2 Trillion over 10 years???

[doodle]

The latest debt talk projections are hinting at a deal for around 2 trillion over 10 years.

So, as far as I can tell the Govt is spending 1.5 trillion over revenue on a yearly basis. That means that our debt will more than double over the next ten years assuming interest rates stay about the same.

Under this debt deal we will have 28 trillion in debt vs. 30 trillion in ten years not to mention the heavier burden that unfunded SS pot is going to place on govt finances.

Is this for real? Can anyone explain how this math works...?

[Gumby]

That means that our debt will more than double over the next ten years assuming interest rates stay about the same.

The media loves to embellish. Isn't that actually $28 Trillion in 2022 dollars? That may be more like $20 Trillion in 2011 dollars for all we know.

Is this for real? Can anyone explain how this math works...?

What exactly is the problem? When you include the unfunded liabilities into the equation, we're more like $114 Trillion in the red. The bond market barely even cares (Long Term Treasury yields actually dropped today).

Seriously. If you won't consider that MMT may have some validity, take a look at the US Debt Clock and then tell me why 30-year Treasury yields have been so tame as the debt goes up and up to mind-boggling levels. Clearly the bond market understands why the US can have that much debt.

[MediumTex]

If you look at the 30 year bull market in bonds, it only started AFTER the Reagan administration and every administration since began spending massively in excess of tax revenue collections.  Even the Clinton surplus years were not really surpluses when you look at the use of payroll tax collections that were used to fund general government expenditures.

The U.S. bond market simply isn't driven by the soundness of the U.S. balance sheet.  Logic suggests that it should be, but reality tells us that it's not.

Does this make any sense?  Of course not, but our job isn't to solve all the mysteries of the universe, it's to find some means of investing our money that is safe and will provide reliable inflation-adjusted returns.

[doodle]

Under this logic deficits can continue forever without reprecussions, but that cannot be the case because at some point servicing a massive debt will take up a larger and larger percentage of government tax revenues and GDP. This is malinvestment and it negatively impacts growth rates.

I think Japan is going to be an interesting case study on what happens with an aging demographic and extremely high debt to GDP ratios. At a certain point...whether it is 200% or 300% or 1000% of GDP...debt becomes unmanageable.

The idea that a country with monetary sovreignty can just print into oblivion strikes me as nonsense. Just as a share of a company represents a certain percentage ownership of that company's assets and productive capacity...A dollars value represents a small portion of our nations productive capacity. If productive capacity rises and the quantity of dollars stay the same you have deflation. If the quantity of dollars rises and productive capacity stays the same then each dollar represents a smaller portion of total economic activity of our economy and is worth less. This is devaluation or you could also call it inflation.

If a company were to theoretically issue more and more shares into the marketplace (which it can do) it would dilute the value of the shares that are already in the marketplace. Why is it any different when a country prints money?

[moda0306]

doodle,

In some ways it isn't any different, but the main difference is that instead of a currency backed by a commodity, the federal government is of the proper size and permanence to basically create a "game," if you will, that gives our currency value, even if that value is eroded by 1-3% every year.  You can argue the morals of this, but all the government needs is an IRS with the clout to collect taxes to sustain it.

Sustainability and morality are two totally different things.

Lastly, servicing the debt in Japan right now probably costs about the same as the US per $ of GDP, since they have about twice the debt but their interesst rates are about half of what ours are.

Think of it this way, too, if half of our debt is going to the fed, anyway, then that means half of the interest is simply money being destroyed... which allows more printing w/o inflationary effects.  The other half is going to others, including China, but we are very capable of running defecits/printing to pay those amounts, and as long as we continue to run a trade defecit with China, they'll have to either invest in our bonds or decide to start running trade deficits to us, both of which are hardly hyperinflationary, and the latter, while inflationary, is only so because its extremely beneficial to our economy in that we'll have tons of new demand from foreign buyers.

