Keynes vs. Abba Lerner on Public Debt

     I was having an interesting discussion with Greg on public debt. He argues that even calling it 'public debt' is a big problem and misleads the public into some wrong inferences. I'm still not sure I feel this strongly-I'm not sure what I think about it yet.

    "Personally I say its time to stop calling it govt debt. Its not something they borrowed. Its not something they had to beg to get from someone else. If Congress approves a spending bill the spending gets done........ period."

     "Bonds issued by the govt are a choice by that govt to offer safe interest bearing assets. They are not the same as a corporate bond where the corporation raises money. Corporate bond issues are zero sum, govt bond issues are not. There is more money added after a govt bond issue. During gold standard times they truly were debt instruments, after the gold window closed they are no longer."

    "Calling it debt puts a huge negative spin on it. It is more accurately an asset for the people, it is more like equity rather than debt."

     "What if we had a no bond policy?"

   http://diaryofarepublicanhater.blogspot.com/2015/02/stephen-williamson-vs-laurence-mishkin.html

  I think putting it the way he does here begs a lot more questions than it answers. Here was my answer to him.

   UPDATE: I had to grammar check myself here as previously I had my own sentence above in quotes which might confuse the reader. 

    "So the govt gains nothing from offering them? I don't think it's such a negative spin. If it's an asset for the people it's got to be a liability for someone. Otherwise it's kind of like an Immaculate Asset. "

      Prosperity is not as simple as just printing as much money as we need-it'd be much easier if that were the case.  

      To be sure, these are difficult issues and I'm not necessarily certain on what I've said here. One thing that I will say differentiates me from a lot of people I discuss things with is they are usually much more certain of their views than I am of mine. Dogmatic certainty often means that you haven't thought the matter through too carefully.  

      Note:  I don't mean everyone is like that. Actually, 2 people who impress me in this regard are Nick Rowe and David Glasner. Even in venturing their opinions there's humility. Even if they're both MMers they really impress me in this regard-Sumner, not so much...

       Here was what Galbraith wrote in the forward for Mosler's 'The 7 Deadly Innocent Frauds'

      "Nor is the public debt a burden on the future. How could

it be? Everything produced in the future will be consumed
in the future. How much will be produced depends on how
productive the economy is at that time. This has nothing to
do with the public debt today; a higher public debt today
does not reduce future production - and if it motivates wise
use of resources today, it may increase the productivity of the
economy in the future."

     http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

    I say these are difficult issues because debates about them so often lead to polemical attacks among people who are quite intelligent. I still remember how mad the MMTers would get when Krugman would suggest that they were saying 'deficits don't matter.'

    http://www.nextnewdeal.net/deficits-do-matter-not-way-you-think

     Here we have the specter of 2 very intelligent people who got in a real row-as they say in Keynes'-and my-Britain-over public debt. 

     "Lerner recalls his exchange with Keynes as follows: 

      "I asked why we should have to worry about that: if you give people enough money they will spend more and then there will be enough spending; there’s no need for any depression if you’re prepared to give them more money. So he asked where would you get the extra money and I didn’t say, ‘the printing press’. I said you could borrow it. He said, you mean the national debt will keep on growing, and I said yes. ‘What would happen?’ I said – nothing. So we talked for a moment and he said: ‘No, that’s humbug … the national debt can’t keep on growing’. ... [T]hat was the end of his discussion. (CL: 108–09) 1 

      "Lerner’s denial that he referred to printing money is a response to Hansen’s recollection of the exchange, in the same interview:

      "In the discussion you [Lerner] raised the question ... ‘Mr. Keynes, why don’t we forget about all this business of fiscal policy, public debt and all those kinds, and have some printing presses?’ To which Keynes made this reply: ‘It’s the art of statesmanship to tell lies, but they must be plausible lies.’ This was supposed to squelch you for the evening and, as a matter of fact, you said nothing more."

      https://varoufakis.files.wordpress.com/2014/01/ta-on-debt-paper-1.pdf

      So Lerner and Keynes couldn't agree on public debt either. Now that I think about it, maybe MMTers  say what Greg said here-that public debt doesn't matter and that we don't need to issue it to spend money. Lerner in this exchange at first talked about public debt then said why not just print money. 

      I think Greg is suggesting that we can just print money. The answer is you can but at some point you hit the law of diminishing returns. If you keep printing and printing money eventually the money starts to be worth too little-and you get too much inflation. 

      In any case, it's a great discussion that I haven't even started to exhaust here-I'm going to read on about the exchange between Keynes and Lerner. 

     UPDATE: Recall that initially, Lerner was a Hayekian over at the London School of Economics (LSE) but latter converted to Keynes and Cambridge-as Keynes triumphed over Hayek many from LSE abandoned him for Keynes.