Because they get upset that the U.S. government has $13T in "debt".
Note that I say "debt", but it's not, really. Debt has to be paid back. So when does this $13T "debt" have to be paid back? Let's make this a multiple choice question:
- Next year
- 10 years from now
- 100 years from now
- Never
Tick....tick...tick....tick... and your answer is? Let's take a look behind... DOOR NUMBER FOUR!
Yes, *NEVER*. Because essentially, this $13T is OWED BY THE SAME PEOPLE WHO LENT IT.
Oh hold on you say, the Treasury holds auctions to sell off Treasury bonds all the time! Well, yes, but the deal is that a) only $3.8T is owed to foreign individuals or government (source), meaning that b) the remainder is money *borrowed* from us that we *owe to ourselves*. And if we choose to never repay ourselves the money that we borrowed from ourselves (or, rather, just roll over the debt year after year), well, so what?
Besides, even $13T is hardly a big deal. U.S. GDP is around $15T/year. If I could afford to buy a $150K house while making $75K/year, then the U.S. could easily repay $30T worth of debt the same way (i.e., by extending repayment over 30 years time). It would require doubling taxes, but it could be done. But really, *why*? I mean, first of all, we owe this money mostly to ourselves, and second of all, the Federal Reserve possesses that most wondrous of inventions, the PRINTING PRESS, and could trade freshly-printed cash for Treasuries with nothing but the stroke of a pen.
At which point I hear the screams of "Inflation!" Well, first of all, as I've repeatedly pointed out, capitalism doesn't work without inflation. Without inflation, money disappears under mattresses and ceases to perform its primary function, which is the lubrication of commercial transactions, thereby causing commerce to grind to a slow drip. And capitalism is a good thing to have, because capitalism allows paying for the capital investment needed to produce future output with the income from that future output, allowing capitalist economies to be far more nimble than economies without capitalism. So... inflation? Given the deflationary pressures we're currently facing, bring it on!
But, more importantly, these Treasuries are already effectively money! The main reason short-term Treasuries are at 0% interest is because people find holding Treasuries to be equivalent to holding cash, and rather than haul around truckloads of cash, they just trade it for Treasuries instead. So if they decide to go the other way around and trade the Treasuries for cash again, how much additional money just got put into the economy? NONE! They started with $1M in cash, and ended up with $1M in cash, for effectively $0 total change in the money supply as far as their personal frame of reference is concerned. In other words, the very act of printing Treasuries is effectively the same as printing money. Making it official at some future point in time makes $0 difference in terms of facts on the ground.
And finally: As I pointed out previously, printing money doesn't cause inflation. Rather, printing more money than there exists goods and services in the economy to trade it for causes inflation. But with 21% real unemployment, there is clearly a *lot* of idle goods and services in the economy that printed money could purchase, with no (zero) change in the effective price of goods and services. In short, we could run a deficit of 10% of GDP this year, financed *entirely* by printing money, and cause no - ZERO - inflation.
So anyhow. Those are the facts. So when hysteria-mongers throw big numbers around and say "oooh, scary" and talk about "solid economic principles", remember: That's solid like THEIR HEADS. Not to mention that this is usually "code" for "gold", about which I've repeatedly noted gold bugs don't understand what money is. 'Nuff said on that.
-- Badtux the Economics Penguin