I want to imagine two extreme worlds, at opposite ends of the spectrum of possibilities.
In the first world (the "fiscal" world), all financial liabilities of the government are non-monetary liabilities, "bonds", that cannot be used as media of exchange. People use something else for money. Maybe gold, or maybe money issued by commercial banks. The government is no different from a local government, or a corporation with the power to tax. Government bonds pay interest.
In the second world (the "monetary" world), all financial liabilities of the government are monetary liabilities, "money", that are used as media of exchange. Unlike local governments, or corporations, the government does not issue "bonds". Government money may or may not pay interest.
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