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Printing money does, in fact, create wealth, in some limited contexts: 1. GDP growth requires printing money, or else it will create a deflationary environment

Printing money does, in fact, create wealth, in some limited contexts: 1. GDP growth requires printing money, or else it will create a deflationary environment, which is dangerous because it creates an incentive to delay business purchasing. 2. Low levels of inflation create a more efficient way for the economy to adjust the mix of labor skill demand. Research shows that it is difficult to nominally lower a worker's pay year over year, but giving no raise in an inflationary environment allows a company to do just that. This is important to lower the rewards for resources the economy has a lesser need for, such as when bar codes reduced the need for grocery store staff. 3. And finally, printing money can help an economy recover from an aggregate demand gap (i.e., a supply-demand disequilibrium that doesn't automatically recover). This can happen in period of high unemployment, where wages need to fall to create more demand for labor, but a fall in wages reduces personal income, further reducing aggregate demand, further reducing the demand for labor. Printing money reduces the cost of money and gives an incentive for companies to invest more, which reduces the aggregate demand gap.

1010011010 16y ago
You're arguing that printing money reallocates wealth, which it certainly does. But it does not create wealth. New dollars created from thin air do not also magically call into existence new goods and services. It's simply more dollars chasing the same goods and services. Either that, or counterfeiters also create wealth.
- mediaman 16y ago
  With all due respect, you do not appear to have understood my reply. I specifically state that it does, in certain situations, create wealth. There is a tremendous amount of economic research to support this. Of course, I agree with you that printing money does not always create wealth. Far from it. There are many cases in which it does not create wealth. Highly inflationary economies are a good example of this. But if you re-read the three situations I describe, you will see that they do indeed describe places that the printing of money will create wealth that would not have existed otherwise without the printing of money, and which are above and beyond the mere reallocation of wealth. Perhaps to better understand why your point is not true is to understand your claim from a different perspective: that the money supply should always stay exactly constant, year after year. Even a cursory understanding of my first point (that economic growth in and of itself requires a corresponding increase in the money supply) shows this to not be true. Imagine the economy grows and the money supply stays constant. The value of products available per dollar now increases annually. This is deflation. Now you are implicitly claiming that deflation is a good thing. To read more on deflation, see: http://en.wikipedia.org/wiki/Deflation http://en.wikipedia.org/wiki/Deflation
  - 1010011010 16y ago
    Printing money will never create wealth. Printing money creates more money. Printing money may enable the creation of wealth (by reallocating existing wealth) but is not, itself, wealth creation.
  - danenania 16y ago
    Your entire argument boils down to casting deflation as a boogie man. Prices decreasing is a GOOD thing. It allows you to afford more and better stuff. Exhibit A: the consumer electronics industry. Yes, deflationary collapses that are preceded by artificially induced inflationary booms cause massive pain. This is why we shouldn't have artificially induced inflationary booms. They massively misdirect resources and create a necessity for a massive restructuring, which is painful and destabilizing, but necessary and inevitable to return to economic viability. You are confusing the heroin with the withdrawal, the alcohol with the hangover, the sickness with the cure.
1010011010 16y ago
http://pair.offshore.ai/38yearcycle http://pair.offshore.ai/38yearcycle

1010011010 16y ago

You're arguing that printing money reallocates wealth, which it certainly does. But it does not create wealth. New dollars created from thin air do not also magically call into existence new goods and services. It's simply more dollars chasing the same goods and services. Either that, or counterfeiters also create wealth.

mediaman 16y ago
With all due respect, you do not appear to have understood my reply. I specifically state that it does, in certain situations, create wealth. There is a tremendous amount of economic research to support this. Of course, I agree with you that printing money does not always create wealth. Far from it. There are many cases in which it does not create wealth. Highly inflationary economies are a good example of this. But if you re-read the three situations I describe, you will see that they do indeed describe places that the printing of money will create wealth that would not have existed otherwise without the printing of money, and which are above and beyond the mere reallocation of wealth. Perhaps to better understand why your point is not true is to understand your claim from a different perspective: that the money supply should always stay exactly constant, year after year. Even a cursory understanding of my first point (that economic growth in and of itself requires a corresponding increase in the money supply) shows this to not be true. Imagine the economy grows and the money supply stays constant. The value of products available per dollar now increases annually. This is deflation. Now you are implicitly claiming that deflation is a good thing. To read more on deflation, see: http://en.wikipedia.org/wiki/Deflation http://en.wikipedia.org/wiki/Deflation
- 1010011010 16y ago
  Printing money will never create wealth. Printing money creates more money. Printing money may enable the creation of wealth (by reallocating existing wealth) but is not, itself, wealth creation.
- danenania 16y ago
  Your entire argument boils down to casting deflation as a boogie man. Prices decreasing is a GOOD thing. It allows you to afford more and better stuff. Exhibit A: the consumer electronics industry. Yes, deflationary collapses that are preceded by artificially induced inflationary booms cause massive pain. This is why we shouldn't have artificially induced inflationary booms. They massively misdirect resources and create a necessity for a massive restructuring, which is painful and destabilizing, but necessary and inevitable to return to economic viability. You are confusing the heroin with the withdrawal, the alcohol with the hangover, the sickness with the cure.

1010011010 16y ago

http://pair.offshore.ai/38yearcycle http://pair.offshore.ai/38yearcycle