“money must enter its accounts that day through taxation and borrowing” - Treasury does not spend without coordination with the Fed. That’s what Open market operations is all about. The Fed will ensure the banks have enough reserves to buy Treasury’s debt offerings.
The debt ceiling is a self imposed constraint on Treasury.
In financial terms, Treasury always has the financial ability to spend. The debt ceiling imposes a legal authority to spend on the Treasury. IOW, there is no financial constraint on Treasury’s ability to spend without taxing or borrowing first. Spending comes first, taxation and borrowing are following operations that happens after the fact.
First of all, I support MMT, but some statements need to be clarified.
Please check the daily treasury data. Without taxation and borrowing, there is no spending. This is based on the law. But it does not have to be so, the treasury can spend the money it gets by borrowing directly from the Fed. Therefore there is no need for taxation. It can only be used to withdraw money from the system.
When the Fed funds banks with repos and the banks buy bonds from the Treasury, the Treasury borrows again.
“money must enter its accounts that day through taxation and borrowing” - Treasury does not spend without coordination with the Fed. That’s what Open market operations is all about. The Fed will ensure the banks have enough reserves to buy Treasury’s debt offerings.
The debt ceiling is a self imposed constraint on Treasury.
In financial terms, Treasury always has the financial ability to spend. The debt ceiling imposes a legal authority to spend on the Treasury. IOW, there is no financial constraint on Treasury’s ability to spend without taxing or borrowing first. Spending comes first, taxation and borrowing are following operations that happens after the fact.
Dear Nathan:
First of all, I support MMT, but some statements need to be clarified.
Please check the daily treasury data. Without taxation and borrowing, there is no spending. This is based on the law. But it does not have to be so, the treasury can spend the money it gets by borrowing directly from the Fed. Therefore there is no need for taxation. It can only be used to withdraw money from the system.
When the Fed funds banks with repos and the banks buy bonds from the Treasury, the Treasury borrows again.
Sincerely
Engin YILMAZ