"They can print money to fulfil those obligations, "
Not really.
By 'printing money' they are simply 'taking value away from those already holding Bolivars'.
Printing money is just devaluing the Bolivars already in circulation - so you can think of it as a 'tax on cash'.
You can print paper, but you can't 'print' economic value and production.
Printing money to pay gov. employees is basically a 100% sign to everyone in the world that 'this economy is destroyed' - and that they should shut down all operations, cut their loses, get all their money out and exit in every way.
You're exaggerating a little. Everybody prints money. It's what central banks do, it's what gold mines do. It's not a bad thing, it's how economies are managed. (completely free markets are a bad thing and anyone that tells you they aren't either doesn't have understanding of economics or is an extremist or both)
You can run a tightly managed economy successfully but it's hard. Very hard. Completely free markets are cruel but corrupt tightly managed economies are moreso. It also becomes difficult to determine the difference between a completely free economy and a corrupt managed economy because without regulation the former tends to concentrate power until it becomes effectively or actually the latter.
Sometimes the only thing for a collapsing economy to do _is_ print money. It's what a failing state will do to prevent itself from becoming a failed state. It's not sustainable but it's like falling off a mountain, you have to do _something_ and devaluing your currency to keep your economy somewhat functional can be the "right" thing to do for a while.
"Sometimes the only thing for a collapsing economy to do _is_ print money. It's what a failing state will do to prevent itself from becoming a failed state. "
No, this is upside down.
Printing money to pay debts, salaries - is what a 'failing state' will do to absolutely guarantee they will fail.
Central banks don't print money - they trade bonds or other assets in exchange for currency, and they do so at a rate to allow monetary expansion as the economy grows.
Cynically, you could say 'government issues debt, which is bought by central bank in exchange for $' which is very much like printing money, but it's not quite.
And 'gold' ... the amount of gold is so small it doesn't really affect anything.
A 'failing state' needs to restore confidence in it's institutions in order to get out of the hole, the last thing it can do is print money willy nilly.
The anti-populist measure would be to cap/cut government salaries, 'de facto' default on bonds - this is obviously a bad signal, but not as bad as printing money. A 'quiet default' i.e. signalling that 'there is no way we can repay so you'd better negotiate with us' is the pragmatic thing to do.
ah, interesting. My understanding of central bank practices was that 'government issues debt, which is bought by central bank in exchange for $' == printing money - but they are not synonymous?
So if you no longer have the paper trail of things being bought and sold, who keeps track/makes public the amount of currency in circulation in this case?
If simply printing more money is a bad signal, why not just keep it secret?
There's a paper trail. It's just that when the Fed buys something the money is pulled from thin air. When the debt is paid back the principal returns to thin air, the profit goes to the US Treasury.
Not all government debt is purchased by the treasury though – it only does that in special circumstances to moderate the financial system. Most of is is purchased domestically and much of that by other pieces of government.
And you can't keep it secret. It's like supply and demand. More money means prices naturally raise because more people have more money to spend and will be willing to pay a higher price.
You are arguing that they shouldn't print money to pay their obligations. You are right, but Venezuela still can print money to do that if they want to and that is precisely what they are doing now.
Not really.
By 'printing money' they are simply 'taking value away from those already holding Bolivars'.
Printing money is just devaluing the Bolivars already in circulation - so you can think of it as a 'tax on cash'.
You can print paper, but you can't 'print' economic value and production.
Printing money to pay gov. employees is basically a 100% sign to everyone in the world that 'this economy is destroyed' - and that they should shut down all operations, cut their loses, get all their money out and exit in every way.
So it's a pretty bad signal.