Question #53

In a fiat monetary system, the concept of debt monetisation is inapplicable because

• the central bank is independent from the treasury and doesn't have to defend the exchange rate any longer.
• the central bank has to manage bank reserves if it wants to target a positive interest rate.
• the central bank can set whatever interest rate it likes subject to its inflation targets.

Answer #534

Answer: the central bank has to manage bank reserves if it wants to target a positive interest rate.

Explanation

Please read Gold standard and fixed exchange rates - myths that still prevail or post a comment for further discussion.