Monday, October 20, 2014

I hate when a good comment gets buried

I hate when I post a good comment to reddit and it gets buried because either no one noticed it or it was a tangent to the OP. Here's one such case:
One of the consequences of MMT is that the national debt is meaningless: it's an accounting fiction.
One of the interesting properties of fiat (government-issued paper) currency is that the government must run a net deficit or there can be no money in circulation: if government doesn't spend the money first (i.e., before collecting taxes), how can there be any in circulation for private payments or tax payments?
Note that MMT isn't prescriptive, just descriptive. It's critical for people to understand how our monetary system actually works in order for sane policy to be created. Of course what I said above isn't true on a gold standard, for instance; but we aren't on a gold standard, so unless we go back to that we should stop treating taxes and government spending as if we were on one.

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