Posted by: Dirk | July 15, 2014

(Book review) Freedom from National Debt

Frank Newman was a CEO and chairman of commercial banks in both the US and China, and he also was Deputy Secretary of the U.S. Treasury Department. Perhaps it surprises that the cover of his book features the following inscription:

Why U.S. Treasury Securities

  • never have to be paid off in total by taxpayers
  • cannot present the problems of eurozone nations
  • are safer than money
  • represent savings for millions of investors

and why America does not need to fear “national debt”

His book Freedom from National Debt makes all these claims and more, backing them up with an insider’s perspective on the working of federal balance sheets. The book focusses on U.S. treasuries and popular misconceptions of the public. With a slim 77 pages it is a quick read, suitable for everyone interested in a confirmation of the view that Post-Keynesians and MMTers hold of the fiscal side of the economy. The only point I find myself in strong disagreement with is chapter 7: why foreign ownership of treasuries is not a problem. Well, from the financial point of view there is nothing wrong with foreign ownership of U.S. treasuries, but from the real point of view this translates into more and more exports of goods and services. While this would create employment, it is a drain of production that otherwise could be consumed at home. It is only fair that those countries that export more than they import to/from the US build up stocks of U.S. treasuries, and it is not a problem if people know what’s happening and are aware that US economic policy today means that more of GDP produced tomorrow will be sent abroad. In times of a depressed economy, this might not be a big issue, but in times of a booming economy there might be some inflationary pressures.

Let’s not worry about the problems of the future upswing while the US economy still has an employment to population ratio way below where it was before the crisis. For those looking for an insider’s view on fiscal management, this book can be recommended.


  1. John Lounsbury, managing editor at, suggests the following modification:

    … it is not a problem if people know what’s happening and are aware that US economic policy today means that (1) more of GDP produced tomorrow will be sent abroad and/or (2) domestic assets may be bought up by foreigners “cashing in” their Treasury holdings in the future.

    I agree with it. When it comes to house prices, this is especially true. Domestic house buyers in the future might compete even more with foreign house buyers, if wealth held in foreign assets in countries like China is redistributed towards the private sector.

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