Bordo, M. D. and White, E. N. 1991. “A tale of two currencies: British and French finance during the Napoleonic wars”. The Journal of Economic History, Vol. 51, No. 2, pp. 303-316. Broadbent, B. 2014. “Monetary policy, asset prices and distribution”. Speech given at the Society of Business Economists Annual Conference. Available at: https://www.bankofengland.co.uk/speech/2014/monetary-policy-asset-prices-and-distribution. Broadbent, B. 2020. “Inflation and beliefs about inflation”. Speech given at the London Business School. Available at: https://www.bankofengland.co.uk/speech/2020/ben-broadbent-speech-at-the-london-businessschool. Buiter, W. H. 2007. “Seigniorage”. Economics – The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, Vol. 1, pp. 1-49. Capie, F. and Webber, A. 1985. “A Monetary History of the United Kingdom, 1870-1982”, Volume 1, Routledge. Chada, J. and Newby, E. 2013. “‘Midas, Transmuting All into Paper’: the Bank of England and the Banque de France during the Napoleonic Wars”, Cambridge Working Papers in Economics, CWPE 1330. Christiano, L. J., Eichenbaum, M. and Evans, C. L. 1999. “Monetary policy shocks: What have we learned and to what end?”, Handbook of Macroeconomics, Vol. 1, Part A, pp 65–148. 22  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  22  Crafts, N. F. R. and Mills, T. C. 1994. “Trends in real wages in Britain, 1750-1913”. Explorations in Economic History, Elsevier, Vol. 31, No. 2, pp. 176-94. De Rezende, R. B. and Ristiniemi, A. 2020. “A shadow rate without a lower bound constraint”. Bank of England Staff Working Paper No. 864. Feinstein, C. H. 1991. “A new look at the cost of living”, in Foreman-Peck, J. ed.

If its debt was so onerous that the government could not or would not finance it by conventional non-inflationary means, and if the independence of the central bank were sufficiently fragile, inflation could come to be viewed as just another tax, rather than something to be stabilised in its own right. In extremis, when the credibility of the macroeconomic framework is entirely lost, inflation expectations – indeed inflation itself – would be determined solely by the fiscal position. Even a notionally independent central bank could do nothing to affect it. Purchases of government debt by the central bank, for example, would do nothing to depress their yields. (Indeed, if they served only to reinforce the central bank’s subservience, thereby pushing up expectations of future inflation, QE could actually raise bond yields. Put another way, the policy can only work as intended to the extent the framework is credible – if it’s generally accepted that deficits are controlled by conventional fiscal measures and monetary policy is devoted to a fixed nominal objective.) There is also the potential, in this extreme situation, of a positive feedback between inflation expectations and inflation itself, and an associated risk of hyperinflationary spirals. When inflation expectations rise, the expected cost of holding zero-interest money goes up as well. Reluctant to hold on for very long to the paper the government is using to fund itself, people spend it straightaway, feeding the inflation and confirming those prior expectations.