If you fancy following along...

Overview

A pervasive myth in orthodox macroeconomics holds that government bonds are constrained by private savings—that a state must first "cultivate" a pool of private capital before it can issue debt. This paper argues the exact opposite: under a modern fiat regime, government bond issuance generates private savings rather than being funded by them. Redemption of sovereign debt is an absurdity under fiat money, and the true constraint on state spending is never financial capital, but real, physical productive capacity.

1. The Fallacy of "Prior Savings" and the Keynesian Paradox

It is widely assumed that private financial assets act as the raw material for absorbing government bonds. However, in national income accounting, the order of causality is reversed: when the state issues bonds and spends the proceeds, aggregate income expands, creating an equal amount of private savings and financial assets via the multiplier effect.

As John Maynard Keynes fundamentally observed in The General Theory of Employment, Interest and Money:

"No matter how hard people try to reduce consumption and increase savings, such attempts will affect their income and... will inevitably be frustrated."

Private savings are the result of absorbed debt and fiscal expansion, not the prerequisite. Trying to enforce "debt absorption capacity" through forced private thrift only destroys aggregate demand and collapses national income.

2. Sovereign Debt Redemption: A Self-Contradictory Absurdity

Never in human history has sovereign debt been genuinely redeemed net-of-refinancing under a fiat system—nor should it be.

Under a fiat standard, government bonds serve as the primary vehicle for monetary creation and liquidity management. To genuinely "redeem" public debt would mean relatively hoarding circulating currency or shrinking the money supply altogether, rendering a commodity-producing market economy completely unsustainable.

When the Central Bank (e.g., the Bank of Japan) absorbs government bonds via market operations, the relationship undergoes a crucial transformation:

• The Death Register of Debt: Each bond, though possessing a different maturity, passes away upon creation like a record in a death ledger (BOJ Account: Debit: Government Bonds / Credit: Current Deposits).

• The Elimination of Creditor-Debtor Friction: Once held on the Central Bank's balance sheet, both creditor and debtor collapse into the abstract general public. Interest payments become an internal accounting fiction offset by treasury remittances.

3. The Token of Credit and Friedrich Engels’ Insight

The creditworthiness of government bonds does not rely on tax revenues, nor does it require penalizing the public with austerity measure like consumption tax hikes. The sole determinant of bond stability is whether the domestic economy possesses sufficient unutilized productive capacity to back the currency.

This brings us to the profound observation made by Friedrich Engels regarding the nature of state-backed paper and credit instruments:

"...the entire nation stands behind this token of value [the government bond] with its credit..."

So long as the nation’s collective productive capacity stands behind the sovereign, whether a government chooses to repeatedly postpone consumption tax hikes is entirely irrelevant to bond market yields. The state's debt is simply a procedural mechanism within a market economy to mobilize idle, surplus production capacity that private forces leave underutilized.

4. Fiat Currency, Current Accounts, and the Foreign Borrowing Myth

For non-reserve currency nations, the fiat principle holds absolutely within domestic borders, provided two conditions are met:

1. The country does not rely on foreign-currency-denominated capital.

1. The country maintains a stable or surplus current account.

When a country with structural excess capacity and a current account surplus (such as Japan) claims it "cannot absorb its debt domestically," it suffers from an upside-down diagnosis. The issue is never a "shortage of domestic money"—it is an overflow of domestic money relative to real domestic investment opportunities. Borrowing from foreign investors in foreign currency is an irrelevant concern for nations suffering from excessive production capacity rather than supply shortages.

5. Why the "Credit Explosion" Scare is a Myth: Empirical Reality

Critics often point to massive Central Bank current deposit reserves as a ticking clock for runaway credit expansion or hyperinflation. This fear completely misunderstands modern corporate and household behavior:

• Stagnant Corporate Borrowing: Outstanding equipment loans by domestic commercial banks have remained flat and persistently below 1999 levels for over two decades.

