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Deficit Owls @DeficitOwls
, 5 tweets, 2 min read Read on Twitter
@Alantwatts23 In detail :)

The truth is, anybody can create money. The problem is to get it accepted. Both banks and government are very good about getting people to accept their IOUs as money.
@Alantwatts23 The government does it through threat of force: you have to pay your taxes with government money, or else the gov will jail you. The banks largely do it through the carrot rather than the stick: they offer nice things like checking services, interest, convenience, etc. And the
@Alantwatts23 gov assists the banks by providing deposit insurance and a lender of last resort, so your bank money is safe.

But there is a hierarchical relationship here: only gov money can (ultimately) be used to settle taxes, bank money cannot. The banks stand in between gov and us, making
@Alantwatts23 payments to the gov for us. You can think of there being a hierarchy, or a pyramid, of money, with the gov on top, then the banks, the non-bank financial firms and other business credit, then the IOUs of households. Each layer, on average, pays each other using the IOUs of higher
@Alantwatts23 layers. The pyramid also expands and contracts as entities extend credit, or repay debt.
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