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> > If the government spends and the economy responds productively to that spending, then you're fine. Taxing is a separate issue. You should only really tax wh

• AnimalMuppet 9y ago
  > What do you feel the difference is between deficit spending and printing money? The difference is whether the government borrows money, or simply creates it. (And yes, I am aware that borrowing money can create money, via the magic of fractional reserve banking.) When the government borrows the money, they have to pay it back, or at least pay interest on it. This puts some constraint on the government. Whereas if the government creates the money, there is no constraint - it can spend as much money as it wants. If you don't see why that might be a problem, let me ask you: Have you looked at Congress lately? But if the government is using the money to create things of value to the society, what's the problem? That's a reasonable position - if the government is doing so. And for some government spending, that's true. But for a fair amount of it, no, it is not invested in creating things of value to society, and so no, society does not get a return from it. Take the military, for example. It keeps other nations from destroying things of value to our society, but it doesn't create any value. (It creates jobs, and profits, but not anything of productive value.) And that means that it's a drain on society - the people who are in the service, or creating weapons, could be doing something else of more value to society - teaching children, or repairing roads and bridges, or building a better air traffic control system. So if Congress can create money, it can divert as much of the actual productive ability of the economy - people and materials - to whatever Congress thinks will get more votes. Again, I say, look at Congress. Do you really want to give them the ability to steer unlimited amounts of the economy to do whatever they think should be done? I don't. It's a horrible idea. I was going to answer more of your questions, but this is already long enough.
  • Suncho 9y ago
    > When the government borrows the money, they have to pay it back, or at least pay interest on it. Sort of. Each individual debt obligation has to be repaid as it comes due, but that's different from saying that total volume of debt ever needs to be paid down. The government can be meeting its debt obligations while at the same time increasing the total amount of debt. As long as there's a market for government debt, they can continue to roll over their debt. They have to pay interest too, but this isn't exactly a problem. They can always borrow to pay the interest. And if treasury yields get too high, the Fed can buy up excess government debt. Then one part of the government is just paying interest to another part of the government anyway. > This puts some constraint on the government. Whereas if the government creates the money, there is no constraint - it can spend as much money as it wants. The borrowing is creating money. You can deficit spend without the bookkeeping of issuing treasury securities etc., but the result is the similar. The ultimate constraint is still the amount of spending that the economy can productively absorb. > If you don't see why that might be a problem, let me ask you: Have you looked at Congress lately? Sure. If Congress doesn't understand how deficits work and you can trick them into creating money without explicitly borrowing (even though you're technically still borrowing), then great. But that's politics, not economics. > But for a fair amount of it, no, it is not invested in creating things of value to society, and so no, society does not get a return from it. Correct. If the government spends money in a way that burns resources, it takes those resources away from the productive economy. But if the government spends money in a way that doesn't help, but doesn't hurt either, they can spend unlimited amounts of it without really changing the constraints on how much additional money they can spend. For example, if they printed money and spent it by tossing it down a hole, they could do it for as long as they wanted without hurting anyone, but without helping anyone either. > And that means that it's a drain on society - the people who are in the service, or creating weapons, could be doing something else of more value to society - teaching children, or repairing roads and bridges, or building a better air traffic control system. Yup. If labor is scarce and you're making people work on things that are not benefiting society, then you're taking a valuable resource (labor) away from the productive economy. I don't think we're particularly short on labor right now, but the same type of reasoning applies to any resource. > So if Congress can create money, it can divert as much of the actual productive ability of the economy - people and materials - to whatever Congress thinks will get more votes. Again, I say, look at Congress. Do you really want to give them the ability to steer unlimited amounts of the economy to do whatever they think should be done? I don't. It's a horrible idea. They already have that ability. I want them to use it to provide a basic income. Maybe that means making basic income more popular so it becomes one of the things that gets them votes.