[doodle]

I would argue that sustainability is based on morality. I think the declaration of independence made this pretty clear on governments relationship to the people.

"But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security"

Ultimately the government is accountable to the people. When the rules of the game run counter to our best interest as individuals, you create a new government, country, etc.

[moda0306]

Your arguments most of this time have not been around public revolt against our government, but the fact that once we hit a certain level of debt, our government will no longer be able to function because foreigners won't buy our bonds, our economy won't be able to service our debt, etc.  It was populism, somewhat, that caused FDR to drop the gold standard, so I'm not going to try to guess as to what's going to rile this country up into a mass fervor.

We all have reservations of handing the power of currency over to government and debate how they should use that power(even the ones here that buy into most of the MMT argument), but the question is what threats do we face, and what flexibilities are we offered to address those threats.  If our threat is the revolt against our government, then I'd say we're on a whole different topic now than whether we can service our "debt" with a sovereign fiat currency.

If the government came up with a game where they pointed a gun at you and said, "Dance," then your dissatisfaction with that game would have little to do with your willingness to play.

...ok, my analogies aren't like MT... I'm still working on them.

[MediumTex]

It seems like we are confusing what the world might be like if one of us created it and how it actually is.

I wouldn't have allowed things to get this screwed up if I was in charge, but I'm not, so what I would do is irrelevant.

The system just IS.  It's not moral or immoral, right or wrong, ethical or unethical.  The nature of all modern bureaucracies is their indifference to such labels.  They move along according to a dynamic and momentum that no individual person can change, and that is what defines their essential nature.  It's like a really boring version of "The Matrix".

So we sit here outraged that a government could spend more money than it takes in year after year after year, making promises that can't be kept, and just generally being stupid.  

But we must remember that we are talking about what is essentially a board game created by governments called the monetary system.  It's nothing but a set of abstractions that are used to effect what economists believe is the optimal means of allocating actual resources, finished goods and services.  In other words, we are not talking about people starving because they don't have enough to eat; rather, we are talking about a government starving for money in the future because it is spending too much money today without appreciating that the goverment can just print up more money if it needs to.  That's the essential nature of post-gold standard currencies.  Citizens will routinely run out of money (that's what makes them want to work), but a government will never run out of money.  This basic observation is what makes it so obvious that the EU will be a transitory arrangement.

I run into this type of thing routinely working with IRS rules and regulations.  I will catch myself thinking they have painted themselves into a corner on a rule, but I must remind myself that it is impossible to paint yourself into a corner when you are the one creating the entire reality in which the corner exists.

Ultimately, the issue comes down to one of force--who has the ability to administer force most effectively in order to get what it wants.  Right now, it's the U.S.  The U.S. controls the greatest force administration apparatus in the history of the world.  Picture a gigantic can of pressurized whup-ass with an applicator tip that can be directed anywhere on the planet--that's the U.S. military, and that's what ultimately determines rates on U.S. government debt.  Take a look at U.S. treasury rates for the last 50 years and you will find that they roughly track the prestige of the U.S. military.  It's sort of weird, but the more you think about it the more sense it makes.

So when you are thinking about how the world works, remember that controlling the use of force is the most important, controlling real resources and finished goods is second, and controlling the cluster of abstractions known as currency systems is third.  It should come as no surprise to anyone that the U.S. enjoys very low borrowing rates when one sees that the U.S. has a near monopoly on the use of international force, vast domestic deposits of natural resources and the world's largest manufacturing base.  With such obvious REAL advantages, the way the monetary board game is setup is almost irrelevant, and thus all sorts of ridiculous things can happen in the imaginary world of fiat money and government debt without any serious consequences.

The government debt will become a problem when the U.S.'s other competitive advantages begin to deteriorate.  When will that happen?  Who knows.  It could be five years or fifty years, or longer.  It's not anything worth betting on with money you can't afford to lose.

