The United States is monetarily sovereign, which means…
A monetarily sovereign country is one that spends, taxes, and borrows in a currency that it, and only it, can create (e.g. US, UK, Japan, Canada, and Australia). This differs from countries who do not issue their own currency (e.g. Venezuela, Argentina, Zimbabwe, and Eurozone countries such as Greece).
Private lending is preferable to public spending.
By creating money through public spending, we win in a variety of ways. We fund our public priorities (such as education and infrastructure) which means we don’t need to raise tax revenue to do so. We also provide our economy with a money supply, which means to some extent, we avoid having to pay interest to the banks in order for them to create our money supply for us.
Our national currency is valuable because…
Our currency’s universal use within our economy is the cornerstone of its value. Most of us accept dollars as payment simply because we see that we can make purchases with them. In other words, we value dollars because others do as well. In this way, the value of money has a self-perpetuating quality once it is established.
Much of what we think of as money is created…
Banks can create money through the accounting they use when they make loans. The numbers that you see when you check your account balance are really just accounting entries in the banks’ computers. These numbers are a ‘liability’ or IOU from your bank to you. By creating these electronic IOUs, banks can effectively create a substitute for paper money.
Banks create ___________
Banks do not have a printing press. As previously stated, they just create the numbers as accounting entries in their computers.
Banks can make their profits by…
When you take out a loan, you must pay the principal amount plus interest on that loan. Banks make their money by charging borrowers slightly more in interest than they pay to savers. The difference between the interest rates – known as the spread – makes up their profit.
The money that banks lend out is…
Banks do not require deposits in order to lend money. Banks create deposits when they lend money and look for reserves later.
Taxes are necessary to fund spending.
At the Federal level, taxes offset spending, but they do not fund it. Instead taxation creates universal demand for our currency within our economy as people need it in order to pay their taxes. By establishing universal demand for the currency, taxation imbues our money with value and allows it to function as a medium of exchange and means of settlement.
There are 3 types of money: Physical money, commercial bank money, and ____________
Central bank reserves are a type of electronic money created by the Federal Reserve and used by banks to make payments between themselves. They are only available to those institutions which have accounts at the Federal Reserve, e.g. banks and the Treasury.
Government finances operate like household finances.
Recognizing our government’s role as currency issuer calls on us to stop thinking of our government’s finances the way we think about a household’s, which is as a currency user that is revenue constrained. The federal government does not need to obtain money in order to spend.
Our Money’s proposals would help…
There are a variety of ambitious public spending proposals on the table to address our economic challenges, including a job guarantee, basic income, Medicare for All, free public college, and a Green New Deal. These proposals, or some combination of them, could well be the basis of a renovated economic model that brings sustainable, broad-based prosperity to our economy.
The Job Guarantee is important because…
The Job Guarantee would directly abolish involuntary unemployment, not only ensuring everyone has access to a job but also improving wages and benefits for those who are already employed. It would achieve this by eliminating the threat of unemployment and putting a floor under wages and benefits, thereby significantly improving labor´s bargaining power.
Deficit spending only becomes an issue when…
Government deficits equate to private sector surpluses – this means individuals and businesses thrive, which stimulates economic activity. If spending exceeds growth of economic output, inflation can occur. However, this inflation can be managed through fiscal policy. The goal is to avoid policies which create inflation.
Our Money proposes to check inflation first by…
Curtailing the private allocation of public funds could be used as a check on inflation if it ever does become a due to increased public spending. This would allow us to place the burden of keeping inflation in check on the private financial institutions which have long profited from the allocation of public funds on their own behalf, rather than placing this burden on the public.
The power of money creation is important because…
Understanding the power of money creation is the key to unlocking our democratic power to attend to our most brutally neglected public priorities like public education, full employment, affordable housing, health care and general community and economic development.
The simple fact is: If we change the way we think about money, we can change the world.
