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So right now it comes from other people's paycheck but does it have to? Why don't rich countries like the US, Switzerland or Japan not print money to cover thei

So right now it comes from other people's paycheck but does it have to? Why don't rich countries like the US, Switzerland or Japan not print money to cover their spending? Inflation is not the problem it used to be and I actually think it's a much better measure of the economy's capacity than unemployment. Would inflation of 4% be that bad for the public and financial system anyways? In the US at least I strongly oppose tax-based welfare because I percieve it as a rigged system where the wealthy can avoid paying their fair share through loop holes and classifying their income differently than mine. But inflation in a sense is unavoidable and progressive since the more money you have the more you lose to inflation if you don't invest it. This is especially true if the cause of inflation is labor scarcity and not some other key resource like oil.

marcoperaza 10y ago
>Why don't rich countries like the US, Switzerland or Japan not print money to cover their spending? Printing money is equivalent to a tax on all US dollar holdings. The value of the printed money is subtracted from everyone else's holdings by inflation. Doing this excessively, e.g. to fund the entire public sector, would cause an inflationary spiral, as everyone tries to get rid of their rapidly-devaluing dollars as quickly as possible.
aianus 10y ago
The rich are even more capable of evading inflation than they are evading taxes. I'm sure Warren Buffet has proportionally less of his money in cash than I do.
- jomohn 10y ago
  You have every option to store your wealth in other assets than USD.
mixedCase 10y ago
Because if you continue printing money the inflation doesn't stop growing at some point. This is Econ 101.
- PrimalDual 10y ago
  I don't understand you try to characterize money printing with runsway inflation. For one I am Not arguing for unlimited money printing I am talking more about QE style money printing. You don't continue pumping money into the economy if it's already at full capacity and you have reached your inflation target. In fact the United States has printed trillions of dollars through QE but what we experience right now is a very far from runaway inflation. What I am saying is perhaps we need higher inflation to get full employment. I also don't think a 4% target is exactly Venezuela levels of inflation.
pesfandiar 10y ago
Printing money out of thin air also robs the productive part of the society out of their assets. A higher inflation without an actual increase in productivity (and thus investment returns) will reduce the value of everyone's assets. This sort of "Robin Hood" schemes have been executed by some populist governments, but I don't know of any which worked out well. The only fundamental difference is taxing income to pay for welfare vs. taxing wealth.
- PrimalDual 10y ago
  So the point in an economy with underutilized resources money printing does not necessarily translate money printing to inflation directly. More importantly, the US has carried out a huge money printing scheme: QE. The federal reserve bought a couple trillion of US debt de facto reducing the amount of outstanding debt. What I am arguing for is QE with a higher tolerance for inflation.
winter_blue 10y ago
> not print money to cover their spending? [...] Would inflation of 4% be that bad Inflation is a tax on currency holdings. So if a person has $10,000 and inflation is 4%, they are effectively paying a $400 tax on it –– because the -4% loss of value is transferred to the one causing the inflation, i.e. the printer of money, which is the government. The people would just divest their US dollar holdings, and switch to investments with better capital preservation, and ROI. > a rigged system where the wealthy can avoid paying their fair share [...] But inflation in a sense is unavoidable and progressive Most people with non-trivial savings invest their money. People who have a basic level of understanding of how to manage their finances understand that cash in a bad investment. The US dollar has an effective "investment yield" of -2%. The best interest rates you can get in the US, don't exceed 2%. If I lock up my money in a 5-year CD (certificate of deposit), I get close to 0% returns. Why would I ever settle for 0% returns on such a terrible illiquid investments? Most sensible people will invest any cash (USD/etc) they have, and will aim to maximize their investment returns, concordant with their investment goals. Most of the wealth in the world (held by people with lots of savings, and by companies/institutions) is in the form of stock/shares and bonds. Currency is just a medium for transmission/exchange of money. Most of the wealth in the world is held in stocks, bonds, and property, and not in currency. > the wealthy can avoid paying their fair share through loop holes and classifying their income differently than mine The solution to that is simply going back to classifying capital gains[1], dividends[2], and carried interest[3] as regular taxable income. The current regular federal income tax system[4] is very progressive and effective. Getting rid of that would be the wrong thing to do, FICA taxes are a bit regressive, but that can also be easily fixed by eliminating the Social Security wage base[5]. References: [1] https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_Unite... [2] https://en.wikipedia.org/wiki/Dividend_tax#United_States https://en.wikipedia.org/wiki/Dividend_tax#United_States [3] https://en.wikipedia.org/wiki/Carried_interest#United_States https://en.wikipedia.org/wiki/Carried_interest#United_States [4] https://en.wikipedia.org/wiki/Rate_schedule_(federal_income_tax)#Format https://en.wikipedia.org/wiki/Rate_schedule_(federal_income_... [5] https://en.wikipedia.org/wiki/Social_Security_Wage_Base https://en.wikipedia.org/wiki/Social_Security_Wage_Base
- PrimalDual 10y ago
hudibras 10y ago
>Why don't rich countries like the US, Switzerland or Japan not print money to cover their spending? The two words that are most likely to cause a old-fashioned Hacker News libertarian-slash-armchair-economist freakout: "print money."
pdonis 10y ago
> Why don't rich countries like the US, Switzerland or Japan not print money to cover their spending? The US is doing exactly that, and has been for decades. Since the 2008 debacle it has being doing even more of it. > inflation in a sense is unavoidable If you mean politically unavoidable, I agree; no government in human history has been able to avoid messing with the currency. If you mean unavoidable period, I'm not sure why it would be. There is nothing in principle impossible about having a currency that cannot be inflated. > if the cause of inflation is labor scarcity How does labor scarcity cause inflation?
- PrimalDual 10y ago
  What do you mean by decades? The US has been borrowing money but that hardly translates to printing it. I can definitely see how quantitative easing essentially translates to printing a couple of trillion to buy outstanding debt but that has already stopped. By unavoidable I meant that if you hold currency, you are subject to it. Especially if you are holding assets that are appreciating at a slower rate than inflation. Essentially I don't think the wealthy get to loophole or lawyer their way out of inflation the same way they can with taxes. I meant labor scarcity not in the exonomic sense but in the sense of literally running out of people to allocate. I think it's clear that if businesses have to compete for a dwindling pool of workers prices will inevitably rise.
  - pdonis 10y ago
    > What do you mean by decades? The US money supply has been increasing fairly steadily since WW II. > The US has been borrowing money but that hardly translates to printing it. The US has indeed been borrowing money. But it has also been printing it. > I can definitely see how quantitative easing essentially translates to printing a couple of trillion to buy outstanding debt but that has already stopped. QE is just the latest round of printing money. (More precisely three rounds, since there was QE1, QE2, and QE3.) > By unavoidable I meant that if you hold currency, you are subject to it. Only if the supply of currency increases. Why is that unavoidable? > I meant labor scarcity not in the exonomic sense but in the sense of literally running out of people to allocate. I think it's clear that if businesses have to compete for a dwindling pool of workers prices will inevitably rise. No, it's not clear at all. What is clear is that the price of labor (wages and salaries) will increase relative to the price of capital (e.g., interest rates). But that does not mean price levels in general will rise. That depends on how well businesses can substitute capital for labor. In the age of automation, that is usually "pretty well".

