Brain Melting Economics

Try wrapping your brain around this bit of MMT.

Now this may shock you, because nearly everyone believes a dollar bill is a dollar. But it isn’t. It’s just evidence you own a dollar. A dollar bill is a title to a dollar.

If you own a house, the evidence you own it is a paper called a “title.” But, the paper is not the house. A dollar bill is not a dollar; it is just worth a dollar.

Every day, the US Government Printing Office takes thousands of blank sheets of paper and prints them into sheets and sheets of dollar bills. Are they dollars? No, they are just worthless paper, like the paper your bank gave you.

The printing office sends these worthless dollar bills to banks, to give to people as evidence these people own dollars. But let’s say, on the way to a bank, the truck carrying the dollar bills crashes, and 10 million dollar bills burn up. Has the government lost 10 million dollars? No, because dollar bills are not dollars.

This is important because people often talk about the federal government “printing” money. But though the government prints dollar bills, it cannot print money. No one can print something that does not physically exist.

And this is important, because it helps you see that dollars are nothing more than accounting balances. Dollars can’t be seen, touched, smelled or tasted. They can’t be stored or shipped.

And all this is important, because it shows why the federal government has the unlimited ability to create dollars and never, never, ever can run short of dollars, if it doesn’t wish to. To create dollars, all the government does is mark up numbers in checking accounts.

And it’s really, really important, because it shows why Social Security and Medicare never can run out of dollars, no matter what benefits they pay and what taxes they collect.

Trippy…

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4 thoughts on “Brain Melting Economics

  1. Any monetary note is just a physical reminder of a promise between members of a community. I once heard of a people that lived on a group of islands that used rather large rocks as tender. Whoever held possession of one of the designated rocks could relinquish control in return for goods or services. Once in transporting one of the heavy stones from one island to the next the canoe tipped and the rock sank. Though the rock could not be raised, the people continued to trade with it, and possession of the rock at the bottom of the sea continued to change hands from person to person. You could even go out and visit it if you wanted. Eventually, the location of the rock was forgotten, but still it continued to be traded.

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