Illustration: Sarah Grillo/Axios

The best way to avoid a W-shaped double-dip recession is to ensure that fiscal stimulus continues past July. Many members of Congress, however, worry about the effect of multi-trillion-dollar deficits on the national debt.

What they're saying: The solution, per Stony Brook economics professor Stephanie Kelton: Run deficits without issuing any debt at all. Kelton suggests we should just monetize the deficit instead — fund it by printing dollars rather than issuing Treasury bonds.

Between the lines: Economically speaking, there's not a lot of difference between paying for the deficit with money or paying for it with bonds carrying a near-zero interest rate. As former IMF chief economist Olivier Blanchard writes, "it just replaces a zero interest rate asset, called debt, by another one, called money."

  • Printing money does not cause inflation — quite the opposite. If you issue debt instead of money, then any interest on the debt is excess money entering the financial system. Take away the interest, and you take away inflationary pressure.

The big picture: There's still enormous demand for risk-free assets, and Treasury bonds serve a very important role in the financial system. No one's suggesting that we stop issuing them entirely. But insofar as rhetoric around the national debt is acting as a brake on necessary economic stimulus, it might make sense to have deficits without debt.

My thought bubble: There's a paradox here. The people who want to print money to avoid adding to the national debt are also the people who say that the size of the national debt doesn't matter. The hope is that monetization would placate the deficit hawks, but that seems unlikely.

Go deeper: Kelton was a guest on my podcast last week, and went into detail on how Modern Monetary Theory views sovereign finance.

Go deeper

Felix Salmon, author of Capital
Sep 10, 2020 - Economy & Business

Argentina's debt restructuring triumph

Illustration: Aïda Amer/Axios

Argentina's debt restructuring is finished, and, for anybody who remembers Argentina's last debt default, this one was gloriously smooth.

By the numbers: Argentina restructured $69 billion in foreign bonds, plus another $42 billion in foreign currency local law bonds. The country negotiated a reduction in its effective interest rate from 7% to 3%, which translates to a creditor "haircut" of about 45 cents on the dollar in present-value terms.

11 mins ago - Technology

Judge temporarily halts Trump's WeChat ban

Photo: Sheldon Cooper/SOPA Images/LightRocket via Getty Images

A federal judge early on Sunday temporarily blocked a Trump administration order banning the downloads of the Chinese-owned, global messaging app WeChat.

Why it matters: The temporary injunction means WeChat will remain on Apple and Google's app stores, despite a Commerce Department order to remove the app by Sunday evening.

Bill Clinton slams McConnell and Trump: "Their first value is power"

Former President Bill Clinton on Sunday called Senate Majority Leader Mitch McConnell's (R-Ky.) vow to fill Ruth Bader Ginsburg's vacant Supreme Court seat before the next presidential inauguration "superficially hypocritical."

The big picture: Clinton, who nominated Ginsburg to the court in 1993, declined to say whether he thinks Democrats should respond by adding more justices if they take back the Senate and the White House in November. Instead, he called on Republicans to "remember the example Abraham Lincoln set" by not confirming a justice in an election year.