Tuesday, June 2, 2020

Bill Mitchell — Why do currency-issuing governments issue debt? – Part 2

This is Part 2 of the two-part series which focuses on the question: If governments are not financially constrained in their spending why do they issue debt? Part 1 focused on the historical transition of the monetary system from gold standards to the modern fiat currency systems and we learned that the necessity to issue public debt disappeared as fixed exchange rates and convertibility was abandoned in the early 1970s. However, there are many justifications for continuing to issue debt that circulate. In this Part, I consider those justifications and conclude that the on-going practice of government’s issuing debt to the non-government sector is primarily an exercise in corporate welfare and should not be part of a progressive policy set....
Bill Mitchell – billy blog
Why do currency-issuing governments issue debt? – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

1 comment:

Matt Franko said...

"Some argue that the Basel requirements for capital adequacy require governments to provide the banks with risk-free bonds. But again, the central bank can create risk-free, high-quality assets to sell to the commercial banks if it wants to increase the quality of the banks’ asset portfolio."

??????? What do you think Reserve Balances are?

What would the banks buy them with?????