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Suppose a government is in debt, why will there be inflation if it makes more money and pay other countries borrowed money back?

user11877521
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    I am voting to close since it seems to be a duplicate of The Printing of Money for Paying Debt – 1muflon1 Aug 12 '20 at 16:08
  • The question is same but the answer doesn't satisfy me. For example, if china will demand its money back from US in this trade war. What will be wrong if the US will just print the money and pay them back and stop trading with them after that? Will there still be an inflation? – user11877521 Aug 12 '20 at 16:20
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    yes Giskards answer addresses that as the user mentions injecting more money into economy will increase demand as more money chase the same amount of goods leading to higher prices. USA cannot print Chinese yuans only dollars and hence they will eventually have to be used to purchase some dollar denominated goods/services/assets in the end. Also note wrong is a word with moral connotations from an economic perspective even country deciding to burn all its products can’t be considered wrong as long as people are mindful and fine with the consequences. – 1muflon1 Aug 12 '20 at 16:26
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    in addition even if you think that the answer there does not satisfy you that does not mean you should post duplicate. You should go over old answers to this question on this site and preferably do some research outside this site if you want to make your question better and hence more attractive to answer before asking then link all those old threads in your question and explain why you are still confused after reading the background material. Just posting a duplicate will most likely result in no new answers just being closed down – 1muflon1 Aug 12 '20 at 16:30
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    "What will be wrong if the US will just print the money and pay them back and stop trading with them after that?" Well, stopping such a large volume of trade will definitely cause inflation, as Chinese goods will have to be substituted with more expensive goods from other countries. But also, this is not a realistic scenario. Does the US stop trading with everyone? Is there no way for the dollars to circulate back? Why not just nuke all creditors or default on the debt? Seems simpler. – Giskard Aug 12 '20 at 17:04
  • Substituting chinese products with any others' may be a bit expensive but its price will not keep increasing. – user11877521 Aug 12 '20 at 17:31
  • Substituting chinese products with any others' may be a bit expensive but its price will not keep increasing." - this is a contradiction if buying x from China costs $10 but buying the same x costs in USA $20 how can prices not increase? Inflation is the change in average prices. Even if half of the people buy x from Ch for $10 and other half of them are somehow for some nationalistic sentiment buying the x from USA regardless of higher price for $20, then P will be (10+20)/2=15. If USA completely stops trade with Ch the P will be 20 – 1muflon1 Aug 12 '20 at 18:16
  • How will the US stop trading with China? It's not like they can tell which dollars came from China and which didn't. They can try, but it won't work. China will just buy some stuff from let's say Japan with dollars, and then Japan will have more dollars they can use to buy stuff from the US. – user253751 Aug 12 '20 at 19:45
  • Most government debt is not direct lending from one government to another, except in the case of bilateral loans (used by poorer countries). If we are talking about the US, it pays owners of bonds/bills. As such, the premise of this question makes no sense. – Brian Romanchuk Aug 12 '20 at 23:19

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