[stone]

Medium Tex "Take a look at U.S. treasury rates for the last 50 years and you will find that they roughly track the prestige of the U.S. military.  It's sort of weird, but the more you think about it the more sense it makes."

Are you saying that low rates are a sign of military strength? Japan is hardly a military muscle flexer and they have lower rates. I get the impression that with a country that uses its own free floating fiat currency, lots of government debt in itself leads to low rates. Military spending leads to government debt so that would be how I'd link it in. Government debt entails the government providing interest payments to bond holders. By definition bond holders are people with an inclination to own bonds. Bond holders are people likely to spend any interest payments on buying more bonds, bidding up the price of bonds and so lowering yields. A scenario where yields are dropping draws in investors wanting to partake in the "bond bull market". That mitigates any currency weakening due to dilution. The stunning thing is that the USA pays a smaller proportion of GDP on government debt interest now then it did in the 1980s. I agree it is totally back to front as compared to say Greece which is using a currency that is not their own or any historical comparison to  currencies that were pegged to gold or another currency and so could be squeezed by bond vigilantes. I guess at some point yields need to hit a lower bound just as property prices can't become too un-affordable and stocks can't increase earnings if customers have falling incomes.
To my mind the key question about deficit spending is who benefits and at who's expense? Is it a politically palatable way to ensure every one gets to do rewarding jobs and we all benefit or is it a sneeky way to dispossess the wealthy or is it a sneeky way to dispossess the poor and empower the wealthy? My guess is that the system is on its course without anyone really knowing what the outcome will be or even what the current effects really are.

[Gumby]

Are you saying that low rates are a sign of military strength? Japan is hardly a military muscle flexer and they have lower rates.

Japan is forbidden to have a standing army or wage war by Article nine of its own Constitution — which was decided after WWII. However, the Japan Self-Defense Forces are one of the most technologically advanced armed forces in the world. Japanese military expenditures are the seventh highest in the world.

http://en.wikipedia.org/wiki/Japan_Self-Defense_Forces

Additionally, the Treaty of Mutual Cooperation and Security, signed in 1960, allows for the continued presence of American military bases in Japan. The agreement has always been understood (even if unofficially) that the US and others will protect Japan if necessary.

http://en.wikipedia.org/wiki/Treaty_of_ ... _and_Japan

Between Japan's Self-Defense Forces and the mutual cooperation of the United States, Japan has a very strong defensive military presence.

[TBV]

Greece can get squeezed because (unlike Japan) not enough Greeks choose to buy Greek debt.  So the foreigners who have are in a position to demand reforms, downgrade debt ratings, roll the debt over and/or declare a default.  This is what happens to countries that no longer control their own financial destiny.  The fact that Greece has recently agreed to the most stringent belt-tightening in recent memory seems to matter little at this point.  Investor sentiment (make that foreign investor sentiment) seems to play a major role in how well or ill things can turn out, regardless of domestic developments. And what about the US?  It too depends on the kindness of strangers. Fortunately for Americans, the US economy is substantially intertwined with the global economy.  I shudder to think what might happen if/when our trading partners decide they can get by without us and our currency.

[MediumTex]

All I am saying is that the quality of a country's debt is a function of many things, one of which is military power, and the U.S. is obviously the world leader in this area, and thus I believe it has contributed to the continued fall in rates since the dramatic increases in military spending and use of the military that began under Ronald Reagan and has continued since.

It's just one factor, but it's one that gets almost no attention when people talk about the bond market.

[melveyr]

At this point I think that the amount of government debt is simply the amount of money that the Fed/Treasury decided to pull out of the economy. In an accounting sense, that it is the only thing that has happened. The money didn't go to "finance" government spending because our government can spend money into existence.

I for one hope the government always offers debt-like securities because I sure do love their 30 year treasuries. A 40 year would be nice too. Maybe I will write a letter to the treasury 

[MediumTex]

I for one hope the government always offers debt-like securities because I sure do love their 30 year treasuries. A 40 year would be nice too. Maybe I will write a letter to the treasury 

Dear Uncle Sam:

I love your bonds!!!

