People worry a lot about “inflation.” This is when the price of goods and services money buys increases, either because the quantity of available goods and services declines or the money circulating in the economy increases faster than the goods and services increase.
People used to think by limiting the money in circulation, prices would stay where they are. So they would “base” the money on something scarce. They thought inflation came from a “debased currency” – meaning the “base” wasn’t scarce enough anymore.
The gold standard was an example of “basing” the economy on scarcity. Governments had to round up (or borrow) gold and trade the gold for the things a government wants to do (forge weaponry, hire mercenaries…) To keep track of this kings and such had to use budgeting methods that made sure they didn’t run “deficits” that drained them of their gold until they couldn’t pay off their “debts.”
We dropped the gold standard in the 1970s. Instead the government creates money and directs that money toward meeting the country’s priorities. We borrow in dollars so we never have to worry that we can’t “pay off” our “debt.” (We “make” dollars so we can just “make” enough to cover any debt.)
But we kept the obsolete language of “borrowing,” “deficit” and “debt” even though it no longer accurately represented the way government budgeting worked.
People who don’t understand this think we still need scarcity for an economy to work, and need to worry about “borrowing too much.” That’s why we have “gold bugs” who want to return the economy to a gold standard. And now people who think we need scarcity to manage an economy believe that crypto is a good “base” for money. People with this outdated understanding say the country shouldn’t “spend too much” on what people need “in case” it “might” trigger inflation. Just in case. Because they’re afraid to “debase” the currency. Because it “might” cause inflation. (They also believe we have to keep unemployment high enough that people can’t demand raises.)
Unfortunately history has proven that austerity – government underspending and failing to meet the needs of the people – leads people in very bad political directions.
Modern economists understand that “hoping” the government is not “spending too much” is not the best way to manage a country’s budget. The resulting austerity just leads to society not meeting the needs of the public.
Modern economists understand that the way to handle inflation is to not do the things that trigger inflation in the first place, rather than “try” to “fight” it after it is here. Example: Want to build a high-speed rail system to modernize your economy? First budget to get the steel capacity, the labor, the equipment, etc in place. Do that first, then build the railroad. (China has built 24,000 MILES of high-speed rail since 2007, and is building the same amount again by 2035, without inflation.) Once the resources are there adding “money” does not chase too few resources.
Similarly with everything else the federal government budgets for. If government analyzes and plans ahead of spending to not trigger inflation it can spend what is needed to get the things done to meet public needs.
This is called Modern Monetary Theory, MMT. There’s a good book on this, The Deficit Myth by Stephanie Kelton.
This website helps people understand MMT: We CAN Have Nice Things, at https://wecanhavenicethings.com/