This paper applies the theory of optimal taxation to the study of aggregative fiscal and monetary policies. It examines two key questions: (1) how to formulate optimal fiscal and monetary policy in a way that allows for the application of the Ramsey theory of optimal taxation, and (2) the time-consistency of optimal policies. In a dynamic context, optimal taxation involves distributing tax distortions over time to maximize welfare. In a barter economy, if the government can commit to a sufficiently rich maturity structure of debt, an optimal policy is time-consistent. However, in a monetary economy, time-consistency does not hold because an "inflation tax" must be considered, and this requires commitment through rules rather than traditional excise taxes. The paper shows that in a monetary economy, nominal assets should always be taxed via inflation, which is a new possibility when money is introduced into an economy without capital. The paper begins by analyzing a barter economy with one produced good and government consumption following a stochastic process. It considers the behavior of a representative consumer, the determination of competitive equilibrium, and the optimal fiscal policy with commitment. The analysis shows that optimal fiscal policy is time-consistent if the government can commit to a tax policy for the future. However, in practice, governments cannot bind their successors, leading to time-inconsistency. The paper then extends the analysis to a monetary economy, considering the role of inflation as a tax and the time-consistency of optimal monetary policy. It concludes that in a monetary economy, time-consistency does not hold because the government cannot commit to future tax policies, and the optimal policy must be implemented through rules rather than direct commitment. The paper emphasizes the importance of the government's ability to bind its successors in determining the time-consistency of optimal fiscal and monetary policies.This paper applies the theory of optimal taxation to the study of aggregative fiscal and monetary policies. It examines two key questions: (1) how to formulate optimal fiscal and monetary policy in a way that allows for the application of the Ramsey theory of optimal taxation, and (2) the time-consistency of optimal policies. In a dynamic context, optimal taxation involves distributing tax distortions over time to maximize welfare. In a barter economy, if the government can commit to a sufficiently rich maturity structure of debt, an optimal policy is time-consistent. However, in a monetary economy, time-consistency does not hold because an "inflation tax" must be considered, and this requires commitment through rules rather than traditional excise taxes. The paper shows that in a monetary economy, nominal assets should always be taxed via inflation, which is a new possibility when money is introduced into an economy without capital. The paper begins by analyzing a barter economy with one produced good and government consumption following a stochastic process. It considers the behavior of a representative consumer, the determination of competitive equilibrium, and the optimal fiscal policy with commitment. The analysis shows that optimal fiscal policy is time-consistent if the government can commit to a tax policy for the future. However, in practice, governments cannot bind their successors, leading to time-inconsistency. The paper then extends the analysis to a monetary economy, considering the role of inflation as a tax and the time-consistency of optimal monetary policy. It concludes that in a monetary economy, time-consistency does not hold because the government cannot commit to future tax policies, and the optimal policy must be implemented through rules rather than direct commitment. The paper emphasizes the importance of the government's ability to bind its successors in determining the time-consistency of optimal fiscal and monetary policies.