Re:Rewarding Neglect and Punishing Investment in Struggling ...
by roenxi on Thursday March 14, 2019 @09:02AM
(#19388804)
> to avoid deflation
Currency collapse is extreme inflation; and that goes to the central point - there are a very wide range of numbers between 0% inflation and hyperinflation (20+% numbers).
Government monatisation isn't that much different from any other tax, except for the rather critical fact that nobody knows who is paying it. That makes it the least intellectually honest type of revenue raising, and the most likely to spiral out of control. Bringing it in is a pretty telling indicator that a country is unable to govern itself. It is a terrible idea. But it is unlikely to cause a currency collapse if they print and bail out the pensions. It'll just destroy some wealth.
It has been doing so, but allowing new dollars to flow into the system has been a policy to avoid deflation that would have occurred without the policy (that is, to reduce the value of the currency in a controlled way), not a monetization of government obligations.
You collapse confidence in the currency not by allowing new dollars to flow into the system in general, but by violating the confidence-building implicit commitment inherent in having an independent central bank, that is, the commitment that monetary policy will not be driven by fiscal concerns.