Prior to 1982, a tap system operated where the government would set the interest rate and then supply bonds to investors up to demand. Sometimes investors did not take up as much as the Government desired. The extra funds came from contra entries in the RBA-Treasury accounts (the government borrowing from itself!).

That's kind of comical :). History is important, certainly, but in those days economies in Europe where much more isolated than today. Btw, that's more or less how the PIIGS operated prior to joining the EU.

Imagining such blatant printing today: the currency would naturally depreciate. With low interest rates and a depreciating currency a feedback would rapidly emerge, where ever fewer investors would bid for bonds denominated in ever less valuable currency.

Another option could be the emission of debt denominated in foreign currency to attract foreign investors. But if the local currency depreciated too fast, servicing that debt could become unbearable and a default would ensue.

I just don't see how could anyone use that strategy successfully in today's highly intertwined global economy (apart from the US of course :)).

luis_de_sousa@mastodon.social