A rather interesting US article has surfaced commenting on a report published during Clinton’s presidency when the United States government was running a budget surplus and it seemed possible that by 2012, there could be no more US government debt at all.
The world would have to do without government bonds known in US parlance as ‘Treasuries’.
The article points out that “the U.S. has been issuing bonds for so long, and the bonds are seen as so safe, that much of the world has come to depend on them. The U.S. Treasury bond is a pillar of the global economy.”
“I probably thought about this piece easily 16 hours a day, and it took me a long time to even start writing it,” says Jason Seligman, the economist who wrote most of the report.
The Americans were most worried about implications for ‘social security’ investment (largely private healthcare). For the British that would predominantly affect, not only the (now compulsory) private pension provision, but also the need for government bonds by businesses who do not trust the solvency of banks and who, unlike private customers are not covered by any guarantees, so they will purchase government bonds for the duration of keeping deposits with banks.
This all clearly demonstrates that governments that issue currency cannot go bust and that that security is known and required in certain businesses.
Now one can maintain (as I would) that except in a trade deficit, interest bearing government debt isn’t really necessary – the government could create proper state pensions for all if it so chose, or the Americans could create healthcare for all.
But it speaks volumes, I suggest, that this report from 18 years ago only came to light at all through a recent US Freedom of Information Act request.
Clearly the powers that be felt that suggesting that government debt can be a good thing would frighten way too many neoliberal horses.