Bruce Bartlett’s testimony:  There is no debt problem if United States retains its present monetary regime of a non-convertible fiat currency, with a floating exchange rate, and no debts owed in any foreign currency. That’s because for such a currency issuer, whatever debt level exists and falls due at any point, that debt can always be repaid because it is denominated in the currency the debtor nation can issue at will. All repayment takes then is the willingness of the issuer to issue the money needed and to use it to repay the debt due.

1. The nominal debt is irrelevant. By this I mean the dollar figure, which, as this is written, is $18,138,459,241,907.59. That’s a lot of money and it scares people. It makes them accept policies that may not only be unnecessary, but harmful. Cutting spending in a recession is clearly counterproductive and I think that the cuts that have been enacted over the last several years were unwise and slowed growth in the economy. The fact that the U.S. economy is doing marginally better than some in Europe is because they cut spending even more than we did.

2. The debt is a stock, not a flow. To determine whether the debt is “excessive” we have to compare it to something that approximates ability to pay. Typically, we look at the debt as a share of the gross domestic product. But this is not a proper comparison; we are comparing apples and oranges. To get an apples-to-apples comparison, we should compare the debt to the federal government’s assets. The comparable figure to GDP would be interest on the debt. Presently, net interest is 1.3 percent of GDP, well down from 3.2 percent in 1992. CBO currently estimates that this percentage will rise in coming years to 3 percent of GDP in 2025. This is due primarily to a projected rise in interest rates, rather than a rise in debt. This problem could be mitigated if the Treasury issued more long-term debt now while interest rates are low.

The government has many valuable assets, and among them the most valuable financial asset is its constitutional authority to create money whose financial value it can specify at will (which under present legislation is delegated to the Federal Reserve System and its member banks, and to the Treasury.

So, there can never be any diminution or increase in the capacity of a fiat sovereign government like the US government to repay its debt instruments regardless how small or large the principal value of those debt instruments is. Whether that value is $50 million or $50 quadrillion the value of the federal money asset ratio is still zero.

3. . . . Budget conventions grossly overstate the interest cost. The reason is that the budget treats the Federal Reserve as part of the public rather than part of the government. Presently, the Fed owns $2.5 trillion of Treasury securities, on which it receives interest from the Treasury. . . . But the Fed pays almost all of it back to the Treasury. In 2014, Treasury paid the Fed $116 billion in interest. After subtracting various costs, the Fed returned $99 billion to the Treasury. . . This amount should be subtracted from the federal government’s interest expense, just as we do with interest paid on trust funds. Instead, the Fed’s payment to the Treasury is treated as a miscellaneous receipt. . . .

4. Tax cuts increase the debt. This may seem like an obvious point, but some of my conservative friends often act as though this is not the case. According to the Congressional Budget Office, tax cuts enacted between 2001 and 2011 added close to $3 trillion to the national debt. . .

More generally, the first four points in Bruce Bartlett’s testimony to the Senate Budget Committee provide many reasons why the “debt crisis” notion should be viewed as seriously overblown.

William Pesek writes: In a new report, Goldman Sachs says the yuan is now used in 80 per cent of transactions into and out of the cyber currency, topping the US dollar, yen and euro. Given that the Communist Party’s highest priority is stability, and the rampant use of bitcoin represents nothing if not the opposite, it’s probably only a matter of time until Beijing tries to crack down.

It wouldn’t be the first time. In December 2013 – at a time when the yuan accounted for about 50 per cent of bitcoin transactions – Zhou clamped down hard on the nascent payment system, citing concerns that it was enabling money laundering and undermining capital controls.

The People’s Bank of China barred financial institutions from handling bitcoin transactions, concluding it wasn’t a currency with “real meaning”. A few months later, in March 2014, it went further, ordering banks and payment companies to close the trading accounts of more than 10 bitcoin exchanges.

But bitcoin traders continue to show up the People’s Bank of China. As Goldman Sachs points out, the trading volume on the mainland has risen markedly – even as bitcoins plunge in value (from about US$1,100 in late 2013 to around US$300) and lose cachet elsewhere. “Bitcoin,” writes Goldman Sachs analyst James Schneider, “has momentum in China.”

