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But you don't have to sell the bond. It is entirely sufficient if you visit your friendly bank and use it as security for a loan.
by generic on Sun Jun 6th, 2010 at 12:49:35 PM EST
[ Parent ]
Which is why when the stock market crashes what is lost is not wealth but loan collateral.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sun Jun 6th, 2010 at 02:20:03 PM EST
[ Parent ]
You could, but how does that differ in practise from selling the bond in the first place? Apart from increasing the gearing of your financial system, that is.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jun 6th, 2010 at 04:52:41 PM EST
[ Parent ]
If the only option were to sell the bond for existing money instead of monetizing it the overall amount of money in the system would stay unchanged. That would supposedly limit inflation.
by generic on Sun Jun 6th, 2010 at 06:19:32 PM EST
[ Parent ]

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