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> buying up government debt, Can someone explain what this actually means ? Presumably it means that something that came from somewhere was exchanged for somet

• _448 4y ago
  Debt is like generating money out of thin air, when it relates to banking. It doesn't have to come from anywhere(this is the fallout of delinking currency from gold). What the central bank does is that when it wants to put money into the economy, it buys(with interest) previously sold government bonds. This way it releases money into the economy. When inflation rises(because of pumping excess money), the government pulls out money from the market by selling bonds. There is another way in which the government can push and pull money from the economy, it is by reducing and increasing taxes/public-spending respectively. The UK government has pumped some much money into the market since 2008, that it has given rise to massive inflation. Hence the government is trying to both increase interest rates and taxes so that the money supply is reduced and that brings down the inflation. They will also have to cut the public expenditure so that excess money does not go back into the economy. What people don't understand is that the government is not separate from the citizens when it comes to country's finances. When we say the government has to pay, it means ultimately the citizens have to pay back in the form of taxes and or by reduction in public services.