Internal debt to prevent inflation
Is the culprit of inflation is not who has embezzled in external gifts, travel and arms’ As the days passed we Venezuelans suffering from the lies of Chavez to convince us that his false economic forecasts we iban crisis to save the world “so I put the oil to zero.” Venezuelan businessmen and economists warned the government the need to curb the blatant waste and official, with the surplus resources of the high oil prices, suggest creating a savings fund that transparent and auditable So here, have been analyzed only when the fiscal deficit is financed with international reserves, or inflation. Of course, there are other ways to finance a deficit, at least in the short term. The most important is the internal debt. In this case, the Treasury issues bonds that are bought by private actors, not by the central bank. This form of debt allows the government to sustain a deficit without losing stocks or to increase the money supply.
By funding the fiscal deficit with an increase in domestic debt, just postpone the date you unleash inflation. The problem is that the internal debt is equivalent to “bread for today and hunger for tomorrow ‘, ie provides the resources now, but it is a debt due in the future. The payment of interest on a tax increase in state spending, but increasing the deficit. The result may be higher inflation in the future, a problem that does not occur if the deficit is financed through money issuance since the beginning. In other words, debt can postpone inflation today, but at the risk of an inflation rate higher in the future.
