Greenspan: 'The United States can pay any debt it has because we can always print money to do that'

August 7, 2011

David Gregory: "Are U.S. treasury bonds still safe to invest in?"

Alan Greenspan: "Very much so. This is not an issue of credit rating, the United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default."

"Central banks can issue currency, a non-interest-bearing claim on the government, effectively without limit. They can discount loans and other assets of banks or other private depository institutions, thereby converting potentially illiquid private assets into riskless claims on the government in the form of deposits at the central bank.

That all of these claims on government are readily accepted reflects the fact that a government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit. To be sure, if a central bank produces too many, inflation will inexorably rise as will interest rates, and economic activity will inevitably be constrained by the misallocation of resources induced by inflation. If it produces too few, the economy's expansion also will presumably be constrained by a shortage of the necessary lubricant for transactions. Authorities must struggle continuously to find the proper balance.

It was not always thus. For most of the period prior to the early 1930s, obligations of governments in major countries were payable in gold. This meant the whole outstanding debt of government was subject to redemption in a medium, the quantity of which could not be altered at the will of government. Hence, debt issuance and budget deficits were constrained by the potential market response to an inflated economy. It was even possible in such a monetary regime for a government to become insolvent."

Alan Greenspan: Central Banking and Global Finance (January 14, 1997)

"As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational. Moreover, there will always be a market for U.S. government debt at home because the U.S. government has the only means of creating risk-free dollar-denominated assets (by virtue of never facing insolvency and paying interest rates over the inflation rate, e.g., TIPS—Treasury Inflation-Protected Securities)."

St. Louis Fed: Why Health Care Matters and the Current Debt Does Not

[DiegoooTech]

The other one was thinking "Come on you are revealing the trick..."

[christophalex]

The SHOCK on the other guests face LMAO A its as if they wanted him to shut up or the Jigg is up ....priceless 😅😅😅

[entropyfu]

looking forward to seeing this on r/Whatcouldgowrong/

[TogameRosecraft]

0% probability of Default by printing Money.
Weimar Republic or Venezuela anyone?

[Rugarabam]

IF U CAME HERE AFTER CARL THE MOON GIVE LIKE.


THUS WHY BITCOIN WAS CREATED

[giovanieeugenio]

So...what about inflation?? I don't understand. this confuses me now so much.

[PipiRoe]

Why don't they pay the whole debt then?

[termodynamics]

Then, beyond the us dollar is only paper.

[bentone]

He's right as long as there are oil purchasing countries that needs to buy oil from OPEC in US dollar the currencies demand isn't coming down anytime soon.... So therefore they have been printing money for a longtime now not backed by gold... However it won't turn out to be as 100% viable as he speaks so....

[worldgaming]

so he plans to make u.s debt to 42 trillion in a month or day ?

[itypethetruthnobshere]

he moneys only worth what you think its worth. Its worthless paper we use to pay and buy things with. That "paper money" can be printed at any time

[neilanderson]

At 00:18, we get a 'close-up' of Austan Goolsbee, a venerated economist, being shocked by Dr. Alan Greenspan's erroneous claim that the Fed could cure any default on US Treasury obligations by simply printing more money. Greenspan failed to recall that whenever the Fed issues money, the law (embodied in the Federal Reserve Act, as amended) demands that the Fed must get equivalent value in collateral.

The collateral received by the Fed has usually been, of course, lots of T-bonds. If the Fed did not receive "good" collateral, then the Fed would become insolvent (i.e., its assets being worth less than it's liabilities, that is, if the collateral lost value). Curing a Fed insolvency is easy - The Treasury borrows money from the public bond market and then gifts it to the Fed. When someone says "The dollar is backed by the Full Faith & Credit of the US Government" ... it is a literal reference to Uncle Sam's credit being used to borrow money to back the dollar by gifting money to the Fed. Dollars held by the Fed are, by definition, not circulating, and not part of the money supply.

The Fed cannot issue money by giving it away for free, as in a "gift", that's Fiscal Policy, which is decided by Congress, which instructs the Treasury to conduct Fiscal Policy. So, to cure any default on US T-bonds, the Treasury would borrow money (from anyone willing to lend money to Uncle Sam, if there are any) and then use those borrowed funds to pay redemptions, which would otherwise have defaulted.) The Treasury has always been the sole party responsible for paying all redemptions as T-bonds mature.
Goolsbee's a democrat, taught at Chicago, and was a leading economist in the Obama Administration.

[cjgirl]

Is that a good thing? I would argue the other way.. That it means our "money" is phoney...Or like Elon musk said "it's a hustle"...

[kateluvshugz]

He said the in your head part out loud

[kentwrankmore]

WTF... USD is f'ed... BTC all day long

[jboreal]

I have Some clarifications to submit as an unofficial Federal Reserve System consultant. Maestro meant to say that the United States can pay any debt it has as long as the medium is U.S. fiat dollars and that the creditor has agreed to receive U.S. fiat dollars. Also this is assuming the dollar remains a reserve currency and the petrodollar system remains in tact. Once the world decides they want something real in exchange for their goods and services other than ether digits or paper, the payment of debt will become more challenging.

[StakedWealth]

Who will pay the interest of the debt?

[phloxie]

lol is this a deepfake or really real? :D

[barth]

He's a bloody lunatic! Because of people like him the global economy is going to collapse soon. Time to go physical gold and crypto.