Nobody Knows The Answer
A Canadian politician, Pierre Poilievre is asking where the money comes from.[mp4].
As an avid reader of this blog, you know the answer don't you?
After a while, Pierre volunteers that deficits drive up interest rates.
A deficit is merely an accounting balance. There's no pool of money that businesses and government are fighting over.
He then suggests that it's coming out of the pockets of working class folks who are paying record inflation.
His currency issuing government doesn't need any tax in order to spend the Can$7 billion or any other amount for that matter.
Finally he asks "Is there a money tree?".
And the answer is yes. Currency issuing government creates money out of thin air.
The accounting is:
Debit government Can$7 billion
Credit household and or business savings accounts Can$7 billion
The debit is just absorbed by government. It's an accounting balance and nothing more.
The credit is money. That's new purchasing power created out of thin air.
It's real because that's how government provisions itself. Households and businesses sell goods and services to government, and government credits their bank accounts.
They need that money because government only accepts its currency in payment of taxes. If you don't pay your taxes with, in this case, Canadian dollars, the government puts you in goal.
You know this, just as you know that nobody you know knows this.
My local politician proposed a four lane highway from the Sunny Coast to Cairns. I'm pretty sure he doesn't know.
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