the choice of the bond buyer is where to park his money, not how to fund his economic activity.

Obviously. The point of the example is to show what actually happens when the government deficit spends. Let’s change the scenario to a 2 person economy to accommodate your point:

The government wants to deficit spend $100, so the treasury offers a bond. Individual 1 buys the bond, and the Fed transfers $100 from their checking to savings. The government then contracts Individual 2 for consulting services, and the Fed credits their checking account $100.

Now you have the exact same AGGREGATE effect. $100 in checking, $100 in savings, and a treasury liability of $100. That’s a net increase of $100 in private savings (and public debt). Individual 1 is merely choosing where to ‘park his money’; not fund his own economic activity. The government is deficit spending by contracting services from Individual 2. The bond sale to Individual 1 is TOTALLY SUPERFLUOUS to the actual funding process. It’s unnecessary.

Again, we could argue whether issuing t-bonds is good or bad public policy. I think it’s bad and you seem to think it’s good, so maybe we could have a reasonable disagreement about that. But the idea that bond sales are what ACTUALLY ‘fund’ deficit spending in any meaningful sense must be dismissed. It’s a procedural carryover from the gold-standard that functions as welfare for debt holders.

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

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