If you owned a legal, money-printing press, would you borrow money? Think about it.
The U.S. government has the infinite ability to create (aka “print”) U.S. dollars. So why would it ever borrowdollars?
It doesn’t.
The same “bark”?
Despite what “learned” pundits tell you, the U.S. government never, never, ever borrows U.S. dollars.
The government issues U.S. Treasury bonds, which are totally unlike the private sector bonds that corporations issue.
The fact that the same words — “bills,” “notes,” and “bonds” — are used to describe completely different things, has confused people who should know better — politicians, economists, and the media — for decades.
It’s as though a professional botanist told you dogs are like trees because they both have “bark.”
In the same vein, the so-called federal “debt” is not debt. It’s not even federal.
Here are Warren Buffett’s comments. He gets it about 95% right.
The U.S. Treasury is borrowing $3 trillion in three months to pay for the pandemic response, a record sum that dwarfs the $1.8 trillion borrowed in 2009 during the financial crisis.
The debt will be sold in bonds to a variety of foreign and domestic investors.
Sorry, Mr. Wolff-Mann, but because the federal government is Monetarily Sovereign, the U.S. Treasury has the infinite ability to create dollars (at the behest of Congress).
If Congress voted for the Treasury to create $3 trillion, or $300 trillion, or $3,000 trillion, the Treasury could do it at the touch of a computer key.
Clearly, it has no reason to borrow dollars.
So it doesn’t.
The so-called, misnamed “debt” is two separate things that have been merged for obsolete reasons:
1. The “debt” is the net total of all deficitsthrough history. Deficits are the difference between taxes received and financial obligations (aka “bills”) paid.
The government doesn’t owe deficits. They already have been paid for. That is what makes them “deficits.”
2. The “debt” also is the total of deposits into Treasury Security accounts, those T-bills, T-notes, and T-bonds that are nothing whatsoever like private sector bills, notes, and bonds.
The government accepts deposits into Treasury Security accounts to provide a safe storage place for unused dollars. This stabilizes the dollar and is partly responsible for the U.S. dollar being the most popular currency in the world.
Rather than putting unused dollars into risky private bank accounts, foreign governments and private investors prefer the safety of U.S. Treasury accounts.
The accounts resemble safe deposit boxesin that the money in these accounts is wholly owned by the depositors, not by the U.S. government, which never touches those dollars.
To pay off these accounts, the government simply returns the contents of the accounts to the owners, i.e. the depositors.
At the 2020 Berkshire Hathaway Annual Shareholders Meeting on Saturday, billionaire investor Warren Buffett carefully explained in simple terms why the U.S. will never default on its debt.
When a concerned shareholder asked him whether there was a risk, he didn’t prevaricate, but started with a “no.”
“If you print bonds in your own currency, what happens to the currency will be the question,” said Buffett. “But you don’t default. The U.S. has been smart to issue its debt in its own currency.”
A U.S. dollar bill actually is a zero-interest, Treasury bond. It is evidence that the bearer owns a U.S. dollar.
Other countries don’t do this, Buffett pointed out.
“Argentina is now having a problem because the debt isn’t in their own currency, and lots of countries have had that problem,” he said.
“And lots of competent countries will have that problem in the future.”
Similarly, U.S. state and local government and euro nation debt isn’t in their own currency. State and local governments use the dollar. Euro nations use the euro, which is the currency of the European Union (EU).
France, Germany, Italy et al have problems with their debt (which is real debt) because they do not issue the euro. The EU does.
Over the years, many have worried about the growing national debt as tax cuts and spending have created an ever-widening gap between revenue and outflows.
But in his explanation, Buffett highlighted the distinctions that make the U.S. Treasury much different than your personal checkbook.
Mainly, the government owns the printing press to pay the money to the holders of its debt.
Close, but that’s not precisely what happens. The money already exists in the accounts. The depositors put it there.
Paying off the “debt” merely involves returning the depositors’ dollars. The only function of the metaphorical “printing press” is to add interest dollars to the accounts.
“It is very painful to owe money in somebody else’s currency,” said Buffett. “If I could issue a currency Buffett bucks, and I had a printing press and I could borrow money, I would never default.”
If he could print Buffet bucks, that would be widely accepted, he never would borrow money, just as the U.S. federal government never borrows dollars.
This is a common refrain of Modern Monetary Theory as well as longtime Fed Chair Alan Greenspan, who once said something similar: “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.”
