Can the Fed Just Cancel the Debt?

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Debt-US Holdings 2014

QUESTION: Mr. Armstrong,

If QE is not inflationary, then why are you proposing debt-for-equity swaps? What’s the point. Why not monetize 100% of all deficits and then simply have the central bank cancel the debt?

Also, why don’t you ever entertain the idea of a free banking system? Why does government need to be involved at all in defining money? Let’s let the free market determine that.

ANSWER: You are listening to way too much propaganda. The Fed does not have everything. Their holdings are at 13% and the bulk of the holdings outside of government are offshore not domestic. Your question is really silly. What about the pension funds, life insurance companies, etc. Just cancel the debt would be the same as a default and everything is gone right down to SS which only has government debt (inter-agency).

I really do not follow your reasoning. If there is no federal debt, that will be the first step to free banking since the feds usurped the banks and ordered them to buy only government debt for WWI. Money cannot be controlled by the state. We have a floating exchange rate system which is market driven. Come on. Pegs always fail just like Bretton Woods collapsed. Where has government EVER been able to dictate the value of money? The business cycle always defeats them.

Think through what you are saying rather than just mouthing what others tell you who have zero real world experience and are typically selling you something. The Fed cannot buy everything and then cancel it. That is just as absurd as issuing 18 $1 trillion platinum coins as if that 34% of foreign holdings would not panic and sell.

Honestly, these are nonsense put forth by people with no practical world experience who are unable to see the ramifications of what they say. These types of proposals are like writing a check to yourself for $1 billion dollars and claiming you have assets of $1 billion in receivables.

Central banks are totally screwed. They lost control and all they can do is pretend to be driving something they do not even know how to deal with any more.