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Slightly OT but I’ve been trying to google this for a while and there are people reading this who will know where I can look: If a government (pretend US if it

Slightly OT but I’ve been trying to google this for a while and there are people reading this who will know where I can look: If a government (pretend US if it helps) stopped collecting taxes, and instead funded the budget by printing money every year, who would be the winners and losers compared to the current system? Where can I go to learn more?

lixtra 7y ago
Look at the discussion around MMT https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory
arbitrage 7y ago
everyone would be losers, because that is insane. see recent history in zimbabwe. the keyword you're looking for is hyperinflation.
- anon84598 7y ago
  But actually, anyone who held a large amount of debt would benefit since the value of their debt would shrink
throwaway123156 7y ago
I suppose it would lead to inflation and as long as the inflation is controlled, that's doable. Effectively, the government is being funded by all dollar holders at that point. It's a wealth tax of sorts imposed on those who hold their wealth in dollars. The idea would be that the government is being funded by the fact that $100 today, is worth only about $90 last year, and that loss in value is what's funding the government.
- jchrisa 7y ago
  So maybe the poor and middle class would be better off and the rich would foot the bill?
  - patrickmcnamara 7y ago
    The rich would also have the means to invest that money and not just hold cash.
- tempestn 7y ago
  This might explain why the idea is more popular on one side of the political spectrum. What's interesting though is that thus far it doesn't seem like the expected inflation has been happening in the US, despite significant deficit spending. Any idea why that might be? What I've heard is a lot of, "Current levels of deficit spending are sustainable because we're not yet seeing a resulting increase in inflation." Which makes sense. But.. what's the mechanism for that? Like, taken to an extreme, if a government did indeed stop taxing and pay for everything with deficit spending, but there wasn't inflation as a result, how would that be? The only explanations I can think of are that 1) many other countries are also doing significant deficit spending, so all major currencies are being devalued together, and so they're not actually being devalued at all, and 2) in as much as (ie) the US currency is being devalued faster than others, there are other, strengthening factors that are counteracting this. (Such as higher interest rates.)
  - henryfjordan 7y ago
    I'm not an expert and expect this to have flaws but here goes: Fiat currency is backed by value (not gold, but also not nothing like some people say). It's worth what we all collectively think it's worth and that's going to depend on the underlying assets of a nation. Lets say there are $1T dollars floating around the economy and this year the Fed wants to print another 100bn. That's totally ok (and necessary) so long as there was that much value created this year. New factories have been built, businesses created, etc. This has created more underlying value in America and so it's ok that we print some more money. Your $1 bill still holds the same amount. That's how I look at it at least.
stkdump 7y ago
Inflation. So I guess it is like taxing everyone who holds cash in the currency that the government is printing with a flat tax.
Gustomaximus 7y ago
You might be looking for 'Modern Monetary Theory' https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory

lixtra 7y ago

Look at the discussion around MMT https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory

arbitrage 7y ago

everyone would be losers, because that is insane. see recent history in zimbabwe. the keyword you're looking for is hyperinflation.

anon84598 7y ago
But actually, anyone who held a large amount of debt would benefit since the value of their debt would shrink

throwaway123156 7y ago

I suppose it would lead to inflation and as long as the inflation is controlled, that's doable. Effectively, the government is being funded by all dollar holders at that point. It's a wealth tax of sorts imposed on those who hold their wealth in dollars. The idea would be that the government is being funded by the fact that $100 today, is worth only about $90 last year, and that loss in value is what's funding the government.

jchrisa 7y ago
So maybe the poor and middle class would be better off and the rich would foot the bill?
- patrickmcnamara 7y ago
  The rich would also have the means to invest that money and not just hold cash.
tempestn 7y ago
This might explain why the idea is more popular on one side of the political spectrum. What's interesting though is that thus far it doesn't seem like the expected inflation has been happening in the US, despite significant deficit spending. Any idea why that might be? What I've heard is a lot of, "Current levels of deficit spending are sustainable because we're not yet seeing a resulting increase in inflation." Which makes sense. But.. what's the mechanism for that? Like, taken to an extreme, if a government did indeed stop taxing and pay for everything with deficit spending, but there wasn't inflation as a result, how would that be? The only explanations I can think of are that 1) many other countries are also doing significant deficit spending, so all major currencies are being devalued together, and so they're not actually being devalued at all, and 2) in as much as (ie) the US currency is being devalued faster than others, there are other, strengthening factors that are counteracting this. (Such as higher interest rates.)
- henryfjordan 7y ago
  I'm not an expert and expect this to have flaws but here goes: Fiat currency is backed by value (not gold, but also not nothing like some people say). It's worth what we all collectively think it's worth and that's going to depend on the underlying assets of a nation. Lets say there are $1T dollars floating around the economy and this year the Fed wants to print another 100bn. That's totally ok (and necessary) so long as there was that much value created this year. New factories have been built, businesses created, etc. This has created more underlying value in America and so it's ok that we print some more money. Your $1 bill still holds the same amount. That's how I look at it at least.

stkdump 7y ago

Inflation. So I guess it is like taxing everyone who holds cash in the currency that the government is printing with a flat tax.

Gustomaximus 7y ago

You might be looking for 'Modern Monetary Theory' https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory https://en.m.wikipedia.org/wiki/Modern_Monetary_Theory