this post was submitted on 07 Jun 2024
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On a serious note. Are there any countries without any national debt? Because if not then clearly capitalism is broken right?
No, if anything it shows capitalism is working. When you can increase or tighten money supply (ie when you can print and shred money) debt isn’t what you think it is. A state with money issuance powers is not a household.
I can thoroughly recommend “The Deficit Myth” book by Stephanie Kelton, if you wish to understand modern monetary policy better.
Or watch the film Finding the Money: https://youtu.be/3HRgsYSLOYw?si=g_CgqMWtC7oBCkGn
And to answer your specific question, there are countries with very low debt, but that’s usually due to either not being able to “borrow” money (again, borrowing doesn’t always mean what we would think as borrowing when you can issue your own money), being locked to another currency (Denmark is a great example - amazing economy and locked to the euro) or having a large generation of wealth (typically oil). Larger countries can issue debt more easily.
The debt we're talking about here (as opposed to deficits) is practically all bond sales, isn't it?
Yeah. It's another form of creation of money. It's a useful tool for some things, like the central bank being able to control interest rates in the economy, as shown during the recent inflationary episode.
Yes more or less, that is indeed how the central bank creates money most of the time; the government creates a piece of paper that says “IOU 100k and I’ll pay you 5% interest on it for 20 years and then I’ll return your original 100k to you in 20 years” (that’s a bond), which they sell on the open market, at auction (where the variable element is the interest rate someone is willing to accept). When the central bank wishes to increase the money supply they buy government bonds on the open market (ie from other holders, rarely from the government directly) by materialising money out of thin air.
When they wish to shrink the money supply they sell their government bonds and destroys the money that they receive from the sale.