That’s why I specified in my first sentence that it depends upon how the monies are spent. I outlined a few different ways in which government spending impacts inflation.
Just paying down interest on national debt (as we have been doing) is just as deflationary as paying down principal, given that it’s removing money from the economy.
Those who hold treasury bonds don’t tend to spend the interest on their day-to-day living costs. Those who hold treasury bonds use them as an investment vehicle, whose proceeds are usually either reinvested or invested elsewhere where the effects of investment aren’t inflationary. Many treasury bonds are also held by the international community, who by definition don’t spend those proceeds within the country whose bonds they hold. Domestic Australian retail investors make up such a small fraction of total ownership and, those that do own them in this context, tend not to use the proceeds as regular income that would be inflationary.
That’s why I specified in my first sentence that it depends upon how the monies are spent. I outlined a few different ways in which government spending impacts inflation.
Just paying down interest on national debt (as we have been doing) is just as deflationary as paying down principal, given that it’s removing money from the economy.
Where the money goes to holders of treasury bonds who then spend it again
Those who hold treasury bonds don’t tend to spend the interest on their day-to-day living costs. Those who hold treasury bonds use them as an investment vehicle, whose proceeds are usually either reinvested or invested elsewhere where the effects of investment aren’t inflationary. Many treasury bonds are also held by the international community, who by definition don’t spend those proceeds within the country whose bonds they hold. Domestic Australian retail investors make up such a small fraction of total ownership and, those that do own them in this context, tend not to use the proceeds as regular income that would be inflationary.