Giant Communist Robot wrote:I think this is wrong. Buying and selling securities--Open Market Operations--are meant to moderate the economy by targeting price stability (inflation) and sustaining economic growth. Typically bonds would be issued to match the deficit, but they don't need to be.
To a large extent, I suppose, it's an accounting gimmick. Maybe it's a legal requirement imposed by a Congress that does not comprehend the complexities of fiat money, or doesn't believe in it. I'm not sure.
I do know that the largely-fictional Social Security 'trust fund' comprises of bonds whch the government buys and sells among itself. This is an accounting gimmick to comply with the Supreme Court requirement (Steward Machine Co. vs. Davis) that all Social Security funds go into the Treasury as taxes in general, and are not 'earmarked' for the purpose of providing old-age insurance. Thus, the funds go into the Treasury, but the special-issue bonds keep track of the value of the 'trust fund' for purposes of record-keeping. While politicians often campaign upon and propose issues to take Social Security 'out of the budget', they know, or they learn, that they can't legally do so and keep the programme compliant with the letter of the law.
I suppose with issues such as the Social Security 'trust fund', the debt, the deficit, and so on, it is easier to maintain the illusion than to explain the reality.