Comments by "" (@downshift4503) on "Government finances are not like those of any household" video.

Households can't spend money without acquiring money. The government can buy anything that is for sale in its own currency. The risk is always inflation because the real world has limits to resources, but there is no limit to the money. It's a fact that they spend to create revenue. Where does the revenue come from in the first place? the only source of reserves is the BoE. For example, when the Euro started, where did the ECB get the Euros? did it borrow them?
3
@grolfe3210 But the amount of goods and services grows over time. Also people tend to have a savings habit (some more than others) which means that money isn't spent on goods and services but sat in savings accounts. It isn't a static pie that static amount of money relates to. The government allows the creation of bank credit by commercial banks to expand and contract the money supply. Printing more tickets can make you more pie over time because incentives are created for people to create goods and services. Again there are limits. It is analogous to company equity. The Euro did not exist until the ECB created it. They did not borrow it from elsewhere. They declare that taxes will be paid in it in the future and then issue it.
1
@grolfe3210 That doesn't answer where the ECB borrowed the Euros from.
1
@grolfe3210 Those aren't Euros. You can't pay tax in those things if the Government says it wants Euros. If the Government needs to borrow Euros in order to finance it, where are the Euros? You can't answer that question simply because the government isn't borrowing the Euros. It is telling the citizens that taxes will be paid in the future in Euros and it begins to spend them. It offers to buy their francs / lira etc etc for a certain amount (not borrow, buy) and then puts the francs / lira into a shredder following the purchase.
1
@grolfe3210 In your China example, all that has happened is China sent goods / services to someone accepting £250 as payment. All that China can do with that payment is buy things that are for sale in UK sterling, or it can put it into a savings account (gilts). Even if China sells the UK sterling, the buyer of them can only do the same. The guy with the patio set got real goods and services. China got a piece of paper.
1
@grolfe3210 It is 100% relevant. The discussion is whether governments are like households. I'm using the example of a currency that started recently. If you want to stick with the UK, tell me where the government obtained the first pound note / coin it spent?
1
@grolfe3210 What you described about the Euro is not analogous to reality. What happened for those 3 houses is that they each had its own currency but agreed to use a new currency supplied by the ECB. Noone on the planet had that currency aside from the ECB and it was impossible for it come from anywhere else. When the ECB said it would allow the currency to be bought by those 3 houses for their own currency, it simply burned their currencies. There was actually no need at all to even buy the currencies with Euros. All that was required was for tax to be set on each house that could only be paid in Euros and they would have no choice whatsoever other than accept the Euros as payment for goods and services. As for the UK (where did the first pound coin / note come from?). Let's say the bank had bars of gold in the cellar. It creates a note called £1 and says that the holder of that note can buy an ounce of gold with it. Did it borrow that £1 note or create it? Does it need the gold in order to create a £1 note? In recent times the gold is irrelevant as we have a fiat currency.
1
@grolfe3210 You still haven't answered where the ECB borrowed the Euros from because you can't answer it. It created them, just like it creates all the Euros. It doesn't borrow them. The BoE didn't borrow its first pound note just like it doesn't borrow them today. It minted it and spent it. People had to accept it as they had to pay tax in pounds. Whether it was convertible to gold or not didn't make a blind bit of difference to the people paying taxes as they no choice but to pay taxes. Fiat currency isn't convertible to gold at all, you can buy gold in the same way that you can buy any commodity on the open market.
1
@grolfe3210 My point was that the initial Euros were not borrowed from elsewhere, but created by the ECB. The ECB isn't borrowing the Euros that it spends. That is why governments are not like households. Governments issue the money households are users of it. Households don't get to create their own money, nor can they force others to pay them tax later. Government do not need to balance their books. The surplus spending of the government represents the savings of the household in the currency they use. The government / BoE also creates the money with which it pays gilt interest. Households don't get to create their own mortgage interest payments. Government "borrowing" is functionally no more than a savings account at the BoE from previously government spending that hasn't been taxed back yet. "if it prints lots of money then all that happens is the currency devalues on the world market and so ends up worth the same" sorry but that's not a fact. If the money it spends ends up creating a bigger economy, the currency might be worth more in the future, not less. There are a lot more USD today than there were in 1950 and yet the USD has gone up around 4 fold against GBP despite the increase it USD.
1