Milton Friedman and Warren Mosler (founder of Modern Monetary Theory) advocated a system where government and central bank issue enough base money to keep the economy working at capacity but do not pay interest to those holding that money. I.e. they advocated a system where government does not borrow. And that amounts to a permanent zero interest rate policy.
Friedman did not produce very detailed reasons for that idea and I find Mosler’s reasons a bit convoluted and hard to follow. So I’ve written a paper setting out an argument for a permanent zero interest rate policy which is essentially very simple: it’s that none of the arguments for government borrowing stand inspection, thus there should be no such borrowing, and that (to repeat) equals a permanent zero interest rate set up.
Having said the argument is basically very simple, actually demolishing the large number of alleged reasons (or “lame excuses”) for government borrowing is not a simple matter: it requires a few thousand words.
The paper is 99% complete, and the draft as it stands at the moment is here. Comments are welcome. I’ll submit it to a journal – probably this week.
P.S. (9th June). Paper now submitted to a journal, though with significant changes to the version linked to above.