We should focus on the real resources available to the government, not just the money supply from "summary" of The Deficit Myth by Stephanie Kelton
The government's ability to spend money is not constrained by the amount of money it has in its coffers. Instead, the real limit on government spending lies in the availability of resources in the economy. This means that the government can afford to buy anything that is for sale in its own currency. In other words, as long as there are goods and services available for purchase, the government can always afford to buy them by creating new money. When the government spends money into the economy, it adds financial assets to the private sector. This injection of money creates the demand for goods and services, which in turn encourages businesses to produce more. As long as there are available resources to be utilized, this increased spending does not lead to inflation. However, if the government tries to buy more goods and services than the economy can produce, then inflation becomes a concern. In order to avoid inflation, the government must carefully monitor the availability of real resources in the economy. This includes not just goods and services, but also labor, raw materials, and technology. By focusing on the real resources available, rather than simply the amount of money in circulation, the government can ensure that its spending is in line with the productive capacity of the economy.- Deficits are simply an accounting record of the government's spending and tax collections. They do not reflect the government's ability to afford its spending, which is ultimately determined by the availability of real resources. By shifting the focus away from deficits and towards the real resources available, we can better understand the true constraints on government spending.
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