This is possible for reasons I explained in an academic article here. In that piece I explain the formula for funding government spending, which is:
G = T + ∆B + ∆M
where G is government spending, T is cash tax revenues, ∆B is the net change in government borrowing in a period and ∆M is the net change in government-created money in a period.
You will not find the formula noted above in many textbooks: I’ve searched and not found it. The ∆M bit is missing. That’s because the mainstream of economics has not recognised that such funding can take place in this way. But that’s because dogmatically they have refused to believe it possible and have insisted that government is solely dependent on funds provided by third parties to fund its activities – so perpetuating the myth of ‘taxpayer’s money’ and the ‘burden of debt’. But neither of those myths is true. The government can create money whenever it wishes, simply by deciding to spend it into existence and by instructing its own bank to create the money to make settlement of the liabilities owing. ∆M changes everything.
Not really, no. If you look at the accounts of the Federal Reserve (I assume the BoE does something similar) you will see that they make a profit printing dollar bills. It’s some $99 and change on a $100 bill for example. This is sent to the Treasury each and every year.
We even have a name for it, seigniorage. A word which first appears in English around 1400 or so. Which means we’ve been aware of the concept for some 6 centuries now just in this one language. There’s a profit to be made in making money, a profit that can be spent. And?
And Diocletian was certainly aware of the concept when he debased the sestercius.
The and being that there are libraries full of information on what goes wrong when it is done in any volume. Not starting with Diocletian either.
It ain’t new Ritchie, it just ain’t new