Read on Twitter
Here's a snippet which may go into my book.
It is often thought that, government spending is implemented by creating money, either as printed notes or through crediting bank accounts. In reality, in modern market economies, these functions are undertaken by central banks ...
It is often thought that, government spending is implemented by creating money, either as printed notes or through crediting bank accounts. In reality, in modern market economies, these functions are undertaken by central banks ...
... such as the US Federal Reserve, which are part of the government in a broad sense, but are not directly involved in the fiscal operations of the government, except to provide banking services.
From day to day, the US government operates pretty much like an ordinary household.
From day to day, the US government operates pretty much like an ordinary household.
It maintains a checking account with the Federal Reserve Bank of New York, called the Treasury General Account. Government expenditure is paid out from this account. Tax revenues and proceeds from the sale of government debt are paid in.
What happens if there is not enough money in the account to pay the government’s bills? This is by no means a hypothetical question? In the normal course of events, governments can issue debt, in the form of bonds and notes to finance their operations.
However, the US government is limited by law in the amount of debt it can issue. This ‘debt ceiling’ has been the cause of repeated crises, leading to periodic shutdowns of government operations.
What about getting the Fed to print the money? The first problem is that the Fed would refuse to intervene in a political crisis. The more fundamental problem is that, even if the Fed created money, it would not deposit it in the TGA, but would buy bonds in the open market.
