Could you explain why using the term "borrowing is a misnomer for what is actually happening even when the Treasury issues bonds?

borrow

[ˈbärō, ˈbôrō]

VERB

take and use (something that belongs to someone else) with the intention of returning it

The Treasury takes money (from banks and investors), uses it and then returns it when the bonds mature. This is clearly borrowing. MMT does not say this is not borrowing. MMT says that the Treasury only has to borrow because Congress has made it the law and if it was not the law the Treasury would not have to borrow. The Treasury could spend without borrowing. This would put the money supply in the hands of Congress or at least make it harder for the Fed to control the money supply. If there were no Treasury bonds, foreign countries would not have them in their reserves and would have to find something else to do with their excess dollars. This would weaken the dollar. Holders of U.S. debt work to maintain the strength of that investment. MMT does not drive down to policy details and the devil is in the details.

The U.S. government is practicing (semi) stealth MMT. The Federal Reserve holds trillions of dollars worth of U.S. Treasuries. That is debt that is not really debt it is really just printed money. It is just a different way of printing money and controlling the money supply (inflation) than more straight forward MMT.

I am not denying the validity of MMT and I agree it is the best available economic theory.

It just does not provide a model for fixing anything.

TEK