@Jon Underwood I agree with these statements. Can you now explain the following in more detail: >>The initial action is you issue new money, so you increase +L…. THEN EITHER -E OR +A (or both) Mathematically you are decreasing A, which requires -E. IF you -A… THEN EITHER -L or - E (or both) Whenever you do both you are really doing 1:1 offsets for each and combining. (+L +A) +(+L -E) = 0<< 1. Are you referring to the Treasury as the issuer: meaning that the Treasury has a +L? If so and we do +A, then who owns the asset corresponding to L? Or if we do +E then we dont have a +A to spend? 2. What does "both" mean? Can you draw up the tables? Can you reconcile this with the Treasury borrowing from the CB which was my model 2 as follows, Model 2: CB+T balance sheet expansion Issuance CB...............................................................Treasury A.........L..........E...........................................A.......L.......E R.........0,R........0...........................................R.......R.......0 Spending CB...............................................................Treasury A.........L..........E...........................................A.......L.......E R.........R,0........0...........................................0.......R......-R ========================================================= Just a footnote on notation BTW. When you say "+A" for example you mean "a positive increase in A". Since the change in A is not the same as A itself, you will often see mathematicians write \delta A > 0 for "+A". Where \delta is the Greek letter "delta".

@Jon Underwood Keeping it simple again:) >>Are you referring to the Treasury as the issuer: meaning that the Treasury has a +L?” - Yes - If so and we do +A, - We do +A at the CB. - then who owns the asset corresponding to L? - CB<< Your shorthand notation is difficult to follow. DEBK means double entry: if the Treasury issues +A and +L then the CB must have +L and +A. So is this my Minsky model here? Model 2: CB+T balance sheet expansion Issuance by Treasury CB...............................................................Treasury A.........L..........E...........................................A.......L.......E R.........0,R........0...........................................R.......R.......0 Spending CB...............................................................Treasury A.........L..........E...........................................A.......L.......E R.........R,0........0...........................................0.......R......-R

@Jon Underwood While I am preparing my response (because you have now spread this to your substack) may be you would like to consider the following: QUESTION Does the paper Money creation in the modern economy By Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate erroneously omit money creation by the Government? RESPONSE The Bank of England paper is definitive regarding commercial bank money creation, but it fails to address the fiscal side of the ledger where government deficits create money directly It was a vital breakthrough that destroyed the money multiplier myth, yet it left the "institutional plumbing" of the Treasury in the background . The Fiscal-Monetary Lever The main mechanism you must look at is the eight-entry model of government money creation While the Bank of England correctly explained that loans create deposits, they focused on credit-backed money, which represents a balance sheet expansion within the private sector A government deficit, however, is a unique injection of net financial assets into the private sector that does not have a matching private debt liability . By focusing primarily on commercial banks, the paper leaves the impression that the Central Bank and private lenders are the only actors In my Ravel simulations, I show that government spending precedes taxation and actually creates the reserves that banks later use to purchase bonds The paper is a superb first step for debunking neoclassical myths, but it only describes one-half of the monetary engine.

@Jon Underwood >>“The paper is a superb first step for debunking neoclassical myths, but it only describes one-half of the monetary engine.” I give you both halves of the sandwich, and a side of fries to booot!<< When I previously made this claim here https://www.skool.com/stevekeen/a-video-loaded-with-the-myths-of-money?p=5d7293ab You said... >>@Gerard Borg “it does not describe how the government of a fiat economy creates money.” Gerard, there is a very simple reason for this…it simply does not happen. In 2024 the U.S. Government issued a grand total of $0 USD.<< So to be clear. Do you agree that the McLeay paper "only describes one-half of the monetary engine." -- and it fails to address the fiscal side of the ledger where government deficits create money directly -- Ans. Y/N

Thank you Demetrios. I found this an interesting read connecting MMT to some history. Have you heard these... The Truth about MMT https://www.taxresearch.org.uk/Blog/2025/08/19/the-truth-about-modern-monetary-theory/ What is modern monetary theory https://www.youtube.com/watch?v=1_vNAY2Nrm0

It is interesting that the same arguments you provide also work if the government also starts with the (self-imposed) full funding fules. The FFRs are (i) The treasury cannot spend unless there is a positive balance in its (TGA) account and (ii) The central bank cannot buy bonds from the treasury. The argument I originally presented here shows how to create $1T exponentially from $1 by government money creation subject to the FFRs. https://www.skool.com/stevekeen-free/mmt-responds-to-their-critics?p=c992b501 The argument goes as follows, Let us say we start with a $1 deposit at the (non-bank financial sector's (NBFS') bank account. From this, new money is created. Let's create an economy... 1. T sells $1 bond to NBFS. Net result: TGA=$1 and the NBFS have a $1 bond asset 2. CB buys the bond and credits the NBFS with one new $1. 3. The treasury spends its $1 which moves thru the economy from the NBNFS to the NBFS. The NBFS now has $2 4. The Treasury sells a $2 bond to the NBFS. 5. CB buys the bonds and credits the NBFS with a new $2. 6. The Treasury spend its $2 which moves thru the economy from the NBNFS to the NBFS. The NBFS now has $4. ... ... ... 115.The Treasury sells a $1T bond to the NBFS. 116.CB buys the bonds and credits the NBFS with a new $1T. 117.The Treasury spend its $1T which moves thru the economy from the NBNFS to the NBFS. The NBFS now has $2T. The 117 steps are in effect 39 groups of the same three steps. Thus the government is capable of spending any target amount provided it first operates a sequence of three steps in succession. The above process could be facilitated in your case if the government also creates a nationalised commercial bank to play the role of the NBFS.

I have already seen a couple of stories about the reverse centaurs: one at the Australian National University and one a friend who owns a tech company using AI to replace software developers. The Doctorow's radiology example explains what happens.

The reverse centaur is a mode of alienation as this old message reminds us https://www.instagram.com/reel/DTTQfumgRvV/?igsh=bHRrbHBxcWxhNWQ1