Elizabeth Warren On President Obama’s Relief on Student Loans

Elizabeth Warren just posted a comment on the recent signing by President Obama of student loan relief.

Proud to have a front-row seat for President Obama’s important announcement for America’s students today. Now it’s time to pass the Bank on Students Act!

I added my standard reminder as a comment.

Just remember that the United States Federal Government does not need to raise taxes to pay for its programs. The Fed proved this when they created trillions of dollars out of thin air to bail out the banks without even causing inflation.

So what is this silly idea of Republicans that every new expenditure must be “paid” for by corresponding changes to the budget elsewhere. It can always be “paid” for by the Fed creating the money to pay for it. The government doesn’t even have to borrow its own currency to pay for it.

I was just thinking that if we took advantage of this understanding of financing federal government expenditures, we would still keep track of the balance of taxes collected and dollars spent.  For control of the budget and the economy we need to know if we are running a deficit or a surplus, or a perfect balance.  However, the deficit does not need to be financed by debt.  The yearly deficit or surplus would be whatever it was, but it would not be tied to the level of Treasury securities outstanding.

The only reason to offer Treasury Securities to the public is to give people a safe place to put their money where we are even kind enough to pay them interest for taking their money out of circulation and letting us hold onto it for them.

If the public tries to park too much money with the Treasury, we could even charge them interest for our holding it for safe keeping.  After all, what sense does it make for the FED to be trying with all its might to pump liquidity into the economy, and then we take back that liquidity and pay people for giving it back to us in the form of letting them keep an account at the Treasury?  Buying Treasury securities is akin to putting money into a savings account at a bank.  One difference is that the banks use the deposits to shore up their stability while they make loans with a good fraction of that money.  The federal government does not need to be given back its own currency.  It is much cheaper for our government to make all the money it needs rather than pay people to give them back the money they have already created.

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