Thread

1. mono442 · 1790969976 · focus · HN ↗

   Technically bond markets with fiat currencies are unnecessary but for some reason they still exist.

   1. nostrademons · 1790970190 · focus · HN ↗

      Why? The purpose of the bond market isn't to supply the government with currency, but rather to distribute risk and capital payments to those most willing to bear them.

      1. mono442 · 1790974157 · focus · HN ↗

         The main purpose is definitely to supply the government with currency. Many countries put imo unnecessary restrictions on themselves and do not borrow directly from the central bank which would be simpler and cheaper.

         1. Ekaros · 1790974333 · focus · HN ↗

            Wouldn't that be just more complicated way to print money? With weird question about would it ever be possible lower debt without actually printing...

            1. mono442 · 1790974736 · focus · HN ↗

               Money comes from debt. Debt is essentially the way to print money.

               1. smallmancontrov · 1790976786 · focus · HN ↗

                  No. Money is a type of debt, but a very special type, one that has no duration and is available now rather than locked up for some period of time. When the treasury sells bonds, it replaces "unlocked" money with "locked" money in the private sector, decreasing the amount of unlocked money in the private sector to balance the increased amount of unlocked money in the public sector. The amount of unlocked money remains constant.

                  If the Federal Reserve prints reserves (unlocked money) to buy bonds (locked money) and keeps doing this as they mature so that WALCL goes up and to the right, that's money printing.

                  1. andsoitis · 1791004827 · focus · HN ↗

                     >> Money comes from debt.

                     > No.

                     Money itself is essentially a hierarchy of IOUs.

                     In a modern banking system most money is created alongside debt.

                     Bank lending creates deposits rather than banks simply lending out pre-existing deposits.

                     Not all money originates through private bank debt. Central banks create base money (currency and bank reserves) and can create reserves when acquiring assets.

         2. nostrademons · 1790975588 · focus · HN ↗

            If that were true we wouldn't have corporate bond markets, and municipal bond markets, and mortgage bond markets. All of these are capital markets where the capital goes to either a private party or a non-monetary-authority government.

            Seignoriage (the practice of the government directly issuing currency to fund its government expenditures) has been around for about 2500 years and predates the invention of the bond market described in this article by roughly 1500 years.

         3. weakened_malloc · 1790988141 · focus · HN ↗

            simpler - yes, but that would also lead to a debasing currency, hyperinflation, and guaranteeing that nobody else would buy your bonds.
         4. badpun · 1791007874 · focus · HN ↗

            That’s the purpose of the bonds themselves, not bond markets. Government could just as well issue bonds without bond markets existing (so that they cannot be bought or sold).

Unofficial Hacker News client; not affiliated with Y Combinator.