The first Fed chairman of the modern Federal Reserve (post-Banking Act of 1933) explains, under oath, in his testimony to the US House of Representatives committee on banking and currency in March of 1947 that the requirement of the US Tsy dept to have a positive balance in its account at the Fed (The TSY General Account aka TGA) is no barrier to Govt spending and deficits. And that preventing TGA overdrafts does not put the "market" in control of Govt interest rates. This means there is no such thing as a bond vigilante, and that the loanable funds theory is a myth. Its amazing that this information is so easily found, yet all modern mainstream economics textbooks teach these falsehoods as an article of faith. The economics orthodoxy is an embarrassment to science and an anvil around the welfare of society. This includes all mainstream left "progressive" economists like Krugman, Baker, Reich, and Stiglitz. Saying this better than I ever could is the aforementioned patriarch of the modern Federal Reserve, Marriner Eccles. Save this one for your bookmark collection.
https://fraser.stlouisfed.org/...
Mr. SPENCE. I assume the reason the authority w^as repealed in 1935 was because of the existing conditions, then, when there was no reason for the authority: is that correct?
Mr. ECCLES. Well, as I remember the discussion—and I have referred to it in this statement—there was a feeling that this left the door wide open to the Government to borrow directly from the Federal Reserve bank all that was necessary to finance the Government deficit, and that took off any restraint toward getting a balanced budget. Of course, in my opinion, that really had no relationship to budgetary deficits, for the reason that it is the Congress which decides on the deficits or the surpluses, and not the Treasury. If Congress appropriates more money than Congress levies taxes to pay, then, there is naturally a deficit, and the Treasury is obligated to borrow. The fact that they cannot go directly to the Federal Reserve bank to borrow does not mean that they cannot go indirectly to the Federal Reserve bank, for the very reason that there is no limit to the amount that the Federal Reserve System can buy in the market. That is the way the war was financed. Therefore, if the Treasury has to finance a heavy deficit, the Reserve System creates the condition in the money market to enable the borrowing to be done, so that, in effect, the Reserve System indirectly finances the Treasury through the money market, and that is how the interest rates were stabilized as they were during the war, and as they will have to continue to be in the future. So it is an illusion to think that to eliminate or to restrict the directborrowing privilege reduces the amount of deficit financing. Or that the market controls the interest rate. Neither is true."
This comment also puts into focus the myth of Central Bank independence. The CB is not independent of the Govt and the legislative body that makes the final decisions about economic society. The elected legislators are the highest authority and the CB has no choice but to follow its orders, which in a democracy the Peoples aka "Our" orders.