> what would happen if such spending was not financed through deficits but was funded instead by direct money creation Theoretically it would be better because

> what would happen if such spending was not financed through deficits but was funded instead by direct money creation Theoretically it would be better because you wouldn't need to pay a fee (interest) to middle men (banks). However, it would also be potentially a lot more abusable if congress could just create as much money as they want. Arguably the Fed now is abusing this ability anyway, so maybe it would be at least no worse if the government could do it directly. > how would that change the inflation dynamic? Well, devaluation would still happen, so the market distortion that incentivizes bad investments and removes an avenue for saving would still exist. If banks continue to lend out more money than they have, then we'd still have a debt cycle of booms and busts. However, the taxpayers would save money. The people gaining from Seigniorage wouldn't change much - whoever the government gives funding to would be gaining from seigniorage, with the same wealth sapping effects from the rest of the population. It might be a reasonable improvement.