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Norman: So the problem is, we’re focused, as a nation or policymakers, more on the scoreboard than the actual game, is what you're saying.

Mosler: Well, it’s a little bit of that, too. But, what I’m saying is, for the issue or the currency, they're just making data entries on their spreadsheet when they give us money or when they tax us money. They don’t have or not have money. There’s nothing to run out of. There's nothing not to run out of.

Norman: But, isn't that what people refer to as "printing money"? I mean, you hear this all the time, that they're printing … some people might get it, at least in the abstract. Not the way you explained it, but they understand that the government could just, without limit, credit bank accounts. They call that printing money. Is that bad?

Mosler: That’s what they call it. And that expression came from the gold standard, where there was actually something called printing money, where you had more money than you had gold. That’s all gone, but the term has carried over. Right now, there’s only one way for the government to spend, and that’s to change a number. You can call it printing money; you can call it data entry; you can call it whatever you want.

But the question is, then, well, why does government tax if they don’t need your money to spend? And there’s a very good reason. They need to tax to take away our spending power, so that when we spend money and they spend money, it doesn’t cause inflation. The purpose of taxing is to do what economists call reduce aggregate demand. Take away our spending power to prevent inflation.

Well, how much should they take away? If they take away too much, we have an economy like today, where there’s a lot of unemployment, and we’re excess capacity everywhere, big recession. If they don’t take away enough, then there’s inflation and unemployment goes too low.

Norman: All right. Regulating taxes is one way to have an impact on demand.

Mosler: Right.

Norman: But the government can also spend and have an impact on demand. The supply-siders were always of the tax reduction school of thought.

Mosler: Right.

Norman: But, they could also spend to inject demand into the economy.

Mosler: Right. But the question I was answering is, why do we tax if we’re just going to throw the money away? The purpose of taxing is to reduce demand. Now, if there isn't enough, and if we’ve taxed to the point where there isn't enough demand, how do we get demand back? How do we get the economy going? Well, we have two choices: We can either reduce taxes or increase spending, as you said. And that depends on one’s politics. If you’d prefer to see more infrastructure and more government-directed research and development, you opt for the spending increase.

Norman: So, theoretically, then, if I understand, there’s no limit to how much the government could spend. They don’t actually have to take in any money in order to spend. But, is there some sort of a limit or a constraint? I mean, if we use up all of our available capital and resources, that’s somewhat of a limit, isn't it?

Mosler: Yes, that’s not the limit to how much you can spend, that’s the limit to where more spending will simply cause inflation.

Norman: So, that’s the real definition of inflation, you would say?

Mosler: Well, that’s another problem. You know, our definition of inflation turns to CPI―consumer price index―which is not what an economist would call inflation. But I would say that there is no agreement of what inflation actually is. But what the problem is, when inflation is high enough where it becomes a political problem, those are our political limits. The limits to spending, nominal spending, are political. They're not numerical. The guy spending is not going to get an electric shock.