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Home Publications Blogs Beat the Press The Washington Post Says Bill Gates Is Broke

The Washington Post Says Bill Gates Is Broke

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Thursday, 19 August 2010 04:46

Actually, they made this assertion about the United States and the United Kingdom, which makes considerably less sense than saying Bill Gates is broke. There is no evidence that either country is coming up against any sort of spending limit. The bond markets are willing to lend both governments at very low interest rates and there is certainly no shortage of people who are willing to accept the currency of the two countries.

Since it has no basis in fact, the Post's assertion that these countries are broke is presumably an expression of its unhappiness with how these governments spend their money. This is the sort of sentiment that newspapers are supposed to leave for the opinion pages.

Comments (15)Add Comment
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written by izzatzo, August 19, 2010 7:21
Why won't Bill Gates stop to pick up a hundred dollar bill on the sidewalk?

A) He wants others to have it as charity
B) He's so rich the opportunity cost of time to slow down and pick it up is not worth it
C) It was planted as bait by Apple and he's terrified of competition
D) He's so worried about the deficit bankrupting the country, he didn't see it

WaPo investigated to confirm the correct answer is D.
hey, I still have checks in the checkbook, Low-rated comment [Show]
People do not understand the monetary system
written by floccina, August 19, 2010 9:51
People do not understand the monetary system which is why median voter control of the monetary is a mistake. Free banking would probably have developed into a much more robust system than the current fragile monopoly currency system.

Alternatively perhaps we would be better off with Jamie Galbraith's system where government deficit spends without selling bonds and sells bonds and raises and lowers taxes to regulate inflation. But this might not work well because it puts the median voter in control and the median voter does not understand money.
Scott's misinformation
written by Tom, August 19, 2010 11:10
Maybe I can't read a document, but according to the GPO copy of the 2011 budget, net interest expense is about 7% of the budget, not 25%. Scott must be smokin something powerful...
Scott is badly misinformed
written by Paul, August 19, 2010 11:35
The federal government spends 3% of GDP (income) on interest, but since most of it just goes to American citizens or the Fed, the interest payments are inconsequential.

"hey, I still have checks in the checkbook"
Can you also print money to cover the checks you write? The federal government can do just that.

"We won't have a problem until we do."
So we don't have a problem then, right?

"China has declined to buy more American debt."
Let us know when the Fed declines to buy more American debt. China is happy to buy our debt to prop up the dollar against the yuan.



Lobbyists and Their Serious Discontent
written by union member, August 19, 2010 2:27
Is not the Post's publisher a disgruntled lobbyist who failed to fatten the paper's diminishing bottom line by selling serious government access to those who would sup on the government spending?
Net interest
written by AndrewDover, August 19, 2010 9:45
Table S5 from
http://www.whitehouse.gov/site...ables.pdf

shows "Net interest" as 1.6 % of GDP in 2011, when total outlays are 25.1%. So %6.37 of outlays is net interest.

However, net interest is projected to double to 3.2% in 2017. And also, net interest is small because it does not include interest paid into the trust funds like social security. If you keep that flow out of Net Interest, then Social Security spending will exceed payroll taxes for ever year in the chart.




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written by AndrewDover, August 19, 2010 9:47
Saying the government isn't broke because the bond market is willing, Low-rated comment [Show]
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written by Calgacus, August 21, 2010 10:17
Ed, you are wrong on all counts and do not understand government finance and modern monetary systems. The US cannot go broke, and is utterly unlike Greece, which can. US debt is protected by ironclad legal guarantees that even Congress has no power to overturn. When governments finance deficits by "printing" interest rates fall to zero. Even this is irrelevant, because we could just "pay off" all debt as it matures, and in a few years have no interest bearing national debt at all.

But the worst mistake is this: Relying on government sucking in more and more money in treasury auctions drains available capital

Think about what happens: (1) treasury auction & government spending matched dollar for dollar (because of mystical superstitions) These mystical superstitions enforce the auction first, but it is better to think of the spending first. In any case, the auction removes dollar bills from the private sector and gives it government bonds. The spending puts back the exact same number of dollar bills as were taken. Result: Same # of dollar bills + a more bonds owned by the private sector - therefore ZERO "sucking in" of available private capital. As Michael Kalecki put it 70 years ago, it is as if the government spent by giving bonds to the private sector.

Government "borrowing" is not borrowing: it is a favor done to holders of dollars to provide risk-free interest. Real borrowing, like for a mortgage involves you giving a bank a (risky) IOU payable in the future, while it gives you an immediate IOU from the bank to you, a deposit in your bank account. Two IOUs in opposite directions.

Government "borrowing" (or its opposite - "debt monetization") involves exchanging two kinds of IOUs from the government to you - bonds and currency. It is an asset swap, like you moving your money between checking and savings or a CD, exchanging two types of IOUs from the bank to you, not borrowing.

The problem right now is that the government, in thrall to mystical superstitions, is spending much too little to offset the aftermath of the financial crisis, and this lack of spending is causing high unemployment and low growth.
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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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