So doesn’t this mean that it’s logical to argue that this is how economies collapse .. wealth inequality which results in reduced consumer consumption and more importantly the selling of treasuries/bonds as the primary means of economic growth, thus increasing debt to unsustainable levels?
I get that there is no debt per say, that with a fiat currency it’s either monies on the government side or consumer side that determine debt/surplus.
I also get the other points you made about selling treasuries/bonds to cover old expiring debt with new debt. understood.
As I see it support programs can help adjust income inequality/money velocity. Anything that either reduces consumer living costs or increase consumer incomes helps money velocity. So for instance, if we fixed our health care issue by producing a medicare for all type program that would slash consumer payouts for healthcare by 50%, that move would increase money velocity.
In similar means since taxes today are still being collected on incomes, further increases in tax rates on the upper incomes to validate support programs to lesser income citizens also increases money velocity. If taxes were not collected wouldn’t it be more difficult to control income inequality?
Nobody likes to talk about it, but so far, every economy eventually collapses or defaults on debt. The US has never done this for a variety of reasons, including being the reserve currency of world trade since before we became a fiat based currency in 1971.
For lack of a better word, there is a point where “debt” exceeds investor confidence and at that point you have to pay out ever higher interest rates to attract investors to prop up your currency via treasury/bond sales, inflating “debt” even further. Meanwhile the continued erosion of money velocity leads to political instability and the further increases in support programs.
So is this what a collapsing economy looks like? I think so. If so is it fair to say that income inequality is a threat to economic stability for fiat currencies?
BTW, thanks for your great insights!