Paddy Carter

I don't know that I even care about simultaneously, I just think "technically this increases money supply and that decreases the money supply" in no way makes "taxes don't finance spending" a sensible conclusion

Governments don’t need taxes to finance public expenditure. They just really want them. MMTers set great store by the idea that the government ushers money into existence when it spends, because if you understand how…

Yes, see "bright spark from IT" here. There is a pot that tax + borrow + print goes into, and spend comes out of, and "actually money is destroyed when it goes in and created when it comes out" gets us nowhere

Sorry I failed to respond to this. Yes I'm not claiming "the govt doesn't have a normal bank account, it had the BoE" has no implications, only that "actually taxes don't finance spending" is foolishness

I do not think govt could sustainably spend 45% of GDP without taxing, hence I think taxes are necessary to financing spending and the rest is distracting sophistry which gives people silly idea, but I also think mainstream econ is too shy of seigniorage

I didn't mean to argue these choices have the same effects on the economy, perhaps I am doing so unwittingly. The hill I am trying to die on is for "taxes are one of three ways of financing spending" and against "taxes don't finance spending"

I don't agree. I think you still need to tax to finance spending unless you want to use print or borrow. If you have 3 ways of financing things it's always a choice between a combination ofX, Y and Z, that doesn't mean you're no longer choosig X to finance things

Whatever you say taxes are for, holding expenditure constant, reducing taxes means one of the other sources of finance must rise. If you think printing money is inflationary, then taxing to financing spending is the same as taxing to avoid inflation

Once you have one item, printing money, which you can avail yourself of as much as you like until you hit your inflation limits, there is no difference between taxes financing spending and "destroying money".

But isn't that analogy taking us back to "actually the government can always print money to pay for stuff if it wants to", which everyone here agrees with. I'm disagreeing with "actually taxes destroy money they don't finance spending". I think three things finance spending, tax, borrow, print.

Would you agree that if the govt had a normal bank account, into which taxes were paid, and its spending came from, but the bank let the govt run and overdraft so that it didn't need taxes before it spent, we would still say taxes fiance spending, and not taxes destroy money?

This is my "bright spark in IT" reference. It's not seeing the woods for the trees. The system described still requires outgoings to tally with incomings (including what I am calling money creation) over time, and it still boils down to spending being financed by tax, borrow, print

The second para of my Medium article talks about setting too much store in the order in which things happen. Now read at e.g. this, and look for words like "prior" and "upfront" mmt-france.org/2025/05/31/t...

but, I am sorry for causing upset I do not intend

I think the MMT idea that taxation destroys money is silly nonsense. I don't think saying so is a "you might feel more at home on the bird site" offence.

oh sorry, maybe I misunderstood you - I thought by burning you were referring to the MMT "govt spending creates money and taxes destroy it" idea, which I don't think is helpful. If you mean that sometimes the govt might want to (indirectly) reduce the money supply to cool the econ, sure.

"financed by" would have been better than "constrained by" - because it's inflation that constrains how much seigniorage you can get away with, but either way I am very clearly saying the gov does not *have to* only borrow and tax.

MMT is the bright spark in IT here:

yes, this was an IS/LM AS/AD exercise, and extracting the useful messages from unrealistic models is tricky, but in this case it does contain the point that if the government tries to raise output beyond what the supply side can supply, it just gets inflation.

i do not think you have read what I wrote because it very clearly does not conclude the govt has to borrow that which only it is allowed to issue

OK. I don't have anything to add to what's in the Medium article.

Governments don’t need taxes to finance public expenditure. They just really want them. MMTers set great store by the idea that the government ushers money into existence when it spends, because if you understand how…

that's awfully big of you, thanks.

I think "printing money" is a perfectly acceptable way of talking about central banks buying government debt

I think the spending £ into existence part is silliness:

carterpaddy.medium.com/governments-...

imo you ought to have been taught that money is IOUs written by banks (see here carterpaddy.medium.com/banks-dont-n... ) but I think the second half about governments burning them is silly nonsense.

what are these implications, that are not already present in the fact that spending is financed by taxes + borrowing + seigniorage? we have always known that governments can print money!!

the bit where he says it's not necessary for national governments to tax?

I think taxes are necessary to sustain that level of spending, and I am very unimpressed by "that's not because taxes finance spending but because tax reduces inflation" silliness

umm, I think I would ask Beardsley if he is seriously suggesting that the UK government could set spending at 45% of GDP and taxes to zero without disaster following.

what blows my mind, is that before anyone had heard of MMT, we knew govt spending was financed by taxes + net borrowing + seigniorage, and in econ 101 we did "what if the govt tries to increase spending by printing money" exercises, looking at when it translates into inflation. It's nothing new!

Maybe they ougha say, you put some money in a bani, it MULTIPLIES it more money, for those that miss it

Mainstream econ emphatically does say banks create money!

Marshall Institute

Maybe there should be some outrage about the LSE taking money from this source of poison www.lse.ac.uk/marshall-ins...

if I had my way, every econ course would have some discussion of the benefits and costs of abstraction, and the practice of focussing on one mechanisms at a time and stripping out everything except what is necessary for that. It's a powerful method, also a dangerous one.