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Congress doesn't print money. The Fed does. Congress can spend money that it doesn't have by getting the treasury to sell bonds. Foreign CBs are not mopping up

• kaonashi 13y ago
  First off, the Fed is a creature of Congress. Congress issues spending orders, the Treasury creates bonds and sells them to the primary dealers (who are contractually obligated to buy them), and the Fed will make liquidity available to those primary dealers if necessary. The practice of issuing bonds equal to the difference between taxes and spending is a self-imposed constraint, and is really a hold-over from the convertible currency era. >What is the problem with a toy model in extreme to illustrate the absurdity of your position? It's not illustrative of anything, other than a contrived absurd example. If there was capacity to absorb 100 trillion in massages (equally absurd), then prices would remain stable. Think of it like this: we hit a recession, orders drop and companies lay off workers and produce less output. From one day to the next the capacity for a certain level of output remains the same, but on the second day less is produced.