It seems that most if not all advanced economies (US, Japan, UK to name a few) have been running budget deficits since basically the last 20 years. I understand that current debts lose value over time because of inflation and economies grow, but how can they do this for basically ever? I can’t wrap my head around the maths that makes this possible, and the markets don’t seem all that worried
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The answer is mostly “we don’t know”.
The US can do it because they are the world’s reserve currency, which means that for now they can always just print more money without consequence. That could change.
Other countries can also print more money, but their money could become worthless. Will ever increasing debt work? Maybe, maybe not. For some countries the currency has spiralled into hyperinflation where the money they print becomes worthless. Most countries have not had that happen.
Hyperinflation could be a rare or inevitable result of deficit spending. We simply do not know.
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