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Comment by TacticalCoder | Hacker News Reader

> Anytime the government spends money on anything it prints money to do so. This is how governments work.

I'm sorry but this is complete, total and utter nonsense.

The government is supposed to work by collecting taxes and then spending these taxpayers dollars.

If the government wants to invest in something (like big infrastructure stuff), it's supposed to borrow money (for example by emitting bonds) and then pay that money back (even under keynesianism).

The European Central Bank's mandate specifically says that the ECB's role is to keep inflation in check.

Nowhere is it explained that any government spending can be realized by the government(s) printing money at will.

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If balanced, it’s just semantics whether you say that spending is printing money (which is balanced by taxation and bond sales deleting money).

Governments in the general sense are capable of not balancing these items, even if it’s not recommended and sometimes not politically viable. In practice, this is actually the current state of the USA via QE, although I’d argue that doesn’t make QE evil but rather indicates there are some situations where printing money isn’t too bad.

> The government is supposed to work by collecting taxes and then spending these taxpayers dollars.

Not by printing? Where are those taxpayers dollars coming from before they're collected, if they were never printed? Once printed, how is new money moved into circulation? Answer:

The government prints money, which it then distributes into the economy via government spending. It then collects taxes to remove money from circulation.

Your suggestion is the common understanding, but that leaves no room for how the whole cycle starts before money has been printed, and seems to reverse the order of events.

You skipped the part about the Federal Reserve and how its supposed to be semi-independent from the spending of the government - i.e. the government cannot print money but the federal reserve can to fund its operations in the form of buying bonds/securities/etc.

Also the government does not distribute the money via government spending. The Federal Reserve distributes the money and it can do so even without the government by purchasing bonds from the private sector.

Your suggestion is actually the common misunderstanding and it reverses the responsibilities of various institutions in such a way that most people feel they are subjects of their government.

Small update: collecting taxes doesn't remove money from circulation either. Ay-yi-yi, people are misinformed.

The difference between printing money and taxing money is almost nil in many cases. Both increase availability of government funds while reducing the purchasing power of citizens. Printing money is just fewer steps.

Playing my own critic though: printing money is a regressive tax. It causes the same percent inflation for every person's money. The reduced purchasing power hurts lower classes more.

This is not how the US monetary system works at all. Money collected in taxes is DESTROYED. It will never enter the economy again.

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