I remember reading this really interesting idea by some economist that a government need not issue fixed-term debt such as bonds, notes or bills. Instead all it could do is print money and use it to pay for everything, thereby borrowing.

It would repay by levying taxes, which it would vary based on the rate of inflation. I. e. if the rate of inflation would be too high, it would increase tax rates to bring it down and vice versa.

My question is -- who was this economist? I need to cite this idea and need a name or better yet a citation to a paper.


I think that Stephanie Kelton is an economist who has mentioned this before. From my research, it is based on the MMT. Some practitioners of the MMT believe that the government should not issue bonds, but can instead print money. I think that I may have heard Kelton mention this a few years ago, but I am not that into the MMT. I would do some research on the MMT however, and Kelton, and that can likely lead you to the answer you're looking for.

  • $\begingroup$ Yes, that’s a Modern Monetary Theory (MMT) position. It’s easy to find articles about MMT in web searches. Although “printing money” might be viewed as a red herring; it’s equivalent to locking interest rates at 0%. Other economists have discussed that possibility - the “Friedman Rule” of Milton Friedman is one example. $\endgroup$ – Brian Romanchuk Mar 15 '18 at 20:46
  • $\begingroup$ @BrianRomanchuk Thank you for the pointer to the "Friedman Rule." But isn't MMT different in that there is no government debt other than money? The Friedman rule counts on the existence of short-term bonds whose yield would be targeted to 0% by the Fed. For MMT, in the absence of any bonds the Fed/Treasury could target a conventional 2% rate of inflation. Thus MMT and the Friedman rule seem different to me. What might I be missing? $\endgroup$ – abauthor Mar 18 '18 at 10:31
  • $\begingroup$ @abauthor - Depends on which MMTer. I belueve that Mosler’s proposal suggested that there would be Treasury bills. The difference is that the T-bill auctions would be for a fixed yield of 0.25%, with the quantity floating. (T-bills are needed for institutional reasons.) The difference is that the central bank has no discretion for setting the yield, so yes, there is a difference. I just wanted to point out that similar ideas did exist. $\endgroup$ – Brian Romanchuk Mar 18 '18 at 14:29

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