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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Government Debt increases the money supply, and because of this is inflationary. Because of the inflation, they are paying back these long term debts 30 years later with money thats worth substantially less than it was worth when it was borrowed.
They can get away with it for the most part, as long as they keep the amount borrowed below a certain percentage of the economy. It works as long as there is someone willing to loan them the money.
However there eventually comes a point where that no longer works, and the Treasury cheats by simply printing more money. You see the resultts in places like Pre-War Germany, Venezuala, and Zimbabwe, where at the end they were printing multi-trillion dollar notes. A wheelbarrow full of them wouldn’t buy a loaf of bread.
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