What gives? Some mainlanders are surely buying bitcoin to engage in relatively innocent forms of financial speculation. But they are probably outnumbered by the people who are using it to move yuan overseas, while circumventing Beijing’s currency controls. That’s partly because the mainland’s broader economic slowdown provides fewer lucrative investment opportunities. But it’s also because of Communist Party general secretary Xi Jinping’s ongoing crackdown on corruption, which has made it harder to launder ill-gotten funds. (Hong Kong money changers used to be the laundering method of choice, but are no longer readily available.)

Bitcoin’s value gyrates too wildly to be a viable transactional unit, but it’s proving to be a nifty way to move money across borders beyond the watchful eye of the government.

Bitcoin’s surging popularity on the mainland – despite the attempts to crack down against it – underscores how fragile the world’s second-biggest economy is at present. Data released on Wednesday showed industrial output since the beginning of the year was at its slowest pace since 2009, rising just 6.8 per cent in January and February. Deflation also seems to be on the horizon.

Wired magazine explored the rise of darkcoin, which is fast becoming the chosen medium of drug merchants and others active on the mainland’s black market. It’s not hard to imagine the development of other such cryptocurrencies with Chinese characteristics.

When the mainland previously faced money laundering problems, it had clearer solutions at its disposal. Last year, for example, Beijing clamped down hard on Macau, whose casinos had become a favoured laundromat for ultra-rich Chinese.

But now that it’s facing a stealthier threat in bitcoin, its options are more limited. Zhou is undoubtedly aware of the problem posed by bitcoin, but he may not yet know what he should do about it.

Maysa Jabout writes: For Arab women, hard-won progress in education has not earned them the economic progress they deserve. Although young women seek and succeed in tertiary education at higher rates than young men, they are far less likely to enter and remain in the job market. Understanding and tackling the barriers that hinder women from working would unlock Arab women’s potential and yield significant social and economic benefits to every Arab State.

Saudi Arabia is largely responsible for the dramatic fall in oil and gas prices in recent months, a U.S. government official said.

Richard Fisher, the head of the Dallas Federal Reserve, said “the Saudis have engineered” the oil crisis. He was speaking at the Economic Club of New York.

“We are a huge supplier of energy. The Saudis took a while to realize what was going on,” Fisher said, referring to the massive growth of the U.S. oil industry in recent years.

Fisher is the most prominent U.S. official to pin the blame largely on Saudi Arabia.

As recently as July, oil traded at over $100 a barrel. By January, it had plunged below $50.

Saudi officials have repeatedly blamed supply and demand for the price meltdown. They say they were caught off guard by the price decline, and acknowledge this is putting a lot of pressure on U.S. shale.

“Although Saudi Arabia and OPEC countries did not engineer the reduction in the price of oil, there’s a positive side effect, whereby at a certain price, we will see how many shale oil production companies run out of business,” Prince Alwaleed bin Talal, a member of the Saudi royal family and prominent global investor, said in January.

The oil games: While the price of oil started falling at the end of the summer, it was exacerbated on Thanksgiving Day when OPEC, led by Saudi Arabia, voted not to scale back on production. That send oil prices diving.

Fisher also noted that the Saudis benefit not just economically, but politically from the oil price decline. Low oil prices especially hurt their biggest regional rival: Iran.

“I’m sure King Abdullah thought to himself, ‘I’ve also done a favor vis-a-vis Iran,'” Fisher said.  Iran’s economy needs oil to trade around $135. Saudi has far larger cash reserves and is thus able to withstand a downturn in prices for much longer.

What’s ahead for oil prices? Given how motivated Saudi Arabia is to keep prices low right now, Fisher doesn’t expect oil will shoot up to $100 a barrel again any time soon.

“From a budget stand point, [the Saudis] have reserves that can handle this,” he said.

While many energy companies are laying off workers and slashing spending, Fisher said that cheap oil’s overall impact on the U.S. economy will be positive. A typical American driver is expected to save $750 this year at the pump, according to government estimates.

Even in his home state of Texas, Fisher said the economy has diversified a lot more beyond oil, so it’s unlikely to be nearly as bad of an effect as the last oil bust of the 1980s.