Who Were the Sea Peoples?

What he does is show that for every effect we supposedly generate through monetary policy, we can generate the exact same effect minus monetary policy, using taxation and expenditures alone. So it is the taxation and expenditures, and not the monetary policy, that is generating these effects. Now, he should do a similar post showing how all re-distributional effects in an Overlapping Generations Model are also due to taxation and expenditures, and not to the debt itself. Because the exact same technique he used for Cantillon effects demonstrates the exact same thing for an OLG model with government debt! UPDATE: As rob noted in the comments, my original posted was not worded as well as it could have been. Therefore, where I originally wrote "fiscal policy," the post now reads "taxation and expenditures."

As Brad Delong notes , a business offered the sort of interest rates that the governments of the US, Germany, and Japan are being offered right now would be nuts not to borrow money and buy most every single thing they are now renting or leasing. The debate about the size of the government is an entirely separate issue: right now, at these interest rates, government of whatever size you prefer should be funded more through debt and less through taxes.