Damn that guy was smart.
I’ve been taking a good deal of heat over on Hit and Run lately — talking about neo-Keynesian finance and MMT — from libertarians who are 100% sure that what they think to be true about debt and deficits is actually true, and that therefore “I am living in an obvious fantasy world.”
In a couple of posts, which I’m not going to bother to link here (you can always search Reason.com for Draco), I argued that it was completely unnecessary to ever “pay down” the US debt, and that those who stayed awake at night worried about our inability to do so were fools. I was, of course, dismissed as an utter crank. A couple of them actually went so far as to read my post about eternal deficits before pronouncing me a madman. I suppose that’s progress of a sort.
Tonight, I wandered over to Warren Mosler’s blog and found this very enlightening, and very radical, post. In it, Mosler dissects the thinking of many well meaning but ill-informed economists and public servants (like John Boehner) and answers them in ways that would only make sense to those educated in the operational realities of US deficit finance and the federal reserve system, and would seem radical or just plain crazy to everyone else. It’s very educational, and even amusing in a depressing sort of way, when coupled with the mandatory readings at http://www.moslereconomics.com.
In that post, Mosler quotes a Business Week article by David Lynch, which, in part, talks about Alexander Hamilton’s intention regarding the US debt in the early days of the Republic:
Unlike today’s debt critics, Hamilton “had no intention of paying off the outstanding principal of the debt,” historian Gordon S. Wood wrote in “Empire of Liberty: A History of the Early Republic 1789-1815.”
Instead, by making regular interest payments on the debt, Hamilton established the U.S. government as “the best credit risk in the world” and drew investors’ loyalties to the federal government and away from the states, wrote Wood, who won a Pulitzer Prize for a separate history of the colonial period.
So, founding father Alexander Hamilton never had any intention of actually paying down the principle on the US debt. Was he crazy, or crazy like a fox?