Where does the Interest go?

[FUCK THE POLICE]

What do you mean by "backed by"? Bonds are not "backed" by anything. They are promises to pay a certain amount at a certain time.

The promises do have weight, otherwise no one would by the bonds. The market isn't completely stupid. There are consequences to not fulfilling the promises, and that's why the promise is usually enough for investors.

 

[FUCK THE POLICE]

We also have the option of just printing more dollars.

We do, but it has pretty much the same effect. Inflating your currency (beyond traditional and expected levels) is sort of like a partial default. The markets raise interest rates in response. They're not stupid. In the short term, yeah, it can do you some good. In the long-term, the markets adjust. That's the current Keynesian explanation of things.

 

[cancel2 2022]

We do, but it has pretty much the same effect. Inflating your currency (beyond traditional and expected levels) is sort of like a partial default. The markets raise interest rates in response. They're not stupid. In the short term, yeah, it can do you some good. In the long-term, the markets adjust. That's the current Keynesian explanation of things.

Printing money means that bond values decrease, which impacts investments, pensions and interest rates. It also means that the Dollar devalues, making exports cheaper and imports more expensive.

 

[Bonestorm]

We do, but it has pretty much the same effect. Inflating your currency (beyond traditional and expected levels) is sort of like a partial default. The markets raise interest rates in response. They're not stupid. In the short term, yeah, it can do you some good. In the long-term, the markets adjust. That's the current Keynesian explanation of things.

Well, I was simply pointing out that we have options that other governments (particularly Euro countries) do not. We can print more money to pay our debts. Greece cannot.

 

[Damocles]

Well, I was simply pointing out that we have options that other governments (particularly Euro countries) do not. We can print more money to pay our debts. Greece cannot.

Right, solely because our deneg has reserve status. Once the dollar is not the reserve currency (which over-inflating would definitely lead to) we would no longer be able to do this. It is one of the things I tried to explain to 2cents. Canada doesn't have the reserve status currency, printing more would kill their economy.