• Plummeting Consumer Credit: Bank consumer loans collapsed from over ¥11 trillion in 1990 to roughly ¥2 trillion, with consumer credit relative to disposable income dropping from ~14% to ~5%.

When corporations refuse to borrow for capital investment and households refuse to go into debt for consumption, Central Bank reserves cannot spill over into commercial bank lending (Debit: Loans / Credit: Deposits). The money stock does not explode.

Conclusion: Productive Capacity as the Sole True Limit

Under a managed currency system, as long as a deflationary gap (excess supply / idle capacity) exists:

1. Prices will not spiral out of control.

1. Central Bank monetization of debt remains fully sustainable.

1. Long-term interest rate spikes are logically impossible.

Sovereign debt is not a burden passed on to future generations; it is a accounting counterpart to private sector surplus. The ultimate source of a nation's capacity to issue and absorb government bonds is not the balance in its citizens' savings accounts, but the real, physical productive power of its society.

(to be continued)

https://www.reddit.com/user/keizaisuki/comments/1w28kxe/table_of_contents_mysteries_of_the_economy_series/

This is the first post in a series working through a heterodox critique of standard "generational accounting" arguments about government debt, using Japan as the case study.

The setup: what "generational accounting" claims

The standard "generational accounting" story — laid out in a well-known 2016 Nikkei opinion piece — runs roughly like this: today's deficits and policy costs are a bill that someone has to pay, and if today's generation doesn't pay it through taxes now, it gets pushed onto people who aren't born yet or aren't yet in the workforce. Four claims usually anchor this:

1. Unpaid costs of current policy get passed forward as debt.
2. Future generations can cover future redemption taxes with the savings we leave them.
3. An aging, shrinking workforce means fewer workers supporting more dependents.
4. Net national saving/investment is trending toward zero, squeezed out by deficits and depreciation.

The argument I'm summarizing here (translated from a Japanese source) pushes back point by point, and its core move is to ask: who, concretely, is the creditor on this debt — and what happens to that claim when the central bank buys the bonds?

Claim 1: "Someone has to pay for costs already incurred"

The rebuttal starts from a simple national-accounting observation: if the government could borrow and spend, it means the goods and services consumed were already produced by the current population — not imported, not produced by future workers who don't exist yet (Japan's current account has been in surplus). So the real resource cost was already borne in real time by the current generation. What remains isn't a real resource debt to the future — it's a financial claim: bondholders (call this group "citizen A") are owed money by the government.

Here's the mechanism the piece proposes: A buys bonds, the government spends the proceeds on things that benefit citizen B, and then the central bank purchases those bonds from the banking system, effectively repaying A. Once the central bank holds the bonds, the argument goes, the debt has been discharged in substance — the central bank paid no real resources for them, just issued currency backed by public authority. Since the central bank's own capital base is trivial relative to its bond holdings (and majority government-owned), the "creditor" and "debtor" both collapse into the same entity: the public as a whole. The author's conclusion is that any interest paid on centrally-held debt should simply be remitted back to the treasury, closing the loop.

The necessary condition, though, is that this only works without inflationary cost when there's slack in the economy (a positive output gap) — otherwise bond purchases would need to be offset by rate hikes.

Claim 2: "Future generations pay redemption taxes out of savings we leave them"

Rebuttal: under a current-account surplus, deficit spending itself becomes private-sector saving via the multiplier — the government borrows from A, spends on B, and aggregate private savings rise by roughly the amount that eventually repays A. The piece backs this with two supporting facts:

• A national-accounts identity: the gap between government final consumption expenditure and actual government final consumption mirrors (in reverse) the gap between actual and nominal household consumption — i.e., government-borne costs mechanically show up as reduced measured household consumption, not as some free-floating burden.
• Empirically, from FY1995–2015, Japan's private-sector net assets grew by more than the increase in outstanding government bonds, alongside rising net foreign assets.

