By Raúl Carrillo
“Where does money come from?” That’s our question. That’s the trump card Deficit Owls play to explain why the case for austerity is shallow and sadomasochistic, now and forever. When one spreads the true answer—that the Federal Reserve creates dollars with keystrokes, that the U.S. government, unlike like a state or a household, can’t possibly “go broke”, that Uncle Sam has to worry about inflation but doesn’t need to tax or borrow to spend—policy creativity explodes. The false choices of public finance are illuminated. We can decrease taxes AND increase expenditures. We can achieve full employment AND price stability at the same time. Once we align conversation with operational reality, and recognize that we can’t collectively run out of money, we can have an honest—if always antagonistic—conversation about what institutions should do to create, administer, and regulate stocks and flows of resources.