> > Has anyone come across a paper available on the net dealing with debt default by a government > > to their own central bank. From: "Alexander Guerrero" <[EMAIL PROTECTED]> > I would say; it is not really a default, but a money financing budget deficit. If the government defaults on its debt at time T1, the budget deficit has already taken place before T1. Therefore, the default at T1 is itself not a deficit. The default reduces the budget expenses of the government, so after T1 it can more easily have a balanced budget, and if it does so, the default has helped eliminate future budget deficits, especially since the government will not easily be able to borrow funds after T1. If the central bank is forced to buy government debt after T1, then it is not an independent central bank, but in effect a branch of the treasury department issuing fiat currency. Fred Foldvary
