Has anyone heard of this? It is actually a description of how the US fiat monetary system works. I believe there are a lot of misconceptions out there, and they are reinforced by the media, politicians, and economists. From my blog: http://fiatcollapse.blogspot.com/2010/12/modern-monetary-theory-or-how-us.html Basically, these are the facts: China does not fund the US deficit. Income Taxes do not fund US government spending. There is a reason that the US Federal Reserve was created around the same time that the US Federal Income Tax was created. The two work together to control aggregate demand, and combined with debt issuance, to hit the target rate. The government is not operationally constrained - it buys whatever it wants, whenever it wants, without reliance on tax revenues or debt markets. Sounds crazy, right? But that's actually how the system works. I'm not saying I support the current system, and I'm not saying that the current system is sustainable either. I'm just making an objective statement. Does that mean we can run deficits forever? No. Because at the end of the day, a free-floating currency is judged by the market and is also subject to geopolitical factors.