Simple question; Could our capital markets function, without the government siphoning up trillions in surplus investment money? No.
Given the Federal debt started with the New Deal, not only was Roosevelt putting unemployed labor back to work, but unemployed capital, as well.
Then World War 2 shifted this public backing of private wealth to the military(war bonds). It was the industrial policy pulling us out of the Great Depression, but placing the military industrial complex beyond question.
Presumably Paul Volcker cured stagflation with higher interest rates, but the logical consequence of this would be to starve capital to those willing to borrow, to grow the economy, from mortgages and car loans, to business borrowing. Meanwhile gifting extra money to those with already more than they need, so can afford to lend it out.
What really cured it was Reaganomics. Cutting taxes and building up the military, thus requiring lots more borrowing.
Not to mention deregulating banking in order to turn the financial system into a casino and able to sustain enormous amounts of notational value in suspension.
One of the main ways the Federal Reserve raises rates is to sell the debt it bought to issue the money in the first place, then retire that money. So the only difference with the Treasury issuing more debt is this money gets spent back into the economy in ways the private sector never would, such as welfare and warfare, because there is no return on investment, but it does provide the private sector more opportunities to serve this additional sector.
I would note that welfare doesn't necessarily create a healthier society, so much as it makes many people wards of the state and the money quickly ends up in corporate pockets.
So if the function of our military is actually an undercover industrial policy, it would certainly explain why the resulting wars have been so monumentally strategically inept and no one is held responsible.
No court martials, no firing squads, as would happen if the actual defence of the country were at stake.
As Deep Throat said, "Follow the money."
