"For the Central Banks, these sources are taxation and borrowing unless they unveil the power of printing money."
Is your bank the "source" of the money in your checking account? Unless you work for that bank the answer is no, just as it is for the federal government. Our constitution gives a monopoly patent on the US dollar to Congress and the Federal Reserve is nothing more than its clearing bank that disperses payments into the private sector.
As the monopoly issuer of new money, Congress has no need for revenue or borrowing to make any payments it wishes to make. In fact, given that one cannot collect or borrow what doesn't yet exist, it must create money "prior to" either collecting taxes or borrowing. Thus, it is far more accurate to state that spending by Congress "funds" both taxation and bond sales.
"For Modern Monetary Theory to work, the economy should not only show a growing trend of domestic output, but this growth should be sustainable as well. "
MMT is simply an accurate description of how money is created and distributed in our present economic system. It works now, only not as well as it could if it were properly understood by those making policy.
After the '08 crash, the Fed adjusted its economic forecast for the following decade downward by "EIGHT TRILLION DOLLARS" because of the lack of consensus on how to best undertake a recovery from the great recession. That wasn't due to any supply chain or resource limitations. It was entirely due to the desire of our leadership to preserve a failed status quo that greatly favored private banking and investors.
Moving the goalposts was simpler than a realistic evaluation and no thought was given to the economic impact for the middle class and working poor that were decimated by an anemic and mostly symbolic spending plan for the Main Street economy while the bank CEOs were sheltered from any finger-pointing or restitution beyond grandstanding by political players. The bailout went to banks and Wall St almost exclusively to entice a resumption of lending, leaving the middle class to finance their own recovery while the working poor were relegated to deeper poverty.
"History has taught us that while deficit spending may be inevitable in times of crisis and to support massive infrastructural investments, governments must, in due time, focus on fiscal responsibility throughout the business cycle to protect themselves from falling."
Simply repeating a common narrative may make it accepted, but doesn't make any more or less true. Deficit spending is the only source of currency that is able to "net" retire private sector debt or store value from our commerce. It cannot be substituted for in the macro view, although a constantly expanding GDP provides the illusion of retiring debt via rolling it over into new debt.
" Hyperinflation in Venezuela and the Greece crisis are examples not unknown. Deficits do matter. So do debts. Though MMTers claim that economies like the United States will not end up like that, a series of 2008-like crises and pandemics, which will not be inevitable owing to climate change, could turn the tables sooner than realized."
There is no guarantee against bad governance and fiscal management. Greece did fairly well with a broad range of social benefits for its citizens until it gave up its monetary sovereignty to the EU and failed to enforce its own tax laws. Venezuela placed all of its economic eggs in the petroleum basket without investing in refinery capacity. Any socialist nation relying on American capitalism can count its days until economic disaster or military action.
"Deficits do matter. So do debts."
No, actually they don't. The deficit is nothing more than an amount of spending that is greater than the amount of dollars destroyed by taxation. A "balanced" budget leaves nothing in the private sector to compensate for the reources and labor the government consumes. Most would consider that "theft" if they better understood econ.
The term "debt" is a misnomer because the deficit "funds" the bond sales. Bonds are not a funding mechanism, but rather, an incentive to save and a way to regulate interest above the "natural" rate of zero. The US dollar is self funding when it is created by Congress and no further funding is necessary, regardless of past spending deficit or surplus.
A Tressury bond is just another form of dollars that pays a bit of interest for giving up the liquidity of cash reserves. The government destroys any procedes from their sales and creates new money to repay investors when the bond matures. One only has to note that retiring bonds upon maturity adds to the deficit by the entire amount of the bond, not just the interest, to realize this.
Nowhere is this more evident than with Social Security and iMedicare. The payroll deductions do nothing to "fund" future benefits and only impart a legal claim to those beneifts to their recipients. All benefit payments are made via new money creation.
