monetize the debt

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Monetize the debt

Financing the national debt by printing new money, which causes inflation due to a larger money supply.

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.

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.
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.
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.
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.