MMP Blog #22: Reserves, Government Bond Sales, and Savings
Since government deficits create an equivalent amount of nongovernment savings, it is impossible for the government to face an insufficient supply of savings.
Since government deficits create an equivalent amount of nongovernment savings, it is impossible for the government to face an insufficient supply of savings.
It is best to think of the net saving of the nongovernment sector as a consequence of the government’s deficit spending—which creates income and savings.
There are often two objections to the claim that government spending effectively takes place by simultaneously crediting the recipient’s bank account as well as the bank’s reserves.
Let us now begin to examine in more detail the government’s budget and impacts on the nongovernment sector.
Our next topic: government spending, taxing, interest rate setting, and bond issue. We will examine fiscal and monetary policy formation by a government that issues its own currency.