You Know Nothing About Economics But there is no shame in that By Thomas SwanPublished about a month ago • 10 min read 4 Photo by JP Valery on Unsplash Did you know that the government can never run out of money, taxes don't fund its spending, the national debt isn't a debt, and printing money doesn't cause inflation? Probably not, because your parents, teachers, politicians, and favorite journalists have always told you the opposite. For most of my life, I didn't know either. I have two PhDs, and if one of them were in economics, it wouldn't have helped. The only people who know how government finances work are central bankers (who won't tell you), traders with hands-on experience of the failure of economic norms, and those who stumble across their work (which I explain below). Everyone else, from New York Times economists to the leaders of both major parties, reinforce common falsehoods, which may be why the economy is brutal and crashes every ten years. Some of these experts lie, others don't want to rock the boat or jeopardize their careers, but most don't have a clue. That is why, if there is a conspiracy to stop us learning "why the government can never go broke," for example, so that we don't ask for nice things like public healthcare, climate action, and a basic income, it is almost effortless. Most people automatically treat the government like a big household that is subject to the same financial rules as themselves—balance income with spending, save for a rainy day, and avoid debt. As responsible adults, that is our lived experience—the hard truth of budget living that accompanies adulthood—and it continues to guide every financial decision we make. When analogized to the government, disagreement appears infantile to us "adults in the room" who assiduously calculate how to pay for government programs with taxes and cuts. What eventually caused me to stop basing my beliefs on assumptions, hearsay, and intuition were questions like "where does money come from?" And, how did the trillions of dollars that exist today actually get here? My intuition had only supported the ridiculous notion that money is an eternal object that circulates in the economy and cannot be created or destroyed. In my examination of what seemed like a scholarly question, I discovered what may be the greatest cause of suffering in the developed world— politicians who falsely declare that a government "cannot afford" something or has "reached its debt ceiling" are creating opposition to social spending that would save lives and could save the planet we live on. The remainder of this article will provide you with the knowledge to reject their misinformation and, I hope, facilitate the greatest societal change of the 21st century. Where Does Money Come From? Take the United States as an example. Every U.S. dollar in existence was created by the U.S. government (or by banks with government licenses), and this exclusive right to create the dollar is enshrined in the U.S. Constitution. It is even called a Federal Reserve Note to tell you it was created by the government's bank. By Lukasz Radziejewski on UnsplashThe first dollar was created in 1792 and trillions have been created since then. In fact, there are twice as many dollars in existence today compared to ten years ago (see graph). Although much of the new money is bank credit, the rest is created when the government passes spending bills. Most national governments are currency issuers, including the U.K., Australia, and Canada, although some are not (e.g., European Union states such as Greece). Localities such as U.S. states also do not create currency and require some form of income. This power to issue currency means that every statement from a politician, economist, or media personality about the government "running out of money" or being "unable to pay its bills" is a lie. The Government Can Never Go Broke In a rare and unreported admission, the Federal Reserve confirmed that the U.S. government issues the dollar and can never run out. As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. — Federal Reserve Bank of St. Louis Alan Greenspan also said the following under oath in front of Congress (see video for context). There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. — Alan Greenspan (Federal Reserve chairman, 1987–2006) Another Fed chairman, Ben Bernanke, said something similar when he described how the government bailed out the banks after the 2008 financial crisis (see video below). As I said in the introduction, central bankers know how it works. They just almost never tell you. Taxes Do Not Fund Spending In the previous video, Bernanke explained that tax money was not used to bail out the banks, and, l