The Wealth of a Nation is Not Measured in Money, but in Productive Output

When a nation has a sovereign currency, measuring national wealth in dollars makes no sense.

Money is created (and destroyed) by the banking system (which in the US includes the US Treasury and the Federal Reserve Bank) as needed.

When we ask things like “How are we going to pay for it”?, we’re misleading ourselves.

Everything the US Federal Government pays for is paid for by way of Congressional Appropriation. Everything.

Congress passes a law. The Federal Reserve, in following the law, sends funding instructions to the US Treasury. The Treasury creates money and distributes it thru the banking system per those instructions.

It’s not about the money.

The real questions should:

  • How are you going to pass that bill?
  • How are you ensuring real resources are available in the economy for that newly created money to pay for?

That second question is critically important, and often never asked.

To illustrate this point, I’m going to use the ridiculous example that the Clinton campaign brought up during the 2016 Presidential election.

We can easily say, every American gets a pony, but how are you going to pay for it?

As explained above, it’s not about having access to dollars. The US Federal Government creates money out of nothing. Literally.

If ponies were a national priority, the question is how to create enough ponies in our econony.

If so some reason, ponies became a weird national priority, and the US Federal Government was creating a pony breeding program so every American can have a pony, are there enough ponies being bred in the US, or do we need to shift more resources into this sector of the economy?

This is how American paid for WW2. For the interstate highway systems. For the moon landings. For everything big we’ve ever done.

Below is a video of Stephanie Kelton explaining this brilliantly within the context or social security.

Within her explanation she shows a short video of Paul Ryan asking Alan Greenspan (then Chairman of the Federal Reserve) how we fortify social security (Ryan seemed to favor privatization) to ensure money is there in the system to pay future benefits.

Alan Greenspan responds with what I’ve said above. It’s not about the money. It’s about the availability of resources in the economy, with which those Social Security benefits will buy.

If there are resources in the economy for those future Social Security recipients to buy, the system is working. If there isn’t, the system breaks.