Clarity please

The chart below is from the U.S. Treasury.

chart 02

“Intragovernmental holdings” is $5.3 trillion that various U.S. states and U.S. federal departments have deposited in Fed accounts. It is correctly called “holdings” (i.e. assets) because it is on deposit.

An additional $13.8 trillion is on deposit from entities other than U.S. states or the U.S. government. This money too is “holdings” (i.e. assets) — but the Treasury calls it “debt” in order to deceive you. Yes, the $13.8 trillion is a debt, since it is on loan; but it is also a deposit, a holding, and an asset. No individual will ever have to pay a penny on any of these $19 trillion in assets

Still, if you want to “pay down the debt,” you can do it online here, or else you can mail a check to

Attn Dept G
Bureau of the Fiscal Servic
P.O. Box 2188
Parkersburg, WV 26106-2188

Bank of America supposedly has $4.549 trillion in deposits. If you want to “pay down that debt,” then be my guest.

chart 03

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Anyway in this post I want to say that most articles about economics are meaningless, because their authors refuse to define their terms. In most cases this is intentional.

For example, most articles use the term “debt” without specifying what the “debt” is, who the debtor is, and who the creditor is.

Here’s an example. The words in blue are mine…

Was Andrew Jackson the only U.S. president to bring national debt to zero?

Former presidential candidate Ben Carson says that Andrew Jackson was the last president to balance the budget and eliminate debt.

What debt? Who owed it? Who was the creditor? Are you talking about private debt or public debt (the so-called “national debt”) ?

Most people are annoyed by questions like these. “You’re nitpicking with details! Why can’t you just accept what they say?”

Why should I? Without clarity, logic, and details, our statements are meaningless.

Many presidents have presided over balanced budgets, which is when the government takes in more revenue than it spends, leading to no net borrowing in that year. Borrowing from who? Who is the debtor? Who is the lender / creditor?

A balanced budget doesn’t necessarily mean no debt, because old debt can carry over from previous years. And because money deposited at the U.S. government’s central bank is separate from money created by the U.S. government for spending. Jackson was, in fact, the only president to preside over a total elimination of all remaining debt while having a balanced budget. “Debt” again. What debt? Who owed it? Who lent it?

However the debt was already on its way down, and by the time Jackson took office, the amount of debt was trivial. What debt? Who owed it? Who was the creditor?

It is nonsense to merely say, “the debt” without clarifying the context. If we say the USA is “in debt,” does we mean the U.S. government is in debt, or society is in debt, or what? Do we mean private debt or public debt?

Jackson, who served from 1829-37, was an ardent supporter of keeping banks and government separated. How does that serve as a check on the power of bankers? He believed that banks would have undue influence on government, and he was hell-bent on eliminating the debt. What debt? Who owed it? Who was the creditor?

(Jackson was also deeply skeptical of paper currency, which adds some irony to the current debate over his position on the $20 bill.) Whose paper currency are you talking about? Why was Jackson skeptical of it?

Jackson took office in March 1829 when the debt was about $58 million. What debt? Who owed it? Who was the creditor? (In today’s dollars, that amounts to about $1.4 billion. The total public debt outstanding today is $19.2 trillion.) 

Okay, the article is now talking about the public debt (or the so-called “national debt”). Is this what the article was talking about all along? They want us to worry about the public debt, which is trivial, and submit to private debt, which is killing us. Which of these debts (public or private) did Jackson supposedly “pay down to zero”? The article doesn’t say.

Jackson watched that debt scale down to zero in 1835. According to the Treasury Department, the debt remained close to zero when Jackson left office.

Just now the article gave a U.S. Treasury link. It too is vague. Example:

President Andrew Jackson was suspicious of banks, and did not trust the paper money they issued. This needs explanation. In 1837 he liquidated the Second Bank of the United States, returning the government’s original investment plus a profit. Actually Jackson vetoed the early renewal of the bank’s charter. What was the government’s “original investment” in this bank? This resulted in a huge government surplus of funds. What funds? At this time the U.S. government did not issue its own currency. The funds had to come from the central bank (The Second Bank of the United States). But if the central bank was defunct, then what was the nature of these “funds” the U.S. government had? And which bank held these funds? More clarification is needed.

In 1835, the $18 million budget surplus was greater than the total government expenses for that year. In what currency? And where did the currency come from? By January of 1835, for the first and only time, all of the government’s interest-bearing debt was paid off. To whom? Congress distributed the surplus to the states (many of which were heavily in debt). To whom? And in what currency was this “surplus” issued? The Jackson administration ended with the USA almost completely out of debt! Do you mean private debt or public debt?

In May 1846 the United States went to war with Mexico over the annexation of Texas and California. The total cost of the war was $64 million, and Congress authorized the issuing of additional debt to meet these obligations. It is this concept that would later become the basis for the Savings Bond program. By the end of 1849, public debt totaled $63.1 million. 

Does “issuing debt” mean the U.S. government issued bonds or securities? Why do that to pay for the war? Money is simply numbers. At this time the USA had no national banking system. So who created the U.S. government’s money?

By now you are thinking, “Okay, I get it! These articles are not clear.”

I’m just saying that lack of clarity is what keeps people impoverished and enslaved, especially when we talk about concepts like debt

chart 04chart 05chart 06

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To clarify some things, state and private banks were the USA’s primary banks until 1863, when the federal government passed the National Banking Act, thereby creating national banks based on a federal charter. That’s when the U.S. government started issuing “greenbacks.”

The Bank of the United States was a private institution that controlled the USA’s money supply, and was governed by a private board of directors, rather than by an elected official, or by anyone working in government. The Fed is the same today, with one difference, namely that the Fed is not the only entity that creates money out of thin air. The U.S. government does it too. And, as I explained in a recent post, the U.S. government has the ultimate power.

The Bank of the United States had special power because it had gold. Theoretically, customers could present the bank’s own currency notes to the bank in exchange for gold. However gold was difficult to carry, and easy to steal. So people gradually became used to trading bank notes. This allowed the Bank of the United States to destroy smaller banks by leaking rumors that the smaller banks had no gold. If a bank could not redeem its notes for gold, then not only would its banknotes become worthless, there would be a run on the bank as people tried to exchange their worthless banknotes for gold.

And indeed this is what happened in some cases.

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