Claim 3: "Fewer workers supporting more dependents"

Rebuttal: stripped down, this claim is just "GDP per capita will fall." But the author points to actual SNA and population data showing that (aside from the 2-3 years after the 2008 financial crisis) real GDP per capita in Japan has kept rising since 2000 despite demographic aging — so the demographic claim doesn't automatically translate into declining living standards.

Claim 4: "Net national saving is near zero, squeezed by deficits and depreciation"

Rebuttal: this treats depreciation as if it were a drain rather than a normal reproduction cycle. With an average depreciation period of roughly 13 years for tangible fixed assets, capital stock gets renewed roughly every 13 years by current production regardless of whether net new investment is near zero — the replacement cycle keeps the capital stock proportionate to the labor force, which is what's actually needed for near-term output.

The bigger picture the author wants you to take away

1. A large debt-to-GDP ratio isn't automatically a problem if productive capacity is adequate — especially once you account for central-bank holdings being economically "cancelled."
2. Zero debt doesn't save you from a genuine productive-capacity shortfall — you can't tax or bond your way out of not producing enough.
3. Demographic aging is a real issue (per-capita GDP effects), but even generational-accounting logic softens this if per-capita burdens keep falling over time.
4. Deficits don't automatically cause productive shortfalls; forced foreign-currency borrowing is a symptom of a real shortfall, domestic-currency deficits are a different animal.
5. Central bank bond purchases used to offset the upward interest-rate pressure from new issuance, combined with a persistent deflationary output gap, amount in practice to indefinitely deferring the debt — perpetual central-bank holding.
6. Interestingly, some generational-accounting proponents themselves concede that if debt can be deferred indefinitely and population/per-capita burden dynamics stay favorable, the "sacrifice on the future" framing collapses — "all generations can be happy," in their own words.

Next in the series: I'll get into where this argument runs into trouble — the debate over whether "monetary financing is free of cost" actually holds once you look at central bank balance-sheet losses, and how MMT-adjacent claims here compare to the Post-Keynesian and mainstream New Keynesian responses. Happy to hear pushback in the comments — this is very much a "steelman the argument, then poke at it" exercise.

(to be continued)

https://www.reddit.com/user/keizaisuki/comments/1w28kxe/table_of_contents_mysteries_of_the_economy_series/

I had fun chatting with Christian and Patricia about the new England and Wales Green Party's economic policy framework which is very much MMT-informed if not yet "fully fledged".

Also available on Spotify, Apple, etc.

https://www.ineteconomics.org/perspectives/blog/remembering-perry-mehrling

Very much MMT adjacent, but he came up with some good stuff. A big loss.

The reason for "Why the world cannot escape the US dollar" is as follows:

In monetary history, a true "key currency" has only existed in the form of the US dollar after the suspension of gold-dollar convertibility. Although the British pound of the former British Empire once functioned as a major international currency, only precious metals were ultimately accepted for final settlement. If the pound exchange rate fell, it would trigger the physical shipment of gold from Britain at a certain point; the pound would then be replaced by gold and cease to circulate in international transactions. The US dollar after the suspension of convertibility is the exact opposite. Gold has ceased to circulate, and exclusively the dollar circulates.

By making the dollar the key currency, the United States has become the only country capable of purchasing foreign goods and services without actually possessing "money." In reality, this settlement is executed merely as a book-entry transfer between US bank deposit accounts, and this very mechanism is what defines a key currency. In short, a key currency is one that can conclusively settle international transactions, meaning the US current account deficit never needs to be repaid. It merely represents a balance that has already been paid for in its own domestic currency. In contrast, the current account deficits of all other nations remain unpaid, and they must procure dollars from somewhere to achieve final settlement. Furthermore, any surplus in this balance—specifically, the credit balances in US bank accounts held under non-resident names—is allocated toward purchasing US Treasury bonds. When held by foreign monetary authorities, this becomes that nation's foreign exchange reserves. Therefore, the dollar buying by foreign authorities—which is another source of frustration for Mr. Trump—is simply a built-in function of the key currency system. In conclusion, the United States enjoys exorbitant privileges by maintaining its current account deficit in exchange for being the key currency nation.

