Currently, the U.S. government issues Treasury bonds, which are liabilities for itself and assets for the private sector. But what if it did the reverse? What if it regularly issued assets for itself and liabilities for the private sector in the form of tradeable revenue bills sold on the open market? The bills would effectively be very low-interest loans. As the IRS is a much more powerful collection agency than any bank, only those borrowers most prone to seeking low interest rates above all else would ever consider accepting Revenue Bills. Currently, the closest real-world equivalent to my proposed Revenue Bills system in the United States are Federal student loans. Currently, the way for the Federal Reserve to lower interest rates and curb inflation is for the New York Fed to buy more Treasury bonds. But what if it instead issued new offerings of my proposed Revenue Bills? By doing so, it could temporarily boost inflation while lowering interest rates, and even offer nominal negative rates if need be (though this would surely result in an insolvent Fed). Crowding out via higher interest rates could occur in reverse. My only question is, why, except for a substantial expansion of its student loan programs, had the Federal Government not done this in the aftermath of the 2008 recession? Under this system, the government could at last become the lender of last resort.

I also wonder why there is not a functioning and thriving market for liabilities like there is a market for assets, or at least any that I’ve heard of.