By Scott Fullwiler and Stephanie Kelton
Paul Krugman has a new post that explains why the debate over money- vs. bond-financing of government deficits is really much ado about nothing. In it, he essentially echoes longstanding MMT-core principles, as we will show below. Indeed, MMT blogs have written as much many times previously (for example, see here, here, here, and here).
Krugman’s post looks at two alternative scenarios:
Case 1: The government runs a deficit, selling bonds to offset the shortfall, while the Federal Reserve does QE
Case 2: The government runs a deficit but does not sell bonds, instead financing all of its spending by “printing money” (i.e. with newly created base money)