marcoperaza 10y ago

>Why don't rich countries like the US, Switzerland or Japan not print money to cover their spending? Printing money is equivalent to a tax on all US dollar holdings. The value of the printed money is subtracted from everyone else's holdings by inflation. Doing this excessively, e.g. to fund the entire public sector, would cause an inflationary spiral, as everyone tries to get rid of their rapidly-devaluing dollars as quickly as possible.

aianus 10y ago

The rich are even more capable of evading inflation than they are evading taxes. I'm sure Warren Buffet has proportionally less of his money in cash than I do.

jomohn 10y ago
You have every option to store your wealth in other assets than USD.

mixedCase 10y ago

Because if you continue printing money the inflation doesn't stop growing at some point. This is Econ 101.

PrimalDual 10y ago
I don't understand you try to characterize money printing with runsway inflation. For one I am Not arguing for unlimited money printing I am talking more about QE style money printing. You don't continue pumping money into the economy if it's already at full capacity and you have reached your inflation target. In fact the United States has printed trillions of dollars through QE but what we experience right now is a very far from runaway inflation. What I am saying is perhaps we need higher inflation to get full employment. I also don't think a 4% target is exactly Venezuela levels of inflation.

pesfandiar 10y ago

Printing money out of thin air also robs the productive part of the society out of their assets. A higher inflation without an actual increase in productivity (and thus investment returns) will reduce the value of everyone's assets. This sort of "Robin Hood" schemes have been executed by some populist governments, but I don't know of any which worked out well. The only fundamental difference is taxing income to pay for welfare vs. taxing wealth.

