Thanks for your response. I believe there are some fundamental misunderstandings about MMT and federal spending/taxes which hopefully we can iron out here.

In your discussions you are contradictory regarding inflation.

Another motivation behind the Congressional mandate was the idea that allowing the Fed to overdraw the TGA would somehow lead to runaway inflation. Examining the underlying operations reveals that this is also nonsensical.


Too many dollars chasing too few resources leads to price increases and inflation. Taxes are one method of removing dollars from the economy and thus cooling inflation.

Which is it. You could claim both are true but that disregards the interconnections of the money supply and the deficit. It is deficit spending the creates the too many dollars chasing too few resources.

This is not true. The Treasury bond issuance that ‘covers’ federal spending occurs on the primary market. These Treasuries are purchased with reserves, not deposits. Deficit spending results in an increase in the net financial assets of the non-governmental sector whether or not bonds are issued. Bond issuance today is effectively a monetary operation that helps the Fed hit its interest rate target by draining reserves. Bond issuance does not fight inflation by ‘removing’ dollars from the economy. Please reference the balance sheet changes in the T-accounts from the article.

You also disregard the fact that the more the Government borrows the higher the interest rates that home and car buyers will have too pay.

This is not true. The Fed can set the overnight rate wherever it wants regardless of the Treasury’s bond issuance. The central bank actually has the ability to fine tune interest rates on longer term government bills if it chooses to, as the BOJ has demonstrated.

If we give money to the poor landlords will raise rents and build more apartments, sellers charge what the market can bear.

Except the poor will still net a greater buying power in this market even accounting for the price increases. We both know this.

the Fed to overdraw the TGA

This is wrong. It is the Treasury that accesses the TGA (Treasury General Account) not the Fed.

Okay- what I meant is that it is operationally possible for the Fed to allow the Treasury an overdraft on the TGA. This was obviously my meaning in the context of the rest of the article.

It makes you wonder why the Plutocratic Oligarchic Elites don’t jump on the MMT band wagon as more government spending means more money that they can rake in.

Rather it is just as easily that because once MMT is well understood, it becomes clear that the ‘how do you pay for it’ argument is based on a fallacy, and that certain industries are nothing more than parasitic profit centers.

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

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