this post was submitted on 22 Mar 2024
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Fiat money is basically an IOU of the government. It has its value because it is the accepted currency. It is the accepted currency, because you can pay your taxes with it.
In order to create money the government first needs to make debt that it hands out the IOUs for.
That is the core of the concept. It is then mediated through an independant central bank and all sorts of private actors and institutions in between. But the account of the government at the central bank cannot go into a plus. It is always a minus, which increases with the debt handed out to private entitities and it is deleted by the tax coming in.
Then why was it a plus in the Clinton Era where there was no national debt but a surplus?
They reduced the debt in this years by having a budget surplus. Still the debt was not zero.
https://en.wikipedia.org/wiki/National_debt_of_the_United_States