"The state sets the terms of exchange for its currency with the prices it pays when it spends, and not per se by the quantity of currency that it spends. For example, if the state has an open-ended offer to hire soldiers at $50,000 per year, the price level as thereby defined will remain constant regardless of how many soldiers are hired and regardless of the state’s total spending. The state has set the value of its numeraire exogenously, providing that information of absolute value that market forces then utilize to allocate by price with exchange values of other goods and services determined in the marketplace. Without the state supplied information, however, there would be no expression of relative value in terms of that currency.

Should the state decide, for example, to increase the price it pays for its soldiers to $55,000 per year, it would be redefining the value of its currency downward and increasing the general price level by 10%, as market forces reflect that increase in the normal course of allocating by price and determining relative value. And for as long as the state continues to pay soldiers $55,000 per year, assuming constant relative values, the price level will remain unchanged. And, for example, the state would have to continually increase the rate of pay by 10% annually to support a continuous annual increase of the price level of 10%."

https://warrenmosler.com/aframeworkfortheanalysisofpriceandi...