Cadernos CEPEC


Malcolm Sawyer


The paper sets out and elaborates on six propositions on budget deficits, public debt and money which should inform debates on fiscal policy. The propositions are:

  1. Money availability is not a limitation on government expenditure as the central bank is able to provide any required finance. The key considerations should focus on the issues of the social desirability of the proposed expenditure and the eventual funding of the expenditure.
  2. Phrases such as ‘magic money tree’ are designed to confuse and mislead.
  3. Proposals such as people’s QE do not enable any stimulus which cannot be obtained from conventional fiscal policy and is anti-democratic putting expenditure decisions in the hands of unelected central bankers.
  4. The golden rule’ of public finance (borrowing only for public investment) suffers from the fallacy of treating government like a firm and is comparable to the ‘government is like a household’ fallacy.
  5. The target for budget position should be to secure full employment and capacity. Funds would be forthcoming to underpin such a position.
Public debt should be judged sustainable (and not excessive) by reference to the level of debt which results from a budget position as forthcoming from proposition 5. Public debt is to be considered as less of an issue (when government can cover interest through taxation and through money creation) than private debt and foreign debt.


Fiscal policy, Budget deficits, Quantitative easing, money creation

Texto completo:



Arestis, P. and Sawyer, M. (2014), “On the sustainability of budget deficits and public debts with reference to the UK” in P. Arestis and M. Sawyer (ed), Fiscal and Debt Policies for the Future, Basingstoke: Palgrave Macmillan , 2014, pp.38-75, 978-1-137-26952-2

Barrett, P. (2018). “Interest-growth differentials and debt limits in advanced economies”, IMF Working Paper WP/18/82

Cecchetti, S., Mohanty, M. and Zampolli, F. (2011), “The Real Effects of Debt”, BIS Working Papers 352, Basel: Bank for International Settlements.

Graziani, A. (2003), The Monetary Theory of Production, Cambridge: Cambridge University Press.

Hendon, T. Ash, M. and Pollin, R. (2014), “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff”, Cambridge Journal of Economics, Volume 38, Issue 2, 1 March 2014, Pages 257–279,

IMF (International Monetary Fund) (2012), “Balancing fiscal risks”, Fiscal Monitor, World Economic and Financial Surveys April, Washington DC: International Monetary Fund

Kalecki, M. (1944a), “The White Paper on Employment Policy”, Bulletin of the Oxford University Institute of Statistics, vol. 6

Kalecki, M. (1944b), “Three ways to full employment”, in Oxford University Institute of Statistics, The Economics of Full Employment, Oxford: Blackwell

Keynes, J. M. (1980), Activities 1940-1946 Shaping the Post-War World: Employment and Commodities, Collected Writings vol. 27, London: Macmillan

Lerner, A. (1943), “Functional finance and the Federal debt”, Social Research, vol. 10, pp.38-51 (reprinted in W. Mueller (ed.) Readings in Macroeconomics , pp. 353-360 : page numbers refer to the reprint)

Panizza, U. and Presbitero, A.F. (2012), “Public Debt and Economic Growth: Is There a Causal Effect?”, MoFiR Working Paper No. 65, April.

Reinhart, C.M. and Rogoff, K. (2011), This Time Is Different: Eight Centuries of Financial Folly, Princeton: Princeton University Press.

Sawyer, M. (2014), “Money and the State” in G. C. Harcourt and J. Pixley (eds) Financial crises and the nature of capitalist money: Mutual developments from the work of Geoffrey Ingham, Basingstoke: Palgrave Macmillan, pp. 162-177.



  • Não há apontamentos.