Thread by @sdgrumbine

First things first we have a sovereign, non-convertible, free floating fiat currency that is backed by an obligation: taxation.

Second: no one says we can just print da muney... all dollars are merely a tax iou and are created by keystrokes. The birth of a dollar is congressional spending and the death of the dollar is taxation

Third: QE is not "printing money". It is merely swapping debt for liquidity. Banks do not lend reserves...

Fourth: taxes do not fund spending at the federal level but they do at the state level. This is universally true.

Greece is a currency user. Puerto Rico is a currency user. Flint Michigan is a currency user. It is dependent on taxes and investments to fund its operations.

The USA, The UK, Australia, Russia, Canada, China and Japan for example are curremcy issuers. They are atate driven fiat curremcies.

Some are fixed to a gold peg. Some are fixed to a dollar peg... all are fixed to a tax obligation that gives value to the currency

The dollar is not backed by oil. It is backed by the tax that drives it.

Money creation occurs with every single dollar the Federal government spends. An actual new net financial asset.

Everytime a dollar in taxes is handle via end of year or quarter returns, accounts are adjusted... tax dollars DELETED.

The real constraint on government spending is found in the following conditions:

1. Are we at full employment ? No? Then the deficit is not large enough.

2. Are we a net importer or net exporter? In other words, do we have a current accounts deficit? If so, the federal spending deficit is not large enough.

3. What is the level of private debt? Do Americans have any disposable income at all? If the private debt is too high, then we need to offset it with spending on the 99% or we will go into recession.

#LearnMMT