We analyse optimal discretionary games between a benevolent central bank and a myopic government in a New Keynesian model. First, when lump-sum taxes are available and public debt is absent, we show that a Nash game results in too much government spending and excessively high interest rates,...

Preface -- The world economy is broken -- The British century and the Great Depression -- Keynes from the Macmillan committee to Bretton Woods -- The American century and the global financial crisis -- Restoring international balance in Europe -- Restoring international balance in the world --...