PrimalDual 10y ago
So the point in an economy with underutilized resources money printing does not necessarily translate money printing to inflation directly. More importantly, the US has carried out a huge money printing scheme: QE. The federal reserve bought a couple trillion of US debt de facto reducing the amount of outstanding debt. What I am arguing for is QE with a higher tolerance for inflation.

winter_blue 10y ago

> not print money to cover their spending? [...] Would inflation of 4% be that bad Inflation is a tax on currency holdings. So if a person has $10,000 and inflation is 4%, they are effectively paying a $400 tax on it –– because the -4% loss of value is transferred to the one causing the inflation, i.e. the printer of money, which is the government. The people would just divest their US dollar holdings, and switch to investments with better capital preservation, and ROI. > a rigged system where the wealthy can avoid paying their fair share [...] But inflation in a sense is unavoidable and progressive Most people with non-trivial savings invest their money. People who have a basic level of understanding of how to manage their finances understand that cash in a bad investment. The US dollar has an effective "investment yield" of -2%. The best interest rates you can get in the US, don't exceed 2%. If I lock up my money in a 5-year CD (certificate of deposit), I get close to 0% returns. Why would I ever settle for 0% returns on such a terrible illiquid investments? Most sensible people will invest any cash (USD/etc) they have, and will aim to maximize their investment returns, concordant with their investment goals. Most of the wealth in the world (held by people with lots of savings, and by companies/institutions) is in the form of stock/shares and bonds. Currency is just a medium for transmission/exchange of money. Most of the wealth in the world is held in stocks, bonds, and property, and not in currency. > the wealthy can avoid paying their fair share through loop holes and classifying their income differently than mine The solution to that is simply going back to classifying capital gains[1], dividends[2], and carried interest[3] as regular taxable income. The current regular federal income tax system[4] is very progressive and effective. Getting rid of that would be the wrong thing to do, FICA taxes are a bit regressive, but that can also be easily fixed by eliminating the Social Security wage base[5]. References: [1] https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_Unite... [2] https://en.wikipedia.org/wiki/Dividend_tax#United_States https://en.wikipedia.org/wiki/Dividend_tax#United_States [3] https://en.wikipedia.org/wiki/Carried_interest#United_States https://en.wikipedia.org/wiki/Carried_interest#United_States [4] https://en.wikipedia.org/wiki/Rate_schedule_(federal_income_tax)#Format https://en.wikipedia.org/wiki/Rate_schedule_(federal_income_... [5] https://en.wikipedia.org/wiki/Social_Security_Wage_Base https://en.wikipedia.org/wiki/Social_Security_Wage_Base

PrimalDual 10y ago

hudibras 10y ago

>Why don't rich countries like the US, Switzerland or Japan not print money to cover their spending? The two words that are most likely to cause a old-fashioned Hacker News libertarian-slash-armchair-economist freakout: "print money."

pdonis 10y ago

> Why don't rich countries like the US, Switzerland or Japan not print money to cover their spending? The US is doing exactly that, and has been for decades. Since the 2008 debacle it has being doing even more of it. > inflation in a sense is unavoidable If you mean politically unavoidable, I agree; no government in human history has been able to avoid messing with the currency. If you mean unavoidable period, I'm not sure why it would be. There is nothing in principle impossible about having a currency that cannot be inflated. > if the cause of inflation is labor scarcity How does labor scarcity cause inflation?

PrimalDual 10y ago
What do you mean by decades? The US has been borrowing money but that hardly translates to printing it. I can definitely see how quantitative easing essentially translates to printing a couple of trillion to buy outstanding debt but that has already stopped. By unavoidable I meant that if you hold currency, you are subject to it. Especially if you are holding assets that are appreciating at a slower rate than inflation. Essentially I don't think the wealthy get to loophole or lawyer their way out of inflation the same way they can with taxes. I meant labor scarcity not in the exonomic sense but in the sense of literally running out of people to allocate. I think it's clear that if businesses have to compete for a dwindling pool of workers prices will inevitably rise.
- pdonis 10y ago
  > What do you mean by decades? The US money supply has been increasing fairly steadily since WW II. > The US has been borrowing money but that hardly translates to printing it. The US has indeed been borrowing money. But it has also been printing it. > I can definitely see how quantitative easing essentially translates to printing a couple of trillion to buy outstanding debt but that has already stopped. QE is just the latest round of printing money. (More precisely three rounds, since there was QE1, QE2, and QE3.) > By unavoidable I meant that if you hold currency, you are subject to it. Only if the supply of currency increases. Why is that unavoidable? > I meant labor scarcity not in the exonomic sense but in the sense of literally running out of people to allocate. I think it's clear that if businesses have to compete for a dwindling pool of workers prices will inevitably rise. No, it's not clear at all. What is clear is that the price of labor (wages and salaries) will increase relative to the price of capital (e.g., interest rates). But that does not mean price levels in general will rise. That depends on how well businesses can substitute capital for labor. In the age of automation, that is usually "pretty well".