Debt versus Deficit-July 23, 2019

It is not easy to find truth in “economics.” But one truth, that the media frequently gets wrong, is the difference between “debt” and “deficit.” “Deficit” is the amount the government loses in one year, while the “debt” is the total amount the Government owes its creditors, mostly Government bond holders. The Government has actually overspent much more than the $22 trillion debt. When the Government wants money, lets say $1 trillion, it asks the Federal Reserve for $1 trillion (don’t try this at home). The Fed puts out for sale $1 trillion in government bonds. If it sells only $500 billion in bonds, then it prints the other $500 billion in bills (Federal Reserve notes), which then inflates the money supply, except that China takes that $500 billion in our trade deficit, which deflates our money supply, and voila, no inflation! Which might explain that in spite of our Government’s ineptitude in controlling spending, we still have somehow averted “hyperinflation” that is plaguing Venezuela and once plagued Germany before WWII. No one seems to know how much Federal Debt will finally CRUSH us with hyperinflation, so cautious investment advisors tell us to put 10% of our investments into gold.