ray.hollowayDr. Herbener, I think it may help to clear up who exactly is burdened by “the loss of resources” when the state borrows. Do you mean only those who bought the bonds? Or, perhaps, do you mean the burden is on the marketplace as a whole (i.e. consumer demands are not being met)? In other words, the voluntary choice that bondholders have made (buying government debt) has actually burdened current consumers (i.e. taxpayers), because the funds used to buy bonds would have better served those consumers, if those funds had been spent in the free market.
Also, is it not fair to say that the voluntary choice that bondholders have made to spend their money on government debt is only voluntary in one direction? There is no voluntary agreement by future taxpayers in this transaction, unless one views past officials/bond elections of their particular geographic region as legitimate representation. The private party to private party analysis is true as far as it goes, but someone breaking into my car and stealing my radio is a private party to private party transaction, too. I certainly don’t consent to it, nor am I happy about having to buy a new radio which I consider to be a burden. Future taxpayers (certainly, the unborn and those unable to vote yet) have not consented to the present sale of bonds, but they are obligated to pay the interest on those bonds.
So, this appears to be a burden on both present and future generations. Today, we suffer from an inefficient use of resources, and, tomorrow, our children are obligated to pay those who enabled the inefficiency.