link to original reddit post by /u/2343252621

On r/AskPolitics, someone asked "Where does the 1.9 trillion dollars for the Covid Relief Bill come from?"

The very, very obvious answer is debt-financing through US Treasury bonds, largely purchased by the Federal Reserve.

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But there is consistent push to identify deficits not as normal debt but as money creation.

It is created new when Congress appropriates the money and tells the Fed to spend it. Then, after that, we choose to sell bonds in order to take currency out of the economy (at least for the period of the bonds' terms). We could choose to NOT sell bonds and we'd still be able to spend the money.

Hence, "selling bonds" is not a correct answer to OP's question.

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So TLDR; When the federal government spends money, it is actually creating that money. When we ask, "how is the government going to pay for something?" we are actually asking, "How is the government going to take money out of the economy to prevent inflation?"

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Debt in this case is an accounting term. Foreign debt is held in Treasury bonds and domestic 'debt' is an asset held by the federal reserve. It is fundamentally much different than household/city/state debt.

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You're missing the point. The money is created new out of thin air when the Congress appropriates money and directs the Fed to spend it.

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Choosing to sell bonds in a corresponding amount to sending is a policy choice. It's not how the government gets the money to spend. All money spent by the federal government is newly created money.

Strictly speaking there is truth here...money supply is affected by the government's debt.

BUT THAT IS TRUE OF ALL DEBT.

A mortgage gives the borrower money and gives the bank an asset (promise of interest payments). That increases the money supply.

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I see a coordinated effort to fabricate distinctions, by pointing out interesting or complicated things, which are indeed interesting, but not actually unique.

The purpose of agenda seems to be to distinguish Normal Debt (mortgage, credit cards) from US Government Debt.

So that plebians' common sense and experience with everyday financial consequences is instantly invalidated when talking about the government's debt.

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You see, your credit card debt has certain consequences. The federal government's debt does not have those consequences, and I'll prove it by confusing you.