Why doesnt the US have" its own cash" ? Why does it need to sell bonds to raise cash?
Answer:
Technically all money is worthless. If you look on your bank note it will say something like 'I promise to pay the barer'. A countries real worth is in its assets and more literally in its bullion reserve. In the UK we have Premium Bonds which is a similar set up to that which you refer, The deal is that a person 'lends' the government some of their money and in return they may win a prize but the value of the bond will never go down and is redeemable anytime. It is not a new thing for governments to ask its countrymen to contribute, during WW1 the German Government asked married women to give them their gold wedding rings to help pay for the war effort. In return they were given a steel ring inscribed: Vaterlands Dank 1914'.
We do have our own cash...however if we just continuously print money...it will soon become worthless like in other countries...it is all supply and demand. There has to be something of value to back up it's worth.in the present we use the Gold standard.
Treasury can print more money if it wants - but this is inflationary, something that governments try to keep in check
Selling bonds can behave as an anti-inflationary device as this 'soaks' up excessive amounts of cash in the economy - cash that may otherwise be spent on goods & services
After World War I, to pay it's reparations bill, Germany just printed money to pay it off. This created massive inflation & the currency became worthless. Everybodies savings suddenly became worthless, the country unstable
The US does have its own cash. However, it cannot simply "print" more currency to pay its debts as the value of the dollar is tied to the economic and military strength of the US (America and the rest of the world are on fiat currency) and has simply become a commodity. More currency in circulation would dilute its strength and devalue the dollar. If the US were to print billions of new dollars one day, the market would adjust by the next and the dollar would tank. That would have a double-whammy effect, too. We make loans to other countries in US dollars while we receive loans in their national currency. If the dollar falls against the Euro, we would owe other countries more money, while they would owe us less.
Government bonds are simply an investment in the US economy. The money you pay allows the US to invest in other things.
it can't just print money, that will cause inflation without the power to purchase more stuff.
the U.S. loves to spend more money than it makes, so they are forced to take out loans (in the form of a bond)
The answers post by the user, for information only, FunQA.com does not guarantee the right.
More Questions and Answers:
More Questions and Answers: