This is nonsensical. Public debt is nothing like private debt, you can't apply prudent financial advice from the context of an individual to that of a currency issuer. The difference being that they are a currency issuer. The Bank of England is a great starting point: https://www.bankofengland.co.uk/explainers/how-is-money-crea...
Key points:
You can't save in a currency you issue. If a state issues its own fiat currency, it does not need to save in that currency because:
- It cannot run out of its own currency.
- It can always credit accounts via fiscal or monetary operations.
- “Saving” in the conventional sense implies a constraint that doesn’t apply to sovereign issuers.
Every single pound the UK gov spends, is a brand new pound that's never existed before - NB: it wasn't collected by tax. From the Bank of England: “The central bank can create money in the form of central bank reserves by lending to the banking sector… or by purchasing assets. This money is new—it did not exist before.” https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... - that is to say, government spending results in the creation of new money, rather than the recycling of pre-existing tax revenues.
The limits to pay attention to are real resources in the economy, not money; you can have all the money in the world but if you can't procure steel then you simply can't build that bridge.
> that is to say, government spending results in the creation of new money, rather than the recycling of pre-existing tax revenues
That's only true in a very technical, but overall unimportant sense.
If you then have to tax people's earnings in order to control inflation from government spending, then the effect is the same - I had to lose $x so that the government could spend $x on something other than my own needs.
I can't overstate how much i disagree that it's unimportant. But first, let me try to steel-man your argument further. It'd be that fiscal freedom doesn't actually solve the harder problem. The harder problem being allocating finite real resources in the economy.
To build upon your "i had to lose $x so that the government could spend $x on something other than my own needs":
Let's say for example, your needs were to buy the only remaining steel available for your construction project but the government would also like that steel for their project. We've reached an impasse, so we still need to calibrate public spending with what the economy can produce. All spending, public or private, carries inflation risk but the problem here is that without the invisible hand, you've sleep walked into a planned economy with the entirely obvious and predictable result that you have broken it - your economy can no longer produce enough steel.
So there's no free lunch to be had here and further, you risk catastrophically unsettling a complex system that kinda mostly works. It's not that by meddling with how things work, you risk a bump in the economy. Instead the risk is some kind of disequilibrium, a snap away to a self-reinforcing runaway feedback loop that totally destroys the economy. So don't fiddle with big things that we don't really fully understand.
Decent steel man attempt? I'm still learning in this space, critique wholeheartedly invited.
Now to why i disagree with your assertion that it's unimportant. Quick recap - you can't beat inflation, when that alarm bell rings you have to redirect public spending, you might also want to encourage private spending to redirect too (the role of taxation, i.e. destroying privately held dollars) but that's a policy decision for the government of the time.
What you CAN do, is spend on things that aren't at capacity. And there's a LOT of unused capacity in the economy.
Want to pay some nurses to fix up some long term sick workers to get them productive again? Go for it. The public good doesn't always align with profit. Outbidding your luxury condo's steel to build a hospital is a contrived example but the demand-pull invisible hand still exists, it's just no longer omnipotent. Supply side economics will still attract steel making capacity in that example. The market and its prices are still the primary signal.
This is nonsensical. Public debt is nothing like private debt, you can't apply prudent financial advice from the context of an individual to that of a currency issuer. The difference being that they are a currency issuer. The Bank of England is a great starting point: https://www.bankofengland.co.uk/explainers/how-is-money-crea...
Key points:
You can't save in a currency you issue. If a state issues its own fiat currency, it does not need to save in that currency because:
Every single pound the UK gov spends, is a brand new pound that's never existed before - NB: it wasn't collected by tax. From the Bank of England: “The central bank can create money in the form of central bank reserves by lending to the banking sector… or by purchasing assets. This money is new—it did not exist before.” https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... - that is to say, government spending results in the creation of new money, rather than the recycling of pre-existing tax revenues.The limits to pay attention to are real resources in the economy, not money; you can have all the money in the world but if you can't procure steel then you simply can't build that bridge.