Money For the Rest of Us National Debt Master Class Part One
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May 8, 2024 Explore why a country can't default with its own currency, how central banks control interest rates, and if government borrowing crowds out the private sector. Learn about money creation, inflation risks, and cases of Japan and Venezuela. Understand the perpetual nature of national debt, its implications on investors, and the impact of large budget deficits on the private sector. Delve into the connection between Treasury bonds, bank loans, and money creation, along with Japan's inflation commitment and debt monetization strategy.
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No Default
- Countries issuing debt in their own currency can't default unless they choose to.
- They can always print more money to cover interest and principal payments.
Interest Rate Control
- Central banks can control interest rates on national debt through monetary policy.
- This involves managing the money supply and bond purchases.
No Crowding Out
- Government borrowing doesn't crowd out private sector investment because money supply is unlimited.
- Inflation or hyperinflation happens when money supply significantly outpaces goods and services production.