Can you give a short explanation or give me something where I can read something about it? I’m not sure what to search for to find something useful
Very short, commercial banks loan money from national banks. That creates money. It has to be paid with interested. Where does the money for that interest comes from? From other loans. So the whole thing becomes an ever increasing pile of loans.
And government loans from national banks to spend money, so creating and distributing money. If government pays back the loans, money disappears.
And because the whole thing is loans on loans, if population would decrease (what is starting to happen) and growth stops, loans decrease and the whole thing starts to wobble.
Fiat money is basically an IOU of the government. It has its value because it is the accepted currency. It is the accepted currency, because you can pay your taxes with it.
In order to create money the government first needs to make debt that it hands out the IOUs for.
That is the core of the concept. It is then mediated through an independant central bank and all sorts of private actors and institutions in between. But the account of the government at the central bank cannot go into a plus. It is always a minus, which increases with the debt handed out to private entitities and it is deleted by the tax coming in.
Then why was it a plus in the Clinton Era where there was no national debt but a surplus?
They reduced the debt in this years by having a budget surplus. Still the debt was not zero.
https://en.wikipedia.org/wiki/National_debt_of_the_United_States
Not very easily. Concise, easy to understand and correct explanations of how modern money (arguably since 1971) works are not easy to come by, and also the system just is a bit weird and counter intuitive. (Concise, easy to understand, but wrong explanations are, of course, all over the place. Almost everybody thinks they know how money works. Almost nobody actually does.)
One source that explains some of it would be “Debt: The first 5000 years” by David Graeber, but a) it’s a fairly lengthy book with quite a lot of historical background and b) it has a fairly strong politicial spin to it.
This is Modern Monetary Theory (MMT). I recommend “The Deficit Myth” by Stephanie Kelton
It helped me to realize that a federal government that’s in control of their own money doesn’t use or even have money, and basic terms that we take for granted mean something different in that context. A federal government creates money through spending and destroys money through taxes. It is necessary for a federal government to spend money in order for money to exist in the economy. So a national debt just means that the federal government is creating more money that is destroying
