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The Private Sector Doesn’t Create Money – It Just Shuffles It Around Debunking the orthodox myth that public services rely on private sector 'wealth creation'

7. Similarly, in the US, the individual states are currency users, while the federal government is the currency issuer.

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6. In short, the government can always provide the financial means; it’s the physical and human capacity that sets the limits.

Note that in the UK, Scotland, Northern Ireland and Wales are all currency users, while the central government at Westminster is the currency issuer.

5. It’s not your money the government needs - it’s your resources: the materials to build those hospitals and bridges, the energy capacity, the infrastructure, and the human labour required to make it all function.

4. A government that issues its own currency can pay for these projects directly, adding new money to the private sector in the process when it deficit spends. The limiting factor is the availability of resources to be purchased in that currency.

3. governments like the UK and the US are currency issuers.

And luckily for all consumers of public services, currency issuers are not bound by the same limits as the private sector.

2. , the money it spends does not come from a big pile of taxes provided by the private sector.

Regular readers will intuitively know where I’m going with this: I’m reminding orthodox economists that there are two types of government, currency users and currency issuers, and

When the public sector needs to build a new hospital, new bridge, new energy plant, or to find the money to pay pensions, pay school teachers, or tackle climate change

UK Chancellor, Reeves, was gleefully annoucing that her 35 billion blackhole had miraculously transformed in 35 billion surplus.

In plain English, she's removed money from the people's pockets, as many will know only too well.

Labour's economics is just another form of austerity.

Job Guarantee: Where Did It Come From and What’s It For? Knitting Together the Threads of the Job Guarantee Story – From Wool Buffer Stocks to Price Stability – and a Job for All Who Want to Work

“A job guarantee is an alternative price stability mechanism without the devastating effects on the wellbeing of workers.”

Job Guarantee: Where Did It Come From & What’s It For? - @learnmmt101.bsky.social
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As you say Jacques, it's a difficult idea for people to get their heads around. They are told that it is the private sector that creates the money than then gets used to fund public services - when in reality it is the exact opposite.

The Private Sector Doesn’t Create Money – It Just Shuffles It Around Debunking the orthodox myth that public services rely on private sector 'wealth creation'

10. So, to put it plainly, what private sector businesses are not doing is creating new net money for the sector as a whole.

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9. – but in reality, when you cash them in, that money is just a transfer from one investor to another.

And from the point of view of physics, even the pot plant doesn’t create something new - it transforms water, sun and nutrients, into leaves, roots and flowers.

8. However, at no point does the money grow: if you think it does, you are thinking of a pot plant, not a financial asset.

And now you are thinking I’m wrong because your stock market investments have grown (assuming you have any)

7. You are now down £100 and the shop and the health club are up £50. And so on.

It is clear that what is happening in this process is that money is changing hands.

6. Think of it this way. If I give you £100 to paint my front room, that £100 is transferred from my bank account to yours. You are now up £100 and I’m down £100.

You spend £50 on a new kettle, and £50 on a monthly subscription to a local health club.

5. And yes, that intuitively feels like the creation of new financial assets, but in practice, what is happening is much simpler.

They are merely shuffling existing private sector assets around - or if you prefer - they are redistributing them within the sector.

4. Yes, they create output and income. And yes, they pay wages, receive revenue and make profits. And yes, they create huge wealth for some individuals and businesses.

3. The truth is a little uncomfortable for our politicians and the economists who advise them: private businesses, taken together, do not create any net new financial assets for the private sector as a whole.

2. My aim in this short article is to debunk an idea that is at the heart of orthodox economics: that the private sector generates the financial resources required to fund public sector spending.

1. Shuffling the Deck: Why Private Business Can’t Create New Money

“Your taxes don’t actually pay for anything, at least not at the federal level. The government doesn’t need our money.” Kelton, Stephanie

The Private Sector Doesn’t Create Money – It Just Shuffles It Around Debunking the orthodox myth that public services rely on private sector 'wealth creation'

New on MMT101: The Private Sector Doesn’t Create Money – It Just Shuffles It Around

Debunking the orthodox myth that public services rely on private sector 'wealth creation'

Read on: tinyurl.com/27dkbckf

Is the private sector capable of saving the planet? Exploring J.D. Alt’s case for why profit-driven finance is mathematically unsuited for climate mitigation—and the alternative we've overlooked

7. Go beyond that point and the private sector will lack the capital it needs to remain healthy.

Alt calls this the ‘mythical paradox of a snake eating its own tail!’

Read on: Is the private sector capable of saving the planet?
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6. The implication of these conventional beliefs is that there is a finite amount of money that can be raised from the private sector to fund public purposes.

There will be a point at which paying for ‘public sector needs’ becomes a problem.

5. New money is generated via ‘interest-bearing debt’. [Note that an examination of the monetary system demonstrates that to be false. However, Alt tells us that the idea that the private sector creates all new money is the standard belief.]

4. Climate change mitigation can only be paid for in the following ways: taxation, philanthropic actions or by borrowing from the private sector.

It is the enterprise and profit motive of the private sector that creates ‘permanent’ new money in the economy.

3. Additionally, there are also services and products that can’t be produced at a price most citizens can afford (healthcare and housing and so on), so again these must be produced by the public sector.

2. If something can’t be produced profitably it won’t be produced by the private sector.

The things that are necessary, but not profitable, therefore, must be produced by the public sector.

1. An explanation of the ‘standard money theory’ by J.D. Alt

In the first section of his book, Alt explains what he calls the ‘standard money theory’. The basic ideas and beliefs of which are encapsulated in the following bullet points:

Wooden money: it literally grows on trees.

Literally.