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nexpermabad t1_j29u7ci wrote

Any central bank can do this, even without a coin. It’s called monetizing the debt.

What happens when you do this? Well you can follow the money. There are two situations.

  1. The central bank immediately prints money (or buys the bond) of newly created debt. Normally, when a government spends money, it increases aggregate demand, and the debt/bond itself is a way of decreasing aggregate demand. Having the government immediately pay off the bond/debt means that you increase aggregate demand. This can lead to inflation if it’s too much aggregate demand.

  2. Quantitative Easing: You pay the debt off by buying the debt off some bond holders. These (generally wealthier) bond holders then gain cash, and will invest some of it (increasing asset prices like stock) and spend some of it, leading to an increase in aggregate demand. If the increase in aggregate demand is too much, then you will notice meaningful inflation.

Many other comments mention stuff about faith in the currency, but this doesn’t really hold unless inflation expectations become very high. Many governments have done this without people losing faith in the currency. Money is simply a tool to balance supply constraints with demand. Printing money is just a way to increase demand and when done correctly can match demand with supply.

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