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marcosdumay 2 days ago

The government creates money every time it spends more than it taxes. AFAIK, the US has been doing that nonstop since the turn of the century.

That new money is different from the new money the central bank creates to push interest rates down. That later one the US has been destroying. But both do many of the same things (but not all).

arcticbull 2 days ago | parent [-]

No, it doesn't. Deficit spending does not create new money. Deficit spending borrows existing money from people in the economy who already have it, and gives it out in exchange for a share of future revenues. The Fed does not participate in Treasury primary auctions and does not monetize the debt as a means of funding government operations.

Think about it this way: if money were just created to fund the deficit why would we have a debt? That's double-counting. You can invalidate your hypothesis very easily: the M2 money supply is about half the size of the debt. It's not possible to square that circle unless deficit spending was re-pledging existing money.