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July 03, 2013, 08:12:22 PM |
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Ultimately an excessive money supply will result in more inflation. Governments typically refinance their outstanding bonds on a regular basis. That's an ongoing/revolving process. If they know (by announcement) that the central bank will buy more and more of their bonds, they will keep issuing them. This floods the economy with money. But if the economy cannot absorb all the money because it doesn't grow at a rate which is comparably to the monetary growth, at some point you could have an undesirable outcome.
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