Nope - Controlled by taxes Posted: Oct 13th, 2018 - 11:47 am In Reply to: Creation of money out of thin air leads to increased - supply of money, which leads to
That's what taxes are for...they pay for nothing.
This is REALLY vital to get.
The government doesnt just print random dollars, ship them to the treasury and then spend them via armored car deliveries as they need them... then when the car is emptied they freak out running to China and private banks to get more because they ran out... just doesn't work that way.
Congress authorizes spending.
Dollars or tallies or credits and debits are made into accounts. Keystrokes.
Social security payments the same.
Food stamps the same.
"Interest on reserves and the debt" the same.
All keystrokes as needed. As required. Government checks DO NOT BOUNCE.
Why?
The government neither has dollars nor doesn't have dollars. It authorizes the creation of funds INTO EXISTENCE every single time it spends. Every time.
Then, to control the speed and heat of the economy, they tax some of those keystrokes OUT OF EXISTENCE. They destroy those keystrokes with taxation.
The Federal government only spends a dollar... once. The next time it sees that dollar is as it is euthanizing it via a tax which destroys currency.
When someone asks about "printing money", it should be incredibly obvious now why that is nonsensical thinking.
Before the digital era, they shredded cash when it was received in receipt as taxes. Back in the day they used to burn these papers when they were returned as a tax.
To quote Warren Mosler, a dollar is merely a tax credit the government uses to provision itself. The tax creates buyers and sellers of goods and, as he also says, the imposition of the tax created the first "unemployed" person because in order to get that dollar, they needed to get that dollar. That dollar didn't exist until the government spent it first on real goods and/ or services. So the government had to spend first then, so it could provision itself and get more goods and services, it needed to ensure you needed and wanted the currency it was pushing. The government's unit of account is worthless until the imposition of an obligation payable only in the government's unit of account... in our case in the US, it is the dollar. In the UK it is the Pound Sterling. In Japan, it is the Yen and in China it is the Yuan. Australia and Canada have their own dollars as well...
States do not create currency nor do the countries with the Euro as their currency. They are currency users and have given up their Monetary sovereignty and are therefore like Michigan or Kansas... currency users and, as you see with Greece and Puerto Rico can go broke.
During the gold standard, the nation would print a certain amount of money against the underlying gold supply. If they printed more money it would "devalue" the dollar. But truth be told, we have been off the gold standard since 1971 and have tax driven money. The Federal government is the monopoly issuer of the currency and therefore, when it spends that currency into existence it is also the price setter. It is the market creator and regulator. Not the other way around. In a sovereign free floating non-convertible fiat currency that we have today, there is no such thing as "Quantity Theory of Money"... not one that is truthful.
It always comes down to does the nation have real resources and services it can buy in its currency. As with any MMTer who has done any homework, inflation is a constraint that can be managed with taxes and stabilizers. It's not a function of "too much money chasing too few goods and services"
#LearnMMT #EachOneTeachOne
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