The U.S. Federal Reserve building in August 2012, Washington, D.C.
Larry Downing / Reuters

Last July, I proposed in these pages that the world’s advanced economies were entering a new age: the age of magic money. Because inflation seemed dormant, central banks faced no penalty for conjuring money out of thin air. And because this money would drive interest rates lower, governments would likewise face no penalty for borrowing—indeed, payments on the national debt might actually fall even as the debt stock mounted. A period of expansive government beckoned, as magic money enabled a boom in public spending.

A year later, this shift has advanced at such a speed that it risks

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