Fiscal deficit financing has been short-term financing

Since central banks in OECD countries have implemented quantitative easing, the financing of fiscal deficits has taken place in the short term, with central banks borrowing short-term from banks by increas ing their reserves at the central bank , and not at all via the issuance of long-term bonds. We explain this in more detail. This method of fiscal deficit financing is akin to financing via the issuance of short-term treasury bills and require s the central bank to keep short-term interest rates very low . So what are the limits to this short-term financing of fiscal deficits? There are three limits: Revolt by savers against the very low level of long-term interest rates that results from the short-term financing of governments; Revolt by young people against the rise in asset prices, especially real estate prices, that results from the excess money creation; A loss of confidence in money, due to the excessive expansion of central banks’ balance sheets, which is the ultimate risk. The main risk may be political (revolt by savers and young people).