Recently heard someone trying to tell me that the government doesnt need a penny of our taxes, they just print the money they need and all tax is a complete scam. He is 100% in belief of this.

I hate taxes too (when they go towards wars), but is this actually true? He mostly gets his ideas from Facebook and x. So yeah.

  • gustofwind@lemmy.worldEnglish
    4·
    8 days ago

    It’s a lot more complicated than that but I’m not an expert maybe one will help out but here’s my shot

    1. Congress allocates funds for stuff and the treasury has to produce the money.
    2. The treasury produces money by selling government bonds and collecting taxes. (This is the government borrowing money)
    3. The federal reserve prints money and buys those government bonds to manage inflation (but they can’t buy them from the treasury they gotta buy them on the open market)

    So if there wasn’t enough taxes to pay for everything the federal reserve prints the money to purchase government bonds which ultimately transfers newly printed money to the government to spend (ngl I’m not sure how exactly the new money gets to the treasury when they can only buy the bonds on the market)

    This increases inflation and whatnot because now there’s more money floating around so it’s worth less causing the federal reserve to raises interest rates and sell + the government bonds get cheaper and people buy them reducing the money supply against inflation