The chief worry about just printing money to pay obligations is inflation.
That is another widespread, false belief. Creating (aka “printing”) dollars doesn’t cause inflation. Shortages of critical goods and services — mostly oil and food — cause inflation. (See: Inflation: Why the Fed is confused)
“What you end up getting in terms of purchasing power can be in doubt,” Buffett said.
But whether the U.S. can pay the dollars that it owes is not in doubt. The Oracle of Omaha noted back to when Standard & Poor’s downgraded the U.S.’s credit rating in 2011.
The U.S. government does not “owe” any dollars. It already has paid for what it has purchased. That is the “deficit.”
And the dollars in Treasury Security accounts — the T-bills, notes, and bonds — are owned by the depositors. The government doesn’t owe them just as your bank doesn’t owe you the contents of your safe deposit box.
“To me that did not make sense,” he said. “How you can regard any corporation as stronger than a person who can print the money to pay you, I just don’t understand. So don’t worry about the government defaulting.”
Buffett then addressed the frequent government shut-downs that happen over partisan arguments about raising the debt ceiling.
“I think it’s kind of crazy incidentally…to have these limits on the debt,” he said. “And then [the] stopped government, arguing about whether it’s going to increase the limits. We’re going to increase the limits on the debt.”
Buffett pointed out that the debt “isn’t going to be paid, it’s going to be refunded,” and referenced the period in the 1990s when the debt came down and the country simply created more.
“When the debts come down a little bit, the country’s going to print more debt. The country is going to grow in terms of its debt-paying capacity,” he said. “But the trick is to keep borrowing in your own currency.”
Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.
Paul Krugman
That was Warren Buffett. Now, here is Paul Krugman, winner of the economics version of the Nobel Prize. He too gets it about 95% right.
The US doesn’t actually have to pay off its $31 trillion mountain of debt, according to top economist Paul Krugman, hitting back at the idea that government finances can be compared to household balance sheets.
Though individual borrowers are expected to pay off debts, the same isn’t true for governments, Krugman argued in a column for the New York Times on Friday.
That’s because unlike people, governments don’t die, and they gain more revenue with each passing generation.
Not quite right. State and local governments are expected to pay off debts. Euro governments are expected to pay off debts.
But the Monetarily Sovereign U.S. federal government always pays what it owes to vendors, on time. It does not accumulate debt.
The reason is notthat “governments don’t die and gain more revenue.” Monetarily nonsovereign governments do borrow and must pay off loans, and may not gain enough revenue to pay off those loans.
Our Monetarily Sovereign government is a different animal, altogether. It does not borrow, it does not have loans to pay off, and its tax revenue does not pay for anything.
“Governments, then, must service their debts – pay interest and repay principal when bonds come due – but they don’t necessarily have to pay them off; they can issue new bonds to pay principal on old bonds and even borrow to pay interest as long as overall debt doesn’t rise too much faster than revenue,” he added.
Treasury bonds don’t supply the federal government with spending money. The government never touches those dollars. The government doesn’t use bond deposits to pay anything.
Treasury securities provide two main functions:
They help the Federal Reserve control interest rates by providing a “base” rate.
They help stabilize the dollar by providing a safe haven for unused dollars.
They do not help the federal government fund any thing.
The debt-to-GDP ratio is oft-quoted, but completely meaningless. The federal government can pay all its financial obligations whether the ratio was 10%, 100%, or 1,000%. (See: Enough Already, With The Debt/GDP ratio)
Federal purchases are part of GDP, but are not paid for with GDP. All federal financial obligations are funded by newly created ad hoc dollars.
Historically, it’s also unusual for governments to pay off large debts, Krugman said. Such was the case for Great Britain, which has largely held onto the debt it incurred as far back as the Napoleonic wars.
It’s more irrelevance from the Nobel winner. Deadbeat governments may not pay creditors, but the Great Britain “debt” is not owed to creditors. It’s an accounting myth for describing the total of deficit spending, which is funded by money creation.
Krugman’s argument comes amid growing contention over the US debt level, with policymakers still sparring over the conditions they want to raise the country’s borrowing limit.
House Speaker Kevin McCarthy has said he would reject a short-term debt ceiling increase unless spending cuts are negotiated, having proposed a bill that would slash around $4.5 trillion on spending.
