Budget deficits do not matter

  Budget and trade deficits are an archaic concept leftover from the gold standard. Historically, paper money was only as good as the volume of commodity that backed it. Thus a nation's GDP, its currency, its wealth, was essentially measured in gold. Today, no such arrangement exists thus GDP, currency, and wealth are all monetary equations printed out of thin air.

  Historically, we could not make such a bold statement. If a national central bank printed more money to pay for government expenditures than it had in gold reserves. Then its citizenry had a larger claim to the government gold than the government could ever claim to exist.

  If a nation imported more goods than it had in its gold reserve. Then foreigners have a larger claim to the gold reserves of that nation than the nation could ever claim to exist.

  Both scenarios would then lead to bankruptcy as the state lacked the gold reserves to pay for the paper currency its citizens or foreign creditors held.

  But this is the 21st century and the era of fiat money. No nation is obligated to intervene in the market by selling gold in exchange for its own bank notes to its citizenry or foreigners at a fixed price. This is why gold is not 20 euros per ounce or 100 yen per ounce. The price of gold goes up and down like the price of a big mac or any other commodity sold on the market.

  The gold has disappeared, with the central bank note taking its place. And the state bonds in a way has now replaced the role of the central bank note. If a citizen tried to purchase gold from his national bank with the central bank note he held. The national bank would declare bankruptcy from being unable to come up with the gold. But if the citizen tried to redeem his state bonds for central bank notes. The national bank can easily print the value. As a result, no bankruptcy can exist if the state does not want to declare bankruptcy.

  In the 21st century, budget deficits, trade deficits, and national debts are largely inconsequential. The only consequence that exists is inflation. And most people around the world are quite used to that. A big mac used to cost 49 cents in 1968. You could purchase two big macs with a single dollar bill. Today, its over 2 dollars. Even if big macs inflated to 5 dollars, the federal reserve can simply add a zero behind every 1 dollar it prints and you can still purchase 2 big macs for 10 dollars.

  Budget deficits have largely become irrelevant. Paper money today is legal tender. Its the only legally acceptable form for exchange for goods, services, and taxes whether there is inflation or not.