Thread by @tymoignee

Saturday question (followed by Sunday Q and analysis): Does the US government issue the USD?

For those of you who answered "YES" to the previous Q (34 people max can answer this Q): do taxes and bond offerings finance the US gov?

Someone answered while I typed the new Q so 35 max can answer.

First pool shows an ambiguity is what"U.S. Government"means in this context.Let's start with some examples of what's meant in this context:

While it is true that the US Treasury lost (most) of its monetary creation power, Government here means US Treasury and the Fed.

It is a rhetorical strategy that gets to the point. One could drag on about minutiae of Treasury and Central bank coordination instead but

one's audience would fall asleep&lose sight of main point:Congress sets budget,Treas executes it,Fed ensures funding is there to execute it

Consolidating Fed&Treas is also a common modeling strategy to simplify analysis.

While a simplification, it is backed by institutional realities of monetarily sovereign govs. This simplification cannot be made for non MSG

Now moving on to the second question, that's where things get interesting. If you agree with ST Fed, Buffet, and Greenspan (and many others)

Then yes the US gov print the currency AND you MUST also agree that taxes and U.S. gov bonds do not fund the US gov.

It is an implication of consolidating Treasury and central bank into the U.S. Government.

Curiously, while most are willing to accept the first implication(gov prints)most have a harder time accepting the second(taxes do not fund)

Pretty sure that if you asked STFed, Buffet and Greenspan if taxes funds the US gov (in the meaning they use it above). they would say yes

Below is a balance sheet representation of the quotes above:

Treasury and central bank are put into one balance sheet and so all claims they have against one another are eliminated.

For the US Gov,taxes destroy currency(L1 falls) and claims on non-fed sectors falls (A1 falls).When US spends, it credits accounts(L1 rises)

So taxes don't provide funds to US gov(no monetary asset is gained):taxes don't finance anything,so no need to ask"how are we going to pay?"

Taxes are needed but not to fund the "US gov" as defined by STFed, Greenspan, Buffet and anybody else arguing that US can print its currency

My experience (with students and others) is that they are prepared to accept that the US prints its currency, they have a visceral reaction

to the point that taxes don't finance the US gov;but once explained it's accepted,which provides a clear understanding of policy constraints

For MSG:
1-the constraint is not money,it is finding the physical resources
2-a budget is needed to preserve transparency and accountability

3-the gov usually must be in deficit because other sectors want to be in surplus
4-public debt can always be serviced & will never be repaid

5-fear waste, regulatory capture, cronyism. don't fear monetary financing.
6-Aim at a gov of the people, by the people, for the people.