What is monetizing the fiscal deficit? The Impact of Fiscal Deficit Monetization on the Stock Market

Monetary deficit, economic vocabulary, budget deficit = sales of bonds + increase in the base of money. Generally speaking, countries** can finance their budget deficits in two ways, either by issuing bonds or by "printing money".

Currency is printed when national banks increase their stock of high-energy money, usually through the open market, to buy part of the bonds sold by the Treasury. The relationship between the budget deficit and the money supply can be expressed by the following formula: budget deficit = sales of bonds + increase in the base of money.

Monetary authorities buy part of the debt sold by the Treasury to finance its deficit, which is known as monetary deficitization. When** finances its deficit by creating money, in fact it continues to print money from period to period, and these banknotes are used to pay for the goods and services he buys, so that these banknotes are absorbed by the public.

The impact of the fiscal deficit on ** should be positive. If there is more currency, it will stir in the ** and the housing market. For this reason, it should be good for **.

We should appropriately raise the fiscal deficit ratio, issue special treasury bonds, and increase special bonds to stabilize employment and promote consumption.

fee, increase investment.

On the other hand, reducing the fiscal deficit ratio refers to reducing government spending to make up for the embarrassing situation of making ends meet.

The amount of currency, thereby reducing the liquidity on **, resulting in **.

In addition, the rise and fall of the market is also affected by the market, in the case of a better market, investors' investment sentiment is high, a large number of **, will lead to **, anti.

, it will lead to ****.

The fiscal deficit represents the imbalance between fiscal revenue and fiscal expenditure that occurs when a country** budgets at the beginning of each year, that is, fiscal revenue is less than fiscal expenditure.

Phenomenon. This kind of is now found in all countries in the world, so the fiscal deficit is when the fiscal expenditure is greater than the fiscal revenue, and at this time, the accounting is carried out in red letters, which is called.

for fiscal deficits.

The impact of fiscal deficit monetization on **, which is very far-reaching and significant, because deficit currencies affect stock prices. **。

Personally, I think that the fiscal deficit should have a positive impact on **, and the currency will be stirred in ** and the housing market, so I personally think it should be good for **.

Fiscal deficit and monetization have a certain negative impact on **, and the drawing ** has formed a downward pressure.

Fiscal deficit monetization, also known as debt monetization, is a monetization of fiscal deficits in which banks finance finance finance the treasury by issuing money, which results in an increase in the money supply. ( An increase in the amount of money does not necessarily lead to inflation, because economic growth itself creates demand for money. ）

1) The scale of the national debt has expanded.

The main revenue** is tax revenue, and increasing tax revenue will face political pressure from all sides. At the same time, the increase in taxation requires the revision of the law, which can only be implemented after various discussions and after the approval of the legislative branch. In the face of urgent spending needs, there is no patience to wait for such a lengthy decision-making process, so the issuance of treasury bonds is often chosen.

**Borrowing is not subject to too many legal provisions, and it can immediately meet the already inflated spending needs.

2) Monetary expansion effect.

After the Ministry of Finance issues public bonds, ** banks can directly purchase public bonds. At the same time as the purchase of public bonds by the bank, the balance of deposits of the Ministry of Finance in the bank increased by the same amount. This increased deposit balance is equivalent to the new high-energy currency issued by the bank.

If the law says that banks cannot buy bonds directly, but after issuing bonds to the public, banks can buy bonds from the public on the open market. As a result, at the same time as the bonds flowed into the ** bank, the same amount of high-energy money also flowed out of the ** bank.

3) Boost aggregate demand and drive economic growth.

**After the issuance of public bonds, they are often used for various investments. Aggregate demand expands exponentially due to the multiplier effect of investment. In addition, investment has also created a good investment environment for the operation of the market economy. Of course, the crowding out effect should be avoided or minimized as much as possible.