Introduction

The recent and ongoing increase in money supply, particularly in the context of the US dollar, often sparks debates and confusion. Many people, especially the so-called 'poor and oppressed,' are unfairly targeted by these misconceptions. To understand why the government prints more money, it is important to delve into the complexities of fiat currency, deficit spending, and central bank policies.

Understanding Fiat Currency

Fiat currency, like the US dollar, is a type of currency that has value because the government declares it to be the legal tender. Unlike precious metals or other physical commodities, fiat currency does not have intrinsic value. Instead, its value is supported by the stability of the issuing government and the trust placed by the public and other countries.

The primary misconception is the belief that the government physically “prints” money for everyone. This is far from the truth. Most of the US currency in circulation is actually used for electronic transactions. The physical cash we see only makes up a small portion of the total money supply. The majority of the money in circulation today exists as electronic entries on a balance sheet. This process is known as creating entries on a ledger.

Your paycheck, for instance, is just a digital number that appears in your bank account. When you demand cash from your bank, they will generate that amount on the fly, printing the notes as needed. There is no need to “print” the money in advance because it is created as needed.

Deficit Spending and Its Impact

When a government engages in deficit spending, it means that the government is spending more money than it is taking in through revenue, such as taxes. Deficit spending often occurs during periods of economic downturn or when there is a need for significant public spending. In the case of the US, this has led to a dramatic increase in federal deficits.

Biden’s Federal Deficits

2021: $966 billion 2022: $1.837 trillion 2023: $1.454 trillion

The American Jobs Plan, which was originally proposed by President Biden, included a massive spending package. Key components include:

621 billion for transportation projects 174 billion for electric vehicles and charging stations 115 billion for bridge and road repairs 45 billion for historic inequities and future infrastructure initiatives 213 billion for energy-efficient housing and commercial buildings 400 billion for elderly care

The spending was largely focused on social engineering and climate change issues. Additionally, the Deficit Spending did not stop there. The American Rescue Plan, a 1.9 trillion “stimulus” package, allocated 350 billion towards bailouts for blue states and cities. And the Inflation Reduction Act, a 740 billion bill targeting climate change, was passed in 2022.

Central Bank Policies and Government Debt

The Federal Reserve, the central bank of the United States, plays a crucial role in managing the money supply and monetary policy. They control the amount of money available in the economy, influencing everything from interest rates to inflation. When the government needs to finance its expenditures, it issues Treasury securities, and the Federal Reserve can buy these securities, effectively creating money to finance the debt.

The Federal Gross Public Debt has hit 34 trillion as of 2023, all of it borrowed. The increasing debt can lead to higher interest rates, which can impact the economy and the financial stability of the country. The long-term sustainability of this debt is a concern, especially if the government continues to engage in significant deficit spending.

Closing Thoughts

Understanding the complexities of fiat currency, deficit spending, and central bank policies is crucial for making informed decisions and forming accurate opinions on economic policies. The government does not “print money” for everyone; it is a highly regulated and managed process. It is important for citizens to be informed about these issues and to engage in constructive discussions to ensure the stability and prosperity of the economy.