To properly clarify the motivation of the doubt think of a hypothetical world when there are no business cycles and Central bank intervenes in the market only to provide enough liquidity to sustain the nominal growth.
Due to inflation currency required in the economy keeps going up. To inject more currency in the economy CB engages in OMO. Now based on the construct here, there are no cycles that economy will overheat and at that time central bank will sell these securities from its books to suck currency out.
In such a scenario the Central bank will keep accumulating securities on its books. What happens when these securities mature?
Govt paying the principal to CB is equivalent to monetizing the govt expenditure. Does this mean a part of govt debt will always be monetized?
I understand this is a hypothetical construct but it is only to separate the money creation process for stabilization vs usual growth purposes. Some money will always need to be created over and above the requirement of stabilization policy. I am interested in understanding the impact of that.