Why do governments care so much about reducing public debt if they are the sovereign issuer of their currency?
In: Economics
I’m not an economist but basically it has to do with supply and demand.
These two factors are always more or less balanced. If you pump currency into the market it’s value will drop.
Think of it this way. You have a basket of apples that you want to trade. Each apple is worth one orange. All of the sudden the farm next door starts supplying more apples then they used to. They’re willing to trade two apples for one orange. You used to be able to get an orange for each apple but now, because there’s more supply, you can only get half as many because people can just go trade next door decreasing the demand.
Now imagine that the apples are currency (the oranges can still be oranges). This is called inflation. It’s the increase of prices and fall of purchasing power.
If the government decided to print money to pay off their debts they would flood the market with currency and crash its value.
Different governments have different regulatory bodies monitoring their currency and trying to manage debt, inflation, and purchasing power but it’s not an exact science so everyone is basically just doing the best they can.
TLDR: All in all it’s a very complicated system but the short answer is: the more money you print the less it’s worth.
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