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"Nearly every country in the world has adopted the US's system of central banking: an unelected, privately owned central bank that creates money through bond pu

"Nearly every country in the world has adopted the US's system of central banking: an unelected, privately owned central bank that creates money through bond purchases or some other mechanism." This is false. A) 'Central Banks' existed long before the US Fed. B) The FED is totally unique in the world in that it is 'privately owned/managed' - most Central Banks of the world are nationalized, and managed indirectly by the governing apparatus. The more advanced the state, the more it is independent. Nobody is copying the US system - that said - the US system is 'de facto' pretty close to Bank of England, Canada, the ECB etc. in the sense that though the Fed is technically a private entity - the way it is managed is pretty close to how most good central banks are managed. Hyperinflation always has the same causes: + Governments printing money to pay off debts + Governments grabbing private property causing a capital flight. That's it, there's no magic to it.

cloakandswagger 10y ago
I'm not sure when hyperinflation entered the discussion, but it'd be more accurate to say that hyperinflation has historically been caused by those two factors. We're in completely uncharted economic waters with QE/ZIRP, and I can think of several scenarios where increasingly more insane central bank intervention decimates the value of currency: -The decision is made to monetize the debt -Another 2008-scenario prompts helicopter money -A large enough minority of people simply lose faith in the monetary system and rapidly spend their dollars All that being said, I don't think we're anywhere close to a hyperinflationary environment, and you can definitely have a problem with the Fed and our system of money sans hyperinflation worries.
- pjc50 10y ago
  I can't see how we can go from near-deflation to hyperinflation without passing through some period of normal inflation during which policy will be adjusted. Especially in the dollar, reserve currency of the world. The wealth has to flee to somewhere. There's another classic reason for hyperinflation, which is a collapse of export industries causing a trade balance collapse. You can't print foreign currency.
  - cloakandswagger 10y ago
    Why else would the US go to such extreme lengths (Iraq, Libya) to protect the petro-dollar? Without near infinite global demand for dollars we would be completely crushed under our own debt.
    - pjc50 10y ago
      It doesn't work that way though - stability breeds stability; the US is second only to Switzerland in stability and has a much larger float. In some ways the huge number of outstanding T-bills is an advantage, as it keeps the liquidity high and volatility low. It's rather like the old joke about "I don't have to outrun the bear, I just have to outrun you": the US is only in trouble if its real economy falls behind. (I'm not convinced of the importance of the petrodollar argument, especially given how spectacularly expensive the Iraq war was; it looks more like Cold War "sphere of influence" politics to me.)
    - jomamaxx 10y ago
      "Why else would the US go to such extreme lengths (Iraq, Libya) to protect the petro-dollar? Without near infinite global demand for dollars we would be completely crushed under our own debt." This position conspiratorial and non-factual and has no sound logical basis. Yes - the US does use some geopolitical muscle to protect the 'petrodollar' but there are clear and unambiguous facts that fly in the face of the notion that Iraq/Libya were petrodollar issues. 1) The petrodollar is important, but not an existential issue for the US. The USD is so deeply entrenched as a global currency, the transactional amount for USD for Oil is relatively small in comparison, moreover, nobody needs to hold dollars to buy Oil, they just need it to transact. The statement 'near infinite amount of demand' isn't remotely true. 2) The US can easily use basic diplomatic pressure to keep Saudi Arabia, Kuwait, and Norway in line. Outside of that - there is no real control. Iran, Russia et. al. can do as they please today. 3) Your argument is a little upside down: the US Fed is fighting deflation not inflation - meaning that the US would love to have some softening of the currency overall. 4) The US is not carrying debt anything like most unstable countries. People loan to the US not because they have faith in the petrodollar, but because they have faith that the US Gov will pay them back - which is ultimately a function of the health of the economy - and relatively speaking, it's good. Or at least compared to most places. Your position takes a simple thing and turns it into the extreme: 'Because the US has a petrodollar - all it's wars and geostrategy revolve around this'. It's like saying 'look at the bad cop on the news' and surmising all cops are bad.
- SubiculumCode 10y ago
  Most historical cases of hyperinflation had roots in limitited.production capacity from externalities e.g. war.
digi_owl 10y ago
> The more advanced the state, the more it is independent. err, ok...
- jomamaxx 10y ago
  Errr, yes. US, Canada, UK, ECB, Norway, Aussie, Sweden - do not print money to pay bills, as you find in Brazil, Venezuela, China, every African state, and a good chunk of the rest of the world.
  - aianus 10y ago
    The US certainly prints money to pay its bills. The fed prints money and introduces it into the economy by purchasing treasuries. It's exactly the same thing.
    - jomamaxx 10y ago
      No, dude. Not the same thing at all. In fact - your very statement clearly indicates that it's not the same thing. The US 'gets money' by taxation - and by selling bonds. Some of those bonds are later purchased by the Fed, using money printed by the Fed. That's how money gets into circulation. In short: US currency is backed by US Government bonds. That's the 'asset' that backs US currency. It's not 'money printing' - because the US Government has to issue debt in this case. Someone - somewhere - in the USA, Japan, China etc. has to actually lend the US money - at a certain interest rate in order for the transaction to happen. So the US government does not print money. It just issues debt. The Fed's actions are a totally separate process. Now - when Venezuela 'prints money' - it just does that. It literally just issues currency to itself to pay it's bills. That is completely crazy. And that causes hyperinflation.
      - gone35 10y ago
        Nope. You would be surprised, but it is indeed the same thing. See e.g. Sec. 29-2 in [1] (or any other undergraduate econ 101 textbook, for that matter). [1] https://books.google.com/books?id=K-jKAgAAQBAJ https://books.google.com/books?id=K-jKAgAAQBAJ