This is purely a political ploy, having absolutely nothing to do with the realities of federal funding. The formula for GDP is:
GDP = Federal Spending + Nonfederal Spending + Net Exports
Slashing $4.5 trillion for federal spending would, by formula, slash at least $4.5 trillion from GDP (Probably more, because federal spending begets private sector, nonfederal spending.)
In short, Republican McCarthy wanted to trash the economy, because a Democrat was President.
Congress now has less than two weeks to raise the borrowing limit before the government could potentially run out of cash, US Treasury Secretary Janet Yellen warned.
Sadly, Yellen is too cowardly (or ignorant?) to tell the truth. The so-called “borrowing limit” is the ultimate fraud. It’s not a borrowing limit, because the U.S. doesn’t borrow.
It’s a limit on deposits into T-security accounts, which do nothing to change the federal government’s ability to fund its spending.
A default on the country’s obligations could result in catastrophe for financial markets, experts have warned.
Krugman is correct. The debt ceiling is a fraud being committed on naive American voters. It’s a bit of meaningless, though harmful, political chicanery, designed to pretend financial frugality.
All those who think the debt ceiling is a good idea either are liars or ignorant.There is no alternative.
I wrote “The president can, and Constitutionally must, pay bills already authorized by Congress….Furthermore, some form of direct money issuance by Treasury is actually REQUIRED constitutionally, when Congress blocks the funds necessary to pay for what it has already approved. From Article 12, Section 9, clause 7:
“No Money shall be drawn from the Treasury, but in Consequence of Appropriation made by Law; and a regular Statement of Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
The president, and certainly not the Treasury Secretary, doesn’t have the authority to pick and choose what to spend an insufficient supply of funds upon. The executive branch cannot choose a bit from column A and a bit less from column B and so on. It must spend 100% of the authorized amount for repayment of the debt, just as it spends 100% for the military, Social Security, the highway system, and so on.”
There’s more about the nation’s first paper currency – the Greenback, aka United States Notes, and how these are not subject to the debt limit, and how the president could authorize his Treasury Secretary to issue U.S. Notes to pay outstanding debts if Congress put the country at unconstitutional risk of default.
This does not usurp Congress’ ability to spend money since it’s money that is already authorized, just not actually spent – thereby potentially stiffing its creditors, even though, as you, Warren Buffet, Alan Greenspan, Ben Bernanke, and the Constitution itself, all say the government “SHALL”, not “could” or “might,” pay its debts.
The president MUST pay what Congress authorizes, and ought to authorize his Treasury secretary (part of the Executive Branch) to do so, rather than violate the Constitution by deciding for himself which bills to pay.
The president doesn’t have that authority, and Congress doesn’t have the Constitutional right to give it to him, even if they impose a silly yet very dangerous, rule – not really a “law” because it only applies to Congress itself – to impose a limit on money it’s already authorized.
The debt ceiling has to go and Congress has to decide what to spend, openly and honestly, not hide behind a self-imposed rule that supposedly forces the president to violate the Constitution.
Since they lack the will, or even the understanding, to abolish this phony rule itself, the president can make it irrelevant by getting around it by reissuing U.S. Notes, which bypasses the Central Bank. If it’s challenged in the Supreme Court – maybe by Congress itself – let’s see how this “originalist” Supreme Court decides when it comes to a clear Constitutional provision.
I dare them to say the country should uphold this ridiculous rule instead of the Constitution.
The Treasury has the Constitutional right to mint a platinum coin in any amount — $1, $1 million, $1 trillion, any amount — (I’d go for $100 trillion) which would at long last put an end to all the bullshit about the federal government’s phony debt.
Biden is well aware of this, but he doesn’t have the political courage to do it.
If he did, we could stop calling T-securities “debt” and end references to the meaningless “debt”/GDP ratio. It’s really amazing how long the con job about federal finances has lasted.
Yes, I remember Obama talking about the Platinum coin too (also, Ellen Brown, who started the Public Banking movement, where I am a Senior Advisor, wrote positively about it in her articles around this time as well). Obama addressed this in a news conference, calling it a “giant coin” and claimed foreign currency buyers would not know how to value the dollar when buying treasuries if such a coin was issued. It sounds like this was discussed behind the scenes and quickly dismissed for this reason.
