The U.S. was not always completely Monetarily Sovereign. Prior to 1971, the U.S was on a gold standard. It had a sovereign currency, but did not have the unlimited ability to create that currency, since every dollar needed to be backed by a fixed amount of gold. No gold; no dollars.
Similarly, the EU nations are on a euro standard. Their ability to create euros is limited by law. Our states, counties and cities are on a dollar standard. Their ability to create or obtain money by borrowing or taxing is limited by local law, by voters and by lenders.
The financial problems of Portugal, Ireland, Italy, Greece and Spain (The PIIGS), are due not to deficits and debt. They are due to these nations having surrendered the single most valuable asset any nation can own -- their Monetary Sovereignty -- thus preventing them from servicing their debt by creating money.
Some debt hawks say that a Debt/GDP ratio exceeding 100% puts a nation on the brink of bankruptcy. Yet today, Japan has a Debt/GDP ratio above 200%, and this Monetarily Sovereign nation has absolutely no difficulty servicing its debt.
The debt hawks, as usual, having learned nothing from this, continue to wail about the meaningless Debt/GDP ratio, which because it is a classic apples/oranges comparison, is devoid of significance (the numerator is a 200-year measure of cumulative T-securities outstanding; the denominator is a one-year measure of productivity. The two are unrelated).
So-called federal "debt" is the nothing more than the total of dollars deposited in T-securities accounts at the Federal Reserve Bank. These accounts essentially are savings accounts.
To "pay off" the federal debt, the Federal Reserve Bank merely debits these T-securities accounts and credits holders' checking accounts, the same way your personal bank transfers dollars from your savings account to your checking account. No new dollars needed.
Thus, all federal debt easily could be eliminated tomorrow.
That would require pressing a few computer keys. This would be a simple asset exchange, with no new money created and no inflation consequences.
Because a Monetarily Sovereign nation has the unlimited ability to create its sovereign currency, that nation needs neither to tax nor to borrow. Why would it?
Further, that nation does not use tax money or borrowed money to pay for spending. Federal income has no relationship to federal spending and so, taxes and borrowing are unnecessary.
When the states, counties, cities, you and I spend, we transfer dollars from our checking accounts to some other checking accounts. When the federal government spends, it creates dollars.
To pay its bills, the government sends instructions (not dollars) to creditors' banks, instructing the banks to increase the dollar amount in creditors' checking accounts. These instructions are in the form of checks or wires.
At the moment the bank obeys those instructions, dollars are created, and the money supply is increased. This is how the federal government creates dollars -- not by "printing," but by sending instructions.
If U.S. federal taxes and borrowing fell to $0, or rose to $100 trillion, neither event would reduce by even one penny, the federal government's ability to create the money to pay any size bills.
Although Monetarily Sovereign nations need neither to tax nor to borrow, they may choose to do so for reasons unrelated to financial need. The spending by Monetarily Sovereign nations is constrained only by inflation.
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