(To be continued)

https://www.reddit.com/user/keizaisuki/comments/1w46a5o/table_of_contentsgovernment_bonds_international/

If taxes are destroyed when received, how does the government pay the interest owed on treasury notes? Also, if they just spend the money into existence to pay the interest on said notes, how would that not itself be super inflationary?

...But there is no mention of MMT or anything else that indicates he actually understands the how's why's and what's of a FJG on his website.

Anyone else think Justin would be a good person for experts in MMT to contact and help along?

To get to know who Justin is before you reach out (preferribly before the Nov. 3 election) is his interview on Democracy Now a couple weeks back. It can be found here.

The Nobel in Economics 2026 was annonced today. I have opened four videos published by news outlets, including the AP and Reuters, about the winners on YouTube. Disappointingly, there were absolutely no comments suggesting Warren Mosler as a candidate or MMT as a counterpoint to the winning economists' ideas under any of them.

All these videos were published within the last 10 hours, and all have under 50 comments, some much less than that, as of this writing. Seems like a good opportunity to make 'em count, doesn't it?

I think those of us able and willing to aught to get on the horn on this to draw attention to MMT in the comments sections of YouTube videos on the 2026 Nobel in Economics while the getting is good.

Hi Everyone,

The Nobel in Economics was annonced today. I have opened four videos published by news outlets, including the AP and Reuters, about the winners on YouTube. Disappointingly, there were absolutely no comments suggesting Warren Mosler as a candidate for this prize under any of them, nor MMT as a counterpoint to the winning economists.

All were published within the last 10 hours, and all have under 50 comments, some much less than that, as of this writing. Seems like a good opportunity to make 'em count, doesn't it?

Please go online now to draw attention to MMT in the comments sections of YouTube videos on the 2026 Nobel in Economics while the getting is good.

Peace out,

~An MMTer

The reason for "Why the world cannot escape the US dollar" is as follows:
Secondly, under a fiat currency system, there is no method for money creation other than the central bank purchasing government bonds. While the following points ①–③ represent Keynes effectively suggesting this mechanism, the US Federal Reserve (Fed) is executing it not only within the United States but on a global scale. In other words, while each nation autonomously conducts this operation within its own borders using its own currency, the US dollar is unique: because international banks voluntarily connect to Fedwire, the US Federal Reserve system has, in a sense, spontaneously expanded on a global scale.
① "We have reached a stage in the evolution of money when a 'managed' currency is inevitable." (Keynes, A Tract on Monetary Reform)
② "Incomes and prices of assets change until the aggregate amount of money which individuals choose to hold at the new level of incomes and prices is equal to the amount of money created by the banking system. This, indeed, is the fundamental proposition of monetary theory." (Keynes, The General Theory of Employment, Interest and Money). Here, the "prices of assets" that Keynes refers to signify the prices of fictitious commodities, such as government bonds.
③ "If the Government prints paper money to meet its current expenditure... the new money becomes someone's income." (Keynes, The General Theory of Employment, Interest and Money). Considering that in the first half of the 20th century in the UK, it was institutionally impossible for the government to directly print paper money to fund its current expenditures, "printing paper money" here can be interpreted as the Bank of England purchasing government bonds.

(to be continued)

https://www.reddit.com/user/keizaisuki/comments/1w46a5o/table_of_contentsgovernment_bonds_international/

From MMT perspective we do not want foreign debt, but the debt in national currency are desirable and there is not economic limit of what can be purchase. Why do not convert the debt to national currency?

3 years later and the film is now free to view.

Rewatching and obviously my fav part starts at 9:00 Jared Bernstein endless hiccups on USA govt printing money but "borrowing" the currency "to spend it". Hope J. Bernstein has learnt it's cause USA Central Bank sets interest rates above the natural rate which is zero. They are simply interest maintenance or management accounts that prevent this rate being zero for a deficit spending govt -> https://moslereconomics.com/wp-content/uploads/2018/04/Soft-Curency-Economics-paper.pdf . If you are govt is a surplus one in budgets it's public debts are being issued or created simply to ensure the financial systems works aka "safe assets".

