[mempko]

When federal government wants to pay for something, it tells the federal reserve to credit a bank account. The federal reserve then goes through the banking system and credits the account. The money comes from a key stroke. When the government collects taxes, the money is destroyed. It's just accounting. Inflation happens when government prints money beyond capacity of economy to produce. Too many dollars to too few resources.

The government can increase deficit to put more money into private sector, which boosts profits and savings, it can choose to take money out by taxing more or spending less. Which creates fewer savings and smaller profits, and more private debt.

[simonh]

You could just as well say that when I pay a bill the money is 'destroyed' in my bank account and 'created' in theirs, it's just accounting.

[mempko]

It IS just accounting! Difference is you need an income or debt to deposit. Gov can get money from thin air.