Its a system of ideas that exactly aren't empirical. It shares this with Austrian Economics.
Social constructs can be observed. They are expressed in law and then carried out. That the US uses a fiat monetary system on a floating exchange is an empirical understanding. Do you agree or disagree? Certain implications follow from the use of a fiat monetary system, including that spending must precede taxation and borrowing, and that taxation and borrowing therefore cannot "fund" spending. If borrowing does not fund spending, then the US government has no need of creditors. This should be a quite obvious implication of using a fiat monetary system, really and hardly in need of further articulation.
They cannot reject payment on issued bonds, but those bonds are renewed as well. This is how the debt is financed, if investors outright rejected payment in US dollars on new bonds (or more likely, demanded extraordinary yields) the results would be disastrous.
The debt--you actually mean deficit spending, not debt--is not financed via bond sales. The debt is financed by the US government's fiat currency, which it creates ex nihilo when it spends it by directly crediting and debiting bank accounts (i.e., via keystrokes on a computer). The government sells bonds for the benefit of investors, not for its own benefit. It has no real use for the money that investors give it. Indeed, money in the government's hands effectively ceases to exist. It has no meaning.
The US government does, however, make it appear as though bond sales finance deficit spending. And that's because when the US was on the gold standard, which limited the quantity of money it could create to whatever arbitrary amount of gold it happened to possess, the US
really did have to borrow back its own money back in order to deficit spend, because the amount of gold it possessed limited the amount of money it could create by law. That constraint does not exist in a fiat monetary system in which money is not convertible upon demand to any other commodity. Thus, the only constraints on the amount of money the government can create are (or should be) real ones, i.e., how much money should be circulating to optimize economic production?
You realize many countries have to issue bonds in other currencies because of the rates investors demand on those bonds, yes?
They don't have to issue bonds at all! (Except Eurozone countries, and that's because they gave up currency sovereignty.) This is the very point you don't get. Bond sales do not fund governments that use fiat currencies. The governments create the money directly, from nothing.
A growing economy needs inflation, not deficit spending. We can affect inflation via the cash rate between banks and the fed.
I don't even know where to start with this. Deficit spending is how the government adds net financial assets to the non-government sector. It is precisely how the government creates demand pull inflation and staves off deflation. So unless you are suggesting that something like oil shortages are good for the economy because they create inflation, then I think you are in fact saying that a growing economy needs deficit spending. If you don't understand the mechanics of this, I will be happy to explain it, but there is no difference between saying a growing economy needs inflation and a growing economy needs deficit spending. They are one and the same.
Your second sentence is not comprehensible to me and will require further articulation. Monetary policy determines the price of borrowing, but that is about it. And it is dependent upon the government's stock of debt (the accumulation of prior annual deficit spending) to do so. It does not determine the money supply. Only Treasury spending injects net financial assets into the non-government sector. And only taxing (or applying fees) removes net financial assets.
US citizens might reject the US dollar in a currency crisis spurred on by the inflation produced by pumping dollars into the economy. Treasuries use bonds because they can buy those bonds back and control the money supply very carefully, as well as bonds being illiquid. With your method you only have taxation, and that's a much, much sloppier means to affect the money supply. Not to mention the effect on the velocity of money this would have.
This is very backwards. Treasury buys bonds back? Treasury controls the money supply carefully? You really haven't the faintest idea what you're talking about. I assume instead of Treasury you mean the Federal Reserve,
but the Federal Reserve does not control the money supply (which includes money created by banks). Rather, it determines the price of borrowing, but determining the price of borrowing requires it to give up control over the money supply. The money supply is in fact determined simply by the demand for money. We should also be clear that talking about the "money supply" in this was is not just a discussion of money created by the government but also money created by banks by leveraging the government's money.
So if your rejection of changing laws to allow the Fed to directly credit the Treasury for any deficit spending is premised on your belief that either the Treasury or the Fed control the money supply,
think again.
