forget it! Let’s stop keeping track”, it will be referred to as a “debt”.

The “debt” will just keep on growing and growing, even though we’re issuing so-called “debt-free” dollars and orthodoxy and members of the public will keep on keeping on with some other nonsense, until, in our own minds, we simply eliminate the term “debt” from association with the cumulative deficits of sovereign currency-issuing governments and urge others to do likewise. You may get rid of bonds, but the word “debt” will remain to harass you to no end unless you simply disregard the term.

In all realty, what I hear when you ask about issuing “debt-free” dollars in connection with “bond-free” spending is, “Can we get the President to order Treasury to issue “debt-free” dollars, so we can stop counting the dollars being added to the non-government sector? It’s urgent that we do so to stop the public’s confusion!” I do not hear, “Can we get the President to order Treasury to issue “debt-free” dollars, so we can end the national debt nonsense.” Yes, he can mint a $100 trillion coin, but those dollars will still be debt instruments and no, we can’t stop counting dollars added to the non-government sector, because accounting and math. Even if we mint the $100 trillion coin, which was and still is an excellent idea by the way, the $100 trillion would still be a liability of the federal government; 100 trillion debt instruments waiting to be spent and if it spent $5 trillion of it, then “the national debt” would now be $24 trillion instead of $19 trillion. It won’t stop the tallying of dollars that remain as the stock of net savings of private entities. If you, therefore, insist that we find a way to stop adding up the national savings, then I would ask you also to stop keeping track of what you personally have in your bank account. Why bother, right? So, what we can do is mint the coin, or we can maintain ZIRP and stop issuing bonds and start calling the national “debt” the national savings, which is what it really is. I will sum up the entire point of this article as it relates to students of MMT in one sentence, and I do wish to be clear:

You are assuming that the word “debt” refers only to bond issuance and thus, you are entirely confused.

Pro tip: if, by “debt-free” dollars, you mean to say “without bond issuance”, then simply say, “Bond-free” deficit spending.

The nonsense needs to stop. The problem is the word “debt” being applied to the stock of net savings. You need to eliminate the word in your mind from association. Frankly, if you were to eliminate bond issuance and just allow the federal government to net spend like it does anyway, the result would not be happy days. It simply would not be what you hoped for. The public, through the influence of orthodoxy, would simply shift its focus from “the national debt” to even more ridiculous claims of “money printing” and hyperinflation and then you’d have that to deal with, except this time, it will be much louder, much more annoying and much more frequent that it already is. Instead of hearing politicians discussing the national debt crisis, you’d only hear them discussing how our continued “money printing” will soon rain hyperinflation down upon our children.

“Oh my God! Sweet Jesus, won’t anyone please think of the children?”

Eliminating bonds will not stop mainstream nonsense. You might have been able to keep the ants away from the cole slaw, but now they’re having a go at the potato salad.

I’m an advocate for ending bond issuance. ZIRP and spend, is my motto. Hell, let’s mint the coin too and end all of the nonsense about the government going broke. Bonds are nothing more than corporate welfare; public funds used by corporations to manage risk and engage in speculative investment. But sadly, even without bonds, it won’t eliminate all of the nonsense out there. You think that without bonds, Austrians will suddenly see the light? I’ve got really bad news for you. And the dollar will still be a “debt” instrument and though the government is no longer paying interest to bond holders, the government will keep on deficit spending and the “debt” will just keep on growing. Stocks and flows, you know. Deficit is a flow, debt is a stock. The “national debt” is the stock of dollars that everyone outside of the government sector has in net savings.

The term “debt” needlessly confuses and frightens people when it refers to cumulative deficits. But counting numbers should not pose any significant threat to the sensibilities of the general public. Because of the useless and inaccurate term “debt” when referring to the stock of dollars in private hands, the absurdity from everyone, both the general public and students has become so thick in some of these posts that I’ve read, that they really need to be put on an episode of Mystery Science Theater 3000, where Mike, Crow and Tom can just have at it. When you think about it, people treat this long running, intolerable B movie called “The National Debt” produced by Washington DC as an Oscar-winning documentary.