The Congress of Lincoln’s day considered this as well, and that’s why U.S. Notes were only to be used for domestic debt, not foreign debt; it’s even written on the actual notes themselves. OK, fine. Continue that custom and pay off the domestic debts which are the only ones that have to be paid in cash or cash equivalents anyway, and then:
The debt will be paid down enough to stay under the “ceiling” to continue paying for what Congress has already authorized, and Treasury “debt” can be rolled over as it has been ever since president Jackson paid off the federal debt in 1835 – and produced one of the largest depressions the U.S. has ever had, maybe bigger than the Great Depression, though records weren’t as good back then, so it’s hard to tell for sure, and it was only in the U.S. then, or…
We just gradually switch to United States Notes for ALL our domestic debts, since they are not subject to the “debt limit” anyway. U.S. Notes are like coins, and are specifically excluded from the national debt limit, in writing, in the quarterly debt report (I wish this blog allowed for me to upload images so I could show you a screenshot of the report that shows this).
Either way, it would expose the falsehood that there is such a thing as “running out of money” or that it has anything to do with taxes collected, except in the accounting convention that Congress uses to deny us things. My guess is that the Central Bank and other banks will panic before all this happens and influence Congress to abolish the debt limit.
The jig might be up on this scam anyway. If the pandemic shutdown taught people anything, it was that the federal government can come up with trillions of dollars whenever it wanted to. Both Trump and Biden passed bills injecting trillions into the economy when it was shut down to stop the spread of Covid. People have a deep core memory of that now, and it’s not going away. Even if they’re simultaneously worried about the federal debt, they also know government can produce any amount of money, at any time, for any reason, just as it says in the Constitution.
” . . . foreign currency buyers would not know how to value the dollar when buying treasuries if such a coin was issued.” Whaaaaaat? Are you referring to foreign exchange? The coin wouldn’t go into circulation. Sounds like a bullshit reason.
As I said, there are many ways to bypass the ridiculous “debt limit” and the politicians know them. So why is it a continuing problem? Because the pols want it that way. Why?
Because the rich donors want it that way. Why?
Because it prevents the government from giving benefits to those who are not rich. It widens the Gap between the rich and the rest.
Notice, that tax cuts for the rich never are a concern. The only concerns are such benefits as Medicare, Social Security, and poverty aids.
The coin itself would not go into circulation, not even domestically, but Obama, or his advisors, were concerned about the devaluing of the dollar if a “giant coin” added trillions of dollars to the base money supply.
“But as bad as a default would be, most experts oppose the use of the trillion dollar coin. They say that such an audacious way of avoiding default would shake the confidence in the dollar and US Treasury as much or more than an actual default.
“The trillion dollar coin is a badly flawed effort to workaround the debt limit that will make a bad situation even worse,” said Mark Zandi, chief economist for Moody’s Analytics, who has warned that a default would be “financial Armageddon.”
“Global investors will know that this isn’t a sustainable way to pay the government’s bills, and given the constitutional crisis it would ignite, it will increase the odds they won’t get paid in a timely way at some point in the future. The trillion dollar coin will not forestall a financial crisis and economic crisis downturn. The only winner in all this would be cryptocurrency.””
Have you ever written a post that walks through the six convoluted steps of our one arm tied behind our back system?
The six transactions for Treasury debt operations for thepurpose of deficit spending in the base case conditions are the following:
The Fed undertakes repurchase agreement operations with primary dealers (in which the Fed purchases Treasury securities from primary dealers with a promise to buy them back on a specific date) to ensure sufficient reserve balances are circulating for settlement of the Treasury’s auction (which will debit reserve balances in bank accounts as the Treasury’s account is credited) while also achieving the Fed’s target rate. It is well-known that settlement of Treasury auctions are “high payment flow days” that necessitate a larger quantity of reserve balances circulating than other days, and the Fed accommodates the demand.
The Treasury’s auction settles as Treasury securities are exchanged for reserve balances, so bank reserve accounts are debited to credit the Treasury’s account, and dealer accounts at banks are debited.
The Treasury adds balances credited to its account from the auction settlement to tax and loan accounts. This credits the reserve accounts of the banks holding the credited tax and loan accounts.
(Transactions D and E are interchangeable; that is, in practice, transaction E might occur before transaction D.) The Fed’s repurchase agreement is reversed, as the second leg of the repurchase agreement occurs in which a primary dealer purchases Treasury securities back from the Fed. Transactions in A above are reversed.
