Quote:
Originally Posted by Flames in 07
So for the economists in the crowd:
http://ca.news.finance.yahoo.com/s/0...-economic.html
where it says this:
Former IMF chief economist Kenneth Rogoff wrote recently that a two-year run of moderate inflation in the six-per-cent annual range - three times the Bank of Canada's sacrosanct target - might be good for the world because it would allow the mountains of debt that has piled up over the last decade or so to be paid off in debased currency.
Grauman said central bankers - especially those that have exhausted monetary policy because they have chopped their rates effectively to zero - can try and reduce longer-term interest rates and ignite inflation by printing money to buy up government bonds.
There is a risk that once the genie is out of the bottle, inflation will get out of control.
My questions are:
First of all, what is 'debased currency'?
Second of all, how does reducing long term interest rates increase inflation. Aren't they opposite things? ie wouldn't interest rates and inflation hold hands together? |
Basically they are saying governments should just start printing money to pay down the debt they owe. You are essentially paying off debt with more worthless dollars.
So say the US owes one trillion in debt? The government essentially "creates" 1 trillion and gives it to whomever they owe. US dollars become worth a little less (because there are more in circulation), but you no longer have to worry about paying back that debt.