I think they are awesome.

Please keep issuing them.

P.S.  Do you think you could sign a bond for me?

[stone]

Greece can get squeezed because (unlike Japan) not enough Greeks choose to buy Greek debt.  So the foreigners who have are in a position to demand reforms, downgrade debt ratings, roll the debt over and/or declare a default.  This is what happens to countries that no longer control their own financial destiny. 

Greece is suffering a double whammy because they are using a currency that is not their own and their debt is largely held by foreigners. But what the USA shares with Japan is that the USA like Japan is using its own fiat currency. I think that entirely turns the situation on its head compared to Greece. The Greek government has to raise money from bond sales and taxes BEFORE it can spend. The governments in Japan, USA, Sweden, Canada, UK, Brazil etc etc spend money (created by the click of a computer mouse) then once the money is spent into the economy retrieve it through bond sales and taxes. For the USA the "only" danger is to have a dramatically diminishing exchange rate compared to other countries. At the moment the USA, UK, Japan, Brazil etc actually want to have lower exchange rates so as to protect jobs.

The CBS interviewer (Scott Pelley) and Bernanke talked about US government spending:
Asked if it’s tax money the Fed is spending, Bernanke said, “It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money than it is to borrowing.”?

[stone]

Medium Tex and Gumby, I see your point that if a country was in peril of invasion and colonization, then that would be catastrophic for its currency. But I still think the US military (and the mini-me UK military) go way beyond what is needed for that. I'm really skeptical whether military might pays for its self even from the narrowest perspective. Invading Iraq, after Saddam Hussain started refusing to accept USD for oil, cost an immense amount even if looked at with blinkers to the human cost. I find it implausible that the damage to the USA from diverting resources to the Iraq war effort was offset by having  Iraq accept USD for oil. Putting those resources into say solar thermal energy infrastructure might have meant Iraqi oil was no longer needed?

In the UK especially, my impression is that all the threats of violence we face are ironically the consequence of making our presence felt militarily. Japan, Switzerland and Singapore are rich countries with purely home defense military. Before WWII, USA was the same. I wish the UK followed that home defense only policy.

[Gumby]

Medium Tex and Gumby, I see your point that if a country was in peril of invasion and colonization, then that would be catastrophic for its currency. But I still think the US military (and the mini-me UK military) go way beyond what is needed for that. I'm really skeptical whether military might pays for its self even from the narrowest perspective.

The overwhelming might of the US military is designed to allow it to influence what happens abroad in order to protect its own interests on a global scale — a super power, if you will. I don't necessarily agree with the strategy, but that's why the military goes beyond a simple defense strategy. I think that ability to dictate what happens abroad is somewhat necessary for a global reserve currency.

 http://en.wikipedia.org/wiki/Superpower

Keep in mind that the US armed forces is also the second largest in the world. The largest is China.

[stone]

Gumby, I just wonder whether the military blows its own trumpet about that above and beyond what the reality justifies. The Swiss Franc gets used a bit as a minor reserve currency but the Swiss economy is too small to absorb bubble effects when Foreigners save in Swiss Francs. If the USD was managed to provide a safe haven and the USA expressed no interest in dictating World event, I suspect people would adopt the USD as a reserve currency just as a free choice. Gold gets used as a currency purely because it is a stable store of value. Gold doesn't have any military backing does it? Gold doesn't really have much true value as a commodity. For electronics and decorative uses alone would gold have a value much above $50/ounce? The rest of the $1500/ounce price tag is just conferred by use as currency? Indian gold jewelry seems to me to be just wearable savings accounts and is in reality not a commodity use. I'm not even sure that having the USD as a reserve currency really does most US citizens much of a favor. Have you seen Stiglitz's thing about using SDR as a global currency?