Prior to spending, the Treasury calls in balances from its tax and loan accounts at banks. This reverses the transactions in C.
The Treasury deficit spends by debiting its account at the Fed, resulting in a credit to bank reserve accounts at the Fed and the bank accounts of spending recipients.
Again, it is important to recall that all of the transactions listed above settle via Fedwire (T2). Also, the analysis is much the same in the case of a deficit created by a tax cut instead of an increase in spending. That is, with a tax cut the Treasury’s spending is greater than revenues just as it is with deficit spending.
Note, also that the end result is exactly as stated above using the example of a consolidated government (treasury and central bank):government deficit spending leads to a credit to someone’s bank account and a credit of reserves to a bank which are then exchanged for a treasury to extinguish the excess reserves.
No, I haven’t and never will. The Rube Goldbergian system is a psychological holdover from when the U.S. government actually did borrow money.
Being completely sovereign over the dollar since 1971 (no gold or silver systems) the government’s issuance of T-securities is only to stabilize the dollar, by providing them with a safe storage place.
#Monetary Sovereignty - Mitchell 
I went even further than Krugman in my updated and repeated article in response to 3 separate so-called “debt crisis'” in my article: Updated: Debt No More! How Biden can defeat Austerity Thugs by Using the Constitution and Debt-Free Money (https://www.opednews.com/populum/page.php?f=Updated-Debt-No-More-How-Banks_Constitution-In-Crisis_Constitution-The_Constitutional-Amendments-230526-519.html).
I wrote “The president can, and Constitutionally must, pay bills already authorized by Congress….Furthermore, some form of direct money issuance by Treasury is actually REQUIRED constitutionally, when Congress blocks the funds necessary to pay for what it has already approved. From Article 12, Section 9, clause 7:
“No Money shall be drawn from the Treasury, but in Consequence of Appropriation made by Law; and a regular Statement of Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
The president, and certainly not the Treasury Secretary, doesn’t have the authority to pick and choose what to spend an insufficient supply of funds upon. The executive branch cannot choose a bit from column A and a bit less from column B and so on. It must spend 100% of the authorized amount for repayment of the debt, just as it spends 100% for the military, Social Security, the highway system, and so on.”
There’s more about the nation’s first paper currency – the Greenback, aka United States Notes, and how these are not subject to the debt limit, and how the president could authorize his Treasury Secretary to issue U.S. Notes to pay outstanding debts if Congress put the country at unconstitutional risk of default.
This does not usurp Congress’ ability to spend money since it’s money that is already authorized, just not actually spent – thereby potentially stiffing its creditors, even though, as you, Warren Buffet, Alan Greenspan, Ben Bernanke, and the Constitution itself, all say the government “SHALL”, not “could” or “might,” pay its debts.
The president MUST pay what Congress authorizes, and ought to authorize his Treasury secretary (part of the Executive Branch) to do so, rather than violate the Constitution by deciding for himself which bills to pay.
The president doesn’t have that authority, and Congress doesn’t have the Constitutional right to give it to him, even if they impose a silly yet very dangerous, rule – not really a “law” because it only applies to Congress itself – to impose a limit on money it’s already authorized.
The debt ceiling has to go and Congress has to decide what to spend, openly and honestly, not hide behind a self-imposed rule that supposedly forces the president to violate the Constitution.
Since they lack the will, or even the understanding, to abolish this phony rule itself, the president can make it irrelevant by getting around it by reissuing U.S. Notes, which bypasses the Central Bank. If it’s challenged in the Supreme Court – maybe by Congress itself – let’s see how this “originalist” Supreme Court decides when it comes to a clear Constitutional provision.
I dare them to say the country should uphold this ridiculous rule instead of the Constitution.
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Thanks, Scott. You are correct. The President actually has several alternatives available. The one I love is the Platinum Coin solution. See: https://en.wikipedia.org/wiki/Trillion-dollar_coin#:~:text=The%20trillion-dollar%20coin%20is%20a%20concept%20that%20emerged,through%20the%20minting%20of%20very%20high-value%20platinum%20coins.
The Treasury has the Constitutional right to mint a platinum coin in any amount — $1, $1 million, $1 trillion, any amount — (I’d go for $100 trillion) which would at long last put an end to all the bullshit about the federal government’s phony debt.
Biden is well aware of this, but he doesn’t have the political courage to do it.
