If it issues the dollar, it has enough money
The federal budget deficit has hit ever more astronomical levels, even $2 trillion per quarter. It is useful to recall the identity that gives the budget deficit. It is government revenue, which comes mainly from taxes, minus government expenditures. A negative result is a deficit. But the United States also issues currency, the dollar. It does this to a tremendous degree. It is the world’s largest currency issuer, by a longshot. If it is not getting something in exchange for this issuance—thereby wiping out any “budget deficit”—something is very wrong. One does not make something of value in the economy, offer it, and then get nothing in return. The history of private currency issuance in this country, mainly prior to 1913 and the founding of the Federal Reserve, and in particular prior to the attempt at banking nationalization in the civil war, is illustrative on this matter. Traditionally, banks in the United States took deposits and made loans and had capital, all adding up to a balanced asset and liability sheet. But in addition, banks issued currency. This currency was called “dollars.” In so being called, this currency availed itself, voluntarily, of a definition offered by American law. A “dollar” per Congressional statute was that currency, issued by anybody, who promised that it could be exchanged back at the place of issuance at the official dollar/precious-metal price. For a long while, again per statute, a dollar’s price was about an ounce of silver or a sixteenth of that in gold. Bank balance sheets were in balance on the basis of assets, deposits, and capital. Bank-issued paper currency was something extra and far exceeded any gold and silver on hand at the institutions. The idea was that investors in the economy need money from banks.