[Gumby]

Gumby, I just wonder whether the military blows its own trumpet about that above and beyond what the reality justifies.

Perhaps. I'm not a Five-Star General, so I can't say I know what kind of firepower you need to keep shipping lanes open in and around multiple continents and maintain precision strike capabilities in key areas around the globe.

Would we have as much access to all of the natural resources of the world if we just maintained a simple defense force? Would those resources cost more if we maintained a simple defense force? Would our exports make it to their destinations? I don't know the answer. The problem is that we consume a lot of resources to keep our economy running. We've now reached a point where our way of life would grind to a halt if the flow of natural resources were interrupted. I think in many ways the military's job is to make sure nothing gets in the way of that consumption (and production).

The Swiss Franc gets used a bit as a minor reserve currency but the Swiss economy is too small to absorb bubble effects when Foreigners save in Swiss Francs. If the USD was managed to provide a safe haven and the USA expressed no interest in dictating World event, I suspect people would adopt the USD as a reserve currency just as a free choice.

You kind of make it sound like the world chooses a global reserve currency because it smells nice. But, that's not how it works. You need an obscene amount of money floating around the world in order to provide a global reserve currency. The Swiss Franc is certainly stable, but the Swiss would have to maintain an unbelievably large trade deficit for their currency to be a global reserve currency. This is known as the Triffin Dilemma.

This may be controversial, but if you think about it, our deficit is necessary to maintain a global reserve currency.

Think about it. How else do you get the dollars into the hands of so many foreigners without creating a large trade deficit? The world is now addicted to dollars. I'm not saying this is a good thing. It's just the way it is.

Gold gets used as a currency purely because it is a stable store of value. Gold doesn't have any military backing does it?

Unfortunately, there's not enough gold on the planet for it to be used as a global reserve currency. And if there was enough gold for everyone, it would have a lot less value (much like tin, or copper). My guess is that it would not be much fun paying for a new car with 2,500 Lbs of tin.

I'm not even sure that having the USD as a reserve currency really does most US citizens much of a favor.

And I would agree with that statement. The Triffin Dilemma basically says that in order to maintain a global reserve currency, you have to be willing to accept that it will cause negative side-effects for your country. And perhaps this is a reason why empires eventually fall.

The US didn't exactly have ambitions to become a global superpower when our country was formed — we rose up to the challenge during WWI and WWII when we had no other choice but to defend our allies (and trading partners). When WWII was won, our troops came home and found the "American Dream." What this really meant is that we became huge consumers of natural resources. Our military transformed into a means to protect our ability to consume tons of natural resources. As we consumed more — and went deeper into debt — our dollars spread out across the globe.

Our military protects our interests, and it protects the ability for us to send our fiat dollars overseas in exchange for goods and natural resources. Is it overkill? You bet it is.

We can lament about how large the deficit is... but if the deficit wasn't as large as it is, we probably wouldn't have as much stuff. Would our lives be better with less stuff? Probably. Maybe. I don't know. People seem very happy in Denmark — and they have a lot less stuff. But, this is the system we have. These are the lives we've lead. This is our reality. If we don't like it, I guess we can all move to Canada.

[moda0306]

Gumby,

Your point about how foreigners got our dollars speaks volumes about how we they are somehow, someday, going to "quit buying our awful bonds."  What are they to invest our dollars in?  They're not going to dump them in the South China Sea.  They either have to buy our bonds (works nicely for us), or purchase stuff from us (that includes investing in a plant to build widgets (hiring people?)... they're basically sending their "confetti" back here for productive uses).

To have a denial of our bonds is to have a reversal of the trade deficit (unless they simply decide to hold cash at 0% interest, at which point they're losing out even more)... and to have that means the US is all of a sudden in a trade surplus, with all those dollars coming here to build plants, purchase steel or goods, etc... now it's hard to imagine that not causing some inflation, but if that's not good demand-pull inflation I don't know what is.

