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Comment by pdonis | Hacker News Reader

Characterizing the problem as "debt" is misleading. The real problem is the government printing money. What we call the "national debt" is just government printed money where whoever "has" it can only draw on a portion of it (the interest) until a certain date (the maturity date of the government bond). And "paying back" the "debt" just means moving the government printed money from one account (the "bond" account) to another (the "bank account" of whoever gets the interest or sells the bond). The actual problem has nothing to do with "not being able to pay back the debt"; the government will just print more dollars (or more precisely, just move more accounting entries from the "bond" account to "bank" accounts). The actual problem is how printing money skews the economy and transfers wealth to the financial system from everyone else.

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> The real problem is the government printing money. What we call the "national debt" is just government printed money […]

The vast majority of money that is in the economy is created by banks with credit creation:

* https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625

The government, especially in the US, hasn't had a money printer for decades.

> The vast majority of money that is in the economy is created by banks with credit creation

That's the way it's described, but banks in this respect are only acting as agents of the government. They can only "create" money under rules prescribed by the government, and the government, through the Fed, controls how much of it they can create.

> The government, especially in the US, hasn't had a money printer for decades.

Whether I take this literally or metaphorically, it's false. Taken literally, the government does still print bills. Taken metaphorically, even apart from what is discussed above, the government, through the Fed, has done "quantitative easing" and other things that involve direct manipulation of the money supply, recently enough to make your claim false.

As far as I understand the federal reserve is not technically part of the government but a private institution. It has shareholders not unlike a public company and those shareholders are the big banks like JPM. I'm not sure if those are the same as the so called primary dealers or if there is just an overlap. You are correct that the actual printing of physical cash is done by the government on behalf of the fed, I think by the treasury.

> As far as I understand the federal reserve is not technically part of the government but a private institution.

It's established by Federal law; its Chairman is appointed by the President. It walks like a duck and quacks like a duck; it's a duck.

> It's established by Federal law; its Chairman is appointed by the President.

It's amusing that you think that the Fed is an instrument of the government, but other conspiracy theorists think it is an instrument of private banks:

> Griffin then turns his attention to the secret meeting that took place on Jekyll Island in 1910. He reveals how a small group of powerful bankers, including representatives from J.P. Morgan, Rockefeller, and other influential figures, devised a plan to create a central banking system that would serve their own interests. They realized that they needed to present the Federal Reserve as a government entity to gain public support, despite the fact that it was, in essence, a private institution.

* https://medium.com/@casuallifellc/the-creature-from-jekyll-i...

* https://en.wikipedia.org/wiki/G._Edward_Griffin

> other conspiracy theorists

The Federal Reserve Act of 1913 is not a "conspiracy theory", it's a fact. The events leading up to it are not a matter of serious dispute as far as I know. Of course the government and the Fed will give you a very different interpretation of those events, but their interpretation doesn't stand up to actual scrutiny.

> it is an instrument of private banks

It is both; it is part of the government (for the reasons I have already given), and it transfers wealth to private banks and financial institutions from everyone else by printing money. The private banks were tired of the government coming to them for a bailout every time there was a financial panic (the Panic of 1907 being the most recent one at the time), so they convinced Congress that creating a central bank would stop the panics. (It didn't, of course, but they convinced Congress that it would.) With the Federal Reserve in place, banks and financial institutions, as I've said, got wealth transferred to them whenever the Fed printed money, and also the burden of recovery from financial panics was transferred from the banks to the taxpayers (a recent example of course being the bailouts of 2008).

> That's the way it's described, but banks in this respect are only acting as agents of the government. They can only "create" money under rules prescribed by the government, and the government, through the Fed, controls how much of it they can create.

And the airlines and aircraft makers can only fly under rules prescribes by the government, specifically the FAA. That does not mean that they are acting as agents of the government.

You can only drive a car under the rules prescribes by your local traffic laws. That does not mean you are acting as an agent of the government.

Yes, there are rules. But following rules passed by government ≠ being (an agent of) the government.

The government did not create airlines, aircraft makers, cars, etc. It created the Fed through Federal law, as I responded elsewhere in this discussion.

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