You are right of course, but they can't get their shit together.

> The point is that a sovereign country with a central bank can print its own money, but that doesn't mean it can borrow in its own currency.

This is getting into a bit wonky details, but the bottom line is that your concerns are misplaced. First of all, a monetarily sovereign government doesn't have to borrow in the first place. The only reason that they "borrow" is to provide a safe interest earning asset for the financial sector to play with, and so that the central bank can effectively raise the interest rate without paying interest itself - and wouldn't that cause interesting questions by the public, if suddenly raising interest rates would cost the central bank money!

Second, at the end of the day when the government runs a deficit, banks have a choice between keeping surplus reserves at the central bank or buying government bonds. As long as the interest rate paid on government bonds is higher than that on reserves, banks will buy government bonds.

So there are no monetary constraints.

What you should be concerned about, if anything at all, is the exchange rate to other currencies. Clearly, most normal countries see their exchange rate fall if they run a current account deficit for too long (the US is an interesting but explainable exception to that rule).

This makes imports more expensive. On the other hand, it makes your exports cheaper for foreigners, which is a boost for domestic industry. So in the end, the economy actually benefits.

You are right that there will always be some unemployed as people need to find the next job after a surprising layoff. However, this is known as frictional unemployment, and can basically not be more than 2%. In practice, you'd expect it to be well below 1% in an otherwise well-functioning labor market, though I will admit that it depends on the exact institutions and laws surrounding labor.

What economists mean when they say "natural" unemployment is something else entirely. It refers to the (contested) idea that there is some "natural" rate of unemployment that the economy "wants" to achieve, in the sense that you will supposedly see some unintended negative side-effects if you use policy (such as classical demand policies) to push unemployment below that level. This unintended negative side-effect is typically said to be inflation.

There is some truth to this idea; the criticism is mostly in how one responds to it. There is truth to this idea because low unemployment increases the wage bargaining power of labor, which may result in higher inflation via the wage-price cycle.

However, the standard reaction to this is disappointing: Central banks purposefully generate unemployment to keep inflation low, making unemployment a macro-level problem, while the rest of policy (and public opinion) acts as if unemployment were the fault of the individual. This is clearly schizophrenic behavior.

The more intelligent response is to say that infinite demand for labor should be created at a fixed wage. This eliminates unemployment without enabling the wage-price cycle. This idea isn't exactly new, but it is not yet widely known, even though its supporters come from a surprisingly wide range of the political spectrum (the supporters disagree on the how of the implementation details; the main search keyword is "Job Guarantee", though I have also seen some superficially quite different proposals such as this one: http://www.morganwarstler.com/post/44789487956/guaranteed-in...).

Why is it not widely known? I believe it is a combination of (a) efforts to make this idea known outside of small academic circles are relatively recent, and (b) while individuals clearly benefit, there are no truly powerful individuals or social institutions that clearly benefit, hence the advocacy is not as well-organized as e.g. Austrian propaganda.

Once everyone has a sufficiently decent job, workers will have have enormous bargaining power, because they do not fear losing their jobs. Imagine how negotiations between bosses and workers would go. The ability to openly disrespect the boss, and the clearer possibility to transcend boss rule.

Absent other methods of control (like the USSR used, as you point out), capitalism would risk overthrow; that is, replaced by another system, with different defining institutions.

Needless to say, this poses a problem for policymakers, whose success depends on their ability to serve the wealthy elites who finance their campaigns and dominate government. So they must pursue economic policies which lead to sufficiently high unemployment (often sacrificing growth too; obviously less people are making stuff); or at least fragile employment, like in the service industry.