cloakandswagger 10y ago

I'm not sure when hyperinflation entered the discussion, but it'd be more accurate to say that hyperinflation has historically been caused by those two factors. We're in completely uncharted economic waters with QE/ZIRP, and I can think of several scenarios where increasingly more insane central bank intervention decimates the value of currency: -The decision is made to monetize the debt -Another 2008-scenario prompts helicopter money -A large enough minority of people simply lose faith in the monetary system and rapidly spend their dollars All that being said, I don't think we're anywhere close to a hyperinflationary environment, and you can definitely have a problem with the Fed and our system of money sans hyperinflation worries.

pjc50 10y ago
I can't see how we can go from near-deflation to hyperinflation without passing through some period of normal inflation during which policy will be adjusted. Especially in the dollar, reserve currency of the world. The wealth has to flee to somewhere. There's another classic reason for hyperinflation, which is a collapse of export industries causing a trade balance collapse. You can't print foreign currency.
- cloakandswagger 10y ago
  Why else would the US go to such extreme lengths (Iraq, Libya) to protect the petro-dollar? Without near infinite global demand for dollars we would be completely crushed under our own debt.
  - pjc50 10y ago
    It doesn't work that way though - stability breeds stability; the US is second only to Switzerland in stability and has a much larger float. In some ways the huge number of outstanding T-bills is an advantage, as it keeps the liquidity high and volatility low. It's rather like the old joke about "I don't have to outrun the bear, I just have to outrun you": the US is only in trouble if its real economy falls behind. (I'm not convinced of the importance of the petrodollar argument, especially given how spectacularly expensive the Iraq war was; it looks more like Cold War "sphere of influence" politics to me.)
  - jomamaxx 10y ago
    "Why else would the US go to such extreme lengths (Iraq, Libya) to protect the petro-dollar? Without near infinite global demand for dollars we would be completely crushed under our own debt." This position conspiratorial and non-factual and has no sound logical basis. Yes - the US does use some geopolitical muscle to protect the 'petrodollar' but there are clear and unambiguous facts that fly in the face of the notion that Iraq/Libya were petrodollar issues. 1) The petrodollar is important, but not an existential issue for the US. The USD is so deeply entrenched as a global currency, the transactional amount for USD for Oil is relatively small in comparison, moreover, nobody needs to hold dollars to buy Oil, they just need it to transact. The statement 'near infinite amount of demand' isn't remotely true. 2) The US can easily use basic diplomatic pressure to keep Saudi Arabia, Kuwait, and Norway in line. Outside of that - there is no real control. Iran, Russia et. al. can do as they please today. 3) Your argument is a little upside down: the US Fed is fighting deflation not inflation - meaning that the US would love to have some softening of the currency overall. 4) The US is not carrying debt anything like most unstable countries. People loan to the US not because they have faith in the petrodollar, but because they have faith that the US Gov will pay them back - which is ultimately a function of the health of the economy - and relatively speaking, it's good. Or at least compared to most places. Your position takes a simple thing and turns it into the extreme: 'Because the US has a petrodollar - all it's wars and geostrategy revolve around this'. It's like saying 'look at the bad cop on the news' and surmising all cops are bad.
SubiculumCode 10y ago
Most historical cases of hyperinflation had roots in limitited.production capacity from externalities e.g. war.

digi_owl 10y ago

> The more advanced the state, the more it is independent. err, ok...

jomamaxx 10y ago
Errr, yes. US, Canada, UK, ECB, Norway, Aussie, Sweden - do not print money to pay bills, as you find in Brazil, Venezuela, China, every African state, and a good chunk of the rest of the world.
- aianus 10y ago
  The US certainly prints money to pay its bills. The fed prints money and introduces it into the economy by purchasing treasuries. It's exactly the same thing.
  - jomamaxx 10y ago
    No, dude. Not the same thing at all. In fact - your very statement clearly indicates that it's not the same thing. The US 'gets money' by taxation - and by selling bonds. Some of those bonds are later purchased by the Fed, using money printed by the Fed. That's how money gets into circulation. In short: US currency is backed by US Government bonds. That's the 'asset' that backs US currency. It's not 'money printing' - because the US Government has to issue debt in this case. Someone - somewhere - in the USA, Japan, China etc. has to actually lend the US money - at a certain interest rate in order for the transaction to happen. So the US government does not print money. It just issues debt. The Fed's actions are a totally separate process. Now - when Venezuela 'prints money' - it just does that. It literally just issues currency to itself to pay it's bills. That is completely crazy. And that causes hyperinflation.
    - gone35 10y ago
      Nope. You would be surprised, but it is indeed the same thing. See e.g. Sec. 29-2 in [1] (or any other undergraduate econ 101 textbook, for that matter). [1] https://books.google.com/books?id=K-jKAgAAQBAJ https://books.google.com/books?id=K-jKAgAAQBAJ