by What happens when a business runs at a loss? If it happens for long enough, eventually it’ll go bust. So why should it be any different for the government? Doh. Another Johnny-come-lately who still hasn't heard that the government is the currency issuer and that everyone that uses the currency must obtain it ultimately from the issuer as the monopoly provider.Therefore, currency users are financially constrained, whereas a government that is sovereign in its currency is not constrained financially. Since the government is the currency issuer, it can always meet its obligations denominated in that currency.The constraint on such governments is not financial but real. The constraint is the availability of real resources priced in the currency that the government issues. This implies that
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What happens when a business runs at a loss?
If it happens for long enough, eventually it’ll go bust.
So why should it be any different for the government?Doh. Another Johnny-come-lately who still hasn't heard that the government is the currency issuer and that everyone that uses the currency must obtain it ultimately from the issuer as the monopoly provider.
Therefore, currency users are financially constrained, whereas a government that is sovereign in its currency is not constrained financially. Since the government is the currency issuer, it can always meet its obligations denominated in that currency.
The constraint on such governments is not financial but real. The constraint is the availability of real resources priced in the currency that the government issues. This implies that the government can always purchase and deploy idle resources without affecting prices.
However, if the government competes with the private sector for real resources in markets, then prices will adjust to what the government offers. This can increase market prices of scarce goods unless production increases to meet the higher demand.
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