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I originally thought this comment deserved downvoting, because "we'll just print money" shows a lack of understanding about the role fiat currency plays in an e

I originally thought this comment deserved downvoting, because "we'll just print money" shows a lack of understanding about the role fiat currency plays in an economy. However, I realized that this comment is a valuable addition to the discussion, because it expresses an increasingly common misconception. So thanks for posting it. Yes, the nation can just print money, but will anyone accept it? When the supply of money increases, but economic output and resources are held constant, prices increase. Imagine if the resources available in the economy are worth M currency. If the government just creates 10M currency, that doesn't mean more things are available to buy, just that each unit of currency is now only worth 1/10 of what it was before, so prices rise. But because people expect that, they try to get rid of the currency even faster, so prices rise even more than the increase in the money supply. This results in "hyperinflation" - prices rising more than 50% per _month_ - see https://en.wikipedia.org/wiki/Hyperinflation https://en.wikipedia.org/wiki/Hyperinflation for accounts of governments who have tried the "create and allocate currency" approach. There's a great "Planet Money" episode on the hyperinflation of Brazil, which started when the country decided they could just print money to build a beautiful new capital city, and how it persisted for decades because it destroyed people's faith in the currency as a store of value, until Brazil created a new stable currency and convinced people they would no longer just print money to spend. https://www.npr.org/sections/money/2010/10/01/130267274/the-friday-podcast-how-four-drinking-buddies-saved-brazil https://www.npr.org/sections/money/2010/10/01/130267274/the-...

noir_lord 8y ago
Printing more money also doesn’t affect external costs. If that heart bypass machine is coming from Germany or Japan printing more rupees isn’t going to make it anymore affordable either. However with abundant natural resources and a large population you could maybe be a self-sufficient economy in close to absolute terms. I’m not sure what the Indian balance of trade currently is but they seem to be rapidly developing in a lot of ways.
omegaworks 8y ago
I knew I'd get this kneejerk reaction to "simply create and allocate the currency," I was holding out hope that responders would finish reading the sentence. What I said was: >a nation-state... can create and allocate the currency to serve this purpose. I totally agree with you in a general sense. Creating and allocating currency and distributing it to the general population equally will cause the scenario you describe. "More dollars chasing fewer goods," as Greenspan described[1]. However, if we take the hypothetical scenario that the government agrees to pay exactly the current cost of the procedure at Narayana for medical procedures, none of what you described will come to pass. Wait times at Narayana might increase because more people might come in to have the services performed, but it will not cause runaway across-the-board inflation. 1. https://www.youtube.com/watch?v=DNCZHAQnfGU https://www.youtube.com/watch?v=DNCZHAQnfGU
- kbutler 8y ago
  The point is that inflating the money supply is a tax, just a hidden one spread across all holders of assets denominated in that currency (cash, loans, salaries, ...) Smaller amounts of "print and spend" inflate less than large amounts, but they do cause inflation, and the wish list is never just healthcare. Controlling a fiat currency lets you hide some taxation as inflation, but it is no free lunch.
  - omegaworks 8y ago
    It is no free lunch, but I never claimed it was. It is an option on the table, not one without consequences. It’s never just healthcare, sure: move the goalposts and set up your slippery slope. But consider this: what if the tax produced value over the cost of its implementation? What if it prevented harder, more expensive downline complications or made the population more productive—more likely to gain, retain and apply their education? What if we looked to it as an investment in our people? Why is it then not justifiable?
    - kbutler 8y ago
      Proposing that it is a justifiable tax for investment is very different from saying "the concept of 'a nation can't afford' does not make sense [for] a nation-state with control of its own currency". It looks like you understand why even a nation that controls it's own currency may not be able to afford nationalized healthcare: 1) because creating and allocating currency inflates prices, it just hides the cost rather than eliminating it 2) because we cannot eliminate the cost by creating currency, cost and benefit of healthcare spending must still be evaluated in comparison to other spending priorities Good discussion.
      - omegaworks 8y ago
        If printing the money results in commensurate levels of increased productivity, then printing the money will not cause price inflation. That’s why most nations grow their money supply over time, after all :)

noir_lord 8y ago

Printing more money also doesn’t affect external costs. If that heart bypass machine is coming from Germany or Japan printing more rupees isn’t going to make it anymore affordable either. However with abundant natural resources and a large population you could maybe be a self-sufficient economy in close to absolute terms. I’m not sure what the Indian balance of trade currently is but they seem to be rapidly developing in a lot of ways.

omegaworks 8y ago

I knew I'd get this kneejerk reaction to "simply create and allocate the currency," I was holding out hope that responders would finish reading the sentence. What I said was: >a nation-state... can create and allocate the currency to serve this purpose. I totally agree with you in a general sense. Creating and allocating currency and distributing it to the general population equally will cause the scenario you describe. "More dollars chasing fewer goods," as Greenspan described[1]. However, if we take the hypothetical scenario that the government agrees to pay exactly the current cost of the procedure at Narayana for medical procedures, none of what you described will come to pass. Wait times at Narayana might increase because more people might come in to have the services performed, but it will not cause runaway across-the-board inflation. 1. https://www.youtube.com/watch?v=DNCZHAQnfGU https://www.youtube.com/watch?v=DNCZHAQnfGU

kbutler 8y ago
The point is that inflating the money supply is a tax, just a hidden one spread across all holders of assets denominated in that currency (cash, loans, salaries, ...) Smaller amounts of "print and spend" inflate less than large amounts, but they do cause inflation, and the wish list is never just healthcare. Controlling a fiat currency lets you hide some taxation as inflation, but it is no free lunch.
- omegaworks 8y ago
  It is no free lunch, but I never claimed it was. It is an option on the table, not one without consequences. It’s never just healthcare, sure: move the goalposts and set up your slippery slope. But consider this: what if the tax produced value over the cost of its implementation? What if it prevented harder, more expensive downline complications or made the population more productive—more likely to gain, retain and apply their education? What if we looked to it as an investment in our people? Why is it then not justifiable?
  - kbutler 8y ago
    Proposing that it is a justifiable tax for investment is very different from saying "the concept of 'a nation can't afford' does not make sense [for] a nation-state with control of its own currency". It looks like you understand why even a nation that controls it's own currency may not be able to afford nationalized healthcare: 1) because creating and allocating currency inflates prices, it just hides the cost rather than eliminating it 2) because we cannot eliminate the cost by creating currency, cost and benefit of healthcare spending must still be evaluated in comparison to other spending priorities Good discussion.
    - omegaworks 8y ago
      If printing the money results in commensurate levels of increased productivity, then printing the money will not cause price inflation. That’s why most nations grow their money supply over time, after all :)