Quote:
Originally Posted by Azure
Didn't some high ranking Fed official say they could just print more money to pay their debts?
|
Typically governments have 2 ways to pay off their debts. Tax everyone, or print more money. However, since the government doesn't control the money supply (the Fed does) the government can only go with option 1. Since the Fed's stated mandate is to control inflation they are unlikely to print more money. If inflation starts to go out of control, they can go to the open markets and sell their debt holdings to take money out of circulation.
There are 2 factors in inflation, money supply and money velocity. Right now there's a pretty high money supply, but it's just being hoarded, which is why you're not seeing much inflation.