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What you're describing is called debt monetisation. People tend to be scared of it because if it isn't used responsibly it can cause all sorts of nasty market d

What you're describing is called debt monetisation. People tend to be scared of it because if it isn't used responsibly it can cause all sorts of nasty market distortions. The principal ones being inflation and loss of trust in a currency (which are sort of two sides of the same coin). If it is used responsibly, it's just another tool of monetary policy, and an effective one at that. But using it is a bit like crossing the rubicon, because once the precedent is set, it's hard to go back. The other point is that taxes have several aims: to fund government spending, to influence behaviour, and to redistribute wealth. A tax via inflation would distribute wealth away from people on fixed incomes (e.g. people who can't negotiate a pay rise). That would tend to favour people who are already wealthy.

gaukes 6y ago
People who are already wealthy could also store their wealth in something like gold and convert to the dollar only when needed which means their effective tax rate is 0. The fed would also enter an inflationary cycle where they devalue their currency which means more money needs to be printed which further devalues the currency. It just wouldn’t work in the real world.
- soVeryTired 6y ago
  Agreed that you can't run a country on tax-via-inflation. But it's worth noting that the bank of england monetized government debt last month and the markets didn't bat an eyelid.
  - m0llusk 6y ago
    That is kind of an oversimplification. The UK government arm twisted companies into not doing mass layoffs using tax policy and some legal wrangling. The amount of debt monetized was small relative to what the US is doing. While the US dollar has the advantage of being the global reserve currency the pound sterling gets substantial value from being relatively well managed. And markets did tremble significantly and there is much speculation that the rally in London and New York exchanges is actually rather shallow and flimsy.

gaukes 6y ago

People who are already wealthy could also store their wealth in something like gold and convert to the dollar only when needed which means their effective tax rate is 0. The fed would also enter an inflationary cycle where they devalue their currency which means more money needs to be printed which further devalues the currency. It just wouldn’t work in the real world.

soVeryTired 6y ago
Agreed that you can't run a country on tax-via-inflation. But it's worth noting that the bank of england monetized government debt last month and the markets didn't bat an eyelid.
- m0llusk 6y ago
  That is kind of an oversimplification. The UK government arm twisted companies into not doing mass layoffs using tax policy and some legal wrangling. The amount of debt monetized was small relative to what the US is doing. While the US dollar has the advantage of being the global reserve currency the pound sterling gets substantial value from being relatively well managed. And markets did tremble significantly and there is much speculation that the rally in London and New York exchanges is actually rather shallow and flimsy.