This is an oft-forgotten reminder that governments can’t simply “create money out of thin air” as the popular expression goes. They are beholden to the same tired rules of debt that afflict us all.

I’m sorry- this is wrong. Money creation “out of thin air” is exactly how the process works. All government spending creates money and taxes ‘destroy’ money. The Treasury directs the Fed to credit the reserve account of a private bank. That’s money creation. That’s it.

Banks create money too when they extend credit, but all ‘bank money’ nets to $0 (because loans create and asset and liability) and is redeemable for reserves, which are ultimately redeemable for tax credit. You need to understand the accounting behind money creation to understand why the entire premise of this article is wrong.

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

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