monetize the debt

(redirected from Monetizing the Debt)

Monetize the debt

Financing the national debt by printing new money, which causes inflation due to a larger money supply.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Monetize the Debt

In government, to print money in order to repay the national debt. For example, suppose a government is $1 trillion in debt. Theoretically, the government can simply expand the money supply by $1 trillion and reduce the national debt to zero. It is not uncommon for governments monetize their debts, but because it increases the amount of money in circulation, it is considered highly inflationary.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

monetize the debt

To convert government debt from interest-bearing securities into money. Although both the securities and the money are considered government debt, the latter can be used to purchase goods and services. Thus, monetizing the debt is considered an inflationary process and, although it may temporarily depress interest rates, it is likely to result in higher interest rates and lower bond prices in the long run.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
The revenue raised will fall short of projections, so governments will turn to monetizing the debt by expanding the money supply--which will bring on higher inflation.
But as long as the Federal Reserve, which in theory is apolitical but in practice is an enabler of both parties, is willing to enable Congress' debt addiction by monetizing the debt, the fiscal pill will continue to be avoided.
Monetizing the debt means using money, creation as a permanent source of financing for government spending.
political system resorts to monetizing the debt. In this situation, the U.S.
Another large bond-buying program could open the central bank up to accusations it is monetizing the debt, something Fed officials would be loathe to do.
Bernanke's strong statement last week about not monetizing the debt suggests that he's in no mood to extend the $300 billion purchase plan any further.
In newspeak, it's called monetizing the debt. If it was called printing up worthless money out of nothing, the natives might just become restless about the whole process.
However, at the state level, the link between deficits and inflation is more direct since monetizing the debt is not an issue.
A subtler version of money printing involves monetizing the debt by purchasing government bonds whose proceeds fund government agencies.
"The quantitative easing program, to the extent it involves buying longer-dated government debt, has often been described as 'monetizing the debt.' This is widely considered to be inflationary, and so inflation expectations are sensitive to such purchases."
This brings us back to Fisher's "cardinal sin" of monetizing the debt. In his April 16 speech, Fisher pointed out that the dollar is a "'faith-based currency' ...