Question

today's western countries spend much more than they raise in revenue. this difference is the national deficit and the summation of the past deficits is the national debt. if the central bank of a country can create an infinite amount of money from a big, black hole of nothingness, then why don't they create enough money to pay off the national debt tomorrow?

Answer 1

The Federal Bank of the United States has the prominent and sole responsibility of solving the issue related with national deficit.  As compared to developing countries, the purchasing capacity of the people in the developed countries especially in the western countries are very high as per capita income also marks the bench mark growth of economic status of the people. Such a sound economic status of the people urges to spend for the luxurious life which leads to imbalance in the spending level and the rise in income level. They spend more than they save and earn. At the certain point level of equilibrium, national deficit acquires its own place. Then due to situation of overspending leads to decrease in savings rate and also leads to increase in the national debt confined to every individual which are tied up with level of their income.

But the federal government of the US nation was not in the position to issue more currency in order to repay the debt instantly next day. This can be explained with the following facts. It is obviously proved that the too much supply of the money will may produce only less quantity of goods with very high level of price of all the products. Though it is the duty of the government to curtail the evils of national debt, but at the same time printing too much currencies leads to over flow of money supply beyond the optimum level of economic development. It will cause hyper-inflation. This will turn paves the way for inflationary pressure. The Central bank should not start to print the money if the pressure of national deficit hampers the growth. They can adopt the measure of increasing the tax base by the way of progressive taxation method and curtailing the overhead cost of valueless benefits. This is will reduce the over liquidation rate of money supply and curtail the unnecessary spending on luxury goods.