It has had a resurgence in recent times but has never been the mainstream view. This view is known as “Ricardian equivalence” because it was first raised–and swiftly rejected–by the English economist David Ricardo in 1817. Whether the accumulated debt is paid off or interest is paid on it forever makes no difference. On this view, when the government runs a deficit and issues new debt, the private sector understands that this means that taxes will be higher in the future and makes provision for it by adjusting savings. Or you could just keep paying interest and never pay off the loan. You could pay it now, or you could get a loan at, say, 10% interest and pay off the $110 loan next year. One view is that government debt doesn’t matter at all. In looking at the effects of this, I’m going to sidestep three issues to keep to a vaguely sensible length: (i) Whether it’s advisable to run deficits to stimulate a sluggish economy (ii) whether it’s desirable to have an official bond market, a by-product of government debt and (iii) whether the problems of measuring what’s going on in government accounts are so severe as to make it impossible to assess the generational effects of budgetary policy. As long as the government doesn’t repudiate the debt–unlikely for the U.S.–future taxes will have to be higher to service it. The key point is simple: Government debt is future taxation. If I may take the liberty of ignoring the paranoid element, you want to know what’s the deal with (i) having existing debt and (ii) adding to that debt by running a budget deficit. (We note in passing that printing money to pay off debt would amount to a large tax on the holding of money.) If the coin disappears into the hands of collectors, the government makes a clear profit at no obvious expense to anyone. If the government replaces a lost coin, it’s spending a small amount to grab the (tiny) increase in value that would otherwise accrue to holders of money, the theory being that if money is withdrawn from circulation, the value of what’s left rises. If you hand in your mangled quarter and the government swaps it for a shiny new one, clearly that’s cost the government about five cents (less scrap value). Whether it raises revenue for the government depends. Issuing new coins is not “making more money” in any of these cases, so it’s not inflationary. And people collect them–125 million people are collecting the State Quarters, according to the Mint. They get lost behind sofas and down drains. its indentured servitudeness? pfm, Albuquerqueīefore we get to your “real question,” pfm, let’s deal with the coins. taxpayers paying interest (we must be paying that interest to someone)? Or is it some entity like the World Bank who prefers that a country stay in debt so that there is essentially indentured servitude by a whole country, making that country’s money worth more-in other words is the underlying wealth of the U.S. to maintain a national debt? Is it the politicians who insist that a national debt is not a problem because they are the ones who are profiting from U.S. What’s up with that? The real question I have, though, is about the national debt. Mint is telling me that they are making money based on nothing more than what it costs to manufacture the money. In a previous column Cecil explained why the Federal Reserve does not just make more money to pay off the national debt as: “If you double the amount of money in circulation without increasing the amount of underlying wealth, all you’ve done is make your currency worth half as much.” But the U.S. The cost to manufacture a quarter is about 5 cents, providing a profit of approximately 20 cents per coin. Government will make money on the 50 State Quarters Program. The FAQ and answer is: What will the 50 State Quarters Program cost U.S. At that site I perused the FAQ section and found one of the answers troubling. Mint website to find one of the state logos of the new quarters being put out. Dear Straight Dope: I recently visited the U.S.
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