If he did, we could stop calling T-securities “debt” and end references to the meaningless “debt”/GDP ratio. It’s really amazing how long the con job about federal finances has lasted.
LikeLike
Yes, I remember Obama talking about the Platinum coin too (also, Ellen Brown, who started the Public Banking movement, where I am a Senior Advisor, wrote positively about it in her articles around this time as well). Obama addressed this in a news conference, calling it a “giant coin” and claimed foreign currency buyers would not know how to value the dollar when buying treasuries if such a coin was issued. It sounds like this was discussed behind the scenes and quickly dismissed for this reason.
The Congress of Lincoln’s day considered this as well, and that’s why U.S. Notes were only to be used for domestic debt, not foreign debt; it’s even written on the actual notes themselves. OK, fine. Continue that custom and pay off the domestic debts which are the only ones that have to be paid in cash or cash equivalents anyway, and then:
Either way, it would expose the falsehood that there is such a thing as “running out of money” or that it has anything to do with taxes collected, except in the accounting convention that Congress uses to deny us things. My guess is that the Central Bank and other banks will panic before all this happens and influence Congress to abolish the debt limit.
The jig might be up on this scam anyway. If the pandemic shutdown taught people anything, it was that the federal government can come up with trillions of dollars whenever it wanted to. Both Trump and Biden passed bills injecting trillions into the economy when it was shut down to stop the spread of Covid. People have a deep core memory of that now, and it’s not going away. Even if they’re simultaneously worried about the federal debt, they also know government can produce any amount of money, at any time, for any reason, just as it says in the Constitution.
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” . . . foreign currency buyers would not know how to value the dollar when buying treasuries if such a coin was issued.” Whaaaaaat? Are you referring to foreign exchange? The coin wouldn’t go into circulation. Sounds like a bullshit reason.
As I said, there are many ways to bypass the ridiculous “debt limit” and the politicians know them. So why is it a continuing problem? Because the pols want it that way. Why?
Because the rich donors want it that way. Why?
Because it prevents the government from giving benefits to those who are not rich. It widens the Gap between the rich and the rest.
Notice, that tax cuts for the rich never are a concern. The only concerns are such benefits as Medicare, Social Security, and poverty aids.
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The coin itself would not go into circulation, not even domestically, but Obama, or his advisors, were concerned about the devaluing of the dollar if a “giant coin” added trillions of dollars to the base money supply.
Here’s how CNN covered the story and other background info: https://www.cnn.com/2021/09/24/economy/trillion-dollar-coin-debt-ceiling/index.html:
“But as bad as a default would be, most experts oppose the use of the trillion dollar coin. They say that such an audacious way of avoiding default would shake the confidence in the dollar and US Treasury as much or more than an actual default.
“The trillion dollar coin is a badly flawed effort to workaround the debt limit that will make a bad situation even worse,” said Mark Zandi, chief economist for Moody’s Analytics, who has warned that a default would be “financial Armageddon.”
“Global investors will know that this isn’t a sustainable way to pay the government’s bills, and given the constitutional crisis it would ignite, it will increase the odds they won’t get paid in a timely way at some point in the future. The trillion dollar coin will not forestall a financial crisis and economic crisis downturn. The only winner in all this would be cryptocurrency.””
LikeLike
Have you ever written a post that walks through the six convoluted steps of our one arm tied behind our back system?
The six transactions for Treasury debt operations for thepurpose of deficit spending in the base case conditions are the following:
Again, it is important to recall that all of the transactions listed above settle via Fedwire (T2). Also, the analysis is much the same in the case of a deficit created by a tax cut instead of an increase in spending. That is, with a tax cut the Treasury’s spending is greater than revenues just as it is with deficit spending.
Note, also that the end result is exactly as stated above using the example of a consolidated government (treasury and central bank):government deficit spending leads to a credit to someone’s bank account and a credit of reserves to a bank which are then exchanged for a treasury to extinguish the excess reserves.
Fullwiler’s 10 page paper on this: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1825303
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No, I haven’t and never will. The Rube Goldbergian system is a psychological holdover from when the U.S. government actually did borrow money.
Being completely sovereign over the dollar since 1971 (no gold or silver systems) the government’s issuance of T-securities is only to stabilize the dollar, by providing them with a safe storage place.
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“…holdover from when the U.S. government actually did borrow money…”
I was surprised to find out the federal government’s involvement in WW1 was financed by J.P. Morgan. Whatta guy!
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