How Government Expenditures Finance Themselves
&gt;This analogy is wrong, she tells us, because households are currency users while the government is the currency issuer: it spends its currency into existence.<p>Starting off with wrong vs wrong? How about a place like Greece who does not control their own currency; whose spending is not issued currency at all? Ever. Who absolutely must balance their budget not only by obligation but by necessity.<p>In a country who does control their currency, you don&#x27;t necessarily issue currency as spending. You do tax and therefore the majority of each budget isn&#x27;t issued currency. Aka &#x27;printing money&#x27; which is more digital than printing today than when the saying was produced.<p>&gt;Of course, the fact that the government can manufacture its own currency does not mean that there are no limits to its spending; but deficits are not evidence of overspending, inflation is.<p>Not really true neither. When a country can issue their own currency, there is practically no limits on spending. If you had a myriad of fantastic ideas you could do it. You would easily get away with it. The problem is that the vast majority of ideas out of politicians are not good ideas. Therefore if they were to spend too much, the wealth destruction from those holding the currency would assassinate said politicians quite quickly.<p>&gt;Once we fully aknowledge the role of the government as the currency issuer, it becomes clear that the sum of all past fiscal deficits—what we call the &quot;National Debt&quot;—really isn&#x27;t a debt in the usual sense of the term. It is &quot;nothing more than a footprint from the past&quot;, a statement of the total amount of currency issued by the government to date.<p>Not quite right. If as the government took on significant debt to produce something that is a net-generator of money. Which is common, OPG for example takes on big debt when building a nuclear power plant but then pays it off by selling the electricity.<p>Like for example <a href="https:&#x2F;&#x2F;tradingeconomics.com&#x2F;canada&#x2F;government-debt" rel="nofollow">https:&#x2F;&#x2F;tradingeconomics.com&#x2F;canada&#x2F;government-debt</a> , lets say Canada didn&#x27;t spending $300 billion on sending paycheques to no end at all and never actually did the stupid lockdown to begin with. But we still took on historic levels of debt causing tremendous inflation.<p>Instead they built the new Canadian moon base where the canadian government is responsible for getting you to the moon. The cost to get you to the moon to start a new life would be a nominal cost, profitable to the gov. There is no question such an endeavor would produce far greater wealth then the debt of today. Such a decision would be good.<p>The reality though is that $300 billion was literally nothing more than buying votes. It won&#x27;t generate any new revenues and very little will ever be recaptured as taxes anytime soon.<p>&gt;This framework starts from a simple accounting axiom: &quot;everything comes from somewhere and everything goes somewhere&quot;. Seen from the perspective of a government&#x27;s finances for instance, this leads to what Godley and Kelton playfully call the &quot;one-equation model of the world&quot;:<p>Which is absolutely wrong in a fractional banking system.