Why can’t a government forgive it’s own internal debt?
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It can.
A government can declare all debt null and void. This tends to happen after violent revolutions. And tends to be followed by sanctions.
But frankly every other nation and capital institution will have to redraw all agreements with the newly minted revolutionary state anyway. So it’s often just seen as par for the course.
Another option is to just print the money in your own currency. The government controls the printer after all.
Well, if you’re in the EU, and youre using the Euro, you can’t do this. As the Euro is only printed in Frankfurt.
It’s very likely you’ll also incurr inflation when you do that, but since we are no longer on the gold standard inflation isn’t necessarily as bad as it used to be,and can be mitigated in a number of ways.
But… the BIGGEST reason why nations don’t just cancel or pay back their debts is….
It actually makes sense to have debt. A nation’s economy is nothing like a household.
Debt over time loses value due to normal inflation. Which means it’s FAR less costly to pay back debt in 40 years, then it is to pay back that debt today. EVEN if that debt has interests.
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