At least that is what I’ve always thought.
So it was good that I’ve encountered some systematic reasoning on the subject, (but it’s drawn from diverse twitter replies so cannot be properly linked).
When the government “borrows”, they give money to somebody, because they, the government, alone create it, and simply decide that, rather than spend outright, they want to borrow in order to spend.
So they sell a treasury bond to somebody else, taking that money away (from the bond purchasor) and spending it elsewhere.
Treasury bonds normally have a maturity date, when the government will redeem the bond. That will, at that future date, transform it into spending money for the holder.
If we just supposed instead, that the bond was redeemable on demand (just take it to the Treasury and they’ll redeem it) and thus get the money instantly, then it would be much like a pound or a fiver because you could then use it to buy things.
Of course, usually treasury bonds are not like that, but there are other systems that create the same result.
For example, markets have dealers who buy and sell treasury bonds on demand, so that if you possess one but need things, you can sell it and they’ll give you money. Or, you can go to a bank and use a Treasury bond as collateral to get a loan and then spend the money.
Thus, these institutions mean that in fact treasury bonds are also in effect, money.
So, in fact, both “printing money” and “borrowing” create the same thing – money.
And if borrowing money is, in the end, the same as printing it, whilst conventional thinking (mistakenly) considers that printing money always leads to rampant inflation, it is surprising that it is never, ever suggested that borrowing does the same.
Is it too cynical of me to think that this is because the lenders are usually the ones who tell us not to print money but are only too delighted to be lending to a rock solid borrower and be paid interest as well?