Abstract

Runaway accumulation of government debt in Japan under the recent financial crises seems to deprive the government of its effective policy discretion due to the burdens of debt repayment. This paper first examines that the government debt is structurally built in the current macroeconomic system of money as debt which is founded by the Keynesian macroeconomic framework, and it is very costly to reduce it. Then, it demonstrates how the government debt could be liquidated without cost under an alternative macroeconomic system of debt-free money that is proposed by the American Monetary Act. Finally, it is posed that debt-free macroeconomic system is far superior to the debt-burden current macroeconomic system in a sense that it can not only liquidate government debt but also attain higher economic growth.

In summary

Conclusion

This paper investigates how to liquidate runaway government debt under the current financial crises. First, the current system is identified as a macroeconomic system of money as debt, under which the accumulation of government debt is built into the system by the Keynesian theory, and the reduction of debtGDP ratio is, it is demonstrated, very costly, triggering economic recessions and business cycles. Then the alternative system is suggested as the system of debt-free money, in which only the government can issue money, and the government debt, it is shown, can to be gradually eliminated. Moreover, it turns out that higher economic growth is simultaneously attained. In this sense, the alternative macroeconomic system, from a viewpoint of system design, seems to be worth being implemented if we wish to avoid accumulating government debt, unfair income distribution, repeated financial crises, war and environmental destruction.