U.S. Federal Government Response

• Congress authorized spending; President signed bills into law

• Treasury spent

  • Cut income support checks

  • Directed Federal Reserve to electronically credit bank accounts ...

    • ... of people and firms providing government with real resources

• Why was U.S. government able to do all this?

  • Monetary sovereignty

  • Federal government is currency issuer -- not a currency user

  • Does not need to amass funds from taxation or borrowing before spending