No, they don’t. Banks do not create money. The Fed creates the money supply and banks use those funds.
This is not true. Private money is created by banks making loans. Loans create deposits. Here is a 2014 paper by the Bank of England that describes money creation in modern economies along with some other activities of central banks like QE.
Second, let’s take your argument to its logical conclusion. You say these programs produce goods and services, and reduce govt handout programs? What “real assets” do you refer to? And even if it were true, our government mandate does not allow it to be in the business of producing marketable goods.
FJG jobs can be employed to build, upgrade and repair essential public works like roads, bridges, power grids, water infrastructure etc. There are any number of socially useful projects which multiply up into increased GDP growth (increasing tax revenue, a countervailing force to inflation) and increasing the capacity of the private sector to produce. Yes, the government does not produce goods for sale on the common market. But it does pick up demand slack and fill in gaps not covered by the private sector, increasing production in the process.
Please reconcile Medicare for all as it is a program that was designed to be funded by those who eventually use it, accounting for actuarial data and long-term contributions.
I’m not sure what you mean by this. The ‘payments’ for Medicare for All are taxes and bond proceeds just like any other funds that flow through the TGA. Thinking of particular tax payments as ‘for’ something makes no sense when you look at the actual debits and credits. The question is whether funding the program would be inflationary or not. There is a good chance there may be an initial deflationary ‘shock’ as an entire industry is destroyed and we have an unemployment spike. This will be at least partially offset by premiums savings, but it’s unclear to what degree. This is why it may require either a tax cut or increase. What is certain though is any tax increase would be less than the current cost of premiums as the program is a net cost saver.
Also, if there is no inflationary effect in your proposal, there is also no limit to the deficit we can create. Unless there is a requirement to reconcile accounts, there is no such thing as a deficit. Do we agree? Otherwise, there is no need to account for any of it. Why worry about deficits unless there is a need to reconcile accounts?
There may or may not be an inflationary effect of my proposals. While there is ‘technically’ no limit to deficit creation, inflation risk runs higher as the deficit increases. Of course, this also depends on how the deficit is employed. Either way, we ought to be willing to stomach some inflation in exchange for full employment given that unemployment is far worse than a few % inflation. This is well documented in both economic and other social science literature.
If by ‘reconcile accounts’ you mean settle debts, then yes I believe there is no such thing as a deficit. But look at deficit definition 2 you provided above:
2. the amount by which expenditures or liabilities exceed income or assets.
That’s the federal deficit. There’s nothing about ‘reconciling accounts’ or settling debts here. The deficit is a description of the relationship between federal revenues and expenditures, as per definition 2 here.
If your method were actually sound, nobody would need to work! There would be no need to produce, except for basic survival. Are we agreed? People could choose to work or not, money would be printed and used at will with no adverse consequences.
I’m not sure where you’re getting this from. The proposal is a federal ‘jobs’ guarantee, not UBI. That there is no need to produce except for survival is sort of trivially true. But even under capitalism people produce for much more than mere survival. Money would be printed and used on what? The point of my argument is that federal spending priorities are resource and inflation constrained, not revenue constrained.
Deficits are accounts payable. In govmt, these are paid with taxes.
I think this is the most common misconception about money; this is half right and half backwards. Money is a government IOU. Imagine a fresh government with no debt that wants to employee some labor or buy something (say 10 sheep). The government buys 10 sheep for $50 in currency. The $50 issued is the government saying “I owe you $50 in tax credit”. At the same time, the government levies a tax (say property or consumption or something). Suddenly, there is demand for currency under threat of imprisonment or whatever the government decides. Hence, fiat
Taxes are the government accepting back it’s own IOU’s in exchange for tax credit. The ‘account payable’ is settled when the government ‘pays back’ the tax credit on receipt of its IOU.
You can look at the historical record and find that this is almost universally the case, including in US history. I can give specific examples if you want to get into that.
So, unless you agree that your proposal has limits, and why that is so, you must agree that your method isn’t sound. You make it sound like our nation can simply deficit spend our way to prosperity and bliss without a need to address the resulting shortfall.
There are limits, but these are resource and inflation limits. Not revenue limits. I’ve insisted on this from the beginning.
One last thing. I’m not patronizing you the way you attempt to treat me. Be nice or be gone. I can read what you write without caps.
Fair enough. I became frustrated because I felt like I was repeating myself ad nauseam to no effect.