Why do governments issue bonds and not simply print more money?

There’s a more technical reason why governments can’t simply print more money to pay off debt and pay for spending: they’re not in charge of it. Money supply and exchange rates are meant to reflect the size of an economy.

Is selling bonds the same as printing money?

Answer 1: Same as EnergyNumbers pointed, the difference is that in buying the bond, the central bank now owns a bond, but when the central bank printed the money, they just printed and inject the money to the economy.

Why does the government not just print more money?

So why can’t governments just print money in normal times to pay for their policies? The short answer is inflation. Historically, when countries have simply printed money it leads to periods of rising prices — there’s too many resources chasing too few goods.

What happens when the government prints too much money?

If the government prints too much money, people who sell things for money raise the prices for their goods, services and labor. This lowers the purchasing power and value of the money being printed. In fact, if the government prints too much money, the money becomes worthless.

Why does the US government sell bonds instead of issuing money?

The US government and other governments that maintain sovereign free floating fiat currencies sell bonds, not to borrow money, but to remove liquidity from the economy so that it government spending won’t create inflation. Remember that the government spends the equivalent of 1/5th of all the money in the economy each year.

Why do governments issue debt in their own currency?

When a sovereign government needs to borrow to fund its operations, there’s a distinct advantage to issuing debt in its own currency. Namely, if it has trouble repaying bonds when they mature, the treasury can simply print more money.

Can the government print as much money as it wants?

At least not according to Modern Monetary Theory (MMT). MMT speculates that nations that control their own currency, often referred to as a fiat currency, should print as much money as needed with minimal concern. The basis of Modern Monetary Theory is the idea that governments create money by spending it.

What is the difference between Bond Printing and central bank printing?

Answer 1: Same as EnergyNumbers pointed, the difference is that in buying the bond, the central bank now owns a bond, but when the central bank printed the money, they just printed and inject the money to the economy. One of the purpose of the central bank is, they control the amount of printed money in the economy,…