Two articles off the Big Picture, both discussing the S&Ps downgrade (which, by the way, seriously? You guys rated toxic waste CDS compiled from fraudulent RMBS AAA, which then proceeded to blow up the economy, and have the gall to rate the United States of America lower?). This one and this one. Both assert the US funds itself via taxation, which is equivalent to asserting a bank funds itself through reserves and is equally false.
Banks do not fund themselves through reserves, and governments (especially currency issuing governments) do not fund themselves through taxes. Banks acquire reserves in order to shore up capital reuirements for liabilities already issued; governments tax for a similar reason.
This shouldn’t be that confusing, though I guess we’re all mostly still bogged down with the notion that you lend money to a bank which then lends it back out ad infinitum through “fractional reserve lending”. What hogwash. Why would any banker tether themself to such a system? Think about that for a bit. In the meantime, go read this guy. While he’s more MMT and I lean to the Ciruitist reading (I find Circuitist systems to be more theoretically sound, and consider MMT to be a specific application which describes a more limited set of models than a Circuitist mode), he’s nevertheless incisive and refreshing. And contrarian. Always listen to your naysmiths.
