Whose money is the government spending?
There are only 3 options of who will ultimately put up the money that is now being spent by the government: • Taxpayers (through taxes) – If taxes are the only way the government increases its income, then we will likely end up with the highest taxes in the world. • Taxpayers (through inflation) – The Fed also doesn’t have money, but it creates it out of thin air. So every dollar that the Fed gives to the government or any bank is a dollar that didn’t exist until they gave it. This creates money, and an increasing money supply is what causes inflation. The effect of inflation on citizens is an invisible tax. Every year it costs more to buy goods and services because there are more dollars in the system. The more rapidly money is digitally printed, the more rapidly our dollar loses its purchasing power. The Fed has obviously been printing a lot of money in the past few years (as evidenced by double digit inflation) and they would have to print exponentially more to level out this mess.
