I’m all for returning the money used to purchase government bonds back to those who bought them. It’s money that already exists so who is harmed. Let them invest it in something other than debt. In fact I think there should be a high rate of taxation on capital gains from bonds to discourage investing in merely debt securities. All it does is encourage an economic vice (hoarding savings) that removes large amounts of money from the circular flow of the economy compared to the interest paid (especially now with treasuries at historic lows). Better that it should be invested in some traditionally productive enterprise. And yes, there is a stock bubble, but if there was actually enough individual income to purchase production (think dividend) corporations wouldn’t have to issue nearly so much stock in order to survive and profit. And if they could sell there products and services for a 40-50% discount and still make more profit than they ever had before they’d have a lot less need to borrow as well. Same for individuals, with the dividend and discount they’d have to borrow less, own what they borrowed for much more quickly and cheaply instead of being nothing but debt slaves all their lives.

Regardless, as Steve Keen correctly points out the real problem is private debt not government debt. Government debt is largely a political football issue for pols to use to attempt to get elected…and then do nothing about it, all the time distracting the populace from the bigger problem of private debt. As I just pointed out the way to reduce and eventually eliminate private debt is to implement the dividend and discount mechanisms that would actually solve the private debt problem. And structural Public Banks as a competitive balance to private finance and a central public bank that calculated and distributed the dividend and discount monies…are exactly the entities and governmental agencies needed to enact such individually freeing and systemically free flowing policies.