The very potential for monetizing the Treasury’s debt eliminates the risk of default, and thereby puts the Treasury on a much longer leash than it would otherwise enjoy. The problem of an artificially low rate of interest in earlier episodes is overshadowed by the problem of an artificially low risk premium on government debt. Although risk-free to the holders of Treasury securities, this black cloud of debt overhangs the market for private securities, distorting the economy’s capital structure and degrading its performance generally
