sykesix is mostly correct in their post. Obviously technically there is a Treasury General Account and we saw those dynamics when the government couldn't have net-issuance of bonds recently. There are rules and such, however arbitrary. But the gist is correct - the deficit spending puts the new money into the system and some of it is sopped back up with taxes and "borrowing."

People often don't realize that the net liabilities of the US government is what we Americans (and a lot of others) use as "money."

It seems to most people that a bank deposit and a 10 year treasury note are fundamentally different, but the fact that government liabilities serve as our money is quite apparent when you get to the short end of the bond market, where the vast majority of the borrowing takes place. "Berkshire Hathaway has $200 Billion of cash." Or is it "Berkshire Hathaway made the decision to loan $200 Billion to the government? There is a reason cash says "federal reserve note" on it.

Moving money from my checking account to my savings account doesn't really change anything fundamental. The money in my account was a liability of the bank in both accounts. One paid higher interest, that's all.

This is also why QE and QT are pointless. QE is supposed to be stimulative (it isn't). The central bank took (at the time) a higher yielding, highly useful government bond out of the hands of the public, who lost that interest income which was then earned by the Fed on their balance sheet, producing a "profit" that was remitted to the Treasury (this is what a Tax is, this is not stimulus) --- and the seller of this treasury bond received bank reserves, a lower yielding (at the time), neutered, almost useless form of money. Both are government liabilities. One is useful in the real economy and paid higher interest, the other paid next to nothing (at the time) and was almost completely useless by the real economy.


Same nonsense with the "Social Security Trust Fund." They looted our trust fund! The assets of the trust fund were/are US Government IOU's. The government "needed money" so they "borrowed" a stack of US Government IOUs from the trust fund to spend on what they wanted to in the here and now!