The Role of Government in the Credit Market

Abstract

The paper assumes a government advantage in collecting income contingent payments and develop a proposal for a government loan program that is an integral part of the tax system. The focus is on administrative costs and the difference between the collection technologies available to the public and the private sectors. In the process of developing the proposal the paper addresses some theoretical issues in the field of monetary economics and public finance. Among the questions addressed are: the optimality of the Friedman rule, the optimal interest rate(s), and the desirability of money substitutes and privately created bubbles.