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No need to cover all the outstanding debt at once. The expectation of future debt monetization is already priced into the interest rate in much the same way as
by incrudible 4y ago
No need to cover all the outstanding debt at once. The expectation of future debt monetization is already priced into the interest rate in much the same way as the risk of default would be. In fact, it is preferable that way. If you were a bond holder, would you prefer default over dilution?
- legitster 4y agoI mean, maybe? If in default I get 75 cents on the dollar, or with inflation my bond loses 25% of it's value through inflation isn't it the same to me? I am skeptical of the infinite money thing though. Sure - theoretically people will buy up bonds at 1000% interest rates. But would they really though?
- incrudible 4y agoIt's not the people that would buy bonds at 1000%, it's the central bank that would buy bonds at whatever interest rate they deem appropriate. They would create all the required money out of thin air. It's not an infinite amount, but obviously at some point the compounding effect of printing new money to finance old debt is going to erode trust.