Functional Finance and Macroeconomic Policy
From this paper, we know that global financial crisis (GFC) has brought about serious financial and social problems around the world, especially in advanced countries. GFC resulted in business bankruptcy and countless layoffs. Unemployment was kept at a very high level. The public experienced a hard time during the GFC period. Therefore, the government played a major role in developing macroeconomic policy to promote economic recovery. Globally, countries united and coordinated with one another to put forward fiscal and monetary policy, stimulating private demand and promoting enterprise production. However, thanks to the uneven and varied economy recovery, macroeconomic policy has become helpless. In the process of policy making, system of functional finance produced by Abba P. Lerner (1943) is strongly recommended to put into practice under the circumstances.
In this paper, that the capacity of the government to spend is not limited by their ability to accumulate taxation or by the private business willing to hold government securities is focused. The capacity of the government to spend is only restricted by the private business willing to exchange fiat currency which is issued by the government, and by the production to meet the increased needs due to fiscal policy actions. The conclusions are accorded with system of functional finance, which offer meaningful starting point for reconstruction of functional macroeconomics.