This is a great piece!

A question about figure 9: Where does the bond come from? I understand it is government debt so the treasury added to its liabilities. So essentially the bond is like an overdraft at the CB (which is illegal I guess)?

Of course if so then we are back at a fiscal transfer, from the government to the the private sector just indirectly via the CB.

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Thanks. The mechanics are left deliberately vague, but the government can just provide a tradeable asset to the CB to restore capital to positive. Don't think "overdraft" is the right word, there is no government deposits associated, only the transfer of a claim on government.

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