Deepak,

If I understand you correctly, then the promissory note would be paid in dollars. If the promissory note was issued by the currency issuing government, then that government would always be able to pay the payee whatever that determinate sum of money is under the terms of that promissory note in its own currency.

~ Jason
    On Tuesday, September 15, 2020, 04:56:40 PM EDT, Deepak Loomba <[log in to unmask]> wrote:  
 
 How are dollars different from undated promissory notes - say issued by the same govt.?
On Wed, 16 Sep 2020 02:16 nysa71, <[log in to unmask]> wrote:

Hello ToK Community,

So far, I've mentioned a few key points about MMT:

One, to make a distinction between currency issuers and currency users...

For a currency issuer, the spending must logically precede taxation. That is, the currency must be spent into existence first before that currency can be taken back in taxes. The taxation (clearly) has nothing to do with "funding" the spending of such a currency issuing government. The function of taxes is to create aggregate demand for the intrinsically worthless currency. After that, they function as a fiscal management tool, (e.g., to keep inflation under control).

I've also mentioned Sectoral Balances. Simply put, in regards to a currency issuing government:

Government deficit = (Domestic Sector surplus) + (Foreign Sector surplus)

That is, a deficit is when the government spends more than it taxes. But on the other side of the equation, this necessarily means that the combined domestic and foreign sectors are the recipients of a surplus exactly equal to that government deficit...right down to the penny. It's just basic accounting.

So how does (for example) the U.S. government create dollars? By the act of spending.

Simply put,

Dollars are created every time the U.S. government spends, simply by crediting accounts.

Dollars a destroyed every time the U.S. government taxes, simply by debiting accounts

Here's a short 6 and a 1/2 video with economics professor, Randall Wray, explaining the basics, (with a cool anecdote about how Colonial governments issued currency.

Have a good one,
Jason Bessey

https://urldefense.proofpoint.com/v2/url?u=https-3A__www.youtube.com_watch-3Fv-3DZzw8AO4vTqc&d=DwICaQ&c=eLbWYnpnzycBCgmb7vCI4uqNEB9RSjOdn_5nBEmmeq0&r=HPo1IXYDhKClogP-UOpybo6Cfxxz-jIYBgjO2gOz4-A&m=5GpBGphcvCcdWm8htGQaYPfOcEIqqS1OB8ke9EavSkI&s=WdNSfWD5nKylFGs4I94JG7O5Lujaj7LDW0xC4XpALXE&e= 



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