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As Dr. Murray Rothbard once famously said of the Great Depression: "The guilt for the Great Depression must, at long last, be lifted from the shoulders of the free-market economy and placed where it properly belongs: at the doors of politicians, bureaucrats, and the mass of enlightened economists."

For macroeconomics, the government is divided into the central bank and the treasury. Positive profits recorded by the first are cancelled out as a negative item in the second. However, a debate has been generated by the transfer by the Reserve Bank of India of a record surplus to the coffers of the overnment. The issue is examined in a stock-flow-consistent model. A tension is found to reside in the pledging of profits for advances to banks on the one hand, and reducing the government budget deficit on the other. In the case of India, we conclude that central bank profits are intended to sub...