Authors Tony Yates
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OK, I'll bite. This is an excellent question, not just a genuine one.
There is not a mechanism in place to write off most of each other's debt. There doesn't need to be.
Not all governments are borrowing, for starters. The ones that are are borrowing from their citizens, and foreign citizens, who have stuff to lend.
These are probably mostly the rich, the middle aged, who are saving, and will accept government IOUs, and the old, who have piles of assets and are ok with more of them being in government IOUs, for now.
You can tell that this isn't a problem yet because there is plenty of demand by those who have savings to swap them for government bonds as they get issued, as the bonds trade for a high price [very low interest rate].
Genuine questions: if most governments are borrowing heavily to pay for the cost of the pandemic, who are they borrowing from, and is there some mechanism in place for them all to agree to right off most of each other\u2019s debt? Oh, and if not, why not?
— Armando Iannucci (@Aiannucci) October 17, 2020
There is not a mechanism in place to write off most of each other's debt. There doesn't need to be.
Not all governments are borrowing, for starters. The ones that are are borrowing from their citizens, and foreign citizens, who have stuff to lend.
These are probably mostly the rich, the middle aged, who are saving, and will accept government IOUs, and the old, who have piles of assets and are ok with more of them being in government IOUs, for now.
You can tell that this isn't a problem yet because there is plenty of demand by those who have savings to swap them for government bonds as they get issued, as the bonds trade for a high price [very low interest rate].