www.stlouisfed.org
That extra five hundred dollars cannot be borrowed from the Fed if your plan is to work.
Not if it replaces money borrowed from the Fed or from investors.The Greenback system doesn't save taxpayers any money and leads to inflation.
Gold Standard Compared to Fiat System
In this video, St. Louis Fed economist David Andolfatto explains key differences between a fiat system and a currency backed by gold.
Not if it replaces money that would otherwise be borrowed.
Borrowing results in interest due, printing money is debt free. It's the difference between a grant and a loan.
Not if it replaces borrowing money. If the budget calls for so much money to be borrowed and printing it replaces some of it, how is it inflationary?
By Harold Chorney, John Hotson and Mario Seccareccia:
“Governments these days find it easy to defend cuts in services and programs. All they have to do is point to their annual deficits and their total accumulated debts. (As of March, 1994, Canada's public debt was about $546 billion.) This public debt provides the politicians with a convenient excuse for cutting spending or raising taxes. Or both. “We're broke”, they tell us plaintively. “We can't afford to increase public services, or even keep them at their present level.”
A lesson from the War
....
The creation of money
“One of the most pervasive myths about the government deficit is that governments which spend more than they receive in revenue must borrow the difference, thus increasing the public debt.
“In fact, a government can choose to create the needed additional money instead of borrowing it from the banks, the public, or foreigners.
“Business and the conservatives in politics and the media are horrified by the suggestion that the government exercise its right to create more money. They claim it would precipitate another ruinous bout of inflation.
“But money creation is money creation — whether by a private bank or the Bank of Canada. And a government in debt only to the government's own bank is not really in debt at all. If it wants to go through the rigamarole of having the Treasury «borrow» from the central bank and later pay interest, that is a minor matter of bookkeeping. As long as the central bank's profits are returned to the Treasury, the results are much the same as if the Treasury had created the money itself.
“There is no reason why the growth of Canada's money supply (averaging about $22 billion annually in recent years) could not be more substantially created by the Bank of Canada. If that policy had been followed, the federal government would not have been obliged to add to its debts to pay interest on old debts. Instead, the Bank of Canada has produced barely 2% of the money added in recent years, while the chartered banks added the rest as they made loans to households, businesses, and all levels of government. At the very least, the Bank of Canada and the chartered banks should share the privilege of creating money on a 50-50 basis.
“Those who dismiss such a proposal as “inflationary” should be required to explain why it would be more inflationary for the government's bank to create $11 billion and the private banks $11 billion, rather than the present practice of having the government's bank create $0.7 billion and the private banks $21.3 billion!
“Clearly the current problem of the Canadian government's deficit is not its absolute size, or its size relative to the GDP, but the insane way it is being financed. A return to the policies of the World War II era, when the Bank of Canada produced almost one-half of the new money at near-zero interest, would do wonders for the economy, while greatly shrinking the deficit... The first order of business for a post-Mulroney-era government must be to regain effective control of the Bank of Canada and make it the primary source of money creation.
“It is ludicrous for the government to put billions of dollars into circulation by borrowing from the private banks, when it can create the extra money it needs, virtually free.”
Banks create money
“We have to keep in mind that our monetary economy only grows when the money supply grows. Under the present debt-driven system, the only way we can increase the money supply is by borrowing it into existence from the private banks, thereby increasing our indebtedness to them.
“It can't be stressed too much that the private banks, unlike non-bank lenders, create the money they lend. They do not — as is so widely imagined, even by the bankers themselves — lend their depositors' money. The amount of new money created by a bank loan, however, is only sufficient to pay back the principal. No money is created to pay the interest, except that which is paid to the holders of bank deposits. That's why debts must continually grow faster and faster in order for each layer of additional debt and interest to be paid.
“If that strikes you as a very dumb and dangerous way to operate a monetary system, you're right. Clearly it would be much safer and more sensible to have at least a large amount of the needed new money spent into circulation debt free by the federal government — or lent by it interest free to the junior levels of government which lack the power to create money. Reform of the monetary system is therefore the key to controlling the deficit and lowering the public debt.” (End of the three economists' pamphlet.)
The Bank of Canada Must Finance our Country, Debt-Free Say Three Economists - Michael Journal
Three economists published a pamphlet “The Deficit Made Me Do It!” in which they affirm that the Bank of Canada Must Finance our Country, Debt-Free.www.michaeljournal.org
I get the feeling that this is a precursor to MMT.