Somebody please, mechanically describe to me how the rest of the world just decides to stop buying our bonds unless they choose invest or spend in the US, creating jobs and GDP... because that's where most people say "we're different than Japan."

Our reserve currency status and foreign ownership of our debt is a direct result of our decades of net overseas consumption.  For the reverse to happen (liquidation of US debt by foreign bond-holders), we'd have more demand and investment in the US than we'd know what to do with.  I can't imagine unemployment staying low for long.

[HB Reader]

The governments in Japan, USA, Sweden, Canada, UK, Brazil etc etc spend money (created by the click of a computer mouse) then once the money is spent into the economy retrieve it through bond sales and taxes.

The CBS interviewer (Scott Pelley) and Bernanke talked about US government spending:
Asked if it’s tax money the Fed is spending, Bernanke said, “It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money than it is to borrowing.”?

Just to clarify something (and I may be wrong), but I think there is something slightly amiss in this discussion about the money creating roles of the USG and the Federal Reserve here.  The Treasury (on behalf of USG agencies) can't spend any money that isn't raised directly by taxes or bond sales first.  The Treasury (through the Bureau of Printing and Engraving) can create banknotes, but they only do this as requested by the regional Federal Reserve Banks (where the banknotes are shipped) who determine what portion of the existing money supply is needed as cash, as opposed to demand deposits.  The USG very seldom (if ever) prints banknotes and then spends them directly.  In short, the Treasury doesn't directly create money by "the click of the mouse" which is then spent in the economy.

The Federal Reserve does create money out of thin air (although there technically may be certain other restraints), but this is usually done through the purchase of new or outstanding debt (usually, but not always, USG) securities in the market place.  The Federal Reserve can also do certain other things, like raising or lowering reserve requirements, that result in more or less money in circulation.  These actions then, in turn, in a fairly complex interplay affect major things such as exchange and interest rates.

These technicalities are often glossed over in the discussion of fiat money because many people (rightly or wrongly) assume the Federal Reserve is merely a handmaiden to the USG and will create money to cover the Treasury debt issuances or create money for other reasons favorable to the USG.  Yes, the Treasury can literally print money, but in practise it's printing presses can't inflate or deflate the way the Federal Reserve can.  A Federal Reserve chairman, like Paul Volcker, can come in and implement a monetary policy that may not please the current administration.  The sway that an Administration or Congress has or doesn't have over the Federal Reserve is a fairly complex topic and probably better left to a separate discussion.     

[moda0306]

HB Reader...

That is one nuance I've been really wondering about what the true impact is... does the fact that the fed purchases bonds, not simply funding government, fundamentally change the game, or does it more-or-less accomplish the same end?

Thanks for clarifying for everyone.

[Wonk]

Think about it. How else do you get the dollars into the hands of so many foreigners without creating a large trade deficit? The world is now addicted to dollars. I'm not saying this is a good thing. It's just the way it is.

100% correct about Triffin's Dilemma, Gumby.  In a purely fiat model, persistent trade deficits are necessary to provide enough liquidity to support global growth.  Whether or not that model is sustainable is another matter entirely.  Also, just so that there's no confusion, it's important to distinguish between trade deficits and fiscal deficits--which I believe was the topic this thread was started on.

Unfortunately, there's not enough gold on the planet for it to be used as a global reserve currency. And if there was enough gold, it would have a lot less value (much like tin, or copper).

This idea gets floated around a lot in the press but it's not accurate.  In fact, The Bernank said the same thing not long ago but I'm not convinced he actually believes it--more like public misdirection.  There's always been enough gold and always will be enough gold to support any currency on the planet.  It's not a supply issue, it's a price issue.  Right now--today--if the price of gold were $10,200, it would support the U.S. monetary base and would therefore be a de facto gold standard.  The last time this occurred was 1980-1981.

