I will share 2 important criticisms of the Modern Monetary Theory. If government spending exceeds taxes, overall bank reserves grow and Without government spending, citizens cannot pay their taxes
Critism 1: You are just looking at daily moves in the Treasury Statement to reach your conclusion. Daily moves are “noise” You should instead look at the fiscal year end totals.
Criticism 2: “94 per cent of the money supply is created by banks” - True. But banks create “bank money” which are liabilities of banks that are denominated in U.S. Dollars. The primary reason we accept “bank money” is because of the promise to convert them to “government’s money” on demand and on par. US Treasury does not deal with “bank money” ever. It only transacts using Reserves via the Federal Reserve.
Regarding your 2 critiques
Critism 1: You are just looking at daily moves in the Treasury Statement to reach your conclusion. Daily moves are “noise” You should instead look at the fiscal year end totals.
https://www.fiscal.treasury.gov/files/reports-statements/financial-report/2022/02-16-2023-FR-(Final).pdf
Criticism 2: “94 per cent of the money supply is created by banks” - True. But banks create “bank money” which are liabilities of banks that are denominated in U.S. Dollars. The primary reason we accept “bank money” is because of the promise to convert them to “government’s money” on demand and on par. US Treasury does not deal with “bank money” ever. It only transacts using Reserves via the Federal Reserve.
1. https://youtu.be/EMEhE-WJFQA?si=OwdBURzVqgsoSZhN
2. https://fedguy.com/two-tiered-monetary-system/
Dear Nathan
Your explanation on my Critism 1:
This is a math. That is very clear. Daily moves are the reality.
Your explanation on my Criticism 2:
Without government spending, citizens cannot pay their taxes. Yes they pay.