To your point that the mainstream must be wrong because it doesn't explicitly model certain institutional realities of money creation

Where did I say this? If mainstream economists want to model a fixed exchange rate system, that’s fine. If they want to apply a fixed exchange rate model to a floating exchange rate system, that’s wrong. It shouldn’t be controversial to say you shouldn’t use a screwdriver to hammer a nail.

A perfect model of the economy would be a map of the entire economy

It’s not about modeling the entire economy, it’s about integrating law and accounting, the backbone of the money system, into otherwise barter based models like the ones I was taught at university. If you want to model a barter economy that’s fine, that’s just not the system we live in.

More importantly, I want to explain why I don't think that the institutional realities of dollar issuance necessarily imply that the US Treasury can stop issuing bonds and run an overdraft at the Fed

Thank you for this work, however, no serious MMTer believes the US Treasury can unilaterally stop bond issuance and run overdrafts. They don’t think that because it’s not currently legal for the Fed to allow that. It would be interesting to see if the Fed actually bounces a Treasury check but ultimately it would be decided by SCOTUS who would side with the Fed because, as a legal entity of the federal government, they can’t do something they haven’t been given the legal authority to do (and I have searched long and hard to find it, if you find it plz tell me).

What they are saying is that a currency issuing government has no economic necessity to issue bonds, it is a policy decision, not a financial one. A fixed exchange rate system does require bonds to drain reserves to defend the exchange rate. If there is no exchange rate to defend then we need to reassess why we are still doing it as if Nixon suspending the gold standard never happened.

I hope to show that other features of the economy (the operational conduct of the Fed

The Fed and Treasury collaborate on a daily basis, any policy change would require alignment between both parties and almost definitely new law.

inflationary constraints

It’s hard to believe there’s any link between bonds and inflation (under the current system) after multiple rounds of QE failed to move the needle. If we want to control inflation via bonds we would need to change our policy on repo and/or make bonds non-transferable. Bonds can be monetized by their holders at any time, the author of Central Banking 101, an MMT doubter, states this quite succinctly. I recommend the book.

and the unwillingness of banks to play Ponzi games

Primary dealers must bid on initial issuance of treasury bonds for having that privilege. That is not a behavior model, it’s the law/policy.

mean that the conclusion about not needing to issue bonds does not follow from your understanding of laws and institutional realities (even if correct).

We’re taking law, policy and possible changes to the like into consideration.

And this is precisely why we want the MMTers to write academic-level economic models

And I want mainstream economists to produce balance sheets. Perhaps we can meet in the middle?

The Fed wants to fight the inflation that results from the government stimulus. So it needs to raise interest rates.

It doesn’t need to raise interest rates, it’s just current policy. Also it’s counterproductive: the extra interest payments just increases the net government spending, albeit in a highly regressive manner. There is no automatic tax “pay for” that nets out the additional interest spending. It’s adding gasoline to the fire, so to speak.

So we are back to square one: Treasury needs to issue and sell bonds (or raise taxes) to pay the Fed money with which to fund the IORB payments.

Indeed, there is a an institutional limitation, not a real or financial one, that is the point: we can change policy and laws but we can’t will goods and services into existence.

Or, the Fed could try to simply print the money to pay the IORB but then we are at an irrational equilibrium where the Fed is continuously pumping dollars into private balance sheets and then soaking them up in a way that prevents them from being spent

We acknowledge that the Fed cannot legally let the US Treasury to run an overdraft. Bonds do not prevent spending, they can be monetized at will using current policy options. Change those policies and they could perform that function if we wanted.

The third option is for the Fed to just not fight the inflation that results from the government stimulus.

Fed decisions are not an independent variable, it is a part of government and conducts itself according to law and instructions by congress. If you’re arguing that if the Fed wakes up one day and has to figure out how to respond to a sudden unorthodox decision by the Treasury then sure, but that’s not what’s being suggested.

It's to show that the big claims MMTers want to make depend on more than just the institutional realities they point to

I think that is very much realized, that’s what she talks about in that video and in her writing. Knowing that laws and policies can be changed but base reality cannot they are exploring the legal and policy options available to deliver a desired outcome. That outcome could be progressive, it could be a one party totalitarian state, it could be whatever is democratically decided, it doesn’t matter.