I'm delighted to see another person blogging about MMT (I found you through the MMT tag). It's almost 3am here, so I hope that what I'm about to write makes sense.

a government surplus means domestic private debt and vice versa.

I'd make a slight tweak - a government sector surplus is a non-government (private sector and foreign sector) deficit, and vice versa.

Government bonds drain excess reserves

When I first came across MMT, people kept repeating that as though I should automatically understand what they were saying. In truth, they didn't understand it, either. Who decides when someone has excess money and what gives them the right to drain it?

Here's a quick(ish) explanation:

• Commercial banks have accounts at the central bank, usually called reserve accounts.
• The type of money in those accounts is often referred to as reserves.
• Commercial banks have to have positive balances in their reserve accounts over a period of a few days (they're allowed to go negative now and again).
• If they don't have enough reserves, they must borrow from the central bank at a penalty rate or from other banks (these are called overnight loans).
• The central bank sets a target interest rate for overnight loans. It's not a fixed rate that's carved in stone - the actual interest rate can fluctuate.
• If there are too many banks competing to lend reserves to a borrower bank, this pushes the interest rate down below the target rate (as competition to make the loan is a race to the bottom).
• The central bank wants the actual interest rate to hit the target so they sell government securities to the banks so that they have less reserves to lend (i.e. the excess reserves have been drained). This pushes the actual interest rate up towards the target rate, so the central bank has manipulated the market to force the borrower bank to pay higher interest.
• If there aren't enough banks willing to lend to the borrower bank, then the actual interest rate goes up above the target rate. The central bank combats this by government securities from the banks so that they have enough reserves to lend out at a profit. This pushes the actual interest rate down towards the target rate.
• If the central bank didn't manipulate the market through open market operations (OMO's - which is just buying and selling government securities), then the actual interest rate would drop to zero.
• The reason why the central bank has a target interest rate in the first place is because they believe that it influences the economy (lower rates stimulate the economy and higher rates cool it down), but ignore the fact that this monetary policy has been proven to be almost completely ineffective.

In November 2017, Bill Mitchell said in his blog that he's "planning to do a MMT talk which connects with Bitcoin/cryptocurrency shemes." But I think you're pretty much right - MMTists would view cryptocurrency as a commodity that can be bartered for other commodities or sold.

@originalworks