The Federal Government Always Money-Finances Its Spending: A Restatement — Nathan Tankus

On this substack I rely on Modern Monetary Theory (among other bodies of knowledge) to inform my analysis. Yet, I rarely explicitly write about MMT (for my own introduction to MMT and an overview of what it has to say about the current crisis, see my written remarks from a speech I gave to a Federal Credit Union). Today though, I’m going to tackle a recurring issue that comes up in discussions of MMT that I think will benefit my substack audience. One of the claims Modern Monetary Theory makes that critics have the most trouble with is the idea that the Federal Government already finances itself through money creation. Today, I’m going to restate this thesis step by step as simply as I can, while using T accounts. Incidentally, Professor Stephanie Kelton already substantiated this thesis in the United States 20 years ago in an article (aptly) entitled “Do Taxes and Bonds Finance Government Spending?”

Naked Capitalism
The Federal Government Always Money-Finances Its Spending: A Restatement
Nathan Tankus