Are We Headed For A Hyperinflation?

Says Rogovy, “In the US, the central bank does not pay debt with the money it creates. Rather, it lends money at its targeted interest rate and the private sector employs that capital more productively. The money created is paid back, which is a crucial reason this monetary policy doesn’t produce hyperinflation.”

Full quote provided:

“Hyperinflation is commonly caused if a government creates money for the purpose of repaying its own debt. This is especially true if the government’s debt is denominated in a different currency or other form of obligation (e.g. commodities). In the US, the central bankdoes not pay debt with the money it creates. Rather, it lends money at its targeted interest rate and the private sector employs that capital more productively. The money created is paid back, which is a crucial reason this monetary policy doesn’t produce hyperinflation. Thus, it is inaccurate to claim the Fed is “printing money” even though it does make a good headline. (Note: when the Fed buys bonds or other fixed-income assets, it is functionally equivalent to lending money). Of course, maintaining low interest rates does produce some inflation. Public and private borrowers could even benefit in a real sense, as their debts become easier to repay. Indeed, stable rates of inflation can help an economy when there is no feedback loop between prices, debt, and money creation.”

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