Why doesn the Bank of Canada just print enough money to pay off the national debt?
Because doing so would reduce the value of our money, raise interest rates, and undermine the growth of the economy the exact opposite of our goals. If the Bank were to print money to repay the national debt or to finance government programs, it would be adding greatly to the amount of money in circulation. This would encourage people to spend and borrow more, and the economy would receive a temporary boost. But overall demand for goods and services would grow faster than the economy’s ability to produce, and this would inevitably lead to higher inflation.
