Bill McKee wrote:
What real money does government generate?


I take it that your endorsing the theory that US Treasury note, bills,
bonds, etc etc are just "worthless IOUs" and "empty promises"?

The government "generates" all money, in the sense that the US Mint
prints it. The Federal Reserve tells them how much, the US Treasury
keeps Uncle Sam's checking & savings account(s).

'But but but,' you protest, 'Uncle Sam doesn't have a savings account,
the U.S. is running a deficit and is carrying a huge national debt.'
True, but the Treasury debt instruments are the US savings account in
the same way that an individual may have savings even if he's carrying a
huge credit card debt. Cash flow & cash balance are two different things.

Does the government generate *wealth*? No. Other than the way they hand
out favors to certain corporate interests, which is a whole 'nother topic.

What makes a US Treasury debt instrument not worhtless? It's just a
printed piece of paper. Well so is a twenty dollar bill. If the U.S.
gov't does not default on it's debts, then a Treasury bond or bill is
the most secure interest-bearing investment in the world, bar none. OTOH
if the gov't does default, then both the Treasury and the twenty are
worthless pieces of paper.

DSK