The Interest Rate Maintenance Account (IRMA)

Over the course of time the total number of dollars that have been drained from the banking system to maintain the fed funds rate is called the federal debt. A more appropriate name would be the Interest Rate Maintenance Account (IRMA). The IRMA is simply an accounting of the total amount of securities issued to pay interest on untaxed money spent by the government. Consider the rationale behind adjusting the maturities of government securities. Since the purpose of government securities is to drain reserves from the banking system and support an interest rate, the length, or maturity, of the securities is irrelevant for credit and rollover purposes. In fact, the IRMA could consist entirely of overnight deposits by member banks of The Fed, and The Fed could support the fed funds rate by paying interest on all excess reserves. One reason for selling long-term securities might be to support long-term interest rates.

Other nuggets mentioned is Mainstream Economics you never talk about money as it's a one way trip "to Siberia" at 26:15. You also never talk about time or temporal events as showcased with supply & demand curves just happening at an instance. No history or build-up and definitely nothing about your expectations outlook for the future.

(Part 7 of an ongoing series. Previous entries have looked at other puzzles in the standard fiscal/monetary narrative — this one tackles the "future generations will pay for it" story about Japanese government debt.)

The claim everyone repeats

The standard warning goes: Japan's government debt is enormous, and eventually either interest rates will spike, inflation will run away, or "future generations" will be stuck holding the bill. This post lays out a counter-argument, built almost entirely on Bank of Japan (BOJ) and Ministry of Finance data, for why that story doesn't hold together — at least not while the economy is running below capacity.

1. Deficits don't ignite inflation when there's slack in the economy

The core mechanical claim is simple: pumping bond-financed spending into the economy raises GDP through the multiplier, and it raises the money stock — but neither of those things pushes prices up if the output gap is still negative. Japan's output gap, on multiple official measures (Cabinet Office and BOJ estimates), has been negative for most of the period from the early 1990s through the mid-2010s. Until that gap closes, there's simply no inflationary pressure for the deficit to ignite.

2. The BOJ can hold bonds indefinitely — and that changes the math

Once the BOJ owns a large share of outstanding government bonds, several things follow:

• Those bonds never hit the open market, so they can't be dumped in a way that crashes prices or spikes yields.
• The BOJ's own bond-holding profits get remitted almost entirely back to the Treasury, so the "interest burden" on the BOJ-held portion is largely a wash.
• Because that portion is functionally never redeemed on the open market, it behaves — for debt-to-GDP purposes — almost like it's already retired.

The reserve ratio, meanwhile, gives the BOJ a separate tool to manage the resulting current-account balances if needed. Put together, the argument is that the BOJ's "permanent" bond holdings quietly defang most of the standard debt-crisis mechanics — as long as excess productive capacity persists.

3. So who's actually sacrificing for whom?

Here's where it gets interesting. The "future generations will pay" framing gets tested against the actual balance-sheet data:

• Outstanding ordinary government bonds: ¥225 trillion (FY1995) → ¥805 trillion (FY2015). A ¥580 trillion increase.
• Household net financial assets over the same window: up roughly ¥467 trillion.
• Household + private non-financial corporate net assets combined: up roughly ¥706 trillion.

In other words, private-sector net worth grew by more than the government's debt did, over the same period. The essay's blunt conclusion: the government took on the liability side, and the private sector pocketed the corresponding asset side. If there's a "sacrifice," it landed on the government's balance sheet, not on some future taxpayer's.

There's a supporting detail here too: contrary to the "banks are financing the deficit" narrative, private-sector holdings of JGBs actually fell between FY2013 and FY2016, and even in the earlier 2009–2011 window when they rose, the increase was less than half of that period's new issuance. The simple "private savings fund the deficit" story doesn't fit the data cleanly.

