For most people, the greatest challenge to near-and-dear convictions is Modern Monetary Theorys claim that a sovereign government’s finances are nothing like those of households and firms. While we hear all the time the statement that “if I ran my household budget the way that the Federal Government runs its budget, I’d go broke”, followed by the claim “therefore, we need to get the government deficit under control”, MMT argues this is a false analogy. A sovereign, currency-issuing government is NOTHING like a currency-using household or firm. The sovereign government cannot become insolvent in its own currency; it can always make all payments as they come due in its own currency. In spite of the greater complexity involved, we lose nothing of significance by saying that government spends currency into existence and taxpayers use that currency to pay their obligations to the state. Indeed, if government spends currency into existence, it clearly does not need tax revenue before it can spend. Further, if taxpayers pay their taxes using currency, then government must first spend before taxes can be paid. Again, all of this was obvious two hundred years ago when kings literally stamped coins in order to spend, and then received their own coins in tax payment. Agrees with everything Zachary David says - Larry Boyer Jordan Foti
Posted on: Wed, 25 Jun 2014 06:52:01 +0000
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