Yesterday, US senators voted to extend the debt ceiling in order to avoid defaulting on their loans. A panel of experts has been put together to work out a plan that will allow for more borrowing and help limit the size of future deficits. This is a big win for America! Yay democracy!
Unfortunately, the cost of borrowing money will increase due to this latest debt ceiling fiasco which is also a big win for America. Holders of US government debt are already starting to demand higher interest rates. Ouch! That means that non-essential spending here at home like education and infrastructure may have to be cut.
On the bright side, there is at least some good news for America’s creditors! The Congressional Budget Office has just announced that it will soon take over all currency issuance by the Federal Reserve, leaving the Fed free to focus on more pressing monetary matters like inflating away America’s debt. All currency denominations previously issued in $5 and below will be retired and replaced with a single new $100 bill, an odd denomination choice but a move that certainly takes care of some weighty business.
With the US Treasury’s authority over currency issuance now transferred to the CBO, there is also light at the end of this tunnel for American taxpayers. The CBO has come up with a new solution for America’s long-term debt problem by removing all taxes from government revenue and replacing them with a simple 0.0% inflation tax on everybody across the country! Nobody will have to pay anything, not even our nation’s creditors! Yay democracy!
Unfortunately, the CBO has yet to come up with a solution for funding public goods, so this solution also means that all roads, bridges, and canals will have to be sold. Oh well! But don’t worry about the creditors! They are pretty much guaranteed to win back any losses they suffer in the bond market due to America’s willingness to inflate away its debt. The CBO has done the math on this too and assured creditors that the price of their debt will remain very low throughout this process.
So, I think this is the point where we’re supposed to cheer. Or cry. Or something. The CBO has calculated that if everything goes according to plan inflation will take us all down about 95% in the long run. Which just happens to be the same number of dollars our debt We can all breathe a sigh of relief now.
The New York Times has more details on this exciting development, including some very convincing quotes from top experts!