Government deficit spending creates money for people.
Here is how:
(Short thread)
Here is how:
(Short thread)
Let me anticipate some of the questions:
''Govt spending only creates money if the Central Bank is doing QE''
No, it's shown above.
In this case banks are buying bonds and still the private sector gets a net worth injection: assets (deposits) go up, and there is no liability.
''Govt spending only creates money if the Central Bank is doing QE''
No, it's shown above.
In this case banks are buying bonds and still the private sector gets a net worth injection: assets (deposits) go up, and there is no liability.
''Yeh but what if banks are not buying bonds''
If the pvt sector is called to absorb bond issuance, then the newly created bank deposits (real-economy money) must be used to buy bonds, yes.
Rare case of govt spending being sterilized.
If the pvt sector is called to absorb bond issuance, then the newly created bank deposits (real-economy money) must be used to buy bonds, yes.
Rare case of govt spending being sterilized.
Money is literally the most misunderstood and yet most important concept in finance.
Central Banks print real-economy money: wrong
Banks lend/multiply reserves: wrong
Govt spending crowds out the private sector: wrong
Central Banks print real-economy money: wrong
Banks lend/multiply reserves: wrong
Govt spending crowds out the private sector: wrong
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