For those that don't want to read this entire post, let's not bury the lead: MMT is wrong: - The U.S. does not have a spend and then tax system, we have a tax then spend system - The U.S. Treasury does not issue the U.S Dollar - The Fed does not issue reserves for the Treasury to spend - The Fed does not issue new reserves to pay the Gov's bills directly - The Gov cannot spend before receiving tax receipts or revenue from bond sales Below I explain in detail exactly why. Please let me know if you think I made any mistakes. After many, many hours of discussions with friends here and elsewhere, I think it’s finally becoming clear, I have finally gotten to the bottom of the MMT debate, so please let me know if you agree. We can have a tax and spend system, which many people believe we have today, and under a tax and spend system in 2024, the USG would have taxed roughly $5T and spent roughly $7T, showing a roughly $2T deficit, and the Gov would have had to borrow roughly $2T to cover the deficit spending. Or we can have a spend then tax system, which MMT believes we have today, and in 2024 the USG would have issued and spent $7T and taxed back $5T, showing a $2T deficit, as the USG spent $2T more than they received back in tax revenue. Two different systems that in practice don’t matter much until you have a deficit. Under a tax and spend model, to cover deficit spending the Gov has to borrow, because desired spending exceeds tax receipts. Under a spend first then tax back model, the Gov already spent the $, so the deficit is covered by issuing money, no borrowing or debt, the deficit is created because tax receipts are lower than currency issued and already spent, so all the money issued is not all taxed back. Which model we have is the heart of the MMT debate. A currency issuer always has a liability for the currency they issue, which means when they issue their currency they increase their Liabilities on their Balance Sheet, and when they receive their currency back as payment, they reduce their Liabilities. If they receive 100% of the currency they issued back as payment, their Liabilities go to zero and all currency is removed form circulation.

Friends, I read the UCL Self Financing State Article, which MMT points to as ‘proof’ the Bank of England creates new money for the Government to both spend and deficit spend. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4890683 The research on the U.K. Government accounts is fantastic! However, their conclusions do not seem to match their research, it is like they wrote the conclusions before they wrote the paper! Chris Rimmer asked me to write out the mistakes I am seeing in their conclusions, so here it is. Please review, and let me know if you see any mistakes; if so, what do you think am I missing? Or do you agree they made mistakes? Please advise. Thx! 1. The U.K. Parliament Approved Deficit Spending Over The Last 4 Years. · 120B pounds 21/22 · 127B POUNDS 22/23 · 134B POUNDS 23/24 · 146B POUNDS 24/25 P24 : https://researchbriefings.files.parliament.uk/documents/CBP-9040/CBP-9040.pdf 2. The BoE Has Reduced The Supply Of Reserves Almost 30% The Last Four Years From Around 1T Pounds To Roughly 700T Pounds Today. https://www.bankofengland.co.uk/markets/bank-of-england-market-operations-guide/our-objectives Q: How could reserves go down if the Bank of England was issuing new reserves to pay for Government spending or Deficit Spending? 3. The Treasury Debt Management Office (DMO) Sells Gilts Before Funds Are Needed, So Treasury Always Has Excess Reserves On Deposit To Meet All Spending Obligations, And Does Not Need To Borrow From The Bank Of England. https://www.dmo.gov.uk/responsibilities/financing-remit/ 4. The U.K Government And HM Treasury Credit Line With The Bank Of England Shows The Government Has Not Borrowed From The Bank Of England In The Last 15 Years.

Preliminary simulations using MESSSI (Macro Economic System State Simulator) developed by Tyron Keynes reveals that whereas the FJG is superior to UBI in targeting this dual objective, nevertheless a combination of the two when applied to lower income earners contributes significantly in reducing overall income and wealth inequalities. https://www.relearningeconomics.com/what-the-messsi-model-says-about-a-ubi-and-fjg

You know how everyone panics about government debt? What if the thing that actually crashes economies is not government borrowing at all, but the debt sitting in your bank account, your mortgage, your credit card, your car loan? In the textbook version, a government running a 1% deficit sees its debt ratio climb toward infinity. Steve built that model in Ravel©. The curve just keeps rising. Looks terrifying. 🫤 Then he changed one detail. He moved the bonds from households to where they actually sit: with the banks. Same equations. Same deficit. Same interest rate. The debt ratio stopped at 50% of GDP. No spiral. No crisis. One wrong assumption in a textbook. 50 years of austerity built on top of it. This one is a must watch. 👇 https://www.youtube.com/watch?v=5l5kROMYEcw&views

This is a great clarifying piece from the thought leaders of MMT responding to their critics. They make the point to differentiate between a generalized description of money mechanics vs. specific implementation like the U.S. model. As has pointed out in the past, they clearly understand how the U.S. system clearly works under today’s self selected fiscal and legal constraints, such as the TGA must be funded prior to spending, no Treasury overdraft at the Fed, and the Fed cannot buy bonds directly from the Treasury. Supporters of MMT often conflate the need for the Fed/CB to create new Reserves by spending or lending, with the Treasury creating new reserves by Gov spending, but which the authors do not. Anything here anybody would like to point out or discuss? Anything anybody would like to add?