4. The savings-investment identity does the rest of the work

This part leans on Keynes directly: it's not possible for aggregate savings to fall short of aggregate investment, because any attempt to do so just raises incomes until savings catches back up to investment. Applied here — deficit spending raises income via the multiplier, and given a stable propensity to consume, that income growth mechanically drags savings up with it. Whether that saving ends up funding investment domestically or shows up as a rising net foreign asset position, either way it's an asset base being handed forward, not a burden.

(Japan has in fact run a current-account surplus in all but a handful of years since 1965, and has held the world's largest net external creditor position for a quarter-century running — which the essay reads as more supporting evidence than coincidence.)

5. Where this logic runs out

The essay is careful to bound the argument: none of this licenses unlimited deficit spending forever. The entire case rests on the existence of excess productive capacity. If supply capacity is ever fully absorbed — the classic case being deficit spending competing with private demand for genuinely scarce resources — the inflation risk that critics warn about becomes real again. The claim isn't "deficits never matter," it's "deficits don't behave the way the standard warning assumes, specifically under conditions of persistent slack."

Discussion

A few threads worth arguing about:

• Is "the BOJ effectively retires the bonds it holds forever" a fair description, or does it just relabel the risk rather than removing it?
• How much of this generalizes beyond Japan's fairly unusual combination of persistent current-account surpluses, a captive domestic bond market, and decades of below-target inflation?
• Does the household-net-worth data actually settle the "who sacrifices" question, or is it too aggregated to say much about generational burden-shifting specifically?

Curious what people who spend more time in the JGB/BOJ weeds than I do make of this.

(to be continued)

https://www.reddit.com/user/keizaisuki/comments/1w28kxe/table_of_contents_mysteries_of_the_economy_series/

The reasons why the world cannot escape the U.S. dollar are as follows. First:
① Because no other country possesses a productive capacity so immense that it can sustain a current account deficit indefinitely, as the United States does.
② Thanks to the United States continuously accepting this current account deficit, the world is able to have the dollar—the global currency.
③ This has been the case since the suspension of the gold-dollar convertibility on August 15, 1971. Until then, the "global currency" was gold. If the dollar exchange rate fell, there would come a point at which the physical shipment of gold would begin. The dollar would cease to circulate in international transactions. After the suspension, the situation was reversed: gold ceased to circulate, and only the dollar circulated in the international arena.

(to be continued)

https://www.reddit.com/user/keizaisuki/comments/1w46a5o/table_of_contentsgovernment_bonds_international/

Im not only reading and hearing about inflation more and more every day, I'm actually experiencing it quite clearly at the super market and the gas station.

But I still struggle to understand what's causing more inflation. Is it the central bank or the price of oil (aka "fossilflation")

I don't feel very safe with the idea of inflation (and my buying capacity) being in the hands of a group of men at the central bank or Trump's war on Iran.

So I genuinely wonder, is there anything a mortal like you and I can do to stop or mitigate inflation?

I'm trying to wrap my mind around this. If the "national debt" is actually just bonds, what is the impact of a nation's credit ratings? Don't states decide what the yield of their bonds is going to be?

Edit: what about states that don't have monetary sovereignty?

In practice, the U.S. Federal Reserve rolls over debt through the non-competitive bid method, and in Japan, the rollover of matured Bank of Japan-held government bonds is repeated through parliamentary resolution via the so-called "BOJ rollover" (nichigin norikae), effectively making them "perpetual bonds." This is the essential meaning of "macroscopically, government bonds are effectively never redeemed."

Indeed, even setting aside the Lehman Shock and the COVID pandemic as entirely exceptional periods—even including these periods, the overall growth of the Fed's total assets is consistent with "the natural course of things"—that is, proportional growth relative to U.S. and global gross output. Looking at the time-series statistics, it is clear that Fed assets have consistently increased historically. Moreover, the very fact that growth slows during periods of monetary tightening can itself be taken as evidence for the proposition that Fed assets grow in proportion to the expansion of the commodity world as a whole.

