|Most money is found on a computer spreadsheet|
- The Fed issues IOUs, so the government can buy goods and services from us.
- The government taxes back some IOUs, which decreases their number.
- If government taxes less that it spends, we get to keep the difference; if it taxes more, we have to get some more IOUs somehow somewhere.
- Taxes make it necessary for us to keep US IOUs, if only to pay taxes.
- We can trade with each other using these IOUs to accumulate more of them and, thereby, increase our wealth.
- Finally, the Fed keeps track of the IOUs it issues on it’s own spreadsheet. These spreadsheet entries are the Fed liabilities that form the basis for our currency..