Henric

Just remember: 1. Every economic entity must fund its balance sheet. MMT misconstrues this concept by treating central government spending as self-funding because the sovereign issues the unit of account, but this ignores liability management: money creation injects liabilities into the private sector that alter asset prices, yield curves, and inflation expectations. Spending without credible funding mechanisms is not a free lunch; it is an inflation tax. 2. While loans create deposits endogenously, banks face strict liquidity and capital constraints. A bank must fund deposit outflows at clearing, manage reserves, and hold regulatory capital against risk-weighted assets. Credit expansion is constrained by balance sheet profitability and solvency risk, not an infinite creation tap. 3. Taxes don't just 'drive currency demand'; the real productive tax base defines a nation's fiscal space. A sovereign's ability to run persistent deficits depends entirely on an endogenous, highly productive private sector creating goods, services, and wealth to back that unit of account. Deficit capacity is a derivative of private-sector productivity, which is why the US can sustain deficits that developing economies like Somalia cannot. 4. The MMT claim that 'government deficits equal private financial surpluses' is an accounting truism, not an economic virtue. By definition, any borrower's liability is another party’s financial asset. Just as household borrowing creates financial assets for the non-household sector, government borrowing creates non-government assets. The critical question isn't whether the ledger balances, it always does, it's whether the debt fuels real output growth or simply inflates nominal claims against a fixed resource base. 5. Real economic wealth is constrained by what the private sector produces. Since government *often* absorbs real resources (labor, capital, materials) rather than producing them, public spending redistributes or competes for private-sector output. Therefore, fiscal policy is bound by productive supply, and expanding nominal claims faster than real output inevitably degrades the currency. Private sector output constraints govt balance sheet expansion. See #3.