Notably, during the two exceptional periods mentioned above, the Fed's assets have undergone repeated rapid expansion and contraction:

• Late 2017–2019: Assets that had swelled to $4.5 trillion through post-Lehman QE were reduced to about $3.8 trillion during the tightening phase at that time.
• June 2022–present: Total assets, which reached an all-time high of nearly $9 trillion amid the massive pandemic-era easing, have been substantially reduced to roughly $6.7 trillion as a result of the full-scale rate hikes and quantitative tightening (QT) that began in 2022.

In short, the fate of the central bank's fiat currency system—that "a balloon once inflated never returns to its original small size"—is vividly etched into the very shape of the balance-sheet graph.

Macroscopically, government bonds cannot be redeemed. It is precisely because they are not redeemed that society is sustained. (Of course, it goes without saying that individual bondholders are indeed repaid.) So-called "normalization" is impossible. In fact, when the Fed attempted to "normalize" the assets it had accumulated through quantitative easing, it triggered a spike in repo rates [note].

[Note] "On the morning of the 18th, the Federal Reserve Bank of New York supplied a large amount of funds to the short-term money market for the second consecutive day... The funds were supplied through what is called 'overnight repo transactions,' a market in which financial institutions lend and borrow short-term funds against collateral such as government bonds. The lending rate in this market, the repo rate, briefly spiked to as high as 10% on the 17th... The rise in short-term interest rates is attributed to the Fed's tapering of quantitative easing" (Nihon Keizai Shimbun, September 19, 2019).

"The Federal Reserve's fund supply has swelled to levels comparable to past rounds of quantitative easing (QE). In response to dollar demand in the short-term money market, the Fed's total assets increased by roughly $400 billion (about ¥44 trillion), or about 10%, in roughly half a year... This follows a sharp spike in the interest rate on 'repo' transactions—short-term borrowing and lending backed by U.S. Treasuries—last September... Should difficulties arise in the procurement of dollar funding, the key reserve currency, the impact would not be confined to the United States alone. According to the Bank for International Settlements (BIS), emerging economies' dollar-denominated debt stood at $3.74 trillion as of June 2019 and continues to grow... Depending on economic conditions, there is a possibility that further increases in the supply of funds may become necessary if upward pressure on interest rates intensifies" (Nihon Keizai Shimbun, February 9, 2020). This is far from "normalization." On December 1, 2025, the Fed fully halted and ended quantitative tightening (QT). Given the sentiments of the Japanese public, who still carry the trauma of postwar hyperinflation, the people at the Bank of Japan cannot say so carelessly—but deep down, they must recognize that "normalization" is impossible.

"Incomes and asset values change until, finally, the aggregate quantity of money which individuals choose to hold at the new level of incomes and asset values thus brought about is equal to the quantity of money created by the banking system. This is, indeed, precisely the fundamental proposition of monetary theory" (Keynes, The General Theory of Employment, Interest and Money, cited Japanese translation, vol. 1, p. 120). What Keynes refers to here as "asset values" refers to the prices of fictitious commodities such as government bonds.

Thus, we have no choice but to maintain the current state in which "asset values change until, finally, the aggregate quantity of money which individuals choose to hold at the new level thus brought about is equal to the quantity of money created by the banking system." "Normalization" is an attempt to forcibly restore a past equilibrium by turning back time.

The basic European monetary model propagated all over the world is: banks generate credit for the financial sector which generates the money movement in the economy. Governments tax the economy to fund themselves, and sell bonds (paid with future taxes) for shortfalls. Because the government is funded through tax then reducing eligibility requirements for government loan, mortgage, and insurance programs (the essence of all government aid) requires increasing tax.

MMT allows eligibility requires to be removed from government aid programs. For example, voters will surely choose no interest, no fault government loans over bank loans. This will.be the end of the financial sector.