"Do Taxes and Bonds Finance Government Spending?" 2000. Journal of Economic Issues, Vol. 34, no. 3.
"The Role of the State and the Hierarchy of Money." 2001. Cambridge Journal of Economics, Vol. 25, no. 3.
Both of these papers appear in earlier, but substantially the same, form as working papers from the Levy Istitute. www.levy.org:
"Can Taxes and Bonds Finance Government Spending?" No. 244, July 1998 Stephanie Bell
Abstract
This paper investigates the commonly held belief that government spending is normally financed through a combination of taxes and bond sales. The argument is a technical one and requires a detailed analysis of reserve accounting at the central bank. After carefully considering the complexities of reserve accounting, it is argued that the proceeds from taxation and bond sales are technically incapable of financing government spending and that modern governments actually finance all of their spending through the direct creation of high-powered money. The analysis carries significant implications for fiscal as well as monetary policy.
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"The Hierarchy of Money," No. 231, April 1998 Stephanie Bell
Abstract
This paper attempts to bring together several of Hyman Minsky's insights in order to suggest a relationship between the State's ability to tax and the money of the economy. Minsky recognized that money represents an IOU or promise to pay and that 'acceptability' is its important feature. He further recognized that the State can play an important role in determining whose IOUs will be accepted (both publicly and privately). I will argue that support for the Chartalist vision of money as a 'creature of the State' can be found in Minsky. Finally, I will apply the Chartalist theory to Minsky's notion of a 'hierarchy of money' in order to suggest that the State determines not only the unit in which all of the monies in the hierarchy are denominated but also influences the positioning of certain monies within the hierarchy.