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That's not how money works. In fact, that's a good way to accelerate a trajectory towards bankruptcy.
by daveslash 4y ago
That's not how money works. In fact, that's a good way to accelerate a trajectory towards bankruptcy.
- lxgr 4y agoNo, it's just a trajectory towards inflation (all other things being equal; it can be the right choice in certain economic environments). A central bank (that issues a sovereign fiat currency) can definitionally not go bankrupt, since its liability is the issued currency itself.
- unyttigfjelltol 4y agoA central bank operates within a framework of rules that, among other things, allow it to operate as a central bank. If those rules require it to raise capital before continuing to operate, and the capital cannot be raised, it is effectively bankrupt.
- orangepurple 4y agoCentral banks can freely create capital if necessary. They can generate anything they want because they are sovereign. The people are de-facto forced to utilize currency the central bank issues to pay taxes in that same currency. Without this system state run currencies would fail.
- kodyo 4y agoIt can go bankrupt if people stop trusting the currency.
- orangepurple 4y agoThe government forces its subjects to pay taxes in that same currency and enforces this policy through courts, police, and the military. That is where state run currencies get their value. You need $CURRENCY because it is required to pay your taxes. The only way it ever stops is overthrow.
- nirimda 4y agoThat isn't true. There's many cases where e.g. through corruption and distrust, the state's capacity to collect taxes has been seriously weakened and the currency has gone into freefall so the country begins to operate - even despite threats of harsh penalty - in alternative currencies. States regularly remain in existence (i.e. are not overthrown) even after their currencies have stopped being used for everyday transactions and as regular stores of value. It is one of many examples of governments playing catchup with the economy.
- lxgr 4y agoThe currency can become worthless, sure, but that does not make the central bank bankrupt. The concept simply does not make sense for a (fiat) currency‘s issuer.
- kodyo 4y agoWhen the state can no longer function because it has allowed its currency to be debased, who gives a shit if the central bank is solvent or not? It’s worse than bankrupt, it’s irrelevant.
- lxgr 4y agoSure, but arguably that‘s a bit like claiming that your house plant got a heart attack, i.e. can die – but not like that.
- civilized 4y agoLetting the central bank go bankrupt is also a good way to accelerate a trajectory towards bankruptcy.