> And it would be kind of hard to measure the presence of even several
> bladdersful of Sawicky pee in Lake Erie. Which is another way of
> saying that while the government can create money out of thin air,
> its prospects for doing so are quite limited if you want the money to
> retain any value.
As I understand it, Bell basically claims that USG taxes to create demand for high-powered money (the exact meaning of this isn't entirely clear to me), and that it issues/sells bonds in order to keep day-to-day receipts and payments from creating havoc with reserves and short term money. Neither of these actually finances deficit spending. The USG has to create money in this case b/c when taxes are paid, money is "destroyed."
This strikes me as a distinction without much of a difference. By this account, taxation directs real resources from the private to the public sector, but only to create demand for money, not to finance gov's ops. So? If an increase in the gov's ops or a change in its balance are the reason you need the level of bond sales or taxation to counter reserve effects, then what doesn't make much difference. Moreover, the idea that a government has to spend money first in order to collect it in taxes is beside the point: ex ante, taxes and spending, not creation, are the way the gov has something to say about distribution, unless it's counting on inflation or deflation to do that for it.
I could be missing something, but I also didn't see the part where Bell spelled out the policy implications of the paper.
Christian