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Sovereign nations don't indebt themselves through banks. They're not taking out loans to fund their spending, so they don't need a creditor Avoiding hyperinfla

Sovereign nations don't indebt themselves through banks. They're not taking out loans to fund their spending, so they don't need a creditor Avoiding hyperinflation is about "how" you spend the money, not where they come from. In the case of Zimbabwe, the events leading up to their crash was massive destruction of productivity, which meant their wealth generation no longer matched the amount of money in circulation The trust in their currency took a nosedive, because of the confiscation of assets from wealthy farmers - basically a clear message saying, that the government will not protect assets purchased with their currency, making it risky to own and use Most western economies are much more stable and have high levels of demand for their currencies, which acts as a counterweight to inflation as well

mytailorisrich 6y ago
This is patently false and a rather strange claim. Sovereign nations do indebt themselves through banks and financial markets in general, most often through the issuance of bonds, which can be defined as highly tradeable loans. This is why sovereign debt is given a rating by credit agencies and why interest rates on debt freely vary based on the perceived risk by creditors. This also means that it can become difficult for a country to borrow at all (hence organizations like the IMF sometimes stepping in) There is no magic. However you spend money, inflation is created by an excess supply, not least when money is printed to cover debts (an effective devaluation). This is actually what happened in Zimbabwe.
- Scandiravian 6y ago
  I think you're missing the point A nation doesn't issue bonds to cover the cost of its spending, but to remove money from circulation. It's simply a way of saying "hey, there's too much money around. If you let us remove some of it now, we'll give you back more in the future" There's literally no situation where a sovereign nation would not be able to pay out the bonds it has issued. It's simply a matter of making the money printer go "brrrrr" and presto - the debt has been resolved In the most broad terms, the only difference between realising bonds and simply printing the money is the lag time As you say yourself - there is no magic In the case of Zimbabwe, and as stated very well by imtringued in the other post to this thread, Zimbabwe could have invested in production, education, and infrastructure to grow the economy, instead of trying to sell bonds, which is essentially saying "Hey, you know this currency that is rapidly loosing value - we're going to print so much more of it in the future! Doesn't this seem like a great investment?"
  - username90 6y ago
    > In the most broad terms, the only difference between realising bonds and simply printing the money is the lag time. Another significant difference: Printing money transfers wealth from the rich to the poor, borrowing transfers wealth from the poor to the rich. So countries which cares for their poor and low corruption among politicians see low government debt rates, while countries like USA where politicians are very close to rich people just continues borrowing forever.
    - emteycz 6y ago
      99% rich people store their wealth in assets - which are not affected by inflation at all (in fact, the value appreciation often beats it - even during a pandemic). Only the poor people have to store their wealth in cash because they don't have enough of it to buy a diversified range of assets, and the short term risk is unbearable to them (while rich people will simply hodl a little longer). Additionally, poor people usually don't have the means to renegotiate their salaries often enough to keep up with inflation, much less to beat it.
      - username90 6y ago
        The government printing bills that they then buy stuff with for the poor transfers those things from the wealthy who owned it in the first place to the poor people who got it. As the poor gets more money demand for stuff they buy increases which raises prices and leads to inflation, meaning that said inflation is a direct result of the original wealth transfer and therefore can't possible be a reverse wealth transfer as you described. On the other hand if we do the same thing with borrowed money demand for goods for poor people will still increase, prices will still go up, just that now it all has to be paid back in taxes or other transfers in the future. So the main effect is that poor people now pay more for goods they pay for with borrowed money and rich people got both interest from the governments loan and can sell their goods to the poor for more.
        emteycz 6y ago
        All prices (but not wages - in case of low income people) are rising with inflation. The rich don't store value as currency, so there isn't any transfer of value because they don't own this kind of asset, just like inflating dollar does nothing to my euro holdings. Actually, since the only thing rich people own that's denominated in currency is debt, rich people get richer thanks to inflation. Inflation is making it worse for poor people; rich people would have stopped it a long time ago if it made them lose value.

mytailorisrich 6y ago

This is patently false and a rather strange claim. Sovereign nations do indebt themselves through banks and financial markets in general, most often through the issuance of bonds, which can be defined as highly tradeable loans. This is why sovereign debt is given a rating by credit agencies and why interest rates on debt freely vary based on the perceived risk by creditors. This also means that it can become difficult for a country to borrow at all (hence organizations like the IMF sometimes stepping in) There is no magic. However you spend money, inflation is created by an excess supply, not least when money is printed to cover debts (an effective devaluation). This is actually what happened in Zimbabwe.

Scandiravian 6y ago
I think you're missing the point A nation doesn't issue bonds to cover the cost of its spending, but to remove money from circulation. It's simply a way of saying "hey, there's too much money around. If you let us remove some of it now, we'll give you back more in the future" There's literally no situation where a sovereign nation would not be able to pay out the bonds it has issued. It's simply a matter of making the money printer go "brrrrr" and presto - the debt has been resolved In the most broad terms, the only difference between realising bonds and simply printing the money is the lag time As you say yourself - there is no magic In the case of Zimbabwe, and as stated very well by imtringued in the other post to this thread, Zimbabwe could have invested in production, education, and infrastructure to grow the economy, instead of trying to sell bonds, which is essentially saying "Hey, you know this currency that is rapidly loosing value - we're going to print so much more of it in the future! Doesn't this seem like a great investment?"
- username90 6y ago
  > In the most broad terms, the only difference between realising bonds and simply printing the money is the lag time. Another significant difference: Printing money transfers wealth from the rich to the poor, borrowing transfers wealth from the poor to the rich. So countries which cares for their poor and low corruption among politicians see low government debt rates, while countries like USA where politicians are very close to rich people just continues borrowing forever.
  - emteycz 6y ago
    99% rich people store their wealth in assets - which are not affected by inflation at all (in fact, the value appreciation often beats it - even during a pandemic). Only the poor people have to store their wealth in cash because they don't have enough of it to buy a diversified range of assets, and the short term risk is unbearable to them (while rich people will simply hodl a little longer). Additionally, poor people usually don't have the means to renegotiate their salaries often enough to keep up with inflation, much less to beat it.
    - username90 6y ago
      The government printing bills that they then buy stuff with for the poor transfers those things from the wealthy who owned it in the first place to the poor people who got it. As the poor gets more money demand for stuff they buy increases which raises prices and leads to inflation, meaning that said inflation is a direct result of the original wealth transfer and therefore can't possible be a reverse wealth transfer as you described. On the other hand if we do the same thing with borrowed money demand for goods for poor people will still increase, prices will still go up, just that now it all has to be paid back in taxes or other transfers in the future. So the main effect is that poor people now pay more for goods they pay for with borrowed money and rich people got both interest from the governments loan and can sell their goods to the poor for more.
      - emteycz 6y ago
        All prices (but not wages - in case of low income people) are rising with inflation. The rich don't store value as currency, so there isn't any transfer of value because they don't own this kind of asset, just like inflating dollar does nothing to my euro holdings. Actually, since the only thing rich people own that's denominated in currency is debt, rich people get richer thanks to inflation. Inflation is making it worse for poor people; rich people would have stopped it a long time ago if it made them lose value.