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Surplus_32 t1_j297kqq wrote

Reply to comment by yalloc in eli5: Why couldn't a country in debt mint a coin of immense value and use it to pay off the debt? by Derikoopa

But what if one country was in debt to another country and to pay back the debt, they give them a shitload of money printed specifically just to pay off the debt? Wouldn't it then be the case that this surplus of money is instantly taken out of the first country's economy and then it shouldn't cause inflation there?

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Moskau50 t1_j29xc4r wrote

Then the lender country has billions of dollars of the borrower's currency. They're either gonna spend it in the borrower country, or they're gonna sell the currency for another currency. If they simply spend it in the borrower country, that will inject the currency right back into their economy, causing inflation.

If they sell the currency, the massive surplus of that currency will cause the international value (exchange rate) of the borrower currency to fall, weakening it on the international market. That makes it harder for the importers in the borrower country to buy foreign goods, so they have to charge more domestically to make up the difference. That will cause a rippling price increase across the borrower's economy.

If your money supply was X and then you increase it to 1.5X, you can't get away from the fact that your money supply increased 50% overnight, no matter where it goes.

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