offset with debt issuance. Could you link the law? To facilitate growth the government could have a balanced budget and increase money supply by GDP or could run a deficit equal to the gowth of GDP, correct? Martin Reply: December 8th, 2010 at 1:41 pm When I say "resulting surplus or deficit" I mean the net of spending minus tax receipts. So the net of the two impacts GDP, etc. The way each is written influences how and who it impacts. Correct? Example: If the government decided to issue bonds at such a high interest rate that all government spending, excluding what was needed to pay taxes, was used to buy those bonds, there would be no demand for any other goods (since no one would have any money to buy those goods). Every dollar that is sent to the government, in exchange for those bonds, is shredded (the bank account is lowered without any other bank account being increased) and the opposite occurs when the bonds mature. It looks just like taxation and spending, but the decision to do so is voluntary by the holder of the dollar. Since the interest rate was set so high, the owners of the bonds would have huge ammounts of dollars after the bonds mature, which would allow them to buy everything in the store (the economy) plus more. If there isn't more, then you would have inflation as too many dollars chase not enough goods (high aggregate demand). "If there isn't more,