Step #1) Federal gov’t keyboards $3.315T & spends $3.315T.
Step #2) Federal gov’t collects back $3.315T (of EXISTING dollars from taxpayers).
Step #3) Federal gov’t keyboards $.666T & spends another $.666T.
Step #4) Federal gov’t collects back $.666T (of EXISTING dollars from Treasury bond investors).
Note: So far it’s all a ‘wash’…
Step #5) Federal gov’t keyboards $.666T of Treasury bonds into existence and keyboards those assets, denominated in $$$, to the bond investors (Note that is a CREATION which is ALSO an ADDITION of Net Financial Assets into the banking system).
Those tax & bond collections are not a ‘financing’ function, but are instead a redistribution of $$$ serving a ‘price-stability’ function. Furthermore, rather than being a ‘financial’ constraint, those Treasury bonds serve as a ‘political’ constraint—meaning that the federal gov’t can shut down if policymakers don’t agree on spending.
Those tax & bond collections are just dollar ‘drains’, ebbs & flows, from different parts of the banking system and NOT a dollar ‘destruction’ from the entire banking system.
This is not rocket science, this is ACCT 101, BANKING 101 and CIVICS 101.
Same as the private sector when ‘deleveraging’, for the federal gov’t it’s not a destruction until the opposite of the creation (THE ADDITION), which means it’s a destruction only if those bonds are paid off for good (if the bonds are put in the ‘shredder’) and the last time that happened was in 1957.
Jim ‘MineThis1’ Boukis was right all along.
#FakeMMT has it completely backwards.
The pure MMT insight is that, operationally, federal taxes and Treasury bond sales ARE NOT NEEDED to fund spending—not that they don’t at all because tax & bond collections are ‘destroyed’. Fake MMTers saying ‘taxes don’t fund spending’ because taxes are ‘destroyed’ are trying to usurp the ‘Power of the Purse’ of Congress, at best; or they’re confused about how the post-gold standard, modern monetary system really works, at worst.
Fake MMTers are their own worst enemy—If you can’t get the ‘description’ right, then how can you expect constituents to trust that you are getting your ‘prescription’ right (How can you expect policymakers to fund—read: approve—your ‘prescription’)?
There’s a difference between a ‘scoreboard’ (used for political ‘prescription’ MMT metaphors) and an excel spreadsheet (used by the consolidated balance sheets of the United States federal gov’t).
“The ‘keystroke to every need’ crowd are nothing more than populists offering free candy to children that in the end rots their teeth. Resorting to a ‘keystroke-first’ approach shows a lack of thought and creativity. There are ways to get at the underlying problems with pen strokes not keystrokes.”—Charles ‘Kondy’ Kondak
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Sometimes more creative pen strokes, and not just more keystrokes (especially if trying to address modern monetary problems) makes better solutions. Not to take sides in this twitter feud between Stephanie Kelton and Paul Krugman, but note that same insight in this particular tweet: