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When the Interest Rate on the National Debt Is a Policy Variable (and “Printing Money” Does Not Apply) — Scott T. Fullwiler

Summary:
Modern Monetary Theory (MMT) argues that the interest rate on the national debt for a monetary sovereign is a policy variable, not subject to whether bond markets “accept” or “reject” it. This paper defines measures of the components of the standard analysis of fiscal sustainability. It then methodically describes the Federal Reserve's operations relevant for understanding why interest rates on government debt in the United States have been and continue to be driven by monetary policy. A corollary that emerges—“printing money,” as economists usually understand it— is not applicable and has never been advocated by MMT. When the Interest Rate on the National Debt Is a Policy Variable (and “Printing Money” Does Not Apply)  Scott T. Fullwiler | Assistant Professor of Economics, University

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Modern Monetary Theory (MMT) argues that the interest rate on the national debt for a monetary sovereign is a policy variable, not subject to whether bond markets “accept” or “reject” it. This paper defines measures of the components of the standard analysis of fiscal sustainability. It then methodically describes the Federal Reserve's operations relevant for understanding why interest rates on government debt in the United States have been and continue to be driven by monetary policy. A corollary that emerges—“printing money,” as economists usually understand it— is not applicable and has never been advocated by MMT.
Scott T. Fullwiler | Assistant Professor of Economics, University of Missouri - Kansas City
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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