This paper argues that in a monetarist economy, monetary policy cannot permanently control inflation if it is interpreted as open market operations. The authors show that even in a monetarist economy, where the monetary base is closely connected to the price level and the monetary authority can raise seignorage, the monetary authority's control over inflation is limited when monetary and fiscal policies are coordinated in a certain way and the public's demand for interest-bearing government debt has a certain form. The public's demand for interest-bearing government debt constrains the government in at least two ways: it sets an upper limit on the real stock of government bonds relative to the size of the economy and affects the interest rate the government must pay on bonds. The extent to which these constraints bind the monetary authority and thus limit its ability to control inflation permanently partly depends on the way fiscal and monetary policies are coordinated. The paper considers two polar forms of coordination: one where monetary policy dominates fiscal policy and another where fiscal policy dominates monetary policy. Under the first coordination scheme, the monetary authority can permanently control inflation in a monetarist economy because it is completely free to choose any path for base money. Under the second coordination scheme, the monetary authority faces the constraints imposed by the demand for government bonds, for it must try to finance with seignorage any discrepancy between the revenue demanded by the fiscal authority and the amount of bonds that can be sold to the public. Although such a monetary authority might still be able to control inflation permanently, it is less powerful than a monetary authority under the first coordination scheme. If the fiscal authority's deficits cannot be financed solely by new bond sales, then the monetary authority is forced to create money and tolerate additional inflation. The paper also shows that tighter monetary policy now can mean higher inflation now. In a model with a common constant growth rate of real income and population, a constant real return on government securities that exceeds the growth rate of the economy, and a quantity theory demand schedule for base money, the government's budget constraint is given by a specific equation. The paper demonstrates that if fiscal policy is taken as given, then tighter current monetary policy implies higher future inflation. The paper also shows that tighter monetary policy now can mean higher inflation now, as tighter monetary policy can lead to higher inflation in the present and future. The paper concludes that the real rate of interest exceeds the growth rate of the economy, and that the path of fiscal policy is given and does not depend on current or future monetary policies. The paper also notes that the monetary authority can make money tighter now only by making it looser later.This paper argues that in a monetarist economy, monetary policy cannot permanently control inflation if it is interpreted as open market operations. The authors show that even in a monetarist economy, where the monetary base is closely connected to the price level and the monetary authority can raise seignorage, the monetary authority's control over inflation is limited when monetary and fiscal policies are coordinated in a certain way and the public's demand for interest-bearing government debt has a certain form. The public's demand for interest-bearing government debt constrains the government in at least two ways: it sets an upper limit on the real stock of government bonds relative to the size of the economy and affects the interest rate the government must pay on bonds. The extent to which these constraints bind the monetary authority and thus limit its ability to control inflation permanently partly depends on the way fiscal and monetary policies are coordinated. The paper considers two polar forms of coordination: one where monetary policy dominates fiscal policy and another where fiscal policy dominates monetary policy. Under the first coordination scheme, the monetary authority can permanently control inflation in a monetarist economy because it is completely free to choose any path for base money. Under the second coordination scheme, the monetary authority faces the constraints imposed by the demand for government bonds, for it must try to finance with seignorage any discrepancy between the revenue demanded by the fiscal authority and the amount of bonds that can be sold to the public. Although such a monetary authority might still be able to control inflation permanently, it is less powerful than a monetary authority under the first coordination scheme. If the fiscal authority's deficits cannot be financed solely by new bond sales, then the monetary authority is forced to create money and tolerate additional inflation. The paper also shows that tighter monetary policy now can mean higher inflation now. In a model with a common constant growth rate of real income and population, a constant real return on government securities that exceeds the growth rate of the economy, and a quantity theory demand schedule for base money, the government's budget constraint is given by a specific equation. The paper demonstrates that if fiscal policy is taken as given, then tighter current monetary policy implies higher future inflation. The paper also shows that tighter monetary policy now can mean higher inflation now, as tighter monetary policy can lead to higher inflation in the present and future. The paper concludes that the real rate of interest exceeds the growth rate of the economy, and that the path of fiscal policy is given and does not depend on current or future monetary policies. The paper also notes that the monetary authority can make money tighter now only by making it looser later.