Perhaps you can show us successful historical references where your scheme actually was successful.
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Uhhh … the U.S.? What do you think QE2 was? The Federal Reserve effectively printed money and used that money to buy U.S. debt. Yes, presumably the U.S. Government has to pay interest on that debt to the Federal Reserve, but the Fed returns all its profits to the Treasury, so that debt was effectively monetized. There was concern at the time that QE2 would cause inflation to spike, but the core inflation rate has remained below 3%.
The only difference between what I proposed in the first post and what the Fed already has done is that the Fed and the U.S. Government would officially announce that the Treasury bills that the Fed bought via QE2 would be retired and thus the deficit would officially go down by that much ($1.5 trillion?).
However, officially announcing that the QE2 debt is being retired is just semantics. So long as the Fed holds that debt, it is effectively retired.
I just find it interesting that I propose what amounts to a semantic difference in what was already done via QE2 and suddenly everybody and their brother goes hysterical and starts throwing out big words like ‘Zimbabwe’.
It just goes to show that the hysteria over the deficit is way overblown. The government should be focused on fixing unemployment and the large child poverty rate (20+%) instead of focusing on the deficit.
