At the federal level taxes aren’t used to pay debt, they’re used to reduce the money supply. That money goes into a shredder, and is functionally unrelated to the money printed.
Not really. Most money is actually just numbers on a spreadsheet. This is because loans actually create money in a virtual sense. If you want to reduce the money supply, a better approach is to up interest rates, which encourages people and companies to reduce how many loans they take and pay off the ones they have.
And yes, this is what the Biden administration did to reduce inflation, and it worked. At the start of his term it was over 8%, and at the end it was under 4%.
Unfortunately, people don’t understand that reduced inflation doesn’t mean reduced prices. It just means the prices don’t go up as fast. They also don’t understand that negative inflation, i.e. prices going down, is actually terrible for an economy since everyone is then encouraged to spend as little as possible, reducing cash flow
This seems very odd… Can you give me a source on that? Both the shredding of federal tax income and the relation to public expenditure? It appears I have much to learn
That makes for an interesting take to things, however it’s simply an inverted way to think of paying for a debt incurred. Without the repayment by government revenue you would simply have acquisition by the government without a means to compensate for it.
The materials purchased have a cost. That cost is paid by the money created by the government. If the government simply continues to create an unbound supply of money then the currency becomes worthless and you end up with a hyper inflation cycle. See places like Zimbabwe or Venezuela where at some point you end up paying thousands of the sovereign currency for basic items. That currency volume needs to be maintained at some reasonable level for it to have any meaningful exchange value to another party.
So while it may not be directly input/output as the general population would see it, you could instead see it as a credit card. A limit is available on a card and to use it you must have available credit which is freed up by repayment of previous purchases.
Now, the fed through congress has the unique ability to extend their limit on demand, that still increases the debt load and associated interest payments, which is visible in the form of treasury bonds due and payable with accrued interest to the holder of those bonds. Those bonds are public debt, often held by foreign governments, but also by private sector investors, both which are assured payment by the credit worthiness of the government. This all is why there’s such a fuss when talk of the government defaulting their debt comes about, the credit rating of the government, and why we have regular fights over extending that debt ceiling.
What this page reads as is some socialist wishes, but not a reflection of reality. We do issue bonds as a means of funding operations, there are no government guaranteed jobs, and while as I’d mentioned taxes may be viewed as a form of inflation control by reducing currency circulation, this is really only a view difference of spending from a bank account vs a credit card.
My grandfather was part of one of those government job programs in the early 1900s that was created to combat massive unemployment, but today we just put people on the street or in jail
At the federal level taxes aren’t used to pay debt, they’re used to reduce the money supply. That money goes into a shredder, and is functionally unrelated to the money printed.
Not really. Most money is actually just numbers on a spreadsheet. This is because loans actually create money in a virtual sense. If you want to reduce the money supply, a better approach is to up interest rates, which encourages people and companies to reduce how many loans they take and pay off the ones they have.
And yes, this is what the Biden administration did to reduce inflation, and it worked. At the start of his term it was over 8%, and at the end it was under 4%.
Unfortunately, people don’t understand that reduced inflation doesn’t mean reduced prices. It just means the prices don’t go up as fast. They also don’t understand that negative inflation, i.e. prices going down, is actually terrible for an economy since everyone is then encouraged to spend as little as possible, reducing cash flow
This seems very odd… Can you give me a source on that? Both the shredding of federal tax income and the relation to public expenditure? It appears I have much to learn
https://www.mmt.works/mmt-taxes-do-not-fund-government-spending/
What is this AI dribble?
Surely, if printing money (theoretically) causes inflation; and if collecting taxes reduces inflation, then the two are somewhat closely related.
If the amount of money that can be created by the government is somewhat limited, then surely tax money is another valid source for that money.
That makes for an interesting take to things, however it’s simply an inverted way to think of paying for a debt incurred. Without the repayment by government revenue you would simply have acquisition by the government without a means to compensate for it.
The materials purchased have a cost. That cost is paid by the money created by the government. If the government simply continues to create an unbound supply of money then the currency becomes worthless and you end up with a hyper inflation cycle. See places like Zimbabwe or Venezuela where at some point you end up paying thousands of the sovereign currency for basic items. That currency volume needs to be maintained at some reasonable level for it to have any meaningful exchange value to another party.
So while it may not be directly input/output as the general population would see it, you could instead see it as a credit card. A limit is available on a card and to use it you must have available credit which is freed up by repayment of previous purchases.
Now, the fed through congress has the unique ability to extend their limit on demand, that still increases the debt load and associated interest payments, which is visible in the form of treasury bonds due and payable with accrued interest to the holder of those bonds. Those bonds are public debt, often held by foreign governments, but also by private sector investors, both which are assured payment by the credit worthiness of the government. This all is why there’s such a fuss when talk of the government defaulting their debt comes about, the credit rating of the government, and why we have regular fights over extending that debt ceiling.
Yes, this is all well accounted for in MMT. I recommend reading a bit more on the website I linked or on the wikipedia page about it.
What this page reads as is some socialist wishes, but not a reflection of reality. We do issue bonds as a means of funding operations, there are no government guaranteed jobs, and while as I’d mentioned taxes may be viewed as a form of inflation control by reducing currency circulation, this is really only a view difference of spending from a bank account vs a credit card.
My grandfather was part of one of those government job programs in the early 1900s that was created to combat massive unemployment, but today we just put people on the street or in jail