Posted Mar 31, 2015 by Martin Armstrong
QUESTION: sure enjoyed your conference via livestream and thank you for your blog site as it is very informative.
I understand the swap of federal debt for equity in the form of coupons. then the coupons will be redeemed as cash from the treasury. what method of funding the coupons will the treasury use? I assume print the money?
ANSWER: That is the very crux of the issue. Debt is the same as money except that this pays interest. There is NO distinction between borrowing and printing if the debt is collateral for anything. There use to be a difference when you could not BORROW using government debt. Under those conditions, the money supply did not increase. When that changed, hello, where is the difference between printing and borrowing from a money supply perspective?
So honestly, this type of swap would REDUCE liabilities of interest and would therefore reduce the money supply for they would swap the coupons for the debt ELIMINATING interest payments. This would contribute to the needed creation of money to fund government without taxation at the federal level. There is no alternative for as long as government THINKS it needs tax revenue it will continue to destroy the economy and create a crater of deflation until we have a revolution.
This proposal will not prevent the business cycle, but it may simply help to temper the swings like Joseph and the Pharaoh.