You keep writing things that seem like utter nonsense to me. You are asserting that the government does not buy anything. I’d like to see an explanation of your statement before concluding that you have taken leave of your senses.

Sorry, the wording was not clear. I’m saying the government does not use your dollar that you paid in taxes to buy anything. Your tax dollars are ‘destroyed’ and new reserves are created when the government spends. This is more accurate than calling taxing/spending ‘transfer payments’ because the government is not revenue constrained by a fixed amount of dollars. Looking at the balance sheet changes for the spend/tax cycle makes this even more apparent.

Productivity? Not wealth?

I’m saying that if the government spends vast sums unproductively, or in sectors that are already operating near full productive capacity, it will generate inflation. This is also accepted in the mainstream Keyensian view.

Huzzah! At last you have written something that I can agree with! 😄

You may in fact agree with MMT generally with a more robust understanding.

As a philosopher I can see the necessity of getting the ‘first principles’ right. So let’s start there. The first and most important insights of MMT are that money is debt and that the government must spend before it can tax. It cannot be any other way. Where do we get the money to pay our taxes? (Remember, taxes can only be paid in reserves or currency). Money must first be spent by the government before it can be paid back in taxes. Only the government (including the Fed) has the authority to issue reserves and currency. This High Powered Money (HPM) is an IOU of the federal government. Reserves and currency held by the public show up on the liabilities side of the Fed balance sheet. A dollar bill is an IOU because the government is saying “I owe you one dollar of tax credit”.

Demand deposits at private banks are also IOUs, which are ultimately created by loans. The bank “owes you” cash in the amount of your demand deposit. This is why an increase in your checking account shows up as a bank credit. Increases in liabilities are credits in accounting, whereas liabilities decrease on the ‘debit’ side. The vast majority of money in the economy is created by banks extending credit. Here’s a 2014 Bank of England paper on the topic, which is actually not too dense:

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

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