“Our present government debt is not funded if your idea of funded is that it be at least theoretically possible to repay the entire debt including principle”
Paying off the entire debt certainly isn’t my idea of a funded public debt, nor Hamilton’s, although it may well describe Jefferson’s preference. A funded public debt simply has to pay its interest, not unlike what a large corporation does. Neither corporations nor governments have fixed lifespans so debt can be rolled over. Sinking funds were used to retire the national debt in the past, but paying off the debt perversely seems to have coincided with economic downturns. Which isn’t a surprise if the debt functions as part of the money supply and paying it off contracts the money supply.
“it’s funded only by the skin of its teeth if all you have in mind is paying interest in perpetuity. “
That would be a serious problem if it were true. It’s not, although Obama seems headed in that direction. If and when there is a danger of defaulting on the debt then the bond vigilantes will let everyone know. Interest rates will soar if there is a danger of default. Default is not exactly what current interest rates are indicating. Deflation maybe, default no.
“The effect that is having on the economy is severe. Middle class people have no way of investing money at present. “
The last time I checked the stock and bond markets were both still open, and they are more than willing to let you invest.
“Our whole system is a house of cards at present and the part of the system which includes bankers creating money and fractional reserve banking clearly needs to be replaced.”
Von Mises describes fractional lending as the definition of what banks do. It’s the credit part of his Theory of Money and Credit. Your plan would in effect do away with all banking other than hard money loans, which would make getting loans something only for the very few.
“They create money out of thin air and lend it at interest without putting the money to pay the interest into the system at the same time.”
Banks indeed don’t create extra money for paying interest, one reason being that there is no need for them to do so. You are making the common mistake of confusing a money flow (interest payments) with the quantity of money (principle).
“A government, on the other hand, assuming it had anybody’s trust to do so or was somehow limited to infrastructure spending via such a process, could create money out of thin air without interest being due i.e. eliminate the middle men (bankers) along with their inflation and interest schemes.”
Apparently you missed the part where Congress sets the national debt. That’s what you pay interest on, via your taxes. You don’t pay a cent of interest on money, and in fact there is no conceivable way that you could pay interest on the money you use even if you wanted to.
Governments have made money out of thin air in the past. John Law. The French assignat. The Continental Dollar. Weimar. The history of what politicians do to money when they are in charge is why no one in their right mind gives them control of monetary policy.
You’re basically wrong on every point. Granted there’d be a big problem with simply letting our present federal govt. just print money, what we’re doing now in allowing banks to create money from thin air and charge us interest for it while simultaneously counterfeiting it at a ten to one ratio via reserve banking is insane. There has to be a better way.