The Myth of the US Federal Debt Ceiling
Executive Summary
- Debt ceilings are a scare tactic that supports private banking interests attempting to set arbitrary limits to the federal debt.
- The concept ignores the ability of governments to create money.
Introduction
Debt ceilings are hotly debated topics. Those individuals who do not take federal debt “seriously” are called “irresponsible” and passing on our debt to “our children.”
The Reality of the Federal Debt and Debt Ceilings
Debt only exists in countries where a private central bank has assumed the government’s money-creation function. When the central bank is public, there is no such thing as debt. However, even under conditions of a private central bank (as in the Federal Reserve of the US), debt ceilings still make no sense and are based on false assumptions on how central banking works.
The illusion of the debt ceiling is explained in the following quotation.
“These include debt ceiling rules, Treasury-overdraft rules, and restrictions of the Fed buying securities from the Treasury. They are all imposed by a Congress that does not have a working knowledge of the monetary system. And, with our current monetary arrangements, all of those self-imposed constraints are counterproductive with regard to furthering public purpose. All they do is put blockages in the monetary plumbing that wouldn’t otherwise be there, and from time to time, create problems that wouldn’t otherwise arise.”
Source: Mosler Economics