Also worth noting that in 1932, U.S. gold reserves represented about 50% of the money supply.  By raising the official gold price via decree by 75% and nationalizing privately held gold, the U.S. achieved 125% gold backing of the currency by 1934.  This effectively devalued the currency enough to support renewed domestic growth and economic expansion.

Annual gold production averages roughly 2%--enough to support modest (and perhaps more sustainable) economic growth.  If currency expansion was set at the same level, CPI would be 0%.  If deemed necessary, conceivably you could raise gold prices by 4% annually and expect roughly 2% inflation annually--albeit with some bumps in the road.

But, this is the system we have. These are the lives we've lead. This is our reality. If we don't like it, I guess we can all move to Canada.

Being at the top of the proverbial food chain has obvious advantages and disadvantages.  On one hand, we get to enjoy the "spoils of war" in the form of cheap and easy consumption.  The disadvantage to this is that corruption and complacency are sure to follow.  The U.S. is not perfect with respect to world justice, but I can only imagine what would happen if a despotic regime were to retain a monopoly on world power.  Like it or not, most of the first world in western Europe and Asia get to live a life of relative luxury so long as they submit to the wishes of a dominant superpower--in this case, the U.S.  They get to spend lavishly on welfare benefits due to the fact that they don't need to spend much on sustaining a formidable military for defense.  As much as I don't like this policy, it is what it is for now.

Some time in the future, the U.S. most likely will follow the same path of the British and Roman Empires--a slow decline and assimilation back into the world's population while ascension of other world powers stake a claim to the throne.  The players will often change but the game stays the same.

[stone]

HB reader, different governments seem to have different configurations of central bank and treasury at various times but the overall fiat currency system seems to end up working the same. That makes me think that there is some justification for viewing them in aggregate as an arm of the government? They pass things back and forth between each other but what really matters is what the net movements are between the "government as a whole" and the private sector.

[HB Reader]

HB reader, different governments seem to have different configurations of central bank and treasury at various times but the overall fiat currency system seems to end up working the same. That makes me think that there is some justification for viewing them in aggregate as an arm of the government? They pass things back and forth between each other but what really matters is what the net movements are between the "government as a whole" and the private sector.

Stone -- Yes, it is true that different governments have different configurations.  In many countries, the central bank is under the Treasury or Economics Ministry and is thus subject to more direct executive branch control.  In many countries the courts are also under direct control of the executive branch.  The Federal Reserve is actually more independent than most central banks (just like our court system is more independent than most), but that certainly doesn't mean they (or our courts) are completely insulated from either the executive or legislative branches or, by extension, from public opinion.   

In a strict analytical "funds flow" sense, I can see some possible justification in some cases in viewing them as part of the government as a whole versus the private sector.  But glossing over the legal and political realities of thier structure quickly leads to very misinformed discussions about monetary and fiscal policy, as well as topics such as the debt ceiling.

In the US, the President can't pick up the phone and tell the Chairman of the Federal Reserve to "get on board" with his policies.  President Carter certainly did not call up Chairman Volcker and tell him to raise interest rates until everyone cried "uncle."  Carter nominated him, but Volcker made the decision later in October 1979 to squeeze the money supply.  Neither Presidents Carter or Reagan favored high interest rates, but they recognized the political futility of "Fed bashing" and largely left him alone.  Even Congress hasn't really tried to directly curtail the Fed's independence, although they have been working to hem it in  by giving the Fed legal "dual mandates" requirements, etc. 

I'm not attacking or defending the Federal Reserve System (I have a lot of reservations) or fiat money, just pointing out they can pursue monetary policies that sometimes run counter (or seem to run counter) to the policies of the executive or legislative branches of the USG and that the money creation process is politically and legally more complex than someone in the Treasury clicking a computer key.

You may well be right that all fiat currency systems will end up with the same result, but the speed and path they take will vary considerably based on their structure and the overall economic literacy of the body politic.