Quote:
Originally Posted by th14
the Federal Reserve sells/buys treasury bonds in order to achieve the desired overnight interest rate. American debt is sold as a tool of monetary policy rather than to pay for things (fiscal policy) per se.
So this is the MMT thing where trivia about the workings of the financial system are repeated with great seriousness in the hopes of tricking people into thinking they're deeply meaningful. The Fed buys and sells government debt to manage interest rates because that's it's job. The Treasury, on the other hand, sells huge amounts of Treasury securities in weekly auctions *to pay for things* because Treasury's job is to finance the American government, which it does by collecting taxes and selling government debt.
This is another big snoozer, like all accounting. It proves nothing. There's no way to demonstrate, purely from rearranging equations, that the offset to net government saving doesn't come in the form of reduced foreign holdings. Indeed, given that other countries have vast holdings of US government debt, that's a natural place for redemptions to come from.
Quote:
MMT says the value of the dollar is because of the US government demanding taxes be paid in USD, not because USD is the world's reserve currency.
Right, and this is dumb. No one holds dollars to pay their taxes. (Your taxes are mostly paid by your employer. Your employer is a fairly sophisticated business who could dollars or Swiss francs or yuan or whatever on the spot market to meet payroll tax obligations.) People hold dollars to buy stuff or as a store of value. Do tax obligations contribute to the value of the dollar? Likely so, but its use to access the USD payment system to process transactions is hugely important too. The proof is cryptocurrencies, which have no tax or inherent value, but still have market value due to their exchange function.