Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it.

I'm your host David Stein. Today is episode 479. It's our finale in our three-part

master class on the national debt. In the past two episodes we've reviewed some important principles when it comes to federal government borrowing.

First, the national debt will never be paid off.

It will just continue to be rolled over and potentially grow over time.

What matters is the size of the debt relative to the economy, the private sector economy that creates the bulk of the income,

pays the taxes that are used to service the debt.

That private sector owns much of the debt in the form of assets.

A second principle we discussed was how the federal government working with the Central Bank can control the terms of the debt issuance,

including controlling the interest rates through what is known as financial repression.

Now even though governments can do that, they don't get a free pass.

The private sector can decide whether they want to hold the debt or hold the currency that the debt is denominated in.

If the central bank coordinating with the government is buying up the debt,

monetizing the debt, at the same time

the government's running a budget deficit that leads to big increases in the money supply

which if there are capacity constraints can lead to much higher inflation and that's

something we've seen in the US over the past few years.

Consequently there are consequences to government borrowing and government money creation.

Too much of it can overwhelm the private sector leading to inflation.

Now in part three, we're going to look at a simple formula to understand where are we?

At what level is the debt too high where a potential default becomes a reality?

Even at that default is through monetization higher inflation because the private sector doesn't want to

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