CREDIT DEFAULT SWAPS ___CDS

[QaB2i]

“monetizing the debt”

stephan.schulmeister.wifo.ac.at/fileadmin/homepage_schulmeister/files/GlobalizationWithoutGlobalMoney.pdf

“monetizing the debt” must be based on the Fed’s motive for increasing the money supply. If Fed buys bonds for its normal monetary policy operations, it is not monetization of debt. However, there is a problem trying to differentiate between motivation aspect versus actions taken by the Fed.

It is difficult to determine whether debt purchases are solely driven by the Fed’s policy. Second, the Fed increases the monetary base whenever it purchases any asset—not only when it purchases government debt.

This increase in monetary base could be used by private sector to purchase govt debt. So a central bank does not really need to buy govt debt to monetize it. It can do it via indirect ways as well.