[quote=dumbrenter]
You have paraphrased my question accurately. I used to believe in the serious consequences theory of monetizing huge debt but just had a serious rethink, hence my question.
[/quote]
It’s really as simple as understanding a balance sheet. For every debt there is a corresponding credit. Most of the credits correspond to somebody’s wealth, whether it’s a pension fund holding bonds or a banks balance sheet. By replacing a promise of future productivity with the equivalent of paper with numbers on it you removed the real wealth. The thing of value is the future productivity not the paper bill.
The flaw in the monetize the debt argument is that people feel like with proper management of money you can remove the debt but still preserve the wealth. Reserve currency status just means you have a higher natural demand for dollars which allows them to preserve their value better than other counter parts. That demand isn’t infinite or guaranteed. It’s just want people happen to value right now.
