Money Creation in The USA


This is hard to convey in words as I have tried to do recently. Maybe this picture will help. It stretches the credulity of most ordinary people. Maybe this is why they think they cannot understand Modern Money Theory. It is not MMT’s fault. This is the way it really works.

Here is the way money creation happens in the USA. 0ne of the purposes of Modern Money Theory is to explain this process that current USA laws require for the USA federal government to spend deficit money. MMT does not create this situation. MMT just explains it. If the USA federal legislature chose to do so, it could change the rules to reduce this to only require the first transaction, and eliminate the other four.

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