I think perhaps the crux of your misunderstanding concerns the difference between reserves and deposits. Clearing this up might elucidate the conversation a bit.

The deposits related to reserves are the deposits made to banks by people and intuitions for the purpose of holding our cash. Checking, savings, certificates of deposit, those deposits. Banks can only lend a portion of those deposits to other parties and the rest must be held as reserves.

This is wrong. I can’t really fault you for this because this is the ‘conventional’ view of banking, but MMT has shown this to be a falsehood. In reality, banks extend credit (creating deposits) first, and then obtain reserves later. Please see the Bank of England paper referenced in the article. Here’s an Investopedia article (published after my piece was originally published) explaining both the ‘conventional’ view and the modern view: https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp

Yes the National Debt has an impact on Mortgage and Auto Loan rates. Not directly but sentimentally which is what sets the spread between bond rates and consumer loan rates. The greater the level of indebtedness in society the greater the risk premium.

What you are not understanding is that the National Debt is the government’s deficit. By identity, the National Debt is the private sector surplus. Please see the graph in the article tracking national account balances over time. If anything, by your logic a larger government deficit leads to lower interest rates since public debt increases the net financial assets of the private sector, reducing demand for private debt.

The printing of money happens when the Fed buys Treasury bonds. We have printed about 5 trillion dollars in the last two decades.

No, this is not ‘printing money’. This is a financial asset swap. The central bank is exchanging one form of government debt (reserves) for another form of government debt (treasuries). Treasuries can be thought of as ‘future reserves’. Both are financial assets; reserves are just more liquid. Printing money is when the federal government spends. Taxes are the destruction of money. That’s it.

We have to give more to the poor but it is a delusion to think that reduces inequality. Giving the poor borrowed money is a windfall to the rich and poor. If it creates inflation then it is a blow to the middle class. Fortunately inflation has stay low.

But it in fact does reduce inequality because while the poor are able to spend more under these conditions, they are also able to retain a greater percentage of their disposable income. This is true any time incomes rise. That’s also why flat taxes are regressive relative if measured against disposable incomes.

Corporate accountant and former auditor with degrees in philosophy and accounting.

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