This discussion reminded me of an article that Randy Wray (Professor of Economics at UMKC, blogger here at Economonitor and New Economic Perspectives) wrote two years ago: The Federal Budget Is Not Like a Household Budget: Here’s Why. The following is an excerpt from the article but the whole thing is worth a read:
4. The federal government is the issuer of our currency. Its IOUs are always accepted in payment. Government actually spends by crediting bank deposits (and credits the reserves of those banks); if you don’t want a bank deposit, government will give you cash; if you don’t want cash it will give you a treasury bond. People will work, sell, panhandle, lie, cheat, steal, and even kill to obtain the government’s dollars. I wish my IOUs were so desirable. I don’t know any household that is able to spend by crediting bank deposits and reserves, or by issuing currency. OK, some counterfeiters try, but they go to jail.
Rebecca Wilder