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Making Fiscal Money Work

Proposals for a new system of “fiscal money” have increasingly appeared in political debates in Italy, where budget constraints and a lack of monetary sovereignty have tied policymakers’ hands. If it is properly designed, such a system could substantially boost economic output and public revenues at little to no cost.

ROME – In a recent commentary, Yanis Varoufakis of the University of Athens pointed out the merits of giving national governments a greater say in domestic money creation. Varoufakis calls for a new parallel payments system based on “fiscal money,” or money backed by future taxes, and he proposes a complex mechanism for creating such money.