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 John Reimann  wrote:

> As far as budget deficits: yes, they do matter... in almost all countries.
> The laws of the market dictate that if there is an increased supply of a
> currency and it does not correspond to an increase in production on which
> to spend that currency, then it will require more of that currency to
> exchange for products. Internationally it means that capital will tend to
> leave that currency. In other words, inflation.
> The US is in an exceptional position because of the role of the dollar in
> international trade and finance. The fact that to this day the US economy
> is still the strongest and most stable has made the dollar universally more
> desirable. By floating increased amounts of dollar-based debt, what the US
> is doing is making international capitalists pay for their spendthrift ways
> at home. That cannot continue forever, especially as US capitalism is being
> challenged by Chinese capitalism.
> Yes, debt does have to be repaid. Or, put another way, the US government
> does have to pay back those loans/bonds and T notes, or at least there has
> to be confidence that it will do so.

If the deficit (and debt) rise in step with production --- (a fairly stable
debt/GDP ratio) then according to John there seems to be no problem.  WHY,
then does he insist that the debt has to be repaid.   T-notes, bonds, etc
can be rolled over.   Dollars borrowed to fight the American Civil War have
been rolled over ever since ---same with the dollars borrowed to finance
WWII or LBJ's escalation of the Vietnam War --

The idea that inflation is an inevitable outcome of surges in deficits (and
therefore the total outstandiing National Debt) --- say between 1981 and
1990 --- is refuted by the experience of the 1970s inflations (very little
deficit spending in the US) and the 1980s conquest of inflation (in the
face of surging deficits).

Or what about the big run-up in deficit spending since 2008?

It is of course true that at some point if the deficit as a percentage of
GDP gets "TOO HIGH" international buyers of the nation's debt will stop
buying --

So what happens in that case -- well in Japan, the Japanese Central Bank
has bought up most of the gigantic national debt that has accumulated there
since the 1990s ....

I am not an aficianado of MMT but the basic idea that a national government
that borrows its own currency can do so without damaging any long run
macro-economic processes appears to me to be borne out by history ...
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