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Where's the Money come from? (General)

by dulan drift, Friday, May 01, 2020, 07:20 (216 days ago)

The world is about to embark on an unprecedented cash-splash in order to kick-start economies. Australia is spending about a trillion dollars while the US is talking several trillion. Most countries are doing the same.

Firstly, i was surprised there even was that much money to spend - when you see how stingy certain governments can be on funding various essential services and now there is a bottomless well suddenly.

Secondly, i'm curious as to where that money comes from? My understanding is that some of it is from Central Banks buying 100-year government bonds - which may or may not be ever paid back. How does that work? Other money comes from loans - though i'm not sure who's loaning the money.

I do wonder what happens if we have another rainy day - say next year? A real rainy day - for example a permanent border shutdown with China due to escalating tensions or even a war? Or another over-reaction to another corona virus?

And how does all this money get paid back? Again, i don't understand it all properly but on the face of it I'd hate to be a young person coz it looks like they'll be getting saddled with higher taxes and less government services for the terms of their natural lives. At least they can be satisfied in the knowledge that through their sacrifice the lives of some sick elderly people were prolonged for an extra few months or even years.

Then there's Modern Monetary Theory. According to an article in The Chronicle:

"The sneaky third way to pay back debt is just printing money and giving it to your lenders. Governments can do that, but historically they have chosen not to, because it tends to cause hyperinflation. However, a variation of this idea is coming back into fashion, with a new name - Modern Monetary Theory."

All of the above feeds back into the basic question: Are government's weighing up these repercussions as they chart radical policy courses that will reverberate long into the future? Coz now is the time to weigh them. Before would have been better. Later, will be too late.


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