I think it's very important for us to be aware that while this is true for private individuals, companies, and local governments, it is totally false for monetarily sovereign governments like the US federal government.

There is no limit to how much money it can spend. Any discussion of budgets at that level in terms of deficits etc. is completely flawed, and not just because a lot of politicians are extremely hypocritical about it, but because it just makes no sense in terms of economics and finance.

When thinking about the spending and taxation of a monetarily sovereign governments, the only real constraint is inflation. This is because the only real constraint is the amount of real resources that are available.

For what it's worth, this approach is part of what's called "functional finance".

This means that theoretically, yes, the folks in charge of your country could expend tremendous effort filling up warehouses with printed cash (or bank accounts with billions of 'fresh' digital dollars) if they wanted.

However, there are innumerable practical limits on such behavior:

Any country that suddenly declared it had more money than all the others combined and was now buying up all the available land on the planet would find themselves in a heap of trouble. Trust still has to be earned & maintained, and this involves continuous demonstrations that no one is 'cheating'. Localized experiments by playing with 'created' money (responsibly) are fine, however, and through this aspect, fiat currencies provide very useful flexibility which is now essential to modern life.

If the government just gave everyone a million dollars, the purchasing power of that money would quickly disappear as purveyors of the most popularly sought limited resources raised prices to meet demand. This is inflation. Eventually most people's extra million dollars would be spent, and almost no one could afford the items with jacked up prices any longer. In turn, those prices would fall back down to - once again - meet demand (deflation). Sellers need buyers and vice versa. Money would change hands, there would be winners and losers, and it would be hugely disruptive-- but eventually life would return to normal for 99% of folks and it would pretty much be like it never happened.

In this particular case:

> Any country that suddenly declared it had more money than all the others combined and was now buying up all the available land on the planet would find themselves in a heap of trouble. Trust still has to be earned & maintained

... why not be more specific and say that if a country did that, its currency would immediately drop in value on the foreign exchange markets.

Anyway, I'm not saying that trust is irrelevant, and I do largely agree with you, I just think it tends to be overrated in these kinds of discussions.

> There is no limit to how much money it can spend. Any discussion of budgets at that level in terms of deficits etc. is completely flawed, and not just because a lot of politicians are extremely hypocritical about it, but because it just makes no sense in terms of economics and finance.

> When thinking about the spending and taxation of a monetarily sovereign governments, the only real constraint is inflation.

The point is that in the typical political discourse, people extrapolate their own personal experience to government. They seem to think that if the government spends too much, then at some point it will literally be unable to spend more -- and that's just wrong.

Inflation doesn't change that. Inflation is simply the answer to the obvious question that comes next. After all when you tell people the truth that government has no limit to how much it can spend, they tend to become understandably suspicious. TANSTAAFL and all that.

Inflation doesn't affect how much money the government is able to spend, but it does affect whether more (net) spending is a good idea, so it is a constraint in that sense. But it's qualitatively very different from the entirely fictional budget constraint that most people seem to be worried about.

That's a terrible idea. Freedom to leave is a powerful force to keep governments from going too far out of control. North Korea is horrible to its people so it has to lock them in. You're effectively wanting the same thing but for everyone. America has important things to attract value producers so that they'll tolerate paying the tax because they're still better off than trying to earn money in some worse country despite lower taxes. It's up to the government to squeeze as much out of them as it can without losing them.

> North Korea is horrible to its people so it has to lock them in. You're effectively wanting the same thing but for everyone.

It would be nice if people paid taxes for the infrastructure that enables businesses worldwide,but that would turn us into north Korea? What? North Korea isn't horrible because of taxes friend (in fact, most of the most horrible places on earth have an official tax of zero, you just need to bribe everyone) What flawed logic enables this?

>America has important things to attract value producers so that they'll tolerate paying the tax because they're still better off than trying to earn money in some worse country despite lower taxes. It's up to the government to squeeze as much out of them as it can without losing them.

Ah, randian ideas of value producers and moochers, instead of participants in a society and economy. I see