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Printing money and putting in into circulation has historically caused hyperinflation. Money is just a proxy for goods and services and without a gold standard

• littletimmy 11y ago
  Monetarists were fanning the fear of inflation at the start of quantitative easing 7 years ago. What inflation has happened since? The fact of the matter is that (1) the inflation fears are far overstated. We are already injecting money into the economy, but we haven't seen inflation. All overt money financing would do is inject money through the people, instead of through banks. (2) A little inflation is good for the economy; that's exactly what we need to ward off a recession (3) The US can export inflation to other countries by virtue of being the reserve currency of the world. | These three points together should address your fear of hyperinflation. I suggest you read Friedman and Keynes, both of whom suggested overt money financing as a mechanism to boost the economy. Your point about the poor dropping out of the work force is based in class bias. Would you say that quantitative easing with banks blowing up asset bubbles would have the rich people dropping out of the work force? No one says that. The poor are not intrinsically different than the rich; the rich continue working when they have basic necessities met, and so will the poor.
  • lujim 11y ago
    There is no inflation because QE money is used to keep up the demand for US Treasuries which keeps long term interest rates low. It jacked up asset prices because baby boomers can't get risk free yield by buying bonds so they are buying stocks. It's non just 1% baby boomers, it's all baby boomers. Had QE 1 through 4 been dumped directly into circulation there would have been large scale inflation. I don't know anyone that would dispute that. A little inflation (about 2%) is good because it means demand is outpacing supply. That means the economy is growing. That is different that inflation caused by the raw printing of money which is destructive. In WW2 Germany had considered the possibility of printing counterfeit British pounds and dropping them on Britain to destroy the currency and economy.
• ZenoArrow 11y ago
  > "Printing money and putting in into circulation has historically caused hyperinflation. Money is just a proxy for goods and services and without a gold standard it's nothing more than paper. Germans were burning and wallpapering with Marks in 1922 and 1923 because of the printing of money." Hyperinflation in Germany was caused by a mix of high economic penalties post WW1 and reckless actions by private banks and investors. It's a common misconception that the hyperinflation was the fault of the government printing too much money, but that doesn't get at the underlying causes. Would recommend taking a look through this, though you don't need to read to the end, as the article also covers the actions taken after hyperinflation started. http://www.wintersonnenwende.com/scriptorium/english/archives/articles/hyperinflation-e.html http://www.wintersonnenwende.com/scriptorium/english/archive... > "My opinion is that there would be runaway inflation if you ended up with a situation where people had the option to drop out of the workforce funded by printed paper money." You get around this by having debt-free money, which removes one of the key demands on money, the demand that it should be directed towards economic growth.
  • lujim 11y ago
    > Hyperinflation in Germany was caused by a mix of high economic penalties post WW1 and reckless actions by private banks and investors. It's a common misconception that the hyperinflation was the fault of the government printing too much money, but that doesn't get at the underlying causes. I agree to some degree. Germany was forced to pay reparations with goods such as coal. However, I've never seen it disputed that money printing causes hyperinflation. Sorry for the Wikipedia quote but I'm doing it... "Hyperinflations are usually caused by large persistent government deficits financed primarily by money creation (rather than taxation or borrowing)" In short you can't create value out of thin air. QE is a tool to keep credit flowing, but I guarantee you have never personally touched a dollar printed for the purpose of QE. If you have you were in a bank vault.
    • ZenoArrow 11y ago
      "However, I've never seen it disputed that money printing causes hyperinflation." It can be caused by that, but you have to question what would cause a government to keep printing money when it became clear that inflation was too high? With the example of German hyperinflation, printing/creating money wasn't the cause of hyperinflation, it was a symptom that resulted from forces in the German economy, specifically high demands from foreign countries as repayment for WW1 (even though it's debatable whether Germany really caused the war or were pushed into it by Britain, and I say this as someone from Britain) and recklessness on the part of private banks and investors. The German government didn't drive the country into hyperinflation. It's worth noting that even the German central bank was privately owned and run at the time, so all the money printing was happening in the private sector. I'd be happy to explore an example of when a government